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47-755 PDF 2009

ENERGY OUTLOOKS, AND THE 

ROLE OF FEDERAL ONSHORE 

AND OFFSHORE RESOURCES 

IN MEETING FUTURE ENERGY 

DEMAND 

OVERSIGHT HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND 

MINERAL RESOURCES 

OF THE

COMMITTEE ON NATURAL RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

Thursday, March 5, 2009 

Serial No. 111-8 

Printed for the use of the Committee on Natural Resources 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 

or 

Committee address: http://resourcescommittee.house.gov 

(II) 

COMMITTEE ON NATURAL RESOURCES 

NICK J. RAHALL, II, West Virginia, Chairman 

DOC HASTINGS, Washington, Ranking Republican Member 

Dale E. Kildee, Michigan 

Eni F.H. Faleomavaega, American Samoa 

Neil Abercrombie, Hawaii 

Frank Pallone, Jr., New Jersey 

Grace F. Napolitano, California 

Rush D. Holt, New Jersey 

Rau ́l M. Grijalva, Arizona 

Madeleine Z. Bordallo, Guam 

Jim Costa, California 

Dan Boren, Oklahoma 

Gregorio Sablan, Northern Marianas 

Martin T. Heinrich, New Mexico 

George Miller, California 

Edward J. Markey, Massachusetts 

Peter A. DeFazio, Oregon 

Maurice D. Hinchey, New York 

Donna M. Christensen, Virgin Islands 

Diana DeGette, Colorado 

Ron Kind, Wisconsin 

Lois Capps, California 

Jay Inslee, Washington 

Joe Baca, California 

Stephanie Herseth Sandlin, South Dakota 

John P. Sarbanes, Maryland 

Carol Shea-Porter, New Hampshire 

Niki Tsongas, Massachusetts 

Frank Kratovil, Jr., Maryland 

Pedro R. Pierluisi, Puerto Rico 

Don Young, Alaska 

Elton Gallegly, California 

John J. Duncan, Jr., Tennessee 

Jeff Flake, Arizona 

Henry E. Brown, Jr., South Carolina 

Cathy McMorris Rodgers, Washington 

Louie Gohmert, Texas 

Rob Bishop, Utah 

Bill Shuster, Pennsylvania 

Doug Lamborn, Colorado 

Adrian Smith, Nebraska 

Robert J. Wittman, Virginia 

Paul C. Broun, Georgia 

John Fleming, Louisiana 

Mike Coffman, Colorado 

Jason Chaffetz, Utah 

Cynthia M. Lummis, Wyoming 

Tom McClintock, California 

Bill Cassidy, Louisiana 

James H. Zoia, Chief of Staff 

Rick Healy, Chief Counsel 

Todd Young, Republican Chief of Staff 

Lisa Pittman, Republican Chief Counsel 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

JIM COSTA, California, Chairman 

DOUG LAMBORN, Colorado, Ranking Republican Member 

Eni F.H. Faleomavaega, American Samoa 

Rush D. Holt, New Jersey 

Dan Boren, Oklahoma 

Gregorio Sablan, Northern Marianas 

Martin T. Heinrich, New Mexico 

Edward J. Markey, Massachusetts 

Maurice D. Hinchey, New York 

John P. Sarbanes, Maryland 

Niki Tsongas, Massachusetts 

Nick J. Rahall, II, West Virginia, ex officio 

Don Young, Alaska 

Louie Gohmert, Texas 

John Fleming, Louisiana 

Jason Chaffetz, Utah 

Cynthia M. Lummis, Wyoming 

Doc Hastings, Washington, ex officio 

(III) 

CONTENTS 

Page 

Hearing held on Thursday, March 5, 2009 ............................................................ 1 

Statement of Members: 

Costa, Hon. Jim, a Representative in Congress from the State of 

California ....................................................................................................... 1 

Hastings, Hon. Doc, a Representative in Congress from the State of 

Washington .................................................................................................... 6 

Prepared statement of ............................................................................... 7 

Lamborn, Hon. Doug, a Representative in Congress from the State of 

Colorado ......................................................................................................... 3 

Prepared statement of ............................................................................... 5 

Statement of Witnesses: 

Birol, Dr. Fatih, Chief Economist, International Energy Agency ................. 8 

Prepared statement of ............................................................................... 11 

Response to questions submitted for the record ..................................... 13 

Gruenspecht, Dr. Howard K., Acting Administrator, Energy Information 

Administration .............................................................................................. 18 

Prepared statement of ............................................................................... 21 

Response to questions submitted for the record ..................................... 25 

Pierce, Brenda S., Program Coordinator, Energy Resources Program, U.S. 

Geological Survey, U.S. Department of the Interior .................................. 36 

Prepared statement of ............................................................................... 39 

Map of Undiscovered Technically Recoverable Oil and Gas Resources 

on Federal Lands ................................................................................... 44 

Map of Total Mean Undiscovered Gas Resources ................................... 44 

Map of Total Mean Undiscovered Oil Resources .................................... 45 

Additional materials supplied: 

Briggs, Don G., President, Louisiana Oil and Gas Association, Letter 

submitted for the record by The Honorable John Fleming ....................... 65 

(1) 

OVERSIGHT HEARING ON ‘‘ENERGY OUTLOOKS, AND THE ROLE OF FEDERAL 

ONSHORE AND OFFSHORE RESOURCES IN 

MEETING FUTURE ENERGY DEMAND.’’ 

Thursday, March 5, 2009 

U.S. House of Representatives 

Subcommittee on Energy and Mineral Resources 

Committee on Natural Resources 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room 

1324, Longworth House Office Building, Hon. Jim Costa [Chairman 

of the Subcommittee] presiding. 

Present: Representatives Costa, Holt, Sablan, Heinrich, 

Sarbanes, Lamborn, Gohmert, Fleming, Chaffetz, Lummis, and 

Hastings. 

STATEMENT OF THE HON. JIM COSTA, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. COSTA. The Subcommittee on Energy and Mineral Resources 

will now come to order. 

For this afternoon’s hearing, we are meeting today with regard 

to energy outlooks and the role that Federal onshore and offshore 

resources play in meeting future energy demands. 

Under Committee Rule 4(g), the Chair and the Ranking Member 

may make an opening statement. And then, if any other Members 

have statements, they can be included in the hearing record under 

unanimous consent. 

I will allow the Ranking Member of the Full Committee, Doc 

Hastings, who is also with us today, to provide some thoughts. And 

we appreciate your participation. 

Additionally, under Committee Rule 4(h), any material submitted 

for inclusion in the hearing record must be submitted no later than 

10 days following this hearing. 

Members of the Subcommittee, our witnesses, and those of you 

in the audience, this is the first energy hearing for the Energy and 

Mineral Resources Subcommittee in this Congress dealing with the 

big picture. I always try to refer to that, in previous hearings that 

were held by the Full Committee and in the last Congress, because 

I think, to really talk about developing a new energy policy in this 

country, we have to look at, as I have said before, the big picture 

and utilizing all the energy tools in our energy toolbox. 

We have three distinguished witnesses today, the leading international and United States sources of energy statistics and forecasts, who are well-respected throughout the country and throughout the world, I might add. 

Dr. Fatih Birol is the Chief Economist of the International 

Energy Agency. They are responsible for writing the organization’s 

2 

annual ‘‘World Energy Outlook,’’ which looks at energy trends 

throughout the world to the year 2030. I don’t know if we can accurately predict that, but obviously we have to try. The outlook also 

focuses on some topics that are of particular interest to the Subcommittee that we will discuss this afternoon as it relates to oil 

and gas production. 

Dr. Howard Gruenspecht—did I pronounce that properly? Dr. 

Gruenspecht is the Acting Administrator of the U.S. Energy Information Administration, which puts out a continuous wealth of 

energy analysis and forecasts, for both short-term and long-term 

forecasts, that include the ‘‘Annual Energy Outlook,’’ which focuses 

on trends in America, again, to the year 2030. 

Last, but certainly not least, is Ms. Brenda Pierce. She heads the 

Energy Resources Division of the United States Geological Survey, 

which is the world’s leading source on oil and gas resources. 

And we are glad that you are here. 

Members of the Subcommittee and those of you in the audience, 

I hope the discussion today is on how we can figure out ways in 

which we can come together to achieve clean and sustainable domestic energy that will address our Nation’s short-term and longterm needs. I think that is everyone’s goal. 

As I said in a hearing we had last month, while we can agree 

on the goal, we have a number of different views on how we reach 

those goals. Obviously, we want to reduce the dependency on foreign sources of energy that we import, reduce it significantly, so 

that we are not held hostage and so that America’s economy can 

remain stable. We also want to reduce our dependency, as we move 

into the 21st century, on fossil fuels. We want to be able to have 

a greater reliance on renewable sources of energy. 

But that is what we have to focus on, in terms of how we use 

all the energy tools in our energy toolbox, knowing that both our 

petroleum and our fossil fuels will continue to play a very important role as we deal with our long-term energy needs in the 21st 

century and as we transition. 

So I am hopeful that today’s hearing will set the discussion in 

what we need to do in terms of the short term in using all these 

energy tools in our energy toolbox; in the near term, by that I mean 

the next 5 to 10 years; and then the long term, and by that I mean 

20 years and beyond. 

I am a strong believer that we can be successful in achieving 

these goals. We know that oil and gas and coal are absolutely essential today, and they will be for a long time. But that should not 

allow us to rest at ease or to take any comfort in the fact that, if 

we don’t lead the world in clean, renewable energy or energy efficiency, because conservation is an ethic that I think we all embrace—and so, therefore, we need to also look at other sources that 

have been successful. For me, that includes nuclear energy, coal to 

liquids, advanced biofuels and, in short, all the tools, again, in our 

toolbox. 

The jurisdiction, of course, of this Subcommittee on how energy 

can be produced on public lands, both traditional and alternative 

forms of energy, we must keep in mind what the jurisdiction of this 

Subcommittee is. 

3 

But, also, I think it is timely, as this hearing will certainly play 

out. And every day, every Member of Congress is mindful of the 

fact that our economic recovery is dependent upon putting together 

a comprehensive energy plan. I think everyone feels that is incumbent and, therefore, we have to focus on that today. We need, when 

we discuss energy legislation in the coming year, to think about 

how this best invests in future jobs in America, builds on new markets, promotes new technologies, as it relates to our energy longterm needs. 

Another pressing need in this country is obviously a lower-carbon 

economy. This week, the United Nations’ top climate officials are 

in Washington. In China, Secretary of State Clinton has engaged 

China, the world’s biggest emitter, along with ourselves, in regard 

to energy and the impacts that the carbon emissions have with 

regard to the energy that we consume. 

The President has signaled that he is placing the United States 

at the forefront of the international effort to deal with these 

climate issues. And his chief climate negotiator said last week, 

according to a report in the New York Times on Sunday, that the 

United States would be involved in the negotiations of a new international climate change treaty, hopefully to be signed in Copenhagen in December of this year. We hope that that is successful. 

The hearing today focuses on those areas that we know relate to 

our choices, the choices we have to make as it relates to the impacts on our climate. So I look forward to hearing from our witnesses not only about their long-term visions of the big picture of 

energy production, on public lands, but both how we ensure that 

onshore and on the Outer Continental Shelf we can do everything 

possible to provide a balanced energy future that I think we all 

strive for. 

With that, I would like to now recognize my colleague and Ranking Member of the Subcommittee, Congressman Doug Lamborn of 

Colorado. 

STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Mr. LAMBORN. Thank you, Mr. Chairman. And I want to thank 

you also for calling today’s hearing. 

This hearing will continue our focus on the Nation’s Outer Continental Shelf, as well as onshore oil and gas resources. Our witnesses today will share with us the energy outlook for the United 

States and the world through 2030, based on the best information 

they have. 

Their testimony, while tremendously helpful, is still only a projection and not the reality that we may face. No one could have 

predicted $150-a-barrel oil last year or 30-some-dollar-a-barrel of 

oil today. Such tremendous swings in prices have dramatic impact 

upon our economy, as the current recession has shown. Professor 

James Hamilton from UCSD has written that, quote, ‘‘Nine out of 

10 of the last U.S. recessions since World War II were preceded by 

a spike up in oil prices.’’ 

As we work to get our economy moving again, we must be prepared to face rising energy prices. The President’s budget recently 

proposed massive tax increases on the oil and gas industry of 

4 

America starting in 2011, and upon electricity from cap-and-trade 

in 2012. These massive tax increases coincide with the projections 

by EIA of a return to $100-a-barrel oil. 

If energy price spikes are what got us into this recession and 

nine out of 10 recessions since World War II, what will happen if 

we face another price spike, as well, when we begin to pull ourselves out of this recession? Couldn’t that have a similar negative 

impact? 

This hearing will focus, again, on what resources may be available in the OCS. While I believe we can all agree that the OCS 

moratoria areas are a fairly unknown commodity, the truth is that 

we have companies willing to gamble billions of their own dollars 

to explore these unknown areas at no risk and no cost to the taxpayer. 

It was stated at a previous hearing that, if the estimates in the 

Atlantic—currently 3.8 billion barrels of oil and 37 trillion cubic 

feet of natural gas—which were last surveyed in the 1970s, were 

to expand in the same fashion that Gulf of Mexico resources have 

expanded since the 1970s, we will have more than 18 billion barrels of oil and 89 trillion cubic feet of gas in the Atlantic alone. 

More importantly is the fact that the resources off the coast of 

California are probably some of the most accessible in the world. 

In many places on the California coast, we have leases which could 

be slant-drilled from shore from existing coastal infrastructure. In 

addition, the resources off the coast of California are fairly wellknown, and we could develop much of that area within just a few 

years, creating American jobs and reducing our dependence on foreign energy, not to mention having more accessible energy for 

America’s working families. 

Our dependence on foreign energy, sadly, is not something that 

we will reduce any time soon. Based on current law, the projections 

in the EIA outlook show that we will still be importing a tremendous amount of oil in 2030. Reducing our dependence on these imports should be a major focus of this committee. 

An increase of 1 million barrels per day of domestic production 

would reduce our imports by a million barrels a day. In today’s 

economy, that means adding nearly $13 billion per year to the 

American economy that we currently ship overseas to foreign governments. So, as we talk about potential oil and gas resources in 

the U.S. as a few million barrels here and a few million barrels 

there, let’s remember that those barrels add up to billions of dollars 

for the U.S. economy, for U.S. jobs, and for the U.S. Treasury. 

EIA’s analysis also shows that, while we close our import dependence on natural gas, we will remain dependent on foreign gas 

to meet our demands. Developing the Atlantic OCS region will help 

to further shrink that gap, as it is primarily believed to be a gasrich area rather than an oil-rich area. 

Finally, I am concerned that the EIA outlook presented here 

today projects that we will become dependent on imported biofuels, 

such as from Brazil, to meet the renewable fuel mandate passed 

last year. One of the goals of biofuels development was to reduce 

our dependence on foreign energy. If that mandate will suddenly 

make us more dependent on foreign energy by simply changing our 

5 

dependence from oil to more costly biofuels, then we will need to 

re-examine this issue much more closely. 

Finally, Mr. Chairman, we must remember throughout our focus 

on the OCS development that this just isn’t about drilling or pumping oil and gas. Opening the OCS is about retooling our energy 

economy to focus on creating American manufacturing jobs, and 

good-paying jobs at that, and building the infrastructure to harness 

our domestic energy. 

We all agree that America is too dependent on foreign governments for our energy supply. We can and should determine the 

most responsible way to develop our OCS resources. However, in 

the end, finding solutions to developing these resources should be 

our ultimate goal. America is a nation rich in resources. Developing 

these resources will free us from our dependence on foreign oil. 

I look forward to hearing from our witnesses. And I yield back, 

Mr. Chairman. 

[The prepared statement of Mr. Lamborn follows:] 

Statement of The Honorable Doug Lamborn, Ranking Mmber, 

Subcommittee on Energy and Mineral Resources 

Mr. Chairman, I want to thank you for calling today’s hearing. This hearing will 

continue our focus on the nation’s Outer Continental Shelf (OCS) as well as onshore 

oil and gas resources. Our witnesses today will share with us the energy outlook 

for the United States and the world through 2030, based on the best information 

they have. Their testimony, while helpful, is still only a projection and may or may 

not be the reality that we will face. No one could have predicted $150 oil last year, 

or $30 oil today. Such tremendous swings in prices have dramatic impact upon our 

economy as the current recession has shown. 

Economy 

Professor James Hamilton from the University of California San Diego (UCSD) 

has written that ‘‘nine out of ten of the U.S. recessions since World War II were 

preceded by a spike up in oil prices.’’ The President’s budget recently proposed massive tax increases on various sources of energy in America starting in 2011. These 

massive tax hikes coincide with projections by the Energy Information Administration (EIA) of a return to $100 oil. If energy price spikes are what got us into this 

recession, and 9 out of 10 recessions since World War II, what will happen if we 

face major tax hikes as we begin to pull ourselves out of this recession? Couldn’t 

that have a similar negative impact? 

Resources 

This hearing will focus again on what resources may be available in the OCS. The 

bottom line is that we have companies willing to commit billions of their own dollars 

to explore these unknown areas, at no cost to the taxpayer. 

It was stated at a previous hearing that surveys from the 1970’s revealed 3.8 billion barrels of oil and 37 trillion cubic feet of natural gas in the Atlantic Ocean. If 

Atlantic supply estimates were to expand in the same fashion that Gulf of Mexico 

resource estimates have expanded since the 1970’s, America would have more than 

18 billion barrels of oil and 89 trillion cubic feet of natural gas in the Atlantic alone. 

Resources off the coast of California are probably some of the most accessible in 

the world. In many places on the California coast we have areas which could be 

slant drilled from shore using existing coastal infrastructure. In addition, the resources off the coast of California are fairly well known. They could be developed 

within just a few years, creating American jobs and reducing our dependence on foreign energy. 

Projections 

Based on current law, the projections in the EIA outlook show that we will still 

be importing a tremendous amount of oil in 2030. Reducing our dependence on these 

imports should be a major focus of this committee. An increase of one million barrels per day of domestic production would reduce our imports by a million barrels 

a day. In today’s economy, that means adding nearly $13 billion per year to the 

American economy that we currently ship overseas to foreign governments. So as 

we talk about potential oil and gas resources in the U.S. as a few million barrels 

6 

here and a few million barrels there, let us remember that those barrels add up to 

billions of dollars for the American economy and the U.S. Treasury. 

EIA’s analysis also shows that while we reduce our import dependence on natural 

gas from an estimated 54% of total U.S. domestic demand down to 41% of total U.S. 

domestic demand, we will remain dependent on foreign gas to meet our needs. Developing the Atlantic OCS region will help to further promote U.S. energy self sufficiency, as the Atlantic OCS region is primarily believed to be rich in gas rather than 

oil. 

Finally, I am concerned that the EIA outlook presented today projects that we will 

become dependent on imported biofuels to meet the renewable fuel mandate passed 

last year. One of the stated goals of biofuels development was to reduce our dependence on foreign energy. If that mandate will suddenly make us more dependent on 

foreign energy by simply changing our dependence from oil to more costly biofuels, 

then we may need to reexamine the issue of biofuels much more closely. 

Closing 

Finally, Mr. Chairman, we must remember throughout our focus on OCS development that this isn’t just about drilling or pumping oil and gas. Opening the OCS 

is also about retooling our energy economy to focus on creating good-paying American manufacturing jobs and building the infrastructure to harness our domestic energy. 

We all agree that America is too dependent on foreign governments for our energy 

supply. We can and should determine the most responsible way to develop our OCS 

resources. Finding solutions to developing those resources should be our ultimate 

goal. 

America is a nation rich in energy resources. There’s absolutely no question that 

developing those resources will help free us from our dependence on foreign oil. 

I look forward to hearing from our witnesses. 

Mr. COSTA. I thank the gentleman from Colorado. 

It is the intention of the Chair to recognize the Ranking Member 

of the Full Committee, the gentleman from Washington State. But 

before I do, I want to suggest to Members that, following his statement, we will then defer to our witnesses. We are going to make 

an exception and allow each of the witnesses 10 minutes in their 

presentation because of the detail and depth of their subject matter 

and their presentation. And I think we obviously want to get to our 

witnesses. 

I might also add, with votes sometime after 4 o’clock, the Chair 

will certainly try to ensure that everyone has 5 minutes for comments or questions. And whether or not we are able to achieve a 

second round will be dependent upon our time. 

The gentleman from Washington State, the Ranking Member of 

the Full Committee, Doc Hastings. 

STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Mr. HASTINGS. Thank you, Mr. Chairman. And I appreciate the 

courtesy you have given me to make a statement. And let me just 

add parenthetically, sometimes 5 minutes is too short. I think this 

is probably a good idea, to allow the witnesses to go on longer, because there is a lot of information to digest. 

Mr. Chairman, I just want to say there are certainly two frontpage issues that have a significant impact on our Nation’s energy 

outlook. One is the production of more American-made energy, both 

offshore and on Federal lands. There is no question that the creation of more energy in our Nation will help create new jobs and 

make us more secure by lowering our dependence on foreign oil. 

7 

The development of our OCS resources is critically important to 

both our energy future and our economic future. While we are discussing possible future development, later this month the Department of the Interior will conduct a lease sale in what is believed 

to be one of America’s best untapped areas, the 181 South Area of 

the Gulf of Mexico. 

Today, I and a number of my colleagues are sending a letter to 

Secretary Salazar stressing the importance of moving forward with 

this critical lease sale. And I say that for this reason: because of 

the Secretary’s recent actions by revoking leases in Utah, reinstituting the moratoria on the OCS by delaying the 5-year plan, and 

stopping oil shale research in its tracks in the mountain West, to 

me that shows a clear trend against oil and gas development and 

job creation. 

So my colleagues and I are concerned that, should the Department act to delay the Central Gulf Oil and Gas Lease Sale 208, it 

will further establish a dangerous trend of blocking new Americanmade energy and the creation of new American jobs. Additionally, 

a delay of this sale would throw obstacles in the way of providing 

Americans oil and gas that the Energy Information Administration 

says that the Nation will need well past 2030 and also discourage 

energy companies from pursuing new opportunities in our country. 

And the other front-page issue affecting our Nation’s energy outlook is the cap-and-trade tax plan—the Chairman alluded to that 

briefly in his opening remarks, regarding the carbon releasing—but 

that cap-and-trade plan that was proposed by President Obama in 

his budget last Thursday. As a conservative estimate in that budget, this is a $646 billion 

cost that is being imposed on our economy. And anyone who uses 

energy—families, schools, factories, farms and so forth—will be affected. 

When you boil it right down, what a cap-and-trade tax means is 

that the Federal Government is going to purposely increase energy 

prices. In these difficult times, we need to keep a focus on growing 

our economy, not imposing additional taxes that will drive up the 

cost of energy for all Americans and potentially further push our 

economy in the wrong direction. 

I know that EIA has extensively examined the impacts of capand-trade programs that they will have on our economy, and I look 

forward to listening and learning from these witnesses and the 

other witnesses. 

So, Mr. Chairman, once again, thank you very much for your 

consideration. And I yield back my time. 

[The prepared statement of Mr. Hastings follows:] 

Statement of The Honorable Doc Hastings, Ranking Member, 

Committee on Natural Resources 

I want to thank the Chairman for holding this hearing so we can examine the 

energy outlook for our nation. There are certainly two front-page issues that have 

a significant impact on our nation’s energy outlook. One is the production of more 

American-made energy both offshore and on federal lands. There’s no question that 

the creation of more energy in our nation will help create new jobs and make us 

more secure by lowering our dependence on foreign oil. 

The development of our OCS resources is critically important to both our energy 

future and our economic future. While we are discussing possible future development, later this month the Department of Interior will conduct a lease sale in what 

8 

is believed to be one of America’s best untapped areas, the 181 South Area of the 

Gulf of Mexico. 

Today, I lead a number of my colleagues in sending a letter to Secretary Salazar 

stressing the importance of moving forward with this critical lease sale. The Secretary’s recent actions: revoking leases in Utah, reinstituting the moratoria on the 

OCS by delaying the 5-year plan, and stopping oil shale research in its tracks, show 

a clear trend against oil and gas development and job creation. My colleagues and 

I are concerned that should the Department act to delay the Central Gulf Oil and 

Gas Lease Sale 208, it will further establish a dangerous trend of blocking new 

American-made energy and the creation of new American jobs. Additionally, a delay 

of this sale would throw obstacles in the way of providing American oil and gas that 

the Energy Information Administration says the Nation will need well past 2030 

and also discourage energy companies from pursuing new opportunities in our country. 

And the other front-page issue affecting our nation’s energy outlook is the capand-trade tax plan proposed by President Obama in his budget from last Thursday. 

At the conservative estimate included in the budget, this is a 646 billion dollar cost 

being imposed on our economy and on anyone who uses energy, from families to 

schools to hospitals to factories to farmers. 

When you boil it right down, what a cap-and-trade tax means is that the federal 

government is going to purposefully increase energy prices. 

In these difficult economic times, we need to keep a focus on growing our economy, not imposing tax schemes that will drive up the cost of energy for all Americans and push our economy further in the wrong direction. 

I know that EIA has extensively examined the impacts that cap-and-trade programs will have on our economy and I look forward to listening and learning from 

the Administrator and the other witnesses. 

Thank you. 

Mr. COSTA. I thank the gentleman from Washington State very 

much for your comments. 

Now we will begin with recognizing our witnesses, who we appreciate very much, first Dr. Fatih Birol. 

Did I pronounce that properly? Thank you. 

He is the Chief Economist for the International Energy Agency. 

And we look forward to your testimony. You probably know the 

system here. A green light will be on, and that will remain green 

for 9 minutes and then, at the 9th minute, it will turn yellow. 

When it turns red, you are in real trouble if you are still speaking. 

No, you have an easy Chair here; I will cut you a little slack—if 

I find it interesting. 

Please begin. 

STATEMENT OF FATIH BIROL, CHIEF ECONOMIST, 

INTERNATIONAL ENERGY AGENCY 

Mr. BIROL. Chairman Costa, members of the Committee, thank 

you for the opportunity to appear before you today to discuss the 

views of the International Energy Agency, IEA, on the outlook for 

global energy markets over the medium and longer term. 

By way of background, the IEA is an intergovernmental organization based in Paris which acts as an advisor to 28 member countries, including the United States, in their effort to ensure reliable, 

affordable, and clean energy for their citizens. 

We were founded during the oil crisis of 1973-1974, and our initial role was to coordinate measures in times of oil supply emergencies. However, as energy markets have changed, so has the 

IEA. Our mandate now incorporates work on climate change policies, market reform, energy technological collaboration, and outreach to the rest of the world, especially major consumers and proVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6602 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
9 

ducers of energy, including China, India, Russia, and key OPEC 

countries. 

As you said, Mr. Chairman, last November the IEA released the 

2008 edition of its ‘‘World Energy Outlook,’’ the WEO 2008. Our report concludes that it is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle 

the twin energy challenges facing us today—twin energy challenges. 

The first one of these challenges is securing the supply of reliable 

and affordable energy, the first challenge; and second, effecting a 

rapid transformation to a low-carbon, efficient, and environmentally benign system of energy supply. 

The current trends point to rising imports of oil and gas into all 

OECD regions and developing Asia while the growing concentration of production in an ever-smaller number of countries threatens 

to increase our vulnerability to supply disruptions and sharp price 

hikes. 

On the climate change front, in the absence of stronger policy action, rising consumption of fossil fuels will drive up emissions and 

atmospheric concentration of greenhouse gases, putting the world 

on the perfect track for an eventual global temperature increase of 

up to 6 degrees Celsius, which will have, as we all know, dramatic 

effects on our planet and on human beings. 

Let me turn to oil. Our report provides a more detailed assessment of oil supply prospects than has ever been before released by 

the IEA. In our reference scenario, the base scenario, in which we 

assume the government policies do not change, oil demand continues to grow, mainly coming from China, India, and Middle East 

countries. 

And the fundamentals are there. Today in China, 18 persons out 

of 1,000 persons own a car. And in the United States, 850 persons 

out of 1,000 persons own a car. In Europe, 680 persons out of 1,000 

persons own a car. So, with the increasing income levels in China, 

India, and other countries, oil demands will grow, and this will put 

pressure on the demand side. 

On the supply side, the bulk of the increase we expect to come 

from in the future from key OPEC countries. The share of OPEC, 

which is about 40 percent today, will increase over 50 percent in 

2030. And the bad news for the non-OPEC countries is that oil production has peaked in most of the non-OPEC countries and it will 

peak in most others before long. 

Coming back to the United States, in the absence of new policies, 

we see that the U.S. oil imports will be around 12 million barrels 

per day in 2030, very similar to what we have today. 

These are not the only changes that we see in the future. Perhaps the most crucial change is that there will be a sea change in 

how the oil industry is being formed. If I may say so, the time of 

the Big Oil, international oil companies are passe ́, because the reserves, what they have today are declining, and they have major 

difficulties in access to new reserves, mainly in the hands of the 

national oil companies. And we expect the bulk of the growth of the 

production of oil and gas in the future, if it comes, it will come 

mainly from the national oil companies under different rules, what 

10 

we have seen in the past when the international oil companies 

were dominating the game. 

Based on our field-by-field analysis of the 800 top fields of the 

world—we analyzed 800 top fields of the world, which make more 

than three-fourths of the global reserves—we see that the existing 

fields are declining in the world significantly. And this decline will 

accelerate in the future, especially in the non-OPEC countries, including Mexico, a key supplier of crude oil to the United States. 

Let me give you an example, ladies and gentlemen, of how important it is to understand the issue of declining oil fields. We do not 

know, as one of the members of the Committee said, how much oil 

demand will grow exactly in the next years to come. But even if 

we assume that global oil demand, which is about 85 million barrels per day today, will stay like this in the next 20 years, even 

then there will be no growth in the global oil demand. In order to 

compensate the decline in the existing fields, just to compensate 

the decline, we have to bring four new Saudi Arabias in the next 

20 years just to compensate the decline. And I can tell you that 

this is a major challenge. 

Here, I would like to highlight, in addition to this geological challenge, another challenge which is a key one, namely the challenge 

of investments, especially nowadays. The credit crisis and deepening economic downturn is leading to a scaling back of all types 

of investment in most countries along the oil supply chain. While 

demand is also falling with the economic slump, there is a danger 

that the investment in the coming months and years is reduced too 

much, leading to a shortage of capacity and another spike in prices 

several years later when the economy is on the road to recovery, 

due to the long lead times in completing large upstream and refining projects. 

These trends I told you about, the declining security of supply 

and climate change, are definitely sobering and alarming trends. 

However, I can tell you that they are not set in stone. Indeed, there 

is much that can and is being done in many parts of the world to 

address these twin energy-related threats. 

In the past, the IEA has noted that very significant room remains to increase fuel-efficiency standards for trucks and cars in 

the United States, which would immediately contribute to energy 

and environmental security. In that respect, we commend the new 

American Recovery and Reinvestment Act. 

We believe consideration could also now be given to taking advantage of the recent slide in the world oil price to review the gasoline and diesel taxes and thereby lock in the efficiency gains that 

resulted from last year’s price surge. 

Similarly, I believe efforts to maximize the production of U.S. domestic oil and natural gas resource, including through an expansion of drilling on the Offshore Continental Shelf, could form a crucial part of a comprehensive strategy to enhance the Nation’s 

energy security. 

To finish, looking at the global picture, the only possible solution 

to a long-term sustainable future is to strive for an energy mix that 

uses all options simultaneously. We need to combine greater energy 

efficiency improvements with more renewables and more nuclear 

power. We must seek to minimize our dependence on fossil fuels 

11 

while recognizing that they will need to continue to make a significant contribution for meeting our energy needs for several years to 

come. And I want to emphasize this, Mr. Chairman: It is not realistic to expect low-carbon technologies to replace fossil energies 

overnight. 

Finally, it is also imperative that international collaboration on 

energy policy is enhanced. Perhaps the best demonstration of this 

is on the climate change front. Many countries, such as the United 

States or the European Union, make suggestions to reduce CO2

emissions 20 percent, 15 percent. However, even if we assume that, 

as of tomorrow, U.S. emissions—forget the reduction in the emissions, but would go to zero, completely zero, and stay like that for 

the next 25 years, European emissions will go to zero and stay like 

that 25 years, Japan and the others, and if China and India would 

continue with their existing policies, we would be still perfectly in 

line with a 6-degrees increase in temperature. So there is a need 

for cooperation in getting China, India, and Russia on the books. 

And even if the U.S. were to succeed in lowering its oil imports 

in the coming years, increasing import dependency in other major 

consuming regions, mainly in China and India, would still mean 

that any oil supply disruption anywhere in the world would result 

in severe knock-on effects for the U.S. market. 

Mr. Chairman and members of the Subcommittee, this completes 

my statement. I would be happy to take any questions you may 

have. Thank you. 

[The prepared statement of Mr. Birol follows:] 

Statement of Dr. Fatih Birol, Chief Economist, 

International Energy Agency 

Chairman Costa, members of the committee, thank you for the opportunity to appear before you today to discuss the views of the International Energy Agency (IEA) 

on the outlook for global energy markets over the medium and longer-term. My 

name is Fatih Birol and I am the Chief Economist and the Director of the office 

responsible for the economic analysis of energy policy at the IEA. 

By way of background, the IEA is an intergovernmental organisation which acts 

as an advisor to 28 member countries including the United States in their effort to 

ensure reliable, affordable and clean energy for their citizens. Founded during the 

oil crisis of 1973-74, the IEA’s initial role was to co-ordinate measures in times of 

oil supply emergencies. As energy markets have changed, so has the IEA. Its mandate now incorporates work on climate change-policies, market reform, energy-technology collaboration and outreach to the rest of the world, especially major consumers and producers of energy including China, India, Russia and the OPEC countries. 

Last November, the IEA released the 2008 edition of its World Energy Outlook 

(WEO-2008). The report concludes that it is not an exaggeration to claim that the 

future of human prosperity depends on how successfully we tackle the twin energy 

challenges facing us today: securing the supply of reliable and affordable energy; 

and effecting a rapid transformation to a low-carbon, efficient and environmentally 

benign system of energy supply. Current trends in energy supply and consumption 

point to rising imports of oil and gas into OECD regions and developing Asia while 

the growing concentration of production in an ever smaller number of countries 

threatens to increase our vulnerability to supply disruptions and sharp price hikes. 

And, in the absence of stronger policy action, rising consumption of fossil energy will 

drive up inexorably emissions and atmospheric concentrations of greenhouse gases, 

putting the world on track for an eventual global temperature increase of up to 6°C. 

The report provides a more detailed assessment of oil-supply prospects than has 

ever before been released by the IEA. In a Reference Scenario, in which government 

policies are assumed to be unchanged, oil demand continues to grow strongly over 

the medium and longer-term. All of the projected increase is expected to come from 

non-OECD countries, led by China, India and the Middle East. The bulk of the increase in supply is expected to come from OPEC countries, their collective share risVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
12 

ing from 41% today to 51% in 2030. Production has already peaked in most nonOPEC countries and will peak in most of the others before long. With respect to the 

United States, in the absence of a change in policy, we expect it to be importing 

around 12 mb/d of oil by 2030, only slightly down on current levels. 

These trends point to a sea change in the structure of the upstream oil and gas 

industry. The international oil companies, which have traditionally dominated the 

sector, will be increasingly squeezed by the growing power of the national companies 

and by dwindling reserves and production in accessible mature basins outside OPEC 

countries. The challenges confronting the oil sector will be further exacerbated by 

the prospect of accelerating declines in production at individual oilfields. Based on 

the WEO-2008’s detailed field-by-field analysis of the historical production trends of 

almost 800 of the world’s oilfields—the most comprehensive study of its kind ever 

made public—we expect decline rates to accelerate significantly. Declines are fastest 

at oilfields in non-OPEC countries, including Mexico—a key supplier of crude oil to 

the United States. 

Our analysis demonstrates that projections of oil supply are far more sensitive to 

assumptions about decline rates than to the rate of growth in oil demand. For instance, even if global oil demand was to remain flat until 2030, some 45 mb/d of 

additional gross capacity—the equivalent of over four times the current capacity of 

Saudi Arabia—would need to be brought on stream simply to offset declining production at existing fields. 

The world’s total endowment of oil is large enough to support the projected growth 

in output. The immediate risk to supply, however, is a lack of investment where it 

is needed. There remains a real possibility that under-investment will cause an oilsupply crunch in the medium term. More immediately, the credit crisis and deepening economic downturn is leading to a scaling back of all types of investment in 

most countries along the oil supply chain. While demand is also falling with the economic slump, there is a danger that investment in the coming months and years 

is reduced too much, leading to a shortage of capacity and another spike in prices 

several years later when the economy is on the road to recovery, due to the long 

lead times in completing large upstream and refining projects. 

Although the trends that I have outlined are a cause for serious concern, they are 

not written in stone. Indeed there is much that can and is being done in many parts 

of the world to address the twin energy-related threats. In the past, the IEA has 

noted that very significant room remains to increase fuel-efficiency standards for 

trucks and cars in the United States, which would immediately contribute to energy 

and environmental security. In this respect, the new American Recovery and Reinvestment Act, with its strong focus on reducing fossil fuel dependence and greenhouse gas emissions by pursuing more aggressive demand-side and clean energy 

policies, is to be commended. Indeed we believe it makes good sense to exploit the 

opportunity of the financial and economic crisis to effect a shift in investment to 

low-carbon technologies. For example, the $95 billion that the IEA estimates the 

United States must invest each year in the power sector to move onto a pathway 

consistent with limiting the increase in the average global temperature to 2°C would 

also create jobs and enhance energy security. 

Consideration could also now be given to taking advantage of the recent slide in 

the world oil price to review gasoline and diesel taxes and thereby ‘‘lock-in’’ the efficiency gains that resulted from last year’s price surge. Similarly, I believe efforts 

to maximize the production of the United State’s domestic oil and natural gas resource—including through an expansion of drilling on the Offshore Continental 

Shelf which is thought to contain significant amounts of recoverable resources— 

could form a crucial part of a comprehensive strategy to enhance the nation’s energy 

security. 

However, at the global level, the only possible solution to a long-term sustainable 

future is to strive for an energy mix that uses all options simultaneously. We need 

to combine greater energy efficiency improvements with more renewables and more 

nuclear. We must seek to minimise our dependence on fossil fuels while recognising 

that they will need to continue to make a significant contribution to meeting our 

energy needs for several decades to come: it is not realistic to expect low-carbon 

technologies to replace fossil energy overnight. 

It is also imperative that international collaboration on energy policy is enhanced. 

Perhaps the best demonstration of this on the climate change front is that even if 

all OECD Member countries were to immediately reduce their CO2 emissions to 

zero, we would still not be on a sustainable path unless non-OECD countries such 

as China, India and Russia were also to curb their emissions. IEA countries must 

also work with non-Members to address energy security, because all countries trade 

oil in an interconnected global market. Even if the United States were to succeed 

in lowering it oil imports in the coming years, increasing import dependency in 

13 

other major consuming regions—notably China and India—would still mean that 

any oil supply disruption anywhere in the world would result in severe knock-on 

effects for the U.S. market. 

Mr. Chairman, and members of the Subcommittee, this completes my statement. 

I would be happy to take any questions you may have. 

Response to questions submitted for the record by Dr. Fatih Birol 

Questions from Chairman Jim Costa, from the State of California 

1. Dr. Birol, we hear a lot about the impact, or lack thereof, of additional 

drilling on oil prices. However, we hear less about the potential impact 

of drilling on natural gas prices. Does increased drilling in the former 

moratoria areas of the OCS have the potential to significantly impact 

natural gas prices, and if so, on what sort of timeframe? 

The potential impact on natural gas prices would depend on the quantities of additional gas supply that these areas were able to produce and the supply-demand 

balance of the market at the time. Offshore exploration and development of both oil 

and gas resources typically takes several years before production can be marketed, 

so it is unlikely that there would be a substantial effect felt during the next few 

years. 

2. Dr. Birol, the New York Times reported on March 15 about the steep decline in U.S. drilling activity, caused by the equally steep reduction in 

oil and natural gas prices since last summer. During last summer’s high 

prices, a common argument was that increasing drilling in the U.S. 

Outer Continental Shelf and on federal lands out west would result in 

lower prices for consumers. However, it appears that instead of the 

amount of drilling being a determining factor on the price of oil and natural gas, in fact the price of oil and natural gas is the determining factor 

on the amount of drilling activity. In simpler terms: drilling doesn’t 

drive prices, but prices do drive drilling. Are these accurate statements? 

Prices are driven by the supply-demand balance of the market. The effect of drilling is to maintain and increase the supply, but the investment needed for drilling 

is funded (over a period of time) from the sale of oil and gas, hence prices and drilling are linked via the market. 

3. Dr. Birol, we would like your thoughts on what our definition and goals 

should be for energy security, as this Committee works on energy policy 

this Congress. Sometimes we talk about energy security as meaning freedom from foreign oil. But there are broader ways to think about the 

term, and the World Energy Outlook puts it very well in the first sentence in the Executive Summary: ‘‘Current global trends in energy supply and consumption are patently unsustainable—environmentally, economically, socially.’’ So can I ask you to give us your thoughts on what 

a ‘‘secure’’ energy future means? Should it be independence from foreign 

oil, or should it be something more? 

I believe the concept of energy security is much broader than just reducing dependence on foreign oil. There are essentially five steps that need to be taken. Firstly, we need to create an investment environment where the private sector is willing 

and able to do its job of providing secure, affordable, clean energy. Secondly, we 

need to continue efforts to diversify our fuel mix, including the geographic sources 

of those fuels. Thirdly, we need to peruse stronger conservation and efficiency policies. Fourthly, we need to improve energy market transparency. And finally, we 

must ensure that we have appropriate emergency preparedness measures in place. 

4. Dr. Birol, one of the issues this Committee has been trying to get a handle on is how much it costs oil and gas companies to do business here 

in the United States, and if that is significantly cheaper or more expensive elsewhere in the world. The GAO has put out a couple of reports 

saying that the amount of revenue the government brings in, as a percentage of the total revenue from the oil and gas, is one of the lowest 

percentages in the world. But on the other hand, some Members of Congress have said that it has to be that way because the costs of finding 

oil in the United States are so much higher than they are in other countries. Is it significantly more expensive to produce a barrel of oil in the 

United States, onshore and/or offshore, than it is in other countries? 

Excluding fiscal burdens, the cost of production per barrel of oil depends on multiple factors including geology, location (onshore/offshore, water depth, type of terVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
14 

rain, climate, accessibility, etc.), infrastructure, distance to market and others. 

There is limited data that could be used to provide a truly representative comparison, however overall production cost indices in the U.S. are higher than the worldwide averages. 

5. Is there an estimate of the additional cost incurred by production companies as a result of complying with federal regulations? 

I am not aware of an independent estimate, but no doubt some production companies have quantified the magnitude of various regulatory expenses. 

6. Dr. Birol, USGS has noted in recent assessments that about 60% of the 

world’s known oil shale is in Utah, Wyoming, and Colorado. And the figure ‘‘1 trillion barrels’’ is often used to discuss the amount of the oil 

shale resource. In addition, the U.S. has significant resources of tar 

sands, another unconventional resource. lEA stresses the need to undertake a major decarbonization of the world’s energy systems; to what extent does it makes sense, relative to other energy options, for the U.S. 

to be pursuing oil shale beyond Research and Development leases right 

now? 

It does make sense to pursue the development of non-conventional oil resources— 

including the vast deposits of oil shale in the United States—as they have the potential to make a significant contribution to energy security in the decades ahead. 

However, it is important to recognise that the production of non-conventional resources leaves a large environmental footprint, including significant carbon dioxide 

emissions. Therefore we must also support the research and development of technologies such as carbon capture and storage which offer the opportunity to continue 

using fossil fuels while still decarbonising the world’s energy system. 

7. Dr. Birol, in the 2009 Annual Energy Outlook, EIA points out that the oil 

fields in the areas formerly under moratoria are expected to be much 

smaller than the average undiscovered field size in the Gulf of Mexico. 

And the 2008 World Energy Outlook states that small fields decline at a 

much more rapid rate than large fields. So does this mean if we started 

drilling in frontier areas, companies would have to drill considerably 

more wells, over wider geographic areas, than they would in the Gulf of 

Mexico? 

Yes. It is likely that more exploration wells would need to be drilled per barrel 

of oil found and more wells would need to be drilled for a given volume of oil produced. Or, put the other way round, well productivity—barrels produced per well— 

would be expected to be lower than in the Gulf of Mexico. As you point out, smaller 

fields tend to decline faster once peak is reached; they also peak sooner and have 

a higher peak relative to reserves than larger fields. 

8. Dr. Birol, the World Energy Outlook says that the role of speculation on 

oil prices ‘‘remains unclear’’, but that was written last fall, before oil 

prices completed their spectacular fall to where they are today. Is there 

a better idea now on what role speculation played in these wild price 

swings? 

It will never be possible to prove one way of another the precise impact of speculation on the historical movements in the price of any commodity. That said, we remain of the view that speculation may well have amplified the effect of market fundamentals in driving prices up but was not the principal cause of the price rise. 

Data that has become available in recent months provides strong support for the 

argument that we advanced last year in the World Energy Outlook and in the 

monthly Oil Market report that tight distillate markets—caused by a lack of refining capacity and exceptionally strong demand—were a major factor behind the surge 

in prices. 

9. Dr. Birol, from an efficiency standpoint, how much sense does a hydrogen economy make? Particularly if you use electricity to create the hydrogen, it appears that the various steps of hydrogen formation, transportation, and recombination creates a number of opportunities for 

power loss in each of the steps, while direct electricity use just incurs 

transmission losses. So, energetically, does it make more sense to try to 

get cars that run on hydrogen, or to focus on plug-in hybrids, or purely 

electric cars? 

Each conversion step has losses, and therefore the typical hydrogen-fuelled vehicle 

is disadvantaged in this respect to an electricity-fuelled vehicle. However a hydrogen 

fuelled vehicle could overcome the limited driving ranges of current pure electric vehicles, and would have lower CO2 emissions than plug-in hybrids which run on peVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
15 

troleum fuels for some part of their driving (assuming the hydrogen was produced 

using low CO2 emission sources). Widespread penetration of hydrogen as a fuel has 

other challenges such as infrastructure and technology development of fuel cells, 

however some vehicle manufactures are putting much effort into RD&D of hydrogen 

vehicles. 

10. Dr. Birol, the 2008 World Energy Outlook projects considerably higher 

levels of needed investment than the 2007 World Energy Outlook—over 

$4 trillion more, which is nearly a 20% increase. Why is that? What 

changed in that year to indicate that such higher investment levels 

would be needed? 

The cost of bringing on new supply in the energy sector surged in 2007 and 2008, 

leading to the upward revision of $4.4 trillion for energy sector investment needs 

to 2030. However, as a consequence of the downturn in the global economy, there 

are signs that unit costs, including labour, concrete, steel and drilling rig day-rates, 

are now starting to fall back. 

11. Dr. Birol, has your organization modelled the impact of the proposed 

Alaska Natural Gas Pipeline, if and when it gets built? Is there a sense 

of the impact that might have on U.S. natural gas supplies or prices? 

We have not modelled in detail the impact of the pipeline as such, though our 

projections assume that a pipeline from Alaska to the lower-48 states is built and 

commissioned after 2015 and before 2030. We assumed the capacity would be 

around 4 billion cubic feet per day (roughly 40 billion cubic metres/year). Were such 

a pipeline to be built, the incremental supplies would certainly have some impact 

on gas prices, as it would relieve the pressure to either develop indigenous resources 

in the lower-48 states or import liquefied natural gas. Putting a precise figure on 

the price impact is very hard, as drilling costs and LNG prices are likely to continue 

to change over time. 

12. Dr. Birol, the World Energy Outlook projects a major contribution from 

carbon capture and sequestration in order to meet lower carbon targets. The reference case of the outlook only has a minor contribution 

from CCS, but indicates that stronger policies, such as a carbon cap, 

would be needed to get significant amounts of CCS by 2030. Are there 

any other policies that could or should be adopted by the U.S., or other 

nations, besides a carbon cap, to accelerate the wide scale deployment 

of CCS? How quickly should we be doing those? 

CCS is a technology that is very promising but there remains some uncertainty 

as to whether it will be viable on a cost-effective basis. While a carbon cap may play 

a central role in incentivising its deployment, there are research and development 

issues to be addressed before deployment can ever happen on the scale set out in 

our Climate Policy Scenarios. Consequently, there is an important role for the U.S. 

and other major economies to play in investing in CCS pilot projects in order to assess and develop the technology’s potential. It is important that development of CCS 

technologies takes into account the likely future uses for the technologies, in the 

U.S. but also in key countries such as China and India, and across both power generation and industrial uses. Given the cost involved, a co-ordinated, international 

approach to CCS research, development and deployment may be most effective. 

13. Dr. Birol, the World Energy Outlook projects that $1.1 trillion that 

would be needed in transmission and distribution investment in North 

America through 2030. How much of that would be needed specifically 

in the United States? Is that investment necessary to support additional capacity, or to provide access to new sources of renewable energy, or to replace aging transmission lines, or is it a combination of 

all of those? 

About 80% of this amount (or $900 billion) is what the United States will need 

to invest in transmission and distribution networks through 2030. This investment 

is necessary to support additional capacity, to replace aging transmission lines and 

to integrate renewables. Please note that this is the investment needed in our Reference Scenario, which takes into account current policies only. Our low carbon scenarios show that this investment can in fact be lower because of lower electricity 

demand (as a result of greater energy efficiency in buildings and in industry), which 

results in fewer power stations being built. For example, in our 450 ppm Policy Scenario (which assumes stabilisation of greenhouse gas emissions at 450 parts per million in the long run) we estimate that the investment needed in networks is $530 

billion. 

16 

14. Dr. Birol, in the low carbon projections of the World Energy Outlook, 

there are significant cost savings to making the necessary investments. 

For the 550 parts per million scenario, the additional investment in the 

world is $4.1 trillion, while the fuel savings from those investments and 

new policies end up saving the world over $7 trillion. Does this mean 

that instead of being a crushing blow to the world’s, or the United 

States’, economy, a carbon cap could actually end up making us money? 

Are there additional costs that the world, and the United States, would 

be expected to incur if no action was taken to address climate change? 

There are indeed many investments in our Climate Policy Scenarios, which effectively pay for themselves, or generate net savings, as a result of energy efficiency 

improvements. These include more fuel-efficient vehicles, building insulation and 

more efficient appliances. Although in most cases, up-front costs will take several 

years to recover, savings globally in the 550 Policy Scenario do exceed additional 

investments. 

For other investments, particularly in power generation and industry and those 

needed to achieve the 450 Policy Scenario will incur net financial costs. Certainly, 

no envisaged carbon cap looks like being a ‘‘crushing blow’’ to either the world’s or 

the United States economy, particularly given the importance and benefit of taking 

early steps to transform the energy sector. The precise costs and benefits to the 

economy will ultimately depend on the level of the carbon cap and the effectiveness 

of policies to underpin it. 

15. Dr. Birol, could you provide your thoughts about our ability to harness 

some of the potential of enhanced geothermal systems? Is enhanced 

geothermal likely to be feasible in the near future? How long would it 

take before people could start building EGS power plants? 

While this technology has a great potential to provide cheap baseload electricity, 

I do not expect that it will make a major contribution in the short to medium-term 

as significantly more R&D is needed to bring costs down and to improve performance. Drilling represents a significant portion of the total cost; the technology could 

benefit from improvements in drilling in the oil and gas industry. 

16. Dr. Birol, in the World Energy Outlook, there is a very comprehensive 

review of the potential for various ocean renewable energy technologies, including tidal and wave power. However, I don’t believe 

there was anything on ocean thermal energy conversion or deep seawater air conditioning. These are both technologies that might be very 

useful for tropical islands, such as the U.S. territories that are under 

the jurisdiction of this committee. Do you have any thoughts about the 

potential of these technologies? 

Ocean thermal energy conversion is a technology with a large potential, but for 

the longer term. I do not expect any major deployment before 2030, as it is still in 

its infancy and needs R&D support. Deep seawater air conditioning is already being 

used, although in just a few locations around the world. It can be a solution for 

small islands. 

17. Dr. Birol, during the hearing, you indicated that there might be some 

countries that placed some restrictions on where oil and gas companies 

were allowed to drill offshore, but you were unable to name them at 

the time. Could you provide the Committee with a list of countries that 

do not provide complete and unfettered access to the entirety of their 

extended continental shelves for the purposes of oil and gas leasing, 

and describe the nature of whatever geographical restrictions or limitations are in place? 

The IEA does not maintain a database on geographical restrictions on drilling. In 

many cases, restrictions exist in order to slow the pace of development of hydrocarbon resources. It is not always clear to what extent the limitations on drilling 

are the result of concerns about the environmental impact rather than a general 

goal of limiting the overall pace of development. 

Questions from the Ranking Member Doug Lamborn, from the State of 

Colorado 

1. In your own testimony you state that no global warming program can 

succeed without cooperation of China and India. Do you have any information on the number of coal plants that China and India have built and 

are planning to build? 

Collectively China and India have about twice as many coal plants as the United 

States. Both countries plan to build many more. Without any additional efforts to 

17 

reduce GHG emissions, they could build over a thousand new coal plants by 2030, 

which is about three times more than the present number of coal plants in the 

United States. These new plants are expected to use more advanced technology than 

what they use now. China is already building more efficient (and therefore less polluting) power plants using the same technology as OECD countries and India is 

catching up. Moreover, both countries are participating in international programs 

to develop carbon capture and storage. 

2. What kind of environmental standards does China impose on coal-fired 

or other power plants? Would these plants meet U.S. environmental 

standards for SOX and NOX? 

China has introduced legislation to control air pollutants from power plants. The 

most important piece of legislation was introduced in 2003 and sets emission standards for power plants. Others concern incentives to operate flue gas 

desulphurisation (FGD), costs of installing and operating FGD, outdated equipment 

that is not to be used, and a trial scheme that introduces penalties for failing to 

operate FGD plant. Moreover, China plans to shut down older polluting plants. We 

expect sulphur emissions in China to rise only modestly in the future as a result 

of greater efficiency in electricity production and greater use of FGD. In contrast, 

we expect the absolute level of NOX emissions to continue to rise, although NOX 

emission per plant will decline. 

3. What would happen to American jobs if the U.S. increased domestic 

energy costs by 100% as a result of restricting carbon emissions while 

the developing nations continue business as usual with no carbon controls? 

There are many possible variations to such a scenario, so we are unable to quantify the employment impact. However, our analysis indicates that the transition to 

a low-carbon energy sector in the U.S. would be likely to result in a strong positive 

impact on employment. Such a scenario would operate as a demand stimulus, with 

positive impacts on a number of sectors—particularly construction, automobiles and 

high value-added technology. 

4. The world leader in car purchases in January of this year was China. 

What sort of ‘‘CAFE’’ or mileage standards does China have? Does India 

have something similar to the U.S. CAFE standards? In addition, can you 

describe the modem pollution control requirements for these countries? 

China has enacted fuel economy standards which are based on the weight of the 

vehicle split into 16 different weight classes. For example, Chinese fuel efficiency 

standards for passenger vehicles are currently around 30% more efficient than those 

of the United States. China also has emissions standards based on the EURO standards used in the European Union. India does not currently have mandatory fuel 

economy standards, however they have mandatory standards for pollutant emissions 

similar to those adopted in the European Union, which may also have the effect of 

improving fuel economy. For example EURO II standards were introduced nationwide in India in 2005, they were introduced in Europe in 1995. Also several of the 

largest cities in India have regulations regarding CNG vehicles due to local pollution concerns. 

5. The development of the recent Nano by India’s Tata motors means that 

the developing world intends for every family to have a car. What impact will this have on gasoline prices, green house gas emissions, and 

climate change going forward? 

Increasing mobilisation helps to drive a countries economy and also improve the 

quality of life for its inhabitants. The introduction of low-price vehicles provides access to motorised mobility to more of the world’s inhabitants, but it should be noted 

that it is increasing incomes in developing countries that also has a large effect on 

vehicle ownership, and that these low cost vehicles are often small and relatively 

efficient. The majority of the global oil demand growth in the mid- to long-term will 

come from the transport sector in developing countries. This demand growth will 

put upward pressure on oil prices, and we may see oil prices return to their highs 

of last summer over the mid-term. 

6. What impact will a cap and trade system have on the domestic agriculture sector, particularly on those sectors which are heavily dependent on fertilizer? How about the domestic cement industry? 

The impacts of a cap and trade system will depend on which sectors are included, 

which gases are included and how the system is designed, including how it links 

with international trade and other countries’ cap-and-trade systems. Given these 

variables, it is not possible to go into specifics. However, as a general rule, cap-andVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
18 

trade will provide incentives for businesses in high-emitting industries to adopt 

more efficient, and less polluting, processes and technologies. At the same time, the 

price mechanism should create greater allocative efficiency, to allow those sectors 

that most need to pollute (due to a lack of viable alternatives) to continue to do so, 

while securing emissions reductions from those parts of the economy where it is 

more cost-effective to achieve them. 

Mr. COSTA. Thank you very much, Doctor. You did go over time 

a little bit, but we found you interesting. So I appreciate that. And 

I do agree that we obviously have to cooperate and collaborate both 

at home and abroad. 

Which brings us to our next witness, Dr. Howard Gruenspecht, 

to testify. 

Mr. Gruenspecht? 

STATEMENT OF HOWARD K. GRUENSPECHT, ACTING 

ADMINISTRATOR, ENERGY INFORMATION ADMINISTRATION 

Mr. GRUENSPECHT. Mr. Chairman and members of the Subcommittee, I appreciate the opportunity to appear before you today 

to discuss the U.S. energy outlook to 2030 and energy resources on 

Federal onshore and offshore lands, focusing on the role of the 

Outer Continental Shelf, or OCS. 

The Energy Information Administration is the independent 

statistical and analytical agency within the Department of Energy 

that produces data projections and analyses to assist policymakers, 

help markets function efficiently, and inform the public. We do not 

promote, formulate, or take positions on policy issues, unlike my 

colleague Mr. Birol, and our views should not be construed as representing those of the Department of Energy or the Administration. 

Later this month, EIA will release the complete 2009 edition of 

our ‘‘Annual Energy Outlook.’’ Notably, our reference case projects 

no growth in U.S. oil consumption, reflecting the combined effect 

of recently enacted corporate average fuel economy standards and 

requirements for increased use of renewable fuels, as well as a rebound in oil prices as the world economy recovers. That affects both 

domestic oil consumption and domestic oil production. 

The net import share of total liquid supply, including biofuels, 

declines from 58 percent in 2007 to about 40 percent between 2025 

and 2030. The world’s crude oil price is projected again to rise as 

the global economy rebounds and global demand once again grows 

more rapidly than liquids production outside of the OPEC area. In 

2030, the average real price of crude oil is about $130 a barrel in 

2007 dollars, which is actually quite similar to the projection that 

the International Energy Agency has. 

I should say that, unlike the International Energy Agency, we 

also prepare low- and high-oil-price cases because—and I think 

they would share this view—we are very uncertain about what oil 

prices will actually be, as recent history suggests. 

Turning to natural gas, EIA has raised its projection for both 

U.S. production and consumption, reflecting increased availability 

of gas shale resources and higher demand for natural gas use in 

electric power generation, due in part to the apparent impact of 

concerns related to greenhouse gas emissions on power plant investment decisions. 

19 

With growing projected production of natural gas from gas shale 

and other unconventional onshore resources, the OCS and Alaska, 

the net import share of total natural gas use also declines from 16 

percent in 2007, most of which comes from Canada, to less than 3 

percent in 2030. 

Total consumption of marketed renewable fuels grows by 3.3 percent per year in our reference case. This rapid growth reflects the 

renewable fuel standard provisions included in the Energy Independence and Security Act of 2007 and strong growth in the use 

of renewables for electricity generation that is spurred by renewable portfolio standards for electricity generators in many States. 

I think it is 28 States and the District of Columbia that have those 

policies. 

Resources on Federal lands, both onshore and offshore, are important to U.S. oil and natural gas production. In 2007, roughly 32 

percent of U.S. oil production and 29 percent of U.S. natural gas 

production were from Federal lands. Looking forward, which is always more uncertain, production from Federal lands is projected to 

reach 47 percent of total production for oil and 36 percent of total 

production for natural gas by 2030. 

The rest of my testimony offers additional detail on current and 

projected OCS production, which provides a preponderant share of 

oil from Federal lands and, over time, a growing majority share of 

natural gas from Federal lands. I will also discuss some of the factors, including access conditions and prices that drive our estimates. 

In 2007, the OCS areas produced 1.3 million barrels per day of 

crude oil, amounting to about 25 percent of total U.S. crude oil production, down from peak OCS production of 1.6 million barrels per 

day in 2003. Natural gas production in the OCS in 2007 was 2.8 

trillion cubic feet, down from a peak of 5.1 trillion cubic feet in 

1997. Although OCS production has fallen off in recent years, in 

the near term we expect OCS production of both oil and natural 

gas to rise, as new projects begin operation in OCS areas that have 

long been open. 

Consistent with our practice at EIA of reflecting existing laws 

and regulations, our reference case that I have discussed reflects 

removal in 2008 of the moratoria for drilling in the Atlantic, 

Pacific, and parts of the eastern Gulf OCS areas. 

Based on the average Minerals Management Service estimates 

for undiscovered resources and our own information on crude reserves and reserves appreciation, these areas held about 20 percent 

of the total OCS technically recoverable oil resource, exclusive of 

past production, as in the beginning of 2007, 18 billion barrels out 

of a total of more than 93 billion barrels. 

For natural gas, the corresponding estimate of unproduced but 

technically recoverable OCS resources at the beginning of 2007 is 

456 trillion cubic feet. Roughly 76 trillion cubic feet is estimated to 

be in areas under moratoria prior to 2008. 

Assumptions about exploration, development, and production of 

fields such as growing schedules, costs, the type of platform you select, reserves-to-production ratios in the Pacific, Atlantic and eastern Gulf of Mexico, in the EIA’s work are generally based on data 

for fields in the central gulf that are of similar water depth and 

20 

size. In addition, when we did our work, we assume that local infrastructure issues and other potential non-Federal impediments 

are resolved. Lack of resolution of those issues would, of course, affect our projections. 

By 2030, total lower-48 offshore crude oil production, including 

very small amounts in State waters, is projected to nearly double 

from the current level to nearly 2.7 million barrels per day, while 

lower-48 offshore natural gas production is projected to rise by 

nearly two-thirds, to 4.9 trillion cubic feet a year. 

Production from OCS leases in the Pacific begins in the next decade, with total crude oil production reaching nearly 500,000 barrels 

per day in 2030. And some of the opening statements have already 

referred to the oil-prone nature of the Pacific resource. Crude oil 

production from the Atlantic region begins somewhat later, reaching 200,000 barrels per day by 2030. 

As part of this year’s long-term outlook, which again will be released later this month, EIA also prepared a restored moratoria 

sensitivity case. OCS crude production in 2030, in that case, is 

about 565,000 barrels per day less than in the reference case. And 

cumulative domestic production of crude oil from all U.S. Federal 

and non-Federal sources between 2010 and 2030 is 4.2 percent 

lower than in the reference case. 

Estimates of production from the OCS areas previously under 

moratoria are higher than in EIA’s previous analysis that was presented in our 2007 energy outlook, primarily because the 2009 outlook has significantly higher oil and natural gas prices. Also, in 

this year’s outlook, the assumed initial flow rates in the Pacific 

OCS fields in shallow waters were adjusted to better reflect the 

production potential from these oil-prone fields compared to the 

more natural-gas-prone fields in the central Gulf of Mexico that 

were used as the basis of earlier estimates. 

Restoration of the previous OCS moratoria also affects the supply 

of natural gas but to a lesser extent. With the restored moratoria, 

production lower-48 offshore is 800 billion cubic feet lower in 2030 

than it is in the reference case, but the resulting higher natural 

gas prices increase the projection for onshore natural gas production by 200 billion cubic feet in 2030. Overall, the difference, the 

cumulative natural gas production between 2010 and 2030, including both Federal and non-Federal, is about 1.3 percent lower in the 

moratoria-restored case than in the reference case. 

Again, prices, as well as access, affect the reproduction from the 

OCS. In the oil price case—where oil prices remain about $50 in 

real terms, close to where it is today—projected OCS crude production under full access is 2.1 million barrels per day, slightly below 

the projected production under reference case prices in the restored 

moratoria case. So, again, access matters, but prices also matter. 

That is an important point. 

In sum, the OCS is expected to remain a substantial contributor 

to domestic crude oil and natural gas supply under a range of access and price assumptions. 

That concludes my statement, Mr. Chairman. I would be happy 

to answer any questions you or the other Members may have. 

[The prepared statement of Mr. Gruenspecht follows:] 

21 

Statement of Dr. Howard Gruenspecht, Acting Administrator, 

Energy Information Administration 

Mr. Chairman and Members of the Committee, I appreciate the opportunity to appear before you today to discuss the U.S. energy outlook to 2030, focusing on the 

role of the Outer Continental Shelf (OCS) in current and projected energy production. 

The Energy Information Administration (EIA) is the independent statistical and 

analytical agency within the Department of Energy that produces objective, timely, 

and relevant data, projections, and analyses to assist policymakers, help markets 

function efficiently, and inform the public. We do not promote, formulate, or take 

positions on policy issues, and our views should not be construed as representing 

those of the Department of Energy or the Administration. 

The Energy Outlook: The Big Picture 

The full Annual Energy Outlook 2009 (AEO2009), which will be issued later this 

month, includes over 35 cases. The reference case and other AEO2009 cases provide 

the results discussed in this testimony. 

Liquid Fuels Consumption and Import Dependence. For the first time in more 

than 20 years, the AEO2009 reference case projects no growth in U.S. oil consumption, reflecting the combined effect of recently enacted Corporate Average Fuel 

Economy standards, requirements for increased use of renewable fuels, and an assumed rebound in oil prices as the world economy recovers. With overall liquid fuel 

demand in the AEO2009 reference case growing by only 1 million barrels per day 

between 2007 and 2030, plus increased use of domestically-produced biofuels and 

rising domestic oil production spurred by higher prices, the net import share of total 

liquids supplied, including biofuels, declines from 58 percent in 2007 to less than 

40 percent in 2025 before increasing to 41 percent in 2030. 

Natural Gas Consumption and Import Dependence. The reference case raises 

EIA’s projection for U.S. production and consumption of natural gas compared to the 

previous Annual Energy Outlook (AEO), reflecting increased availability of resources and higher demand for electric power generation, due in part to the apparent impact of concerns related to greenhouse gas emissions on power plant investment decisions. With growing production of natural gas from unconventional onshore sources, the OCS, and Alaska, the net import share of total natural gas use 

also declines, from 16 percent in 2007 to less than 3 percent in 2030. 

Total Primary Energy Use and Energy-Related Carbon Dioxide Emissions. Recently-enacted efficiency regulations and higher energy prices in the AEO2009 reference case, compared to the last AEO, slow the rise in U.S. energy use, which is 

projected to grow from 101.9 quadrillion Btu in 2007 to 113.6 quadrillion Btu in 

2030. When combined with the increased use of renewables and a reduction in projected additions of new coal-fired conventional power plants, this slows the growth 

in energy-related greenhouse gas emissions. Energy-related carbon dioxide emissions grow at 0.3 percent per year from 2007 to 2030 in the AEO2009 reference 

case, reaching a level of 6,414 million metric tons in 2030, compared with 6,851 million metric tons in the Annual Energy Outlook 2008 reference case. 

Oil Prices. The assumption of a higher world oil price path in the AEO2009 reference case reflects tighter constraints on access to low-cost oil supplies in a setting 

where the forces driving growth in long-term demand in countries outside of the Organization for Economic Cooperation and Development remain as strong as previously expected. The world crude oil price is projected to rise as the global economy 

rebounds and global demand once again grows more rapidly than non-Organization 

of Petroleum Exporting Countries liquids supply. In 2030, the average real price of 

crude oil is $130 per barrel in 2007 dollars ($189 per barrel in nominal dollars). 

Renewable Energy Use. Total consumption of marketed renewable fuels— 

including wood, municipal waste, and biomass in the end-use sectors; 

hydroelectricity, geothermal, municipal waste, biomass, solar, and wind for electric 

power generation; ethanol for gasoline blending; and biomass-based diesel—grows 

by 3.3 percent per year in the AEO2009 reference case. This rapid growth reflects 

the renewable fuel standard provisions included in the Energy Independence and 

Security Act of 2007 and strong growth in the use of renewables for electricity generation that is spurred by renewable portfolio standards for electricity generators 

in many States. 

As requested by the Committee, the remainder of my testimony focuses more specifically on projections for oil and natural gas production from onshore and offshore 

resources, the factors that drive the projections, and sensitivity analyses under alternative access and price assumptions. 

22 

Federal Offshore and Onshore Resources in Context 

Resources on Federal lands, both offshore and onshore, are important to U.S. 

energy production. Table 1 places onshore and offshore oil and natural gas production for 2007 in the context of total U.S. production and consumption. In 2007, 

roughly 32 percent of U.S. oil production and 29 percent of domestic natural gas 

production were from Federal lands. 

Looking forward, production from Federal lands is expected to play an increasingly important role in total U.S. oil and natural gas production. Through 2030 the 

share of production from Federal lands is projected to increase to 47 percent for oil 

and 36 percent for natural gas (Table 2). 

OCS Production: Historical Data and Near-Term Forecast 

OCS areas in the Western and Central portions of the Gulf of Mexico (GOM) are 

an important source of oil and natural gas production. In 2007, the GOM OCS 

areas, which have been producing substantial volumes of oil since the 1970s, produced 1.3 million barrels per day, amounting to about 25 percent of total U.S. crude 

oil production and down from peak OCS production of 1.6 million barrels per day 

in 2003. There are small amounts (less than 70 thousand barrels per day) of additional production from the Pacific OCS. Dry natural gas production in the GOM 

OCS in 2007 was 2.8 trillion cubic feet, down from peak production of 5.1 trillion 

cubic feet in 1997. 

In the near term, OCS production is expected to rise as projects already under 

development come into operation. By 2012, projected GOM OCS oil production is 2.1 

million barrels per day of oil and 3.4 trillion cubic feet of natural gas. As discussed 

below, forward-looking OCS production estimates to 2015 and later years, beyond 

the commissioning of projects already under development, are necessarily less certain since they are sensitive to the actual resource available, future prices, and future access to resources. However, using information from the Department of Interior’s Minerals Management Service (MMS) regarding undiscovered technically recoverable resources, EIA data and MMS estimates regarding known reserves 


47755.001.eps 47755.002.eps
23 

(proved reserves and projected reserve appreciation in known deposits), and assumptions regarding access policies, EIA develops projections of offshore oil and natural gas production through 2030. 

Consistent with the AEO practice of reflecting existing laws and regulations, the 

AEO2009 reference case reflects the removal in 2008 of the moratoria for drilling 

in the Atlantic, Pacific, and parts of the Eastern GOM OCS areas. Timing issues 

constrain the impacts of increased access in the near term. The MMS began the 

process of developing a leasing program that includes selected tracts from these 

areas after the moratoria were removed, with a timeline calling for the first leases 

to be offered in 2010. Once offered, leases must be bid on and awarded, and the 

wining bidders must develop and get approved exploration and development plans 

before any wells can be drilled. Thus, even if leasing were to begin next year, conversion of these newly-available resources to production would require some time. 

The AEO2009 reference case assumes that the Pacific and Atlantic OCS regions are 

open for leasing starting in 2010 and that leasing begins in the Eastern GOM in 

2022. 

Based on the mean (50-percent probability) MMS estimate of undiscovered technically recoverable resources and estimates of known reserves and resources, the 

OCS areas that were until recently under moratoria in the Atlantic, Pacific, and 

Eastern GOM are estimated to hold about 20 percent of the total OCS technically 

recoverable oil resource (TROR)—18 billion barrels out of a total of more than 93 

billion barrels, exclusive of past production as of January 1, 2007. The estimates of 

TROR in the GOM OCS areas open to leasing prior to 2008 and the Alaska OCS 

are 47 billion barrels and 27 billion barrels, respectively. According to MMS estimates, there is only a 5-percent chance that OCS areas formerly under moratoria 

have more than 27 billion barrels of TROR. 

Based on the MMS mean estimate of undiscovered technically recoverable natural 

gas resources and estimates of known reserves and resources, total technically recoverable natural gas resources in the OCS are estimated at 456 trillion cubic feet 

as of January 1, 2007. Roughly 76 trillion cubic feet (or 17 percent) are estimated 

to be in areas formerly under moratoria in the Atlantic, Pacific and Eastern GOM— 

nearly half or 37 trillion cubic feet in the Atlantic, 18 trillion cubic feet in the Pacific, and 21 trillion cubic feet in the Eastern GOM. 

Assumptions about exploration, development, and production of economical fields, 

such as drilling schedules, costs, platform selection, reserves-to-production ratios, 

etc., in the Pacific, Atlantic, and Eastern GOM are generally based on data for fields 

in the Central GOM that are of similar water depth and size. In addition, it is assumed that local infrastructure issues and other potential non-Federal impediments 

are resolved. Lack of resolution of these issues would, of course, affect the projections. 

Lower-48 offshore crude oil production is projected to increase from 1.4 million 

barrels per day in 2007 to 2.7 million barrels per day in 2030. Production from new 

OCS leases in the Pacific is projected to begin in 2015, with total Pacific production 

reaching nearly 0.5 million barrels per day in 2030. Crude oil production from the 

Atlantic region is projected to begin in 2019, reaching 0.2 million barrels per day 

by 2030. Crude oil production in all areas of the GOM rises from 1.3 million barrels 

per day to 2.1 million barrels per day between 2007 and 2030. 

Estimates of production from the OCS areas previously under moratoria are higher than in a previous analysis presented in the Annual Energy Outlook 2007 primarily because the AEO2009 has significantly higher oil and natural gas prices and 

because the assumed initial flow rate of Pacific OCS fields in shallow waters was 

adjusted to better reflect the production potential from these oil-prone fields compared to more natural-gas-prone fields in similar water depth and size in the Central GOM. 

Lower-48 offshore natural gas production is projected to increase from 3.0 trillion 

cubic feet in 2007 to 4.9 trillion cubic feet in 2030. By 2030, Pacific natural gas production is projected to reach nearly 0.3 trillion cubic feet and production from the 

Atlantic region is projected to reach 0.5 trillion cubic feet. 

EIA’s OCS Estimates: Discussion and Comparison with Historical 

Experience 

One way to gain perspective on EIA’s estimates of production in OCS areas formerly under moratoria is to consider how the relationship between projected production and MMS indicators of resource levels and characteristics in those areas compares to that for the GOM OCS area that was open prior to 2008. 

TROR Comparisons. Oil reserves in the GOM OCS area open before 2008, which 

has already been leased and developed extensively, are about 4 billion barrels, with 

an additional 9 billion barrels of expected reserve appreciation in discovered fields. 

24 

Adding the estimate of 34 billion barrels of undiscovered TROR, the mean estimate 

of total TROR in the GOM area open before 2008 is 47 billion barrels, which is more 

than 2.5 times the MMS mean estimate of 18 billion barrels of TROR in OCS areas 

formerly under moratoria. 

Average Field Size Comparisons. Field size matters because larger fields are more 

attractive development targets than smaller ones. The average size across all existing GOM OCS oil and natural gas fields is 43 million barrels of oil equivalent. MMS 

has also developed field size distributions for undiscovered OCS fields that it used 

to prepare reports mandated under the Energy Policy Act of 2005. The MMS estimate of the average undiscovered field size in GOM OCS areas open to drilling prior 

to 2008 is 59 million barrels of oil equivalent, which is significantly greater than 

the average field size of 15 million barrels of oil equivalent for OCS areas formerly 

under moratoria. 

Other Project Development Factors. Project development time frames and expected returns vary substantially across offshore projects depending upon such factors as: 1) size of the field; 2) relative proportion of oil, natural gas, and condensates 

in the field; 3) reservoir and oil characteristics,;4) water depth; 5) distance to nearest oil and/or natural gas pipelines; 6) whether there are other nearby fields to 

share in the expense of building new pipelines; and 7) the type of production system 

chosen for field development, e.g., anchored platform, tension-leg platform, tethered 

spar, or floating production storage, and offloading ship. 

To the extent that information is available, the indicators of resource levels and 

characteristics for the OCS areas previously under moratoria are generally inferior 

to those for the GOM OCS open prior to 2008, as discussed above. This is reflected 

in EIA’s view that, through 2030, access to the OCS areas formerly under moratoria 

adds only a fraction of the daily production volume provided by the GOM OCS area 

open prior to 2008. 

EIA recognizes that all forward-looking production estimates are inherently uncertain. Some factors that could lead to higher daily production estimates for the 

OCS areas formerly under moratoria include the use of the 5-percent, or 1-in-20, 

probability estimate of TROR and the assumption of a more favorable field size distribution than that used by MMS in its recently published reports. Consideration 

of any long-term constraints on rig availability that reflect the prioritization of alternative offshore projects or the possibility that non-Federal impediments to production would persist over time could result in lower daily production estimates. 

AEO2009 Access Sensitivity Case 

As part of the AEO2009, EIA prepared a restored moratoria sensitivity case. U.S. 

OCS crude oil production in 2030 is projected to be 565,000 barrels per day lower 

in the restored moratoria case than in the reference case—2.2 million barrels per 

day compared to 2.7 million barrels per day. Cumulative domestic production of 

crude oil from both onshore and offshore sources between 2010 and 2030 in the restored moratoria case is projected to be 2.1 billion barrels, or 4.2 percent, lower than 

in the AEO2009 reference case. 

As with oil, access to OCS resources affects the domestic supply of natural gas. 

However, because the volume of technically recoverable natural gas in the OCS 

areas previously under moratoria accounts for less than 5 percent of the total U.S. 

technically recoverable natural gas resource base, the volume impacts are smaller 

relative to the baseline supply level. Cumulatively, domestic natural gas production 

from both onshore and offshore sources between 2010 through 2030 is projected to 

be 1.3 percent lower in the restored moratoria case than in the AEO2009 reference 

case. Natural gas production from the Lower-48 offshore in 2030 is projected to be 

4.1 trillion cubic feet in the restored moratoria case compared to 4.9 trillion cubic 

feet in the AEO2009 reference case. In contrast to the situation in oil, the reduction 

in offshore supply of natural gas in the restored moratoria case is partially offset 

by an increase in onshore production. Reduced OCS access in the restored moratoria 

case results in higher natural gas prices, which increase the projection for U.S. onshore gas production by 0.2 trillion cubic feet in 2030 compared to the level in the 

reference case. 

AEO2009 Low Price Sensitivity Case 

The impact of access to OCS resources on domestic production is lessened in the 

low price case, where oil prices are assumed to remain near $50 per barrel (2007 

dollars) through 2030, rather than rising to $110 per barrel by 2015 and $130 per 

barrel (2007 dollars) by 2030 as assumed in the reference case. In 2030, total OCS 

crude oil production is projected to be 440,000 barrels per day higher in the low 

world oil price case than in the low oil price case with the OCS moratoria reinstated—2.1 million barrels per day compared with 1.7 million barrels per day. The 

25 

observation that U.S. OCS production in 2030 under reference case prices with full 

restoration of the OCS moratoria, at 2.2 million barrels per day, is projected to be 

higher than U.S. OCS production in the low price case with no moratoria underlines 

the importance of prices as a determinant of future production. 

The OCS is expected to remain a major contributor to domestic crude oil and natural gas supply under a variety of price and access assumptions. Although a significant volume of undiscovered technically recoverable oil and natural gas resources 

has been added with access to the Pacific, Atlantic, and parts of the Eastern GOM 

OCS, there is a great deal of uncertainty surrounding the resource estimates as well 

as the timing and cost to explore and develop these resources. 

This concludes my statement, Mr. Chairman. I will be happy to answer any questions you and the other Members may have. 

Response to questions submitted for the record by 

Dr. Howard K. Gruenspecht 

QUESTIONS FROM CHAIRMAN COSTA 

Q1 Dr. Gruenspecht, we hear a lot about the impact, or lack thereof, of additional drilling on oil prices. However, we hear less about the potential impact of drilling on natural gas prices. Does increased drilling in 

the former moratoria areas of the OCS have the potential to significantly impact natural gas prices, and if so, on what sort of timeframe? 

A1 Increased drilling in the former moratoria areas of the OCS is not expected 

to significantly impact natural gas prices between now and 2030. As part of the Annual Energy Outlook 2009 (AEO2009), the Energy Information Administration prepared a restored moratoria sensitivity case. Because the volume of technically recoverable natural gas in the OCS areas previously under moratoria accounts for less 

than 5 percent of the total U.S. technically recoverable natural gas resource base, 

results show that access does not significantly impact natural gas production or 

price levels. 

Cumulatively, domestic natural gas production from both onshore and offshore 

sources between 2010 and 2030 is projected to be 1.3 percent lower in the restored 

moratoria case than in the AEO2009 reference case. Total U.S. production of dry 

natural gas is 210 billion cubic feet less in 2020 and 600 billion cubic feet less in 

2030 in the restored moratoria case than projected in the reference case. The reduction in offshore supply of natural gas in the restored moratoria case is partially offset by an increase in onshore production of 170 billion cubic feet and a decrease in 

consumption of 360 billion cubic feet in 2030 compared to the levels in the reference 

case. The average U.S. wellhead price of natural gas in 2030 (per thousand cubic 

feet, in 2007 dollars) is 8 cents higher in 2020 and 21 cents higher in 2030 in the 

restored moratoria case, representing price increases of 1 percent and 3 percent, respectively. The increased onshore production and decreased consumption result from 

higher natural gas prices, which are seen mainly in the later years of the projection. 

Q2 Dr. Gruenspecht, the New York Times reported on March 15th about 

the steep decline in U.S. drilling activity, caused by the equally steep 

reduction in oil and natural gas prices since last summer. During last 

summer’s high prices, a common argument was that increased drilling 

in the U.S. Outer Continental Shelf and on federal lands out west would 

result in lower prices for consumers. However, it appears that instead 

of the amount of drilling being a determining factor on the price of oil 

and natural gas, in fact the price of oil and natural gas is the determining factor on the amount of drilling activity. In simpler terms: drilling doesn’t drive prices, but prices do drive drilling. Are these accurate 

statements? 

A2 Prices definitely drive drilling, but drilling can also drive prices. The processes 

involved in the formation of prices and the collective decisions to drill are interrelated and complex. 

Prices respond not only to actual supplies made available by drilling, but to expectations of supplies that will or even that can be brought to market. In that sense, 

the first potential effect on crude oil prices of changing expectations about access 

to supply from the U.S. Outer Continental Shelf and on Federal lands would be a 

signal to raise expectations of global supply in the future. While the exact response 

of the market would be difficult to predict, an increase in expected future global 

supply availability could be expected to result in somewhat lower prices. 

On the other hand, the drilling response to price declines in oil and natural gas 

we are seeing now is part of a business cycle that has occurred several times in the 

26 

past few decades. Lower price expectations make investments more difficult to justify on their own merits, thus leading to the cancellation of less profitable drilling 

prospects. In addition, when crude oil and natural gas prices fall, companies’ cash 

flows decline. We are seeing a slowing of some capital projects in exploration and 

production as well as in other areas, including refinery investments. 

A notable result of the drilling response to price is that by eliminating more marginal investment opportunities, the efficiency of the market increases. As a result, 

though drilling is dropping steeply, new production is falling less quickly. In effect, 

the best prospects are getting drilled and the less attractive are not. The same goes 

for the drilling equipment and crews. As the number of rigs running drops, only the 

most effective and efficient continue to work. Also, the base of production from already-drilled wells is large compared to the total. As a result, the drop in drilling 

does imply a proportional drop in production. Longer-term effects could be significant if the capacity of the industry to respond to stronger price signals in the future 

is reduced. This lagged market/investment response is what drives some of the price 

cycles in the oil and natural gas supply. 

Q4 Dr. Gruenspecht, one of the issues this Committee has been trying to 

get a handle on is how much it costs oil and gas companies to do business here in the United States, and if that is significantly cheaper or 

more expensive elsewhere in the world. The GAO has put out a couple 

of reports saying that the amount of revenue the government brings in, 

as a percentage of the total revenue from the oil and gas, is one of the 

lowest percentages in the world. But on the other hand, some Members 

of Congress have said that it has to be that way because the costs of 

finding oil in the United States are so much higher than they are in 

other countries. Is it significantly more expensive to produce a barrel 

of oil in the United States, onshore and/or offshore, than it is in other 

countries? Is there an estimate of the additional costs incurred by production companies as a result of complying with federal regulations? 

A4 The costs of finding and producing oil and natural gas vary considerably 

across world regions and can be quite volatile, but they tend to be higher in more 

mature producing areas such as the United States. The combined cost of finding and 

producing oil and natural gas also tends to be greater in the U.S. offshore areas 

than in the U.S. onshore. Costs have risen sharply and have been more volatile in 

recent years because of substantial increases in expenditures for property acquisition, exploration, and development of oil and natural gas resources. We do not have 

an estimate of the additional costs incurred by production companies as a result of 

complying with Federal regulations. 

EIA collects data on the costs of finding and producing oil and natural gas in its 

Financial Reporting System (FRS) survey. EIA publishes finding costs (which include the costs of unproved property acquisition, exploration, and development of 

the oil and natural gas) and production costs (which include the costs of extracting 

or lifting the oil and natural gas). Finding costs are usually larger than production 

costs and tend to be more volatile. 

The finding cost calculation is a ratio of expenditures for exploration and development to proved reserves found. The difference in timing between the expenditure 

of funds and the booking of proved reserves is one important reason for the volatility in finding costs. This is especially evident when changes occur rapidly, as has 

been the case in recent years. The large and rapid increase in oil prices since 2002 

resulted in large increases in expenditures for exploration and development. Proved 

reserves have not increased to the same extent as yet, resulting in higher finding 

costs. Increased acquisition activity, which results in unusually large acquisition expenditures in the year the acquisition takes place, also causes volatility in finding 

costs. 

One way to smooth this volatility is to average the data over several years. The 

figure below shows the costs of finding and producing oil and natural gas in the U.S. 

onshore and U.S. offshore regions and three international regions over the ten-year 

period from 1998 to 2007. Canada and Europe are more mature producing areas like 

the United States. Their combined finding and production costs were higher than 

the U.S. onshore but lower than the U.S. offshore. The ‘‘Rest of World’’ region, an 

average of the other regions of the world, had the lowest total finding-plus-production costs. 

27 

Q5 Dr. Gruenspecht, there were a lot of energy provisions in the recent 

stimulus bill (H.R. 1) that Congress passed and the President signed— 

this was a major commitment to developing new, cleaner forms of energy. Has EIA analyzed the bill and determined if it will have any effect 

on your short- or long-term projections? If there has not been a formal 

EIA analysis, are there any general expectations that EIA would have 

about some of the energy-related provisions in that legislation? 

A5 EIA has prepared an updated Annual Energy Outlook 2009 reference case reflecting provisions of the American Recovery and Reinvestment Act (HR.1) and recent changes in the economic outlook. A copy of the paper, which is also available 

on EIA’s website, is attached. 

Q6a Dr. Gruenspecht, has EIA looked at the potential of federal lands to 

provide renewable energy? 

A6a In 2001, EIA prepared maps showing Federal lands and total lands (lower48 States) with renewable resources with high potential for generating electric energy. EIA has used the information in its analysis and forecasting products. The 

maps are based on resource data prepared by the National Renewable Energy Laboratory (NREL), the Pacific Northwest National Laboratory, and Southern Methodist University, collated with Geographic Information Systems (GIS) analysis by 

EIA. More recent data are now available from NREL, which could alter the assessment. Five renewable resources were mapped: wind, biomass, geothermal, concentrated solar power, and photovoltaic solar energy. The data showed that Federal 

lands contain almost half of the national endowment for geothermal resources (46 

percent). In contrast, Federal lands contain only 38 percent of concentrating solar, 

29 percent of wind, 27 percent of solar photovoltaic, and 13 percent of biomass resources. 

Q7 Dr. Gruenspecht, in the Annual Energy Outlook reference case in 2008, 

EIA projected that carbon dioxide emissions from energy would grow 

at an average annual rate of 0.9 percent. In the 2009 Outlook, EIA 

projects that energy related CO2 emissions grow by 0.3 percent per year. 

What are some of the reasons for that change, and do those reasons give us any 

direction as to how we could lower that even more? 

A7 The projected slowdown in the growth in U.S. energy-related carbon dioxide 

emissions that occurred between the 2008 and 2009 versions of the AEO was driven 

by numerous factors including: higher energy prices that reduced growth in energy 

consumption, the growing use of renewable fuels in the transportation and elecVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY

47755.007.eps
28 

tricity sectors, and growing concerns about greenhouse gas emissions that dampen 

the projected additions of new coal power plants. 

For example, in the AEO2008 reference case, world oil prices were projected to 

rise to $72 per barrel (2006 dollars) in 2030 while in the AEO2009 reference case 

they are expected to rise to $130 per barrel (2007 dollars), more in line with the 

high price projections from the AEO2008. This change was driven by the belief that 

oil demand in developing countries would continue to grow rapidly while oil-rich 

countries would seek to control access to their low-cost resources and develop them 

more slowly than anticipated in the AEO2008. These higher oil prices lead to reduced transportation energy use and lower carbon dioxide emissions as consumers 

drive less and purchase more fuel efficient cars. 

Carbon dioxide emission projections are also lower because of the expected reduced dependence on new coal plants. In the AEO2008 reference case, over 100,000 

megawatts of new coal capacity was projected to be added to meet the growing demand for electricity, while in the AEO2009 reference case this projection was reduced by more than half because growing concerns about greenhouse gas emissions 

have dampened the interest of developers, regulators and the financial community 

in new coal plants. Over the past few years, as oil and natural gas prices rose, a 

large number of new coal plant projects were announced. However, while some new 

coal plants are under construction, many of the projects that had been announced 

have already been cancelled. This led to a reassessment of potential new coal plant 

additions in the AEO2009 and increased dependence on new natural gas and renewable plants. 

Q8 Dr. Gruenspecht, the 2009 Annual Energy Outlook points out that oil 

imports are projected to fall, apparently by quite a bit, by 2025. This 

appears to be the result of increased production, some of which is on 

the OCS, and decreased consumption, partially through new car fuel 

economy standards. Which one of those has a bigger impact on the drop 

in imports: increased production from the OCS or increases in fuel 

economy standards? 

A8 The new car fuel economy standards account for the larger portion of the impact on oil import reduction. Depending on the method used to calculate the energy 

savings from the new Corporate Average Fuel Economy (CAFE) standard, between 

72 percent and 81 percent of the reduction in oil imports would be due to the new 

CAFE standard. 

The U.S. offshore is estimated to contain substantial resources of both crude oil 

and natural gas, but there are uncertainties regarding potential leasing and development of the Outer Continental Shelf (OCS). Assuming that leasing goes forward 

as previously leasing programs have, conversion of available OCS resources will require considerable time and financial resources to develop. The Annual Energy Outlook 2009 (AEO2009) reference case projects that significant increases in OCS production occur after 2020. By 2030, EIA projects that lifting the ban on OCS drilling 

will increase domestic crude oil production by 8 percent (0.5 million barrels per day) 

and will increase domestic natural gas production by 3 percent (0.6 trillion cubic 

feet per year). 

An evaluation of the energy impacts with and without the new CAFE standards 

was not included as part of the AEO2009. However, the AEO2008 did examine the 

energy impacts with and without the 35-mpg CAFE standard required under EISA. 

Although the AEO2008 estimates might not be directly comparable to a similar 

analysis using the AEO2009, they provide a reasonable expectation of the impacts 

of the new CAFE. 

In the AEO2008 Early Release reference case (December 2007), which did not include the new CAFE standard in EISA, light-duty vehicle average fuel efficiency 

was projected to be 30.0 miles per gallon, significantly above the floor of approximately 26.4 miles per gallon set by the pre-EISA CAFE standard. Consumer behavior coupled with technology improvements resulted in vehicle owners choosing more 

efficient vehicles than those required by the CAFE standard of the time. In the full 

AEO2008 reference case (June 2008), which included the new CAFE standard, consumers do not purchase vehicles significantly more fuel efficient than the new CAFE 

standard of 35 miles per gallon. 

With the new CAFE standard, light-duty vehicle consumption is 1.2 to 1.4 million 

gasoline-equivalent barrels per day (12.1 to 12.9 percent) less than in the case with 

the previous CAFE standard. Measured against a case where vehicle efficiency does 

not improve above the floor set by the previous CAFE standard (a frozen-efficiency 

case) the new CAFE standard reduces light-duty vehicle gasoline-equivalent barrels 

per day by between 2.1 and 2.2 million barrels per day (17.9 to 18.2 percent). 

29 

As a result, depending on the method used to calculate the energy savings from 

the new CAFE standard, a low estimate of the reduction of oil imports would be 

between 1.7 and 1.9 million barrels per day, with new CAFE standards accounting 

for approximately 72 percent of the reduction. A high estimate of the reduction in 

oil import would be between 2.6 and 2.7 million barrels per day, with CAFE standards accounting for approximately 81 percent of the projected reduction. 

Q9 Dr. Gruenspecht, in your testimony you mention that there are local infrastructure issues regarding production from the former moratorium 

areas, and that your projections assume they are resolved. Could you 

give us a little more detail on what these issues are, and what their potential for impacting your projections would be? 

A9 To produce oil and gas from former moratoria areas that have been closed to 

exploration and production for decades, considerable infrastructure will need to be 

built. Major infrastructure categories include platform fabrication yards, port facilities, shipyards and shipbuilding yards, support and transport facilities, waste management facilities, pipelines, pipe coating yards, natural gas processing facilities, 

natural gas storage facilities, and petrochemical facilities. States and local areas affected by offshore development activities have a say in the approval process and 

could hold up development. EIA assumes in the Annual Energy Outlook 2009 analysis that issues regarding local siting and permitting will be resolved by the producers and the State and local governments in an expeditious manner. Protracted 

permitting processes could add significantly to the time and/or cost to develop offshore resources in affected regions and possibly discourage development of associated offshore areas, resulting in less and/or more costly production from portions of 

the OCS. 

Q10 Dr. Gruenspecht, in the 2009 Annual Energy Outlook, EIA points out 

that the oil fields in the area formerly under moratoria are expected 

to be small—much smaller than the average undiscovered field size in 

the Gulf of Mexico. And the 2008 World Energy Outlook states that 

small fields decline at a much more rapid rate than large fields. So 

does this mean if we started drilling in frontier areas, companies 

would have to drill considerably more wells, over wider geographic 

areas, than they would in the Gulf of Mexico? 

A10 Yes. The Minerals Management Service estimates that the average field size 

in the Gulf of Mexico is almost 3 times greater than the average field size in the 

Outer Continental Shelf areas formerly under moratoria (43 million barrels of oil 

equivalent compared to 15 million barrels of oil equivalent). Because of the smaller 

size of the fields in the areas formerly under moratoria, in areas deemed profitable 

companies will need to drill more wells over a wider geographic area to achieve the 

same output as in the Gulf of Mexico where the average field size is considerably 

larger. 

Q11 Dr. Gruenspecht, you mentioned in your testimony that various characteristics of the new OCS areas are generally inferior to those areas 

currently open. There are three separate areas that need to be considered, though: the Atlantic, the Pacific, and the Eastern Gulf of Mexico. 

Could you put those in order—which has the least inferior characteristics and which has the most inferior characteristics? 

A11 While it is difficult to rank the areas of the Atlantic, Pacific, and Eastern/ 

Central Gulf of Mexico (GOM) that were previously under moratoria based on their 

inferiority relative to those areas that were already open, certain generalizations 

can be made considering resource level, average field size, and proximity to existing 

infrastructure. The areas previously under moratoria rank differently depending on 

whether the emphasis is on oil or gas production. 

Resources: The EIA relies on estimates of technically recoverable resources provided by the Minerals Management Service (MMS). The Pacific resource estimate 

for undiscovered oil (10.5 billion barrels) is almost three times as much as the estimate for either the Atlantic (3.9 billion barrels) or the Eastern/Central GOM (3.7 

billion barrels), compared to 47 billion barrels of technically recoverable resources 

in the Central/Western GOM. The Atlantic resource estimate for undiscovered natural gas (36.5 trillion cubic feet or Tcf) is almost double that of the Eastern/Central 

GOM (21.5 Tcf) and the Pacific (18.4 Tcf), compared to 247 Tcf of technically recoverable resources in the Central/Western GOM. 

Average Field Size: The MMS estimates of the average undiscovered field size in 

GOM Outer Continental Shelf (OCS) areas open to drilling prior to 2008 (59 million 

barrels of oil equivalent (mmBOE)) and in the Eastern GOM (43 mmBOE) are sigVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
30 

nificantly greater than the average field size for the Pacific (11 mmBOE) and Atlantic (16 mmBOE) OCS areas formerly under moratoria. 

Infrastructure: The Eastern/Central GOM has the advantage of being closer to extensive existing infrastructure in the Central and Western GOM areas that have 

been open to exploration and development. Some infrastructure exists in the Pacific 

near currently producing leases. This suggests an assignment of the highest ranking 

to the Central/Western GOM, followed by the Pacific, then the Eastern/Central 

GOM, and last the Atlantic. 

Q12 Dr. Gruenspecht, has EIA modeled the impact of the proposed Alaska 

Natural Gas Pipeline, if and when it gets built? Is there a sense of the 

impact that might have on U.S. natural gas supplies or prices? 

A12 In the Annual Energy Outlook 2009 (AEO2009) reference case, an Alaska 

gas pipeline to the lower-48 States is projected to begin operation in 2020. The 2020 

date is largely dictated by the 9 years required to design, permit, and construct this 

pipeline. Once completed, an Alaska gas pipeline is expected to take 2 years to 

achieve full operation, delivering 1.4 trillion cubic feet (Tcf) per year to the lower48 States by the end of the second year. 

The AEO2009 also includes a scenario entitled the ‘‘no Alaska pipeline case’’ in 

which an Alaska gas pipeline is precluded from going into operation. The no Alaska 

pipeline case projections of U.S. natural gas production, consumption, imports, and 

prices can be compared to those projected in the reference case to ascertain the impact of the pipeline. 

After 2020, Alaska natural gas production is 1.6 Tcf per year lower in the no Alaska pipeline case than in the reference case. The lower Alaska production includes 

both the pipeline throughput to the lower-48 States and the natural gas consumed 

in the production, processing, and compression of the pipeline gas. 

In the no Alaska pipeline case, later-period Henry Hub spot natural gas prices 

are higher than in the reference case. Regional prices may differ to greater or lesser 

extents. The greatest Henry Hub price difference occurs in 2022 at $0.69 per million 

Btu (2007 dollars), which is 9.5 percent higher than the reference case price. After 

2022, the magnitude of the natural gas price impact gradually diminishes, as lower48 natural gas supply grows and consumption declines. By 2030, Henry Hub gas 

prices are only $0.15 per million Btu or 1.6 percent higher in the no Alaska pipeline 

case relative to the reference case. 

As a result of the higher natural gas prices projected in the no Alaska pipeline 

case, lower-48 natural gas production and imports are higher, while natural gas consumption is lower. 

In the no Alaska pipeline case, the higher natural gas prices cause lower-48 production to increase by 800 billion cubic feet (Bcf) in 2021, and then level off to 

around 600 Bcf per year for the remainder of the projection. Of the lower-48 natural 

gas production categories, unconventional natural gas production posts the greatest 

increase, adding about 500 Bcf per year from 2022 through 2030. 

Net natural gas pipeline imports are about 525 Bcf higher in the no Alaska pipeline case in 2028. LNG imports increase only slightly in the no Alaska pipeline case 

due to the high LNG prices relative to the less expensive U.S. and Canadian natural 

gas production. 

The greatest impact on natural gas consumption occurs in 2026, when total natural gas consumption is about 760 Bcf lower than in the reference case, with the 

largest share of the decline—290 Bcf—occurring in the electric power sector. 

Q14 Dr. Gruenspecht, could you provide your thoughts about our ability to 

harness some of the potential of enhanced geothermal systems? Is enhanced geothermal likely to be feasible in the near future? How long 

would it take before people could start building EGS power plants? 

A14 It is EIA’s understanding that current efforts related to enhanced geothermal systems (EGS, also known as ‘‘hot dry rock’’ systems) are limited to precommercial research and development efforts, with a few proof-of-concept projects 

and limited government-funded research efforts in several countries (including the 

U.S.). Given the lack of current commercial-scale experience with this technology, 

EIA does not believe that EGS technology is likely to contribute significantly to U.S. 

electricity production in the near future. The timing of its ultimate introduction to 

commercial service will largely depend on the ability of researchers and private investors to develop a cost-competitive product, and may also depend on future policies to support this technology specifically or to support renewable or carbon-free 

technologies in general. 

EIA does not currently include projections for enhanced geothermal systems in 

our Annual Energy Outlook 2009. This is, in large part, because the technology is 

not sufficiently well developed to establish reasonable estimates of cost and characVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
31 

terization of the resource base that could be used in our National Energy Modeling 

System. EIA expects that these data should develop in advance of significant commercial deployment. 

Q15 Dr. Gruenspecht, in her testimony, Ms. Pierce states that ‘‘the EIA’s 

2009 forecast of significant increases in domestic oil production is 

partly owing to advances in enhanced oil recovery technologies.’’ 

Could you provide additional detail regarding this statement? What is 

the growth of enhanced oil recovery (EOR) that EIA projects to 2030? 

Do these projections assume existing EOR technology or ‘‘nextgeneration’’ EOR? How much of the growth in EOR is driven by carbon dioxide-EOR, and how much is from other injectants? Does EIA 

project how much carbon dioxide used for EOR would be coming from 

anthropogenic sources versus natural sources? 

A15 In the Annual Energy Outlook 2009 (AEO2009), EIA projects that oil production from enhanced oil recovery (EOR) will increase more than fivefold between 

2007 and 2030, growing from 0.3 million barrels per day in 2007 to 1.7 million barrels per day in 2030. The projections assume some improvement in carbon dioxide 

(CO2) EOR technology over existing technology, but not what might be considered 

‘‘next generation’’ technology. The current National Energy Modeling System 

(NEMS) used for the AEO2009 only includes CO2 flooding; other injectants were not 

competed in the model. The new Oil and Gas Supply Module of NEMS currently 

under development includes 4 EOR processes: CO2 flooding, steam flooding, polymer 

flooding, and profile modification. Roughly 37 percent of the projected CO2 used for 

EOR production in the AEO2009 is from anthropogenic sources versus natural 

sources. 

Q16 Dr. Gruenspecht, please provide an update to the Committee on EIA’s 

efforts to provide additional energy data for the U.S. insular areas (in 

particular the Commonwealth of the Northern Mariana Islands, Guam, 

American Samoa, and the U.S. Virgin Islands). When does EIA expect 

to be able to provide State Energy Profile pages for each of those territories? 

A16 EIA plans to publish State Energy Profiles for the five U.S. insular areas 

(American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, 

Puerto Rico and the U.S. Virgin Islands) on the EIA web site by June 12, 2009. 

Each Profile consists of a map, a narrative section, and a data table. There are very 

limited EIA and other data available on the U.S. territories. Options to expand territory data collection are outlined in EIA’s January 2009 report to Congress, State 

Energy Data Needs Assessment, prepared in response to the direction in section 

805(d) of the Energy Independence and Security Act of 2007, P.L. 110-140. This report is on our website at http://www.eia.doe.gov/oiaf/servicelrpts.htm. 

QUESTIONS FROM RANKING MEMBER LAMBORN 

Q1 UCSD Economics Professor James Hamilton has written that ‘‘nine out 

of ten of the U.S. recessions since World War II were preceded by a 

spike up in oil prices.’’ Has the EIA examined the impact of the high 

energy prices Americans faced last year on our GDP and the recession? 

A1 EIA has not formally examined the impact of the high energy prices on the 

recession. However, the most widely-cited reasons for the current recession include 

the inflated housing market and its impacts on financial institutions, and financial 

institutions’ treatment of risk. The higher energy prices impacted the economy, although the impacts of housing price inflation, wealth deflation, global recession and 

the credit crunch probably outweigh impacts of high energy prices alone. 

Q2 In your various studies and the Annual Outlook you address the impact 

high energy prices will have on our economy correct? Do these findings 

uniformly show that high energy prices are a drag on our economy? 

A2 The results from EIA’s analysis of the impacts of higher energy prices depend 

on the supply and demand responses to increased energy prices as well as the trajectory of higher prices. Initially, when faced with higher prices, the economy will 

experience a reduction in gross domestic product (GDP), a broad measure of economic output; however, if prices begin to stabilize the economy will begin to recover. 

With respect to higher oil prices, other important factors include to what extent domestic producers can increase their production and how much oil imports will fall. 

Typically, the economy will experience an early reduction in growth and, depending 

on the oil price trajectory and supply response, may return to the reference case 

growth trajectory over time. 

32 

Q3 Is it safe to say that a majority of the studies you have done on congressional proposals like Renewable standards and cap and trade proposals 

have shown that increases in the cost of energy result in a lower GDP 

going forward? 

A3 Most of the past EIA studies on renewable energy standards have found very 

modest impacts on energy prices and the economy. However, EIA has found that 

under some circumstances, a greenhouse gas cap and trade policy could lead to significant energy price increases and a reduction in economic output. In an analysis 

of S. 2191, the Lieberman-Warner Climate Security Act, EIA found that total discounted gross domestic product (GDP) losses over the 2009 to 2030 time period 

range from $444 billion (-0.2 percent) to $1,308 billion (-0.6 percent) across the cases 

considered. Similarly, the cumulative discounted losses for personal consumption 

range from $546 billion (-0.2 percent) to $1,425 billion (-0.6 percent). GDP losses in 

2030, the last year explicitly modeled in the analysis, range from $27 billion to $163 

billion (-0.1 to -0.8 percent) while consumption losses in that year range from $58 

billion to $149 billion (-0.4 to -1.1 percent). Economic impacts were largest when it 

was assumed that key low-emissions technologies including nuclear, fossil with carbon capture and sequestration, and various renewables are not developed and deployed in a timeframe consistent with the emissions reduction requirements, and 

international offsets are not available. Generally higher energy prices represent 

higher costs to the economy and the magnitude of the impacts depends on price impacts of the policies analyzed. 

Q4 In January 2007, EIA was asked to analyze a generic cap and trade program by Sen. Bingaman and others, and in that analysis you were 

asked to consider options for both a partial auction and a full auction. 

A brief excerpt from that report, ‘‘GDP and consumption impacts in the 

Full Auction case are substantially larger than those in the Phased 

Auction case. Relative to the reference case discounted total GDP (in 

2000 dollars) over the 2009-2030 time period in the Full Auction case is 

almost twice the estimated consumption loss in the Phased Auction 

case.’’ 

Q5 Can we assume based on this study that in most cap and trade schemes 

a full auction of carbon allowances will have a higher cost to the economy than a partial auction? Do you think, as analyzed in the January 

2007 study, the costs of a full auction plan might be double a quarter 

auction plan? Could those costs be triple? 

A4-5 The economic impacts of a greenhouse gas cap and trade policy will depend 

on many factors, including the stringency of the emissions cap, the speed of implementation, and the use of carbon allowance revenue. The January 2007 EIA analysis did show larger gross domestic product (GDP) and consumption losses in the 

full auction case compared to the partial auction case; however, it also stated that 

the economic impacts would be different if alternative revenue recycling assumptions were made, so a general conclusion that a full auction case would always have 

worse economic impacts than a partial auction case is not warranted. Likewise, a 

general conclusion that a full auction would have double or triple the negative economic impact of a quarter auction is not warranted. 

Q6 In the EIA analysis of the Lieberman Warner Cap and Trade proposal 

the EIA findings say that energy costs will rise. Specifically, the report 

states that ‘‘The Consumer Price Index (CPI) for energy, a summary 

measure of energy prices facing households at the retail level, increases 

by approximately 18 percent above the Reference Case level by 2030. 

Industrial energy prices increase 10 percentage points more, at 29 percent above Reference Case levels.’’ 

Q7 So this finding says that consumers will see a nearly 20% rise in costs 

and industry, nearly a 30% rise in costs under the basic case presented 

by EIA of the Lieberman Warner bill. In addition, the EIA report states 

that in what it views as essentially the most restricted case ‘‘consumer 

energy prices increase as much as 62 percent and industrial energy 

prices by 100 percent.’’ 

Q8 What would be the impact on American industry if we increased our 

energy prices by 100% and other nations, without restrictions on carbon emissions, continued to reduce their energy costs? 

A6-8 We have not estimated the impact on American industry if we increased our 

energy prices by 100 percent and other nations, without restrictions on carbon emissions, continued to reduce their energy costs. The April 2008 EIA analysis of the 

33 

1 Cumulative impacts, present value calculated using a 4 percent discount rate 

Lieberman-Warner Climate Security Act (S. 2191) showed a range of industrial 

shipment impacts consistent with the projected increase in energy costs. 

In the April 2008 analysis, the industrial shipment impacts ranged from 2.9 to 

7.4 percent below reference case levels by 2030, depending on the assumptions used. 

Over the period of 2009 to 2030, industrial impacts in the analysis ranged from 1.3 

to 3.6 percent below reference case levels. 1 The industrial impacts presented in the 

April 2008 report only included the manufacturing, construction, mining and agriculture sectors of the economy. It did not include the service sector, which is an increasingly important part of the U.S. economy. 

Q9 In EIA’s analysis of the Lieberman-Warner Climate Security bill last 

year, some of the key findings pointed out that ‘‘The electric power 

sector accounts for the vast majority of the emissions reductions, with 

new nuclear, renewable, and fossil plants with CCS [Carbon Capture 

and Sequestration] serving as the key compliance technologies in most 

cases. [And] Many existing coal plants without CCS are projected to 

be retired early because retrofitting with CCS technology is generally 

impractical.’’ 

Q10 This was in a bill which had only a ‘‘share of the allowances...auctioned, while the remainder would be distributed for transition assistance to covered entities, energy consumers, and manufacturers as incentives for carbon sequestration’’. Can you estimate for 

the Committee how much higher the costs might be under a similar 

regulatory scheme where 100% of the credits are auctioned at the beginning of the program? 

A9-10 Since the EIA analysis of the Lieberman-Warner Climate Security Act 

used the allowance distribution called for in the bill, a 100-percent auction case was 

not prepared. A 100-percent auction case would lead to higher energy price impacts 

but the economic impacts could not be determined without knowing how the auction 

revenue was to be used. 

Q11 In the assessment of Lieberman-Warner, EIA says ‘‘As energy prices increase, the energy-intensive sectors, including food, paper, bulk 

chemicals, petroleum refining, glass, cement, steel and aluminum, 

show greater losses compared to the rest of the industrial sectors, 

reaching between 5 and 10.2 percent’’ in most projections. 

Q12 Do you believe these projections to be on the low side if we adopted 

a 100% auction of carbon allowances as proposed in President 

Obama’s Budget? 

Q13 Would we see a doubling of those projections? Meaning could we see 

20%, 30% or 40% job losses in our industrial sector as a result of the 

Presidential proposal with 100% auctions? 

A11-13 As noted in the previous answer, a 100 percent auction would lead to 

somewhat higher energy price impacts than what we estimated in our analysis of 

the Lieberman-Warner legislation, but the economic impacts could not be determined without knowing how the auction revenue would be used. The overall impacts 

on energy intensive industries would vary depending on how the overall economy 

reacts to the distribution of the carbon allowance revenue as well as the technologies used by firms to substitute away from or reduce their use of fossil fuels. 

However, larger impacts on energy-intensive industries in response to a carbon allowance price do not translate into the same impacts experienced by the U.S. industrial sector as a whole, since energy-intensive industries comprised approximately 

20 percent of industrial (non-service) gross output from 2003 to 2007. 

Q14 Can you elaborate on the subsidies for energy creation. It’s a bit dated 

but EIA data shows that solar energy was subsidized at $24.34 per 

megawatt hour and wind at $23.37 per megawatt hour for electricity 

generated in 2007. By contrast, coal received 44 cents, natural gas and 

petroleum received 25 cents, hydroelectric power 67 cents, and nuclear power $1.59 per megawatthour. 

A14 In 2008, EIA’s most recent report on energy subsidies (Federal Financial 

Interventions and Subsidies in Energy Markets 2007) developed estimates of electricity subsidies by fuel, and then compared those subsidies to actual electricity output in Fiscal Year 2007. This approach yields a wide range of estimates when subsidies are expressed in proportion to the overall level of electric output. Technologies 

34 

like solar and wind have relatively large subsidies per unit of output for two reasons. First, subsidies are often motivated by a policy goal of making new technologies more competitive, so subsidies may be directed disproportionately to these 

emerging technologies, rather than to more mature forms of production. Second, 

there are substantial differences in generation between established base-load generating technologies (primarily coal and nuclear), which account for 70 percent of all 

generation, and relatively new renewable technologies like wind and solar, which together accounted for 1.3 percent of total net generation in 2008. The per-unit measure of electricity production subsidies used in EIA’s report may provide a better indicator of certain market impacts than the dollar amount of the subsidy. For example, even though coal receives higher subsidies in absolute terms than wind power, 

the use of wind is likely to be more dependent on the availability of subsidies than 

the use of coal. Other factors can also play an important role in determining the 

market impact of a particular production subsidy. For example, credits claimed by 

refined coal producers have lapsed since EIA’s 2008 report, and the small amount 

of generation using refined coal as fuel has probably been replaced by steam coal. 

In contrast, generation from wind power, supported by renewable production tax 

credits, would likely be replaced with generation from a broad mix of fuels if that 

credit were unavailable. 

Q15 The 2007 energy bill, the 2009 stimulus package, and the FY09 omnibus appropriations all included increased funding for renewable 

energy we [sic] would expect those numbers to be slightly higher than 

the 2007 data correct? Do you have any idea how much higher those 

numbers might be? Would you be willing to update those figures for 

this committee? 

A15 EIA is able to provide an updated comparison to some of the programs 

itemized in EIA’s report Federal Financial Interventions and Subsidies in Energy 

Markets 2007 by using the Treasury Department’s tax expenditure estimates for 

Fiscal Year 2009 (FY09). These estimates are itemized in the Office of Management 

and Budget’s (OMB) Analytical Perspectives, Budget of the United States Government—Fiscal Year 2009. The latest Treasury Department estimates also include revisions to FY07 and FY08 data contained in EIA’s report. However, EIA cannot update the Joint Committee on Taxation (JCT) estimates of tax expenditures enacted 

in the Energy Policy Act of 2005 because they are not itemized by the Treasury Department. EIA is able to update its FY07 tax expenditures and provide a comparison 

of FY08 and FY09 estimated tax expenditures, but no updates are available at this 

time for direct expenditure programs, research and development programs, or Federal electricity programs. 

Table 1 shows FY07 estimated tax expenditures contained in EIA’s report, along 

with revised FY07 tax expenditures and FY08 and FY09 estimates reported in the 

FY09 budget documents. For these items, EIA previously reported $10.1 billion of 

tax expenditures (excluding tax expenditures scored by the JCT) for FY07, while the 

revised FY07 expenditures from the Treasury Department are about $300 million 

higher. The latest Treasury Department estimates show these energy-related tax expenditures declining approximately $700 million in FY08 and $1 billion in FY09. 

The decline reflects the expiration of certain tax expenditures and changes in the 

tax credit rates applied in certain other programs based on the tax law as it existed 

at the time the FY09 budget was submitted to Congress in February 2008. The 

Energy Independence and Security Act of 2007 (EISA), although it had been signed 

by that time, did not contain energy production-related tax expenditures. While 

Table 1 shows tax expenditures declining, energy legislation passed subsequent to 

the submission of the FY09 budget expanded and extended existing tax expenditures. The Energy Improvement and Extension Act of 2008 (EIEA), and the AmerVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY

47755.008.eps
35 

ican Recovery and Reinvestment Act (ARRA) extended and expanded existing 

energy production tax credit and investment tax credit provisions, and appropriated 

significant funds for direct expenditures associated with the development of new 

energy infrastructure and end use energy efficiency. 

The extended and expanded energy tax expenditures include: 

• Long-term extension and modification of the renewable energy production tax 

credit. The credit is now available through 2012 for wind projects and through 

2013 for other forms of renewable energy. It has been expanded to include marine and tidal projects. 

• Allowing renewable energy producers to take the investment tax credit in lieu 

of production tax credits for those facilities placed in service in 2009 and 2010. 

• Creation of a new tax credit for combined heat and power systems. 

• Extension of the expiration date for solar energy, fuel cell and microturbine 

property tax credits through the end of 2016. 

• Repeal of the double-dipping limitation to allow energy projects receiving subsidized financing to realize the full benefit of investment tax credits; and 

• Authorizing an additional $1.6 billion of Clean Renewable Energy Bonds. 

These items have not yet been quantified by the Treasury Department in terms 

of their estimated losses to the Treasury. 

Q17 In your studies you say that many of our current coal fired power 

plants will be phased out as a result of their inability to meet carbon 

control requirements. What percentage of current plants do you estimate would be candidates for CCS technology? 

A17 EIA has not performed a study of the potential to retrofit existing coal plants 

with Carbon Capture and Sequestration (CCS), rather than retiring and replacing 

them to meet carbon control requirements. Numerous factors would influence such 

a decision including the age and vintage of the plant, the technology employed at 

the plant, the plant’s efficiency, the availability of space to install capture equipment and the proximity of suitable sequestration locations. The Department of Energy’s National Energy Technology Laboratory (NETL) found in a recent study (see 

http://www.netl.doe.gov/energy-analyses/pubs/CO2%20Retrofit%20From%20Existing 

%20Plants%20Revised%20November%202007.pdf) that, while it was technically feasible to retrofit existing coal plants with CCS, it could be economically challenging. 

Q20 What impact will a cap and trade system have on the domestic agriculture sector, particularly on those sectors which are heavily dependent on fertilizer? 

Q21 How about the domestic cement industry? 

A20-21 The impact of a cap-and-trade program on agriculture and other sectors 

will depend on the details of the program that is implemented. The allocation of allowances is a critical factor for all sectors, but agriculture will also be impacted by 

provisions that may allow farmers to receive offset credits for practices that reduce 

or sequester carbon dioxide and other greenhouse gases. The fertilizer and domestic 

cement industries are both classified as energy-intensive industries. Therefore, to 

the extent that a cap-and-trade program raises the cost of using fossil fuels, there 

industries would be expected to experience higher product costs. 

QUESTION FROM REPRESENTATIVE BOREN 

Q1 The Obama Administration proposes to increase taxes on the nation’s 

oil and natural gas industry by 34 billion dollars. Most of the burden 

will fall on independent producers. Given that these independent producers currently drill 90% of new natural gas wells and produce more 

than 80% of the nation’s natural gas, can you estimate the impact on 

domestic natural gas production that will result from the taking of so 

much capital from these producers? 

A1 EIA has not done an analysis of this issue, so we cannot quantify the impacts. 

In December 2007, EIA produced a service report ‘‘Oil and Natural Gas Market Supply and Renewable Portfolio Standard Impacts of Selected Provisions of HR. 3221.’’ 

That legislation also included some proposals impacting the taxation of the oil and 

gas industry. While EIA was not able to analyze those provisions, which are not the 

same as those presently proposed by the Obama Administration, our December 2007 

report does provide some context on oil and gas industry cash flows that may be 

helpful. 

[NOTE: The attachment, ′′An Updated Annual Energy Outlook 2009 

Reference Case Reflecting Provisions of the American Recovery and 

Reinvestment Act and Recent Changes in the Economic Outlook,′′ April 

36 

2009 Report by Energy Information Administration, U.S. Department of 

Energy, has been retained in the Committee’s official files.] 

Mr. COSTA. We look forward to asking you questions when that 

time arrives, Dr. Gruenspecht. We do appreciate that. I am not 

sure I made it clear during your introduction that you are the acting administrator for the Energy Information Administration office 

at this time. 

Our next witness is to present as the program coordinator on the 

Energy Resources Program for the U.S. Geological Survey within 

the U.S. Department of the Interior. We would very much welcome 

the testimony of Brenda Pierce. 

Brenda, please present. 

STATEMENT OF BRENDA S. PIERCE, PROGRAM COORDINATOR, 

ENERGY RESOURCES PROGRAM, U.S. GEOLOGICAL SURVEY 

Ms. PIERCE. Mr. Chairman and members of the Subcommittee, 

thank you for the opportunity to appear here today to discuss with 

you the U.S. Geological Survey’s role in studying, understanding, 

and assessing the undiscovered geologically based energy resources 

of U.S. onshore and State waters and the world and the Minerals 

Management Service’s role in providing information on Federal resources of the Outer Continental Shelf. 

Adequate, reliable, and affordable energy supplies obtained using 

environmentally sustainable practices are essential to economic 

prosperity, environmental and human health, and political stability. National and global energy demand and resource consumption are projected to increase over the next several decades, as you 

have heard. Thus, the volumes, quality, and availability of domestic and foreign energy resources are of critical importance to the 

United States. 

The Nation continues to face important decisions regarding the 

competing uses of public lands and offshore waters, the supply of 

energy to sustain development and enable growth, and the environmental effects of energy resource development. The USGS provides 

the research and information needed to address these challenges by 

conducting scientific investigations of geologically based energy resources, such as oil, gas, and coal; emerging resources, such as gas 

hydrates; underutilized resources, such as geothermal; and unconventional resources, such as oil shale; and research on the effects 

associated with energy resource occurrence, production, and utilization. 

The results from these geoscientific studies are used to evaluate 

the quality and distribution of energy resource accumulations and 

to assess the energy resource potential of the Nation and the world. 

As one example, the USGS recently produced the first-ever estimate of undiscovered, technically recoverable gas from natural gas 

hydrates. Although these resources have not yet been proven economic, this USGS assessment estimates a mean of 85.4 trillion 

cubic feet of technically recoverable gas from gas hydrates from the 

Alaskan North Slope. 

USGS assessments focus on undiscovered, technically recoverable 

oil and natural gas resources of the United States, exclusive of the 

Federal OCS, which is assessed by the MMS. Undiscovered, techVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
37 

nically recoverable resources are resources that have yet to be 

found or drilled but, if found, could be recovered using currently 

available technology and industry practice. Economic factors are 

not always considered. For example, it may not be economically 

feasible to exploit those gas hydrate resources on the Alaskan 

North Slope, but they are technically recoverable. 

The purpose of USGS and MMS assessments are to develop robust, geologically based and statistically sound and well-documented estimates of quantities of energy resources that have the 

potential to be added to reserves and, thus, contribute to the overall energy supply. The USGS and MMS resource assessment methodologies are thoroughly reviewed and externally vetted so as to 

maintain the transparency and robustness of the assessment results. 

The assessment of undiscovered, technically recoverable resources do change over time. There are several reasons for this, including scientific and technological developments regarding petroleum resources as well as improvements to the geologic understanding in numerous settings. 

One example of this is the change in the recently updated USGS 

assessment of the Bakken Formation of the U.S. portion of the 

Williston Basin. This assessment, released just last year in 2008, 

shows an estimated 3 billion to 4.3 billion barrels of undiscovered, 

technically recoverable oil, to compare to our 1995 mean estimate 

of 151 million barrels of oil. 

Oil and natural gas produced offshore on the Outer Continental 

Shelf is a major supply source of energy for the domestic market. 

About 17 billion barrels of oil and 174 trillion cubic feet of natural 

gas have been produced from the OCS since 1954. Current production levels are about 1.4 million barrels of oil and about 8 billion 

cubic feet of natural gas per day. This represents approximately 27 

percent of domestic oil production and 14 percent of natural gas 

production. These shares are expected to grow over the next 7 

years, as new deep-water production in the Gulf of Mexico comes 

on. 

OCS oil and gas resource assessments are completed as part of 

the Secretary’s responsibilities for managing OCS energy and mineral resources and their requirement to assure fair-market value 

for OCS lands to be leased. The MMS conducts resource assessments for the OCS at various scales and for many purposes, such 

as evaluating future supply options, analyzing the relative merits 

of oil and gas development proposals, and providing critical input 

to decision-makers regarding various policy alternatives, and providing data essential for valuing Federal lands prior to leasing. 

MMS assessments estimate the undiscovered, technically recoverable resources of oil and gas for individual plays. Estimates of 

the quantities of historical production reserves and future reserves 

appreciation are presented to provide a frame of reference for analyzing the estimates of undiscovered, technically recoverable resources. 

Reserve growth is a well-documented phenomenon in the United 

States and is a major component of the Nation’s remaining oil and 

natural gas resources. In fact, most additions to the world oil reVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
38 

serves in recent years are from growth of reserves in existing fields 

rather than new discoveries. 

Given this context, it is important to note the important distinction between the terms ‘‘resource’’ and ‘‘reserves.’’ ‘‘Resource’’ is a 

concentration of naturally occurring hydrocarbons in or on the 

Earth’s crust, some of which is, or potentially is, economically 

extractable. ‘‘Reserves’’ specifically refer to the estimated quantities 

of identified, discovered petroleum resources that, as of the specified date, are expected to be commercially recovered from known 

cumulations under prevailing economic conditions, operating practices, and government regulations. 

The assessment of both undiscovered resources and of additions 

to reserves from discovered fields and reservoirs requires estimation of reserve growth. The USGS has an active research effort 

to develop a methodology approach for better quantifying domestic 

and global contributions of reserve growth to the petroleum resource endowment. 

U.S. undiscovered, technically recoverable mean oil resources 

total 48 billion barrels of oil onshore and in State waters and 86 

billion barrels of oil for OCS. Undiscovered, technically recoverable 

mean natural gas resources total 743 trillion cubic feet onshore and 

in State waters and 420 trillion cubic feet for the OCS. 

These resources have the potential to be added to reserves but 

are not yet proven and may or may not be economic at current or 

future prices. For example, the 86 billion barrels of undiscovered, 

technically recoverable oil resources in the OCS—of that, 54 billion 

barrels of that is estimated to be economically recoverable at about 

$46 per barrel. 

Turning to other energy sources, coal accounts for 48 percent of 

domestic electricity generation. USGS has recently completed an 

assessment of coal resources and reserves in Wyoming’s Gillette 

coalfield. The Gillette area accounts for nearly 40 percent of the 

Nation’s current coal production, making it the single most important coalfield in the United States. 

A total of 164 billion tons of original coal resources was found in 

the six beds included in the evaluation. Of that original resource, 

10 billion tons, or about 6 percent, can be classified as reserves at 

the current average estimated sales price. So USGS studies will determine what portion of the resource base are technically and economically recoverable. 

The USGS also evaluates renewable resources, such as geothermal energy. We recently completed a national geothermal resource assessment, the first one in more than 30 years. Results indicate that full development of the conventional, identified systems 

could expand geothermal power production by approximately 6,500 

megawatts of electricity, or about 260 percent of the currently installed geothermal total of more than 2,500 megawatts electric. 

The resource estimate for unconventional, enhanced geothermal 

systems is more than an order of magnitude larger than the combined estimates of both identified and undiscovered conventional 

geothermal resources, and, if successfully developed, could provide 

an installed geothermal electric power generation capacity equivalent to about half of the currently installed electric power generating capacity of this country. 

39 

America’s oceans may also provide potential new renewable 

energy sources to support our Nation’s growing energy needs, and 

MMS is developing a program for managing their uses. To date, 

there is no comprehensive evaluation for the available renewable 

energy potential in our offshore waters, but researchers have begun 

to examine the resource potential in specific areas of interest. 

Although significant wave, wind, tidal, and current resources 

exist in close proximity to coastal population centers, areas that 

consume the majority of the Nation’s electricity generation, the 

technologies used to generate this energy are relatively new and 

untested so far in the offshore environment of the U.S. OCS. 

And, briefly, USGS international resource assessments. Our Nation depends heavily on imported energy resources. About 58 percent of the oil and 16 percent of the natural gas consumed in the 

U.S. come from imports. Given the significance of imported oil and 

gas in the U.S. energy mix, scientifically robust, unbiased assessments of the world’s remaining endowment of petroleum accumulations are very important. 

And a major focus of USGS research recently has been the 

Circum-Arctic petroleum assessment, which is the first estimate of 

the entire area north of the Arctic Circle. Results from that, released last July, indicate that there are 90 billion barrels of undiscovered, technically recoverable oil north of the arctic and 1,670 

trillion cubic feet of technically recoverable natural gas. This accounts for about 22 percent of the undiscovered, technically recoverable resources in the world, 13 percent of that oil and 30 percent 

of that gas. 

So, in conclusion, during the next decade, the Federal Government, industry, and other groups will need to better understand 

the domestic and global distribution of, genesis of, use of, and consequences of using geologically based energy resources to address 

national security issues, manage the Nation’s domestic supplies, 

predict future needs, anticipate as well as guide changing patterns 

in use, and facilitate creation of new industries. 

As the Nation’s energy mix evolves, the USGS and MMS will 

work to ensure that our research and assessment portfolio ties into 

a comprehensive suite of assessments to inform policymakers about 

the energy choices. USGS and MMS stand ready to assist Congress 

as it examines these challenges and opportunities. 

Thank you for the opportunity to provide an overview of our 

work, and we would welcome to answer questions. 

[The prepared statement of Ms. Pierce follows:] 

Statement of Brenda S. Pierce, Program Coordinator, Energy Resources 

Program, U.S. Geological Survey, U.S. Department of the Interior 

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity 

to appear here today to discuss with you the U.S. Geological Survey’s role in studying, understanding, and assessing the undiscovered, geologically based, energy resources of the Nation (exclusive of the Federal offshore) and World and the Minerals 

Management Service’s (MMS) role in providing information on Federal resources of 

the Outer Continental Shelf (OCS). 

Introduction 

Adequate, reliable, and affordable energy supplies obtained using environmentally 

sustainable practices are essential to economic prosperity, environmental and 

human health, and political stability. National and global energy demand and resource consumption are projected to increase over the next several decades, though 

40 

at a slower rate than in recent years. The United States currently consumes 21 percent of the total world primary energy consumption and produces 15 percent of the 

total world primary energy production. Thus, the volumes, quality, and availability 

of domestic and foreign energy resources are of critical importance to the United 

States. The Nation continues to face important decisions regarding the competing 

uses of public lands and offshore waters, the supply of energy to sustain development and enable growth, and the environmental effects of energy resource development. 

Role of the U.S. Geological Survey 

The U.S. Geological Survey (USGS) provides the research and information needed 

to address these challenges by conducting scientific investigations of geologically 

based energy resources, such as research and assessment on the geology of oil, gas, 

and coal resources, emerging resources such as gas hydrates, underutilized resources such as geothermal, and unconventional resources such as oil shale, and research on the effects associated with energy resource occurrence, production, and 

(or) utilization. Our goal is: (1) to understand the processes critical to the formation, 

accumulation, occurrence, and alteration of geologically based energy resources; (2) 

to conduct scientifically robust assessments of those resources; and (3) to study the 

impact of energy resource occurrence and (or) production and use on both environmental and human health. The results from these geoscientific studies are used to 

evaluate the quality and distribution of energy resource accumulations, and to assess the energy resource potential of the Nation (exclusive of the Federal OCS)) and 

the World. As one example, the USGS recently produced the first-ever estimate of 

undiscovered, technically recoverable gas from natural gas hydrates. Although these 

resources have not yet been proven economic, this USGS assessment estimates a 

mean of 85.4 trillion cubic feet of technically recoverable gas from gas hydrates on 

the Alaska North Slope. 

The results from this and other USGS research provide impartial, robust scientific 

information about energy resources that directly supports the U.S. Department of 

the Interior’s mission of protecting and responsibly managing the Nation’s natural 

resources. The USGS and MMS information is used by policy and decision makers, 

land and resource managers, other Federal and State agencies, the domestic energy 

industry, foreign governments, nongovernmental groups, academia, other scientists, 

and the public. The USGS works with the MMS, which has responsibility for energy 

and minerals management in Federal offshore waters, to provide an integrated evaluation of the Nation as a whole. Collectively, information from USGS research advances the scientific understanding of energy resources, contributes to plans for a 

balanced and secure energy future, and facilitates the strategic use and evaluation 

of resources. 

USGS and MMS National Oil and Gas Resources qResearch and Assessment 

Activities 

The overall goal of USGS domestic energy activities is to conduct research and 

assessments of all geologically based energy resources. This includes undiscovered, 

technically recoverable oil and natural gas resources, both conventional and unconventional of the United States (exclusive of the Federal OCS, which is assessed by 

the MMS). These are resources that have yet to be found (drilled), but if found, 

could be recovered using currently available technology and industry practice. Economic factors are not always considered; for example, it may not be economically 

feasible to exploit gas hydrate resources on the Alaska North Slope and both conventional and unconventional Alaskan gas resources are currently considered 

stranded without the means of transporting gas from the region. The purpose of 

USGS and MMS assessments are to develop robust, geologically based, statistically 

sound, well-documented estimates of quantities of energy resources having the potential to be added to reserves, and thus contribute to the overall energy supply. 

The USGS and MMS resource assessment methodologies are thoroughly reviewed 

and externally vetted so as to maintain the transparency and robustness of the assessment results. 

The current USGS effort to update national (onshore and State waters) assessments of oil and gas resources is done in support of the Energy Policy and Conservation Act (EPCA) Amendments of 2000 (P.L. 106-469 § 604). Through a collaborative, 

multi-agency effort involving the Bureau of Land Management, the USGS, the U.S. 

Forest Service, the Department of Energy, and the EIA, the USGS provides the oil 

and gas resource estimates as the basis for the EPCA inventory. The USGS role is 

to assess the potential volumes of conventional and continuous (unconventional) resources (e.g., coalbed gas, shale gas, tight gas sands) in each priority province using 

established, externally reviewed and vetted methodologies and provide this informaVerDate Nov 24 2008 18:19 Jun 26, 2009 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6621 L:\DOCS\47755.TXT Hresour1 PsN: KATHY
41 

tion to the appropriate land and resource management agencies for subsequent 

analysis. The Energy Policy Act of 2005 (P.L. 109-58) re-authorized EPCA 2000 assessment activities by the USGS, emphasizing the unique and critical role of the 

USGS and specifically mandated that ‘‘the same assessment methodology across all 

geological provinces, areas, and regions [be used] in preparing and issuing national 

geological assessments to ensure accurate comparisons of geological resources.’’ 

The estimate of undiscovered, technically recoverable resources changes over time. 

There are several reasons for this, including scientific and technological developments regarding petroleum resources in general and improvements to the geologic 

understanding in numerous settings. These advances in geologic understanding, as 

well as changes in technology and industry practices, necessitate that resource assessments be periodically updated to take into account such advances. One example 

of this change is the recently updated USGS assessment of the Bakken Formation 

in the U.S. portion of the Williston Basin. This assessment, released in 2008, shows 

an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil 

compared to USGS’s 1995 mean estimate of 151 million barrels of oil. Another example is the USGS assessment of gas hydrates on the Alaskan North Slope. Substantial investments in gas hydrate research now support categorizing some accumulations of gas hydrates as technically recoverable. Research challenges remain in 

order to determine if this technically recoverable resource will be economically recoverable, but current multi-organizational (including USGS) and multi-disciplinary 

efforts are focused on overcoming these obstacles. 

The passage of the OCS Lands Act in 1953 established Federal jurisdiction over 

the mineral resources of the OCS and authorized the Secretary of the Interior to 

manage oil and natural gas and other marine minerals activity seaward of state 

submerged lands. Oil and natural gas produced offshore on the OCS is a major supply source of energy for the domestic market. About 17 billion barrels of oil and 174 

trillion cubic feet of natural gas have been produced from the OCS since 1954. Current production levels are about 1.4 million barrels of oil and about 8 billion cubic 

feet of natural gas per day. This represents approximately 27 percent of domestic 

oil production and 14 percent of natural gas production. But these shares are expected to grow over the next 7 years as new deepwater production in the Gulf of 

Mexico comes on line (Gulf of Mexico Oil and Gas Production Forecast: 2007-2016, 

May 2007). Recent discoveries in the deep and ultra-deep waters of the Gulf of Mexico could help provide a significant source of oil and gas supplies for decades to 

come. OCS oil and gas resource assessments are completed as part of the Secretary’s 

responsibilities for managing OCS energy and mineral resources and the requirement to assure fair market value for OCS lands to be leased. The MMS conducts 

resource assessments for the OCS at various scales and for many purposes. Regional 

assessments may be prepared simply to develop an inventory of potential oil and 

natural gas resources as part of an evaluation of future supply options. Assessments 

may be undertaken to analyze the relative merits of oil and gas development proposals and alternatives versus other competing uses. Resource estimates also provide critical input to decision makers regarding the virtues of various policy alternatives, and provide data essential for valuing Federal lands prior to leasing or analyzing industry exploration or development proposals. The MMS conducts periodic 

national assessments of the oil and natural gas resource potential of the Nation’s 

Outer Continental Shelf; and in 2005, Congress directed (in Section 357 of the 

Energy Policy Act of 2005) that the Secretary conduct a comprehensive inventory 

and analysis of oil and natural gas resources of the U.S. OCS. This MMS assessment, which was completed in 2006, considers recent geophysical, geological, technological, and economic information and utilizes a probabilistic play based approach 

to estimate the undiscovered technically recoverable resources (UTRR) of oil and gas 

for individual plays. This methodology is suitable for both conceptual plays where 

there is little or no specific information available, and for developed plays where 

there are discovered oil and gas fields and considerable information is available. 

After estimation, individual play results are aggregated to larger areas such as basins and regions. Estimates of the quantities of historical production, reserves, and 

future reserves appreciation are presented to provide a frame of reference for analyzing the estimates of UTRR. 

Reserve growth is well documented in the United States and is a major component of the Nation’s remaining oil and natural gas resources. In fact, most additions 

to world oil reserves in recent years are from growth of reserves in existing fields 

rather than new discoveries. The EIA’s 2009 forecast of significant increases in domestic oil production is partly owing to advances in enhanced oil recovery technologies. Given this context, it is important to note the important distinction between the terms ‘‘resource’’ and ‘‘reserves.’’ Resource is a concentration of naturally 

42 

occurring solid, liquid, or gaseous hydrocarbons in or on the Earth’s crust, some of 

which is, or potentially is, economically extractable. Reserves specifically refer to the 

estimated quantities of identified (discovered) petroleum resources that as of a specified date, are expected to be commercially recovered from known accumulations 

under prevailing economic conditions, operating practices, and government regulations. 

Reserve growth occurs for a variety of reasons, including: (1) extensions of existing fields, infill drilling and new pool discoveries, (2) application of new recovery 

technologies and improved efficiency, and (3) revisions resulting from recalculation 

of viable reserves in dynamically changing economic and operating conditions. The 

assessment of both undiscovered resources and of additions to reserves from discovered fields and reservoirs requires estimation of reserve growth. The USGS has an 

active research effort to develop a methodology and approach for better quantifying 

domestic and global contributions of reserve growth to the petroleum resource endowment. 

Undiscovered, technically recoverable mean oil resources total 48 billion barrels 

of oil onshore and in State waters and 86 billion barrels of oil for the OCS. Undiscovered, technically recoverable mean natural gas resources total 743 trillion cubic 

feet onshore and in State waters (or 657 trillion cubic feet, exclusive of the recent 

natural gas hydrates assessment), and 420 trillion cubic feet for the OCS. These resources have the potential to be added to reserves, but are not yet proven and may 

or may not be economic at current or future prices. For example, according to the 

2006 MMS national assessment (http://www.mms.gov/revaldiv/PDFs/NA2006 

BrochurePlanningAreaInsert.pdf), of the 86 billion barrels of undiscovered, technically recoverable oil resources in the OCS, 54 billion barrels of that is estimated 

to be economically recoverable at $46/barrel. Of the 420 trillion cubic feet of undiscovered, technically recoverable natural gas resources in the OCS, 215 trillion cubic 

feet is estimated to be economically recoverable at $6.96/million cubic foot.’’ 

These numbers can be compared to proved reserves numbers (EIA): proved U.S. 

petroleum reserves (for 2007) are 22 billion barrels of oil and proved world petroleum reserves are 1,317 billion barrels; proved natural gas reserves for the U.S. are 

204 trillion cubic feet and for the world are 6,124 trillion cubic feet. 

Unconventional Oil and Gas Resources 

In April 2007, the USGS received funding for a two-year project to reassess oil 

shale deposits of the Eocene Green River Formation of Colorado, Utah, and Wyoming. The new assessment will incorporate considerable data acquired by the USGS 

following the collapse of the oil shale industry in the 1980’s. It will subdivide the 

oil shale section into various subunits that will be assessed separately and the data 

will be made available on-line in a manner that can be easily utilized by modern 

computer models. This will allow simulations of various development scenarios for 

open pit mining, underground mining, and in-situ retorting, should oil shale development ever get underway. 

Coal 

Coal dominates the U.S. fossil energy endowment and accounts for 48% of domestic electricity generation. The USGS has recently completed an assessment of coal 

resources and reserves in Wyoming’s Gillette coalfield, the most prolific coalfield in 

the country. This assessment is part of the National Coal Resource and Reserve Assessment, which is systematically evaluating the domestic coal resource and reserve 

base. By utilizing an abundance of new data from coalbed methane development in 

the region, the USGS was able to produce the most comprehensive assessment to 

date. The Gillette area accounts for nearly 40 percent of the Nation’s current coal 

production making it the single most important coalfield in the United States. A 

total of 164 billion tons of original coal resources was found in the six coal beds included in the evaluation. Of that original resource, 10.1 billion tons (6 percent) can 

be classified as reserves at the current average estimated sales price. Substantial 

additional resources could be recoverable assuming increased market prices will 

support the higher costs needed to recover deeper coal. Coal is currently the most 

important fuel for electricity generation and the USGS studies will determine what 

portion of the resource base is technically and economically recoverable. 

Renewable Energy 

In addition to petroleum and coal resources, the USGS also evaluates renewable 

resources such as geothermal energy. The USGS recently completed a national geothermal resource assessment, the first one in more than 30 years. The USGS evaluated 241 moderate- and high-temperature geothermal resources capable of producing electricity. The USGS assessment estimates (1) 9,057 Megawatts-electric 

(MWe) of power potential from conventional, identified geothermal systems, (2) 

43 

30,033 MWe of power generation potential from conventional, undiscovered geothermal resources, and (3) 517,800 MWe of power generation potential from unconventional Enhanced Geothermal Systems (EGS) resources. The results indicate that 

full development of the conventional, identified systems could expand geothermal 

power production by approximately 6,500 MWe, or about 260 percent of the currently installed geothermal total of more than 2,500 MWe. The resource estimate 

for unconventional EGS is more than an order of magnitude larger than the combined estimates of both identified and undiscovered conventional geothermal resources and, if successfully developed, could provide an installed geothermal electric 

power generation capacity equivalent to about half of the currently installed electric 

power generating capacity of the United States. 

America’s oceans may also provide potential new renewable energy sources to support our Nation’s growing energy needs, and MMS is developing a program for managing their uses. Resources on the OCS can be used to generate electricity in a variety of ways. To date there is no comprehensive evaluation for the available renewable energy potential in all offshore waters, but researchers have begun to examine 

the resource potential in specific areas of interest. DOE’s National Renewable 

Energy Laboratory has a program to produce validated wind resource maps for priority offshore areas, and the results show that the offshore wind resource potential 

is vast and has the potential to meet a significant amount of the Nation’s future 

energy needs. Although significant wind, wave, tidal and current resources exist in 

close proximity to coastal population centers—areas that consume the majority of 

the Nation’s electricity generation—the technologies used to generate this energy 

are relatively new and untested in the offshore environment of the U.S. OCS. Wind, 

wave and ocean current technologies have been demonstrated at the pilot scale, and 

wind has been developed at the commercial scale outside the United States—e.g., 

offshore Denmark, the United Kingdom and Germany. 

U.S. Geological Survey International Energy Studies 

Our Nation depends heavily on imported energy resources: about 58 percent of the 

oil and 16 percent of the natural gas consumed in the U.S. come from imports. 

Given the significance of imported oil and gas to the U.S. energy mix, scientifically 

robust, unbiased assessments of the world’s remaining endowment of petroleum accumulations are of the utmost importance. For this reason, global petroleum resource assessments are a core USGS research activity and have significant global 

visibility. The USGS world oil and gas resource estimates are used as a standard 

reference by many organizations including the EIA and the International Energy 

Agency (IEA). 

The overall objectives of USGS studies of international petroleum resources are 

to continue providing high-quality, comprehensive petroleum assessments and to update previous assessments as needed. A major focus of recent USGS research in this 

area is the Circum-Arctic Resource Appraisal (or CARA), the primary emphasis of 

which is to provide a comprehensive, unbiased probabilistic estimate of potential future additions to conventional oil and gas reserves in the high northern latitudes. 

The Arctic is an area of high petroleum resource potential, low data density, high 

geologic uncertainty and sensitive environmental conditions. The assessment is the 

first publicly available petroleum resource estimate of the entire area north of the 

Arctic Circle. 

The results of the assessment, released last July, estimate that the area north of 

the Arctic Circle has 90 billion barrels of undiscovered, technically recoverable oil, 

1,670 trillion cubic feet of technically recoverable natural gas, and 44 billion barrels 

of technically recoverable natural gas liquids in 25 geologically defined areas 

thought to have potential for petroleum. These resources account for about 22 percent of the undiscovered, technically recoverable resources in the world. The Arctic 

accounts for about 13 percent of the undiscovered oil, 30 percent of the undiscovered 

natural gas, and 20 percent of the undiscovered natural gas liquids in the world. 

About 84 percent of the estimated resources are expected to occur offshore. 

Conclusion 

During the next decade, the Federal government, industry, and other groups will 

need to better understand the domestic and global distribution of, genesis of, use 

of and consequences of using geologically based energy resources to address pressing 

environmental problems such as climate change, national security issues, manage 

the Nation’s domestic supplies wisely, predict future needs, anticipate as well as 

guide changing patterns in use, and facilitate creation of new industries. Energy resources research and assessments are a traditional strength of the USGS and the 

MMS, and these activities provide impartial, robust information necessary for the 

many needs just outlined. As the Nation’s energy mix evolves, the USGS and MMS 

44 

will continue to work with other Federal agencies such as DOE to ensure that our 

research and assessment portfolio ties into a comprehensive suite of assessments to 

inform policymakers about energy choices. Future USGS and MMS assessments are 

anticipated to include hydrocarbon-based (for example, unconventional gas from coal 

and shale, gas hydrates, oil shale) and nonhydrocarbon-based sources (for example, 

geothermal resources and uranium) and address the effects of such resource use on 

land use, ecosystem health, and human welfare. USGS resource assessments and 

research play an important role in the public and government discourse about the 

energy resource future of the Nation so that science can inform, advise, and engage 

decision makers. The USGS and MMS stand ready to assist Congress as it examines 

these challenges and opportunities. 

Thank you for this opportunity to provide an overview of USGS and MMS research and assessments of geologically based energy resources. I would be happy to 

answer your questions. 


47755.003.eps 47755.004.eps
45 

Mr. COSTA. Thank you very much, Brenda. 

Now we will get to the part of the questions. 

I would like to ask you at U.S. Geological Survey and the gentleman from EIA, given the changes that have occurred in recent 

decades—I mean, just think about in the last 10 years, the last 20 

years—in our ability to determine carbon deposits, either oil or gas, 

with the seismology technology and others, how good the estimates 

are that both of you have just made your comments on. 

Mr. GRUENSPECHT. Well, for the undiscovered, we really rely on 

USGS and MMS for the reserves part—the part that the operators 

have already identified and booked and report to the Securities and 

Exchange Commission if they are public companies—that we collect directly. The bigger part of the resource is the undiscovered resource, so maybe—— 

Mr. COSTA. So how good do you think your numbers are on the 

undiscovered, based upon current technology? 

Ms. PIERCE. It is a very good question. It does depend on the 

amount of data and what that technology will help us understand. 

So areas that we have seismic or drill-hole data, I think our estimates are fairly good because we understand that. In areas that 

there are very little data, like parts of the Arctic, it is less certain. 

And that is why we do probabilistic estimates; we give a range. 

And so the uncertainty is reflected in that range, so some of the 

estimates are quite uncertain and are reflected. So these numbers 

I shared are only mean numbers. So it is a mixed bag. Some areas 

we are pretty certain; some not so. 

Mr. COSTA. I think you gave a good big picture for us to begin 

to try to draw a road map for our policy. 

I question, as we ponder the issue of providing more availability 

of OCS leases, many of my colleagues question whether or not we 


47755.005.eps
46 

are realizing the full potential of those leases that are already 

available. 

Do you understand what I am saying, Mr. Gruenspecht? 

Is it your determination, as that discussion—I mean, I made the 

comment last week that I thought part of the debate or discussion 

last year was somewhat, in my view, mindlessness, but maybe that 

is my own view, about ‘‘use it or lose it’’ or ‘‘drill, baby, drill.’’ 

But having said that, is, to your knowledge, every carbon footprint on lease that is currently available for utilization retain that 

same carbon footprint, whether it be oil or gas, as you make these 

estimations? Do you understand my question? 

Mr. GRUENSPECHT. I am not sure I do, sir. 

Mr. COSTA. Well, if the idea is that all we really need to do is 

to exercise all of those lands that are currently available for lease, 

and if you were to assume that they all have the same carbon footprint, i.e. The same amount of oil and gas, or gas, than each lease 

lot that now is available for drill purposes, then logically you would 

assume that you would take, really, a usage of all that resource 

that is available in that area that is already available for lease. 

Mr. GRUENSPECHT. You know, my understanding of the situation 

is that again we are projecting growing production from the OCS 

that at least we are pretty certain about, because close in, you 

know, between now and 2015, we know what projects are underway in the deepwater Gulf in particular. And we do see rising oil 

production coming out of that and rising natural gas production 

coming out of that. 

But part of the development decision, as I understand it, there 

are multiple stages, there are issues about the connection to existing—— 

Mr. COSTA. Let me ask the question. To your understanding is 

there a lease available for utilization purposes containing the same 

amount of carbon in that lease, whether it be oil or gas? In terms 

of the value of the production? 

Mr. GRUENSPECHT. No, that is not my understanding. 

Mr. COSTA. You would concur, U.S. Geological Survey, why different leases are priced differently when they go to bid? 

Ms. PIERCE. No, that’s right. I do have a colleague from MMS 

here if you have specific questions for MMS. And geologically I 

would concur, yes. They are not all created equal. 

Mr. COSTA. Dr. Birol, I talked in my opening statement about the 

near term, the interim and the long term. What should we be doing 

to utilize these resources for sustainable energy policy for a comprehensive energy policy today? What should we be doing in the 

next 5 to 10 years and beyond? 

I am going to take the privilege of the Chair because my time 

has just run out, but please answer the question. 

Mr. BIROL. OK, I think short term there are low hanging fruits 

in the United States which are the most important way to improving energy efficiency, using energy much more efficiently, the 

energy from transportation, cars, trucks, jets to electrical appliances. There is huge room to improve energy efficiency there, and 

we can save energy in the short term. 

Second is the current Administration is very much determined to 

make more user renewable energy with solar and biomass. But at 

47 

the same time it will not be a bad idea to look at the option of nuclear power as it provides energy, particular energy, without emitting carbon emissions and without creating problems for security of 

supply. 

In the longer term we all know that coal is the backbone of electric generation in the United States and will remain so for many 

years. So to look at the possibilities of using coal in a cleaner way 

may be a very good option. 

To sum up, more energy efficiency, more renewables, more nuclear power and in the longer term clean coal technologies. 

Mr. COSTA. My final question, if we were to take advantage in 

the short term of that low hanging fruit that you described, what 

are the best examples around either here in the United States or 

elsewhere of that low hanging fruit for us to pattern after? 

Mr. BIROL. I think the most important ones today are energy efficiency improvements, renewables and nuclear power, sir. 

Mr. COSTA. In what places are those most exhibited? 

Mr. BIROL. Energy efficiency—almost throughout the world, but 

in the United States especially in the transportation sector—cars, 

trucks—there is huge room for improvement. But also in China, 

India, Middle East countries, there is strong room for improvement 

and nuclear power. We have the chance to increase the share of nuclear energy, which is good for the twin challenges I described 

here—to address the climate change issue and the security of supply issue. 

Mr. COSTA. That good old-fashioned ethic of conservation? 

Mr. BIROL. Yes, it is. That is right. 

Mr. COSTA. Sir, my friend from Colorado. Mr. Lamborn. 

Mr. LAMBORN. Thank you, Mr. Chairman. Mr. Gruenspecht, you 

did some analysis last year for the Senate Lieberman bill, Lieberman-Warner bill on cap and trade, your organization. I would like 

to ask you a couple questions about that. The report that EIA put 

out said, ‘‘The consumer price index for energy, a summary measure of energy prices facing households at the retail level, increases 

by approximately 18 percent above the reference case level by 2030. 

Industrial energy prices increase 10 percentage points more at 29 

percent above reference case levels.’’ 

So by my reading of this report consumers will see a nearly 20 

percent rise in cost in the industry, nearly 30 percent rise in cost 

under essentially the basic case presented by EIA of the Lieberman-Warner bill; is that correct? 

Mr. GRUENSPECHT. I am trying to remember back exactly what 

we had. I remember that we did several different cases in part because of the issue of it is very difficult to know will nuclear power 

really be available, will coal carbon capture and sequestration really be available. I do recall we did a range of cases. But certainly 

not surprisingly coal is some of the cheapest—the electricity sector 

is where a lot of the reductions occur. It comes from backing out 

the current coal technology. So one needs to build a lot of new capacity of other types if one is subject to these caps and it does have 

significant impacts on energy prices, particularly electricity prices, 

and there are some impacts on gasoline prices and other fuel 

prices. 

48 

Mr. LAMBORN. Now did your analysis go on to analyze what 

would happen with these kinds of price increases, depending on the 

scenario and I know that that varies to the economy and to economic growth and jobs? 

Mr. GRUENSPECHT. I am sure we did. I am trying to again think 

back to that, but I know there was a range of economic impacts on 

both the overall size of the economy and level of consumption, 

which is another measure of welfare, clearly depending on what 

technologies at what costs were soon to be available. 

One thing to keep in mind, I think, is the EIA has sort of a funny 

mission—we try to present information. There is certainly uncertainty in all projections, but we don’t do a lot of framing of that 

information. A good example would be the economic effects of a climate change policy. You could either measure it in how many billions or hundreds of billions or maybe even trillions, a number that 

we use more and more frequently in Washington these days, of dollars you get comparing one case to another. 

On the other hand, you could say, you know, how big is the economy in 2030 if we did this and if we didn’t do it. And the economy 

is very big, you know. So a difference of a few hundred billion or 

a trillion, which is certainly a lot of money to me, if you put those 

two bars next to each other in a 20 or 30 trillion dollar economy 

out into the future it doesn’t look like that much. All I am saying 

is you can take the same results and depending on how they are 

framed you can say gee, this is a tremendous—— 

Mr. LAMBORN. Thank you. 

If we are going to do cap and trade, knowing that it would raise 

energy prices, would you have a recommendation on the timing for 

instituting that? In other words, during a time of growth or during 

a time of recession if that was the two choices that we had? 

Mr. GRUENSPECHT. That probably strays into the policy area 

where EIA does not play. 

Mr. LAMBORN. OK. 

Mr. GRUENSPECHT. But I think you could imagine what an answer might be. 

Mr. LAMBORN. On carbon capture and sequestration am I correct 

in assuming that there is absolutely no proven technology for that 

today? 

Mr. GRUENSPECHT. I think that is not—certainly in the power 

sector there is no carbon capture and sequestration operating on a 

full scale power plant. That would be correct. But there is carbon 

capture and sequestration going on in oil production and in some 

other areas. 

Mr. LAMBORN. OK, thank you for that clarification. 

So as far as the cost that that would add to energy and so on 

or even if it is feasible on a commercially scalable and viable level, 

we don’t even know—really know—that for sure, do we? 

Mr. GRUENSPECHT. It is pretty significant. The issue of baseload 

power generation, I think my colleague Dr. Birol raised, you can 

think of nuclear as one carbon free option and coal with carbon 

capture and sequestration as another. We probably have a lot more 

experience with nuclear. In EIA’s analyses, the cost of those tends 

to be actually pretty close to each other. So coal with carbon capture and sequestration in addition to the extra kit that you need, 

49 

you also use a lot of the energy that you generate in the plant to 

run that extra kit to capture and handle the carbon. So it is pretty 

expensive. 

Mr. LAMBORN. Thank you, I see my time is up. Thank you, Mr. 

Chairman. 

Mr. COSTA. Thank the gentleman from Colorado. We now will 

give 5 minutes to the gentleman from the Northern Mariana 

Islands, Mr. Sablan. 

Mr. SABLAN. Thank you, Mr. Chairman. I have one question, Ms. 

Pierce. I would like to thank you USGS for some of the recent activities you had in the Northern Mariana Islands. I come from the 

Mariana Arc in the Pacific Ring of Fire. I have no idea if we have 

oil in the Marianas, I don’t know if you do, but I know we don’t. 

But it seems that we have other kind of energy that is actually 

clean that no one has thought of—well, they have thought about 

using it but not in a commercial way. Do you have any efforts to 

update the national assessments of oil and gas resources on offshore and state waters? It does not appear that you have those assessments completed for the Northern Mariana Islands. Is USGS 

planning to perform an assessment some time? 

Ms. PIERCE. Recently we have been very focused on domestic oil 

and gas resources in our state waters and onshore. And our international assessment has been focused solely on the Arctic because 

that was such a large piece missing. Now that the Arctic is done 

we need another year to integrate those efforts. But as that year 

goes on we are going to reprioritize the rest of the world, where 

there are holes and where there is missing information where we 

need to focus on next. 

So certainly in that time frame we would be looking at potential 

and what we might do, and so we would be developing those plans. 

Mr. SABLAN. Thank you. 

Mr. COSTA. If the gentleman from the Northern Marianas would 

like to try to get some direction for the U.S. Geological Survey to 

focus in your area, I would be pleased as the Subcommittee Chairman to put together a letter to ask that when the resources become 

available that they do so if that is your intent. 

Mr. SABLAN. Well, actually yes, Mr. Chairman. And actually I 

would also ask one of the other witnesses. In your last hearing in 

the Virgin Islands you actually asked, I think it was Energy Information Administration, to put some information for the territories, 

and I don’t think it has been done yet. So I would also ask for that. 

You had a hearing in the Virgin Islands. 

Mr. COSTA. No, we did. And part of it was done with our colleague. 

You have just gotten some new information? 

Mr. GRUENSPECHT. I am informed that there is work underway 

on that request. It has not been forgotten. 

Mr. SABLAN. So they do listen. 

Mr. COSTA. Does that include, besides the U.S. Virgin Islands, 

the Northern Mariana Islands as well? 

Mr. GRUENSPECHT. I thought it was all of the territories. 

Mr. COSTA. I thought it was, too. I want to get clarification since 

we have a Representative here who obviously needs to be clear as 

to what he understands is taking place. 

50 

Mr. GRUENSPECHT. How about if it doesn’t, it will? 

Mr. COSTA. I think it would be appropriate if your agency would 

provide a letter to the Subcommittee and to the Representative indicating what is taking place and on what time line. And then if 

we need to follow up with further response we can do so. 

Mr. GRUENSPECHT. I think that is very reasonable, sir. 

Mr. SABLAN. Thank you, Mr. Chairman. I yield the rest of my 

time. 

Mr. COSTA. The gentleman always appreciates when Members 

are judicious with their time, which brings me to the gentleman 

from Utah, Mr. Chaffetz. 

Mr. CHAFFETZ. Thank you, Mr. Chairman. 

Mr. Gruenspecht, I appreciate all three of you being here, but my 

questions are primarily directed to you. It is not a trick question. 

What percentage of Americans consume energy? 

Mr. GRUENSPECHT. All of them. 

Mr. CHAFFETZ. And so if we had a tax, a cap and trade tax, what 

percentage of Americans would be affected by that tax? 

Mr. GRUENSPECHT. Probably all of them. 

Mr. CHAFFETZ. One hundred percent of Americans. 

One of the things that is interesting here is that what I have 

read, and correct me if I am wrong, is that it assumes the current 

laws and regulations are in place. And one of my concerns is the 

disruption that we have, the lack of regulatory certainty that those 

companies that may be manufacturing and extracting these resources are dealing with. 

Can you try to help me quantify or understand what the impact 

is when there is a lack of regulatory certainty? We are dealing with 

an issue, for instance, in Utah after a multi-year process where 

unilaterally we were no longer allowed to proceed with some leases 

on public lands. What sort of impact do you think that that lack 

of regulatory certainty has in the market? 

Mr. GRUENSPECHT. It is actually a very tough question. It is not 

a trick question. 

Mr. CHAFFETZ. In about 20 seconds. 

Mr. GRUENSPECHT. Twenty seconds. There is an impact. If one 

knew what the ultimate decisions were going to be policy wise, I 

think everyone would agree that you would rather they know about 

them now than be uncertain about them. But on the other hand, 

there is a lot of disagreement about what the policy decisions are 

going to be. I think the parties also care about how the program 

comes out and how the decisions come out. 

Mr. CHAFFETZ. Certainly you wouldn’t disagree with the fact 

that, given the lack of regulatory certainty, there are real expenses 

that are ultimately passed on in the consumption of energy? 

Mr. GRUENSPECHT. Uncertainty has a cost, but certainly people 

would rather be uncertain and not have the outcome they don’t 

want than be certain that they have the outcome that they don’t 

want. That is what I would say, and that is really the truth. That 

is an honest answer. 

Mr. CHAFFETZ. And over the course of time, at least until 2030, 

you do see an increase in the consumption or extraction of resources in all areas, including those resources that are extracted 

from public lands? 

51 

Mr. GRUENSPECHT. We do and we see energy demand growing, 

but not growing that fast, in part because of some efficiency options 

that we think are really coming into play and in part because of 

some of the legislation that you all have enacted. You enacted fuel 

economy standards in 2007 and other things. 

Mr. CHAFFETZ. Now, there has been a lot of discussion about increasing wind and solar development to reduce our dependence on 

foreign energy. Can you help quantify how many imported barrels 

of oil will be reduced by generating more electricity from renewable 

sources? 

Mr. GRUENSPECHT. Well, I would say that very little oil is used 

to generate electricity right now. So while certainly using more renewable energy to generate electricity would affect the use of fossil 

fuels, probably since little oil is used to generate electricity, it 

would not affect—— 

Mr. CHAFFETZ. So if we don’t generate much electricity from oil, 

how much electricity do we import from foreign nations? 

Mr. GRUENSPECHT. I think we have net importers from Canada, 

but not much. 

Mr. CHAFFETZ. So clearly when we talk about reducing our dependence on foreign energy it is not about creating more wind and 

solar power or about generating electricity, it is about the combination of producing more oil and gas here at home and consuming 

less. If that is clearly the case, since we have put in place many 

of the standards to begin to control the consumption of oil, 

shouldn’t our focus be on increasing domestic production to reduce 

our import dependency? 

Mr. GRUENSPECHT. Again, I think people would argue that there 

is—again EIA would not take a policy position. People would argue 

that there is still more room for increased efficiency. Certainly it 

is a combination of less demand and more domestic supply that reduce imports. So if your focus is on reducing imports both demand 

and supply matter. 

Mr. CHAFFETZ. My last question, Mr. Chairman. My understanding is that by 2030 the United States will still need to rely 

on oil for more than 80 percent of its transportation fuels, is that 

correct? 

Mr. GRUENSPECHT. I think our reference case projection would 

have something like that. 

Mr. CHAFFETZ. We still are going to have more than 80 percent. 

Mr. GRUENSPECHT. That would be down from a current 96 percent, yes. 

Mr. CHAFFETZ. But still a huge 80 percent. 

Mr. GRUENSPECHT. A lot, yeah. 

Mr. CHAFFETZ. Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. COSTA. Thank you. We appreciate that. 

The next gentleman on the Subcommittee that the Chair will recognize, Mr. Sarbanes from Maryland. Good to have you here. 

Mr. SARBANES. Thank you. I am glad to be here. Thank you for 

holding the hearing. I have an assortment of seemingly random 

questions, so bear with me. 

First one is just definitional. Undiscovered but technically recoverable means what? 

52 

Ms. PIERCE. We produce resource estimates on those that are not 

currently reserved, so not booked by the SEC, not currently in production. They are undiscovered so they have not been drilled yet. 

Mr. SARBANES. So would there be three categories or would there 

be in production and then there would be reserve, a class of reserve 

items, and then there would be this undiscovered, but technically 

recoverable. 

Ms. PIERCE. And there is yet a bigger one of all undiscovered, 

like all molecules in the ground. 

Mr. SARBANES. So, there are like four categories? 

Ms. PIERCE. There are many, but in general, in general. 

Mr. SARBANES. The OCS discussion is one that we have been 

having for the last couple of weeks and, of course, we are operating 

now in an environment where the moratorium has been lifted so 

the discussion is over. Re-imposing it or not having it at all, and 

so forth. 

Describe, if you will, what you view as the practical impact of reimposing the moratorium, recognizing that when it was in place 

there was a fair amount of the OCS what, 15 or 16 percent or 

something like that, that was available for exploration and production, because what I am trying to get a handle on is until that was 

lifted presumably people were projecting models on how they were 

going to make this transition and where our resources were going 

to come from that assume the moratorium would stay in place. 

And maybe Ms. Pierce, you could speak to the question. You 

mentioned the Gulf of Mexico, there is going to be new deepwater 

production there in the next few years or something? 

Ms. PIERCE. Yes. 

Mr. SARBANES. Is that in the place exempt from the moratorium 

when it was in place? 

Ms. PIERCE. Yes. And I would like to have MMS answer that 

question. 

Mr. COSTA. State your name for the record. 

Mr. SYMS. I have a cold. Harold Syms. 

Could you ask that again, please? I am not quite sure. 

Mr. SARBANES. The specific question was the Gulf of Mexico anticipated increased production that was referenced was something 

that was exempt from the prior moratorium that was in place? 

Mr. SYMS. It was. 

Mr. SARBANES. And so I guess my point is we are still in that 

time period where we are referencing things that we could have explored and produced, notwithstanding the existence of the moratorium because people haven’t yet built all the new models that 

would assume the moratorium was gone. And the old models 

seemed to make it sound like there was a significant amount of resources that could come, energy resources that could come, even 

though the moratorium was going to be in place, and that you 

would be able to make this transition that we all talk about making from our current portfolio of energy resources to a new one that 

is less dependent on oil and all the rest of it. 

And so what I am asking, and maybe, Dr. Gruenspecht, you 

could speak to this, when the moratorium was in place we still saw 

our way clear to a decent transition, notwithstanding the new 

needs that we project, right? 

53 

Mr. GRUENSPECHT. As I discussed in the testimony, we expect 

total OCS production to increase whether or not the moratoria are 

restored. In one case to about total lower 48 offshore would be 

something like 2.2 million barrels a day and in the other case it 

is something like 2.8 million barrels a day, but they are both higher than today’s 1.3 million barrels a day in the OCS. 

The other thing to keep in mind, the open—there is Alaska, 

Atlantic, and Gulf of Mexico that were open prior to 2008. There 

is the eastern Gulf of Mexico that was off limits and the Pacific 

that was off limits. The Gulf of Mexico that was open actually, and 

again MMS could speak for the undiscovered part, but I think 

those resources were something like 40 billion barrels. And the 

total OCS undiscovered is something on the order of 100. So actually the open part by the estimate of oil that it contains is actually 

more than the 17 or 18 percent that you referenced in your question. That might be the square miles or something. 

Mr. SARBANES. OK. 

Mr. GRUENSPECHT. That is a very rich part, but the Atlantic and 

Pacific together has been discussed as being 18 billion barrels of 

oil, and then you have the Alaska OCS which is open, was not subject to the moratoria, although there has not really been significant 

development there. 

Mr. SARBANES. My time has expired, but I think you have helped 

make the point I am trying to make, which is that there is all this 

alarm about how we would be tying our hands if we went back to 

the moratoria that were in place when in fact we could argue we 

were in pretty decent shape with making the transition we need to 

make. 

Now I myself argue that we should put more off limits than even 

the moratoria required, but at the very least it seems that going 

back to the moratoria isn’t going to put us in a highly compromised 

position in terms of getting the energy that we need. 

Thank you, Mr. Chairman. 

Mr. COSTA. I thank the gentleman from Maryland. That just goes 

to prove that we all have different perspectives on this. 

The gentleman from Texas, Mr. Gohmert. Would you yield? 

I thought the questioning was very good between you and the 

gentleman from Maryland. My understanding is and I asked you 

how good your determination on these numbers. Haven’t most of 

the fields once we have determined been lower than the projections? I mean higher once they have gone into production, the initial projections? 

Mr. GRUENSPECHT. Sure. I know USGS has done studies on this, 

but there have been fantastic studies of some of the California 

fields and some of the Texas fields. I don’t have the picture in front 

of me. I would need the picture. Maybe Brenda—— 

Mr. COSTA. You might provide that information. 

Mr. GRUENSPECHT. I would be glad to provide that for the record. 

Mr. COSTA. Thank you. 

The gentleman from Texas. Thank you for yielding. 

Mr. GOHMERT. Absolutely. Thanks for having the hearing. I 

mean you called the hearing, why wouldn’t I yield? 

54 

So I would like to ask Dr. Birol, the UCSD economics professor 

James Hamilton had written ‘‘Nine out of 10 of the U.S. recessions 

since World War II were preceded by a spike up in oil prices.’’ 

Has EIA examined how much high energy prices Americans 

faced last summer may have contributed to reducing our GDP and 

pushing us into a recession at the end of the summer? 

Mr. BIROL. We looked into that and it would be definitely an exaggeration to claim that the current recession is because of the 

high energy prices, but we do believe that high energy prices did 

make the economy much more vulnerable through higher budget 

deficits and provide a fertile ground for higher impact of the financial crisis on the economy. 

Mr. GOHMERT. Thank you. There are people around Capitol Hill 

today who are concerned because they have been notified it looks 

like there will be additional taxes on the manner of producing oil 

and gas. And I am from east Texas where apparently we produce 

more natural gas in east Texas than anywhere else in the State of 

Texas. And people are concerned obviously that if this taxation 

goes into place, as was established earlier, it means every American will pay higher prices for everything at the worst possible 

time. 

And so anybody can answer, but if we raise taxes on U.S. production, doesn’t it mean that the marketplace will go outside the U.S., 

the Americans will end up buying more foreign oil if we tax more 

of our own production. Don’t we normally see that? Anybody? 

Mr. BIROL. I am not an American. I can better understand question. 

Mr. GOHMERT. I enjoy your accent. You may enjoy talking to me 

since I don’t have one. 

Mr. COSTA. I was wondering when we were going to go there. 

Would you like me to translate for each other? 

Mr. GOHMERT. You may need to translate for him. I can understand him. 

Mr. BIROL. Let me just put the big picture. I tried to say in my 

testimony that the good times for the international oil companies 

will be soon over, mainly because of the fact that the reserves of 

the big oil companies are declining on the one hand. Second, there 

are enough reserves somewhere in the world, especially in the Middle East and elsewhere, but the big oil companies have difficulties 

to access those reserves because they are under the control of the 

national oil companies and they do not allow these international oil 

companies to go and invest and increase production. 

So what happens is that the international oil companies now 

have to turn to perhaps less profitable fields to increase the production. And anywhere in the U.S. and elsewhere, if there is a tax, 

additional tax on production, this would definitely discourage those 

companies to increase the production and this would definitely 

have implications for the U.S. oil production prospects in a negative sense. 

But, of course, this picture needs to be put in a broader context. 

What are the macroeconomic and political implications of it? But, 

just looking at it from oil production prospects, it will definitely 

have a negative implication for U.S. production prospects. 

55 

Mr. GOHMERT. Thank you. That means less jobs and it means 

less American energy that will be produced and apparently higher 

prices for what is. 

But we keep talking about the carbon footprint, cap and trade, 

and I had some very good teachers growing up and they were basically all Democrats and they were brilliant. And they taught me 

that if you don’t have carbon dioxide plants die, that you have to 

have carbon dioxide or plants die. Obviously there is concern on 

Capitol Hill that we produce too much carbon dioxide up here, especially on the Floor. But the problem is if we are going to put caps 

on carbon, it looks like we are going to have to cap what some 

people—some people are breathing too much apparently. But now 

there is a disagreement over global warming, and now I think that 

is why people are starting to call it climate changes because they 

are not sure that maybe we are cooling instead of warming and 

they don’t want their contributions to slack off. So we need to go 

calling it climate change. 

But this last question, do you know how many countries with 

coastlines besides the U.S. have historically placed their offshore 

oil and gas resources off limits, besides the United States? Does 

anybody know, because I don’t know. I am curious if anybody 

knows. Are there other countries? 

Mr. BIROL. I would say very few, sir. 

Mr. GOHMERT. Do you know of any personally? 

Mr. BIROL. No. 

Mr. GOHMERT. You can’t name any countries that do? 

Mr. BIROL. I don’t know how many. 

Mr. GOHMERT. Either they are all really, really stupid or draw 

your own conclusion. Thank you very much. 

Mr. COSTA. I thank the gentleman from Texas. I am glad that 

we are not determining that there is a lot of carbon problems with 

the Subcommittee here today. So that we are keeping that under 

control. And then I do want for the record it to be stated that the 

gentleman from Texas has acknowledged that there are smart 

Democratic teachers. 

Mr. GOHMERT. Very smart. 

Mr. COSTA. I always enjoy our exchange. 

I think the next Committee member who is up is Mr. Heinrich 

from New Mexico. The gentleman from New Mexico for 5 minutes. 

Mr. HEINRICH. Thank you, Mr. Chair. 

Dr. Birol, in your testimony you stated that you believed that expanded drilling in the OCS could form ‘‘a crucial part of a comprehensive strategy to enhance the Nation’s energy security.’’ I 

don’t think that anyone can disagree with the idea that oil production from the OCS is critical to our energy security and will be for 

some time to come. 

The question that a number of us are wrestling with as a Nation 

and on this Committee is where should that expanded production 

take place from in the near term before the long term. And should 

it be those areas where drilling has already been allowed before the 

moratorium expired or should we be focusing on these new areas 

that seem to be the focus of renewed interest? 

Now we heard the statistic today that the MMS provides that 

says that roughly 80 percent of the oil and gas on the OCS is in 

56 

those parts of the Gulf of Mexico and Alaska that are open for leasing. But another statistic that I find interesting from the MMS is 

that just in the central and western Gulf, where almost all of our 

offshore oil currently comes from, 60 percent of undiscovered oil is 

in the areas that have not been leased. That’s about 24 billion barrels in the Gulf of Mexico available for leasing but not yet leased. 

That is more than the total, which I believe we mentioned about 

18 billion, available in MMS estimates under the previous moratorium areas. 

So when you say that drilling on the OCS should be expanded, 

should we be prioritizing basically the western-central Gulf region 

or should we be looking immediately to those new areas such as 

the Atlantic and the Pacific? 

Mr. BIROL. I think, first of all, we should see that the U.S., as 

in many countries, is facing two major challenges. We cannot disconnect these two challenges, the energy security mainly on the oil 

side, and the second one is climate change. And in many cases the 

policies which are good for the climate change are at the same time 

good for the energy security. I wanted to make this point here that 

this is a win-win solution. 

The question you raised, Mr. Chairman, which policies energy efficiency, renewables, nuclear power, they are good for the climate 

change but at the same time for energy security this is a win-win 

station here. I think there is no contradiction between pushing 

energy security or the climate change agenda. So I wanted to make 

this point that there are many synergies there. 

In terms of energy security, I think a major problem for the 

United States which is going to come is the increasing risks with 

oil import dependency. 12 million barrels per day of oil import is 

very high in 2030, essentially if we see that one of the major suppliers such as Mexico, the production is going to decline, so U.S. 

has to import oil from longer distances and from countries which 

are far from the United States and very few number of countries. 

And two countries which are very important in this context are 

Saudi Arabia and Iraq, which will be the major exporting countries 

in the next years to come. 

In this context I think there are two areas which are key to address this oil import dependency issue. One is using less oil, the 

question of oil import dependency, and because of increasing efficiency especially in the transportation sector. It is an old concept 

but it is a very important concept, and there is a lot of room still 

to apply this old but not yet fully implemented concept to two different channels. One standards and regulations and, second, perhaps it is not very politically correct here, but perhaps you can get 

the prices of gasoline and diesel in the United States and bring it 

to a level which would discourage the wasteful use of oil. So this 

on the efficiency side and which will bring the demand growth 

slower, which would make U.S. import less oil. 

And the second issue you mentioned, distinguished member, it is 

increasing production from the offshore. These reserves offshore 

will be very important. If you look at the last 20 years, almost all 

the growth including what came from the offshore fields, no onshore growth, almost all the growth came from offshore fields. And 

when you get to the reserves two-thirds of the global reserves are 

57 

under the water. So there is no way of escaping this. This is under 

the water, otherwise we will lose that domain. In the context of the 

prioritization I would think that the Gulf of Mexico and Alaska 

these are the areas that we have to look at carefully, but this 

shouldn’t exclude to get to other parts the offshore especially in 

terms of having much more realistic assessments in terms of having more drilling. 

Thank you. 

Mr. HEINRICH. Mr. Chair, do I have more time for another question or am I out? 

Mr. COSTA. If it is a quick one. 

Mr. HEINRICH. Real quick question. We heard about the risk of 

addressing pollution from carbon. Do you see an economic risk in 

not addressing pollution from carbon as the temperature rises? 

Mr. BIROL. That may be long-term implications in terms of the 

climate change would have an effect on many areas of the world, 

including United States, ranging from the productivity in the agriculture sector, to the availability of water, changing the landscape 

of the plants and others. That may have such implications. 

But second, I think more importantly, the later we address the 

climate change issue, the more costly it will be in the future. Because there are a lot of investments being done, not everywhere in 

the world, especially in China and India and also in those countries 

which do not take into account the climate change issue, and those 

investments once they are done, for example, building a coal-fired 

power plant, it will be with us 50, 60 years. So the earlier, if you 

want to give a signal to the investors we give, the better and less 

costly it is in the next years to come. 

Mr. COSTA. We thank the gentleman for his response. It may 

have been a quick question, but it wasn’t a quick answer. 

Mr. HEINRICH. I thought it was a yes or no. I apologize. 

Mr. COSTA. I think he tried to respond in a complete fashion. 

The Chairman is pleased to recognize the gentlewoman from Wyoming, Ms. Lummis. 

Mrs. LUMMIS. Thank you, Mr. Chairman. My first question is for 

Dr.—is it Gruenspecht. Would you pronounce it for me? 

Mr. GRUENSPECHT. Gruenspecht. 

Mrs. LUMMIS. Gruenspecht. Thank you. 

Mr. GRUENSPECHT. Gruen means ‘‘green,’’ so you are pretty close. 

Mrs. LUMMIS. There is a great town in Texas called Gruen and 

they pronounce ‘‘green,’’ but it is pronounced like your name. It is 

really neat. You ought to go down there some time. 

What percentage of our domestic energy use is renewables right 

now? 

Mr. GRUENSPECHT. I would say probably close to 10. And the biomass industry and the wind and the solar all together will probably 

be close to maybe 9 or 10. 

Mrs. LUMMIS. And what do you predict that percentage will increase to by 2030? 

Mr. GRUENSPECHT. I don’t have the renewable all together, but 

I have the fossil part, is like 85 percent now, and we see that dropping to about 79 percent. So the other 15 percent would be renewables and nuclear now and then that renewables and nuclear 

58 

would grow to about 21 percent by 2030. I can get you the breakdown if you want. I just don’t have it in my head. 

Mrs. LUMMIS. Thank you, Mr. Chairman, I would love to have 

that. So thanks. 

Mrs. LUMMIS. The President’s budget, I am on the Budget Committee and I was over there this morning, his budget proposes to 

repeal the intangible drilling cost deduction for oil and gas producers. And that would prevent people who are drilling for oil and 

gas to deduct some of their business costs up front like other industrial sectors do. I have been informed that eliminating the IDC deduction will increase the cost associated with domestic natural gas 

production to such a degree that it will single-handedly reduce the 

number of natural gas wells in the U.S. by one-fourth. 

How would such a decrease affect your analysis that net imports 

of natural gas will decline to less than 3 percent by 2030? 

Mr. GRUENSPECHT. Clearly in our projection we do have an increase in natural gas drilling in the unconventional areas. A lot of 

that it would be sensitive to—tax provisions definitely matter, although I can’t agree or disagree with the specific estimate you 

cited. The other thing that matters a whole lot is the price of natural gas. And as a person from an energy producing state, you and 

I know that drilling right now is—natural gas prices have come 

down quite a bit, as have oil prices come down and drilling activity 

is down dramatically. So I would say that certainly tax provisions 

matter and certainly the wellhead prices available matter. 

Mrs. LUMMIS. Thank you. My next question, Mr. Chairman, is for 

Dr.—and once again is it Birol? 

Mr. BIROL. Birol. 

Mrs. LUMMIS. Thank you for joining us. The whole panel has 

done a great job. You state in your testimony that even if global 

oil demand remained flat until 2030 the equivalent of over four 

times of the current capacity of Saudi Arabia would be needed to 

offset declining production at existing fields. How much of that 

global oil demand do you associate with the United States? 

Mr. BIROL. I think for the United States likely we expected that 

the oil demand in the U.S. in 2030 will be less than today. But still 

a significant portion of the oil demand would come from the United 

States but less than today. And the bulk of the growth would come 

from China, India, and the Middle East countries. 

Mrs. LUMMIS. OK. And is there an analysis that you know of regarding how much of that demand could be met if the OCS areas 

that were formerly under a moratorium were actively developed? 

Mr. BIROL. It would depend on how much of the OCS will be utilized. But I wouldn’t say that OCS will be a big part. 

Mrs. LUMMIS. Thank you. One more question, Mr. Chairman, 

this one for Mrs. Pierce. You made a key point in your testimony 

that the estimate of technically recoverable resources changes dramatically over time. It is based on geologic understanding and developing technology. 

One of the technologies that has really improved production in 

recent years and has the potential for doing so into the future 

years is that of a fracking technology. And that has allowed us to 

recover from tight sands, and so forth. 

59 

There is concern here in Congress, on my part certainly, that if 

fracking technology is not allowed to be used and it is brought 

under the Safe Drinking Water Act and basically regulated out of 

existence, that even more resources that we could recover with 

nonconventional fracking technologies would be lost. Do you think 

that is a fair statement? 

Ms. PIERCE. It probably is a fair statement. I mean part of the 

reason the Bakken Formation grew exponentially in terms of resources, and the Barnett Shale and the Marcellus Shale, is the 

technology you are talking about and the horizontal drilling. 

Our assessments are technically recoverable and they are based 

upon what technology is used today. If any technology isn’t used 

today, we don’t use that in our technically recoverable resource estimate. So regardless of the type, whichever one is there or not, it 

will effect the resource estimates and what is usable and what is 

not, what is economically recoverable. 

Mrs. LUMMIS. Thank you, Mr. Chairman. This has been a very 

informative panel, and I am deeply grateful to all of you for attending today. Thank you. 

Mr. COSTA. Thank you. And the Chair stands corrected. I believe 

I mispronounced the gentlewoman’s name, it is Lummis? 

Mrs. LUMMIS. Lummis, yes, thanks. 

Mr. COSTA. I know a Lummis in my district and so I mispronounced it, obviously not intentionally. Lummis. 

Mrs. LUMMIS. Thank you very much. 

Mr. COSTA. You are welcome. It is the Chair’s intention to recognize both the two remaining members of the Subcommittee who 

have not had a chance to ask questions yet, the gentleman from 

New Jersey and the gentleman from Louisiana, and at that time 

I think we are going to be having votes. So we will close the testimony. So Members who have additional questions, I don’t think we 

are going to get to a second round is my point. 

Anyway, the gentleman from New Jersey, who has a deep interest and his own research on this subject, Mr. Holt. 

Mr. HOLT. Thank you. I take that to mean I have only 5 minutes. 

Mr. COSTA. Well, the Chair has been somewhat generous with 

the time. 

Mr. HOLT. I would gladly spend all afternoon talking with the 

witnesses. It is an excellent panel. 

Mr. COSTA. It has been a good panel. 

Mr. HOLT. I apologize for my absence earlier in the hearing. 

Mr. COSTA. We missed you. 

Mr. HOLT. Let me ask a general question that is, I guess, a request for your help in answering what we all hear from our constituents, and I suppose this would be directed to Dr. Birol and Dr. 

Gruenspecht. We have heard drill here, drill now, pay less. Last 

summer we got a lot of mail from constituents on both sides of 

that, but they said, gasoline is at $4 a gallon, you have to start 

drilling off the Jersey shore or off the Virginia shore or wherever 

else. What would you say to the people who write us Members of 

Congress and ask that? I think it is worth noting that the price has 

dropped from $4 a gallon to considerably less than that and this 

drilling didn’t take place. And that during the early part of the 

60 

21st century for the first half dozen years there was quite a bit of 

drilling and prices went up. 

So let me ask you to help us answer those constituents. 

Mr. BIROL. I guess our answers would be a bit different, because 

I don’t have the concern to be elected or reelected. So I will tell you 

what I believe. 

Mr. COSTA. That is why he is asking you the question. 

Mr. BIROL. So I would say even if it is $4 per gallon, it is cheap. 

It is still half of the money that the people pay in Europe or even 

less than they pay in Japan. 

Mr. HOLT. But putting that aside, and I take your point. 

Mr. BIROL. Yes. 

HOLT. But really what I wanted to get at is the effect of drilling 

here, drilling now on gasoline prices for the commuter, for the local 

businesses. 

Mr. BIROL. I wouldn’t say that even drilling here or there will 

have major impact to bring the price down. It may have some impact by increasing the production, but I would be surprised if it 

would change a lot. Because why the prices so increased was the 

result of what happened in the entire nation’s oil markets. And the 

drilling and getting more oil from here and there wouldn’t have a 

major impact on the international oil markets and wouldn’t unfortunately bring the prices significantly down, is my answer. 

Mr. HOLT. Mr. Gruenspecht. 

Mr. GRUENSPECHT. I think that all else being equal, which is an 

important thing, because all else is not always equal, I think more 

production has some impact on prices but a pretty small impact on 

prices. When we have done analyses of increased—either it is opening ANWR, which we have been asked to look at that by various 

folks over the years, or the OCS. Again in our OCS case without 

the moratoria restored, we get about 600,000 barrels a day more 

production in the U.S. That is in the long-run setting. It isn’t like 

you added 600,000 barrels a day to the market today. In the short 

run that could make a very big difference, but over time there is 

both supply response from other suppliers and there is also a demand response to prices and the effect of adding 600,000 a barrels 

a day is probably $1 or $2 a barrel, which translates into the $0.02, 

$0.03, $0.04 or $0.03 to $0.05 a gallon. 

Mr. COSTA. Will the gentleman yield for a second? I will give you 

the extra time. Could you define for the Subcommittee what you 

mean by in the short time and the long term, years, 5 years, 10 

years? 

Mr. GRUENSPECHT. Let’s say if you are looking—when the oil 

markets were extremely tight, let’s say before last summer when 

you were getting all your fan mail, adding a million barrels of demand to that market where there was no spare capacity or removing a million barrels of supply or adding a million barrels of supply 

could immediately make a difference. Over time people can make 

different decisions in terms of the vehicles they buy, in terms of the 

fueling decisions they make. So over a 10-year or 20-year period, 

we often talk about 2030, both the IEA and EIA, there are both responses from other suppliers and responses in demand that tend to 

attenuate the price effects. 

61 

So I don’t know if I have answered your question. But I would 

say less than a year for a short run—10 years or longer for a long 

run—would be a fair way to look at it. But again the drilling takes 

time. So all these issues is that if one would start leasing or if one 

would—I know ANWR isn’t on the agenda today, or open ANWR, 

it takes a long time for that production to occur, so one thinks that 

the long run responses where other suppliers adjust and other people take account of that in the equipment they buy is probably 

valid. 

Mr. HOLT. If the Chair will allow me to reclaim my time? 

Mr. COSTA. No, no, go ahead. 

Mr. HOLT. Your report and it is well-known that energy—and 

this is getting at the demand question. You report and it is wellknown that energy intensity has decreased continually and actually 

quite in an almost a straight line, whether you are talking about 

energy per capita or energy per dollar of economy, economic activity, for now 30 years. 

Do you see any reason for that to be leveling off any time soon? 

Mr. GRUENSPECHT. We actually have had energy per dollar GDP 

has been falling off. Historically, energy per capita in the U.S. over 

the last 20 years has actually been pretty flat, but we do see it falling off going forward somewhat because—in part because of the 

things—again, what you folks do up here have consequences. So 

things like the Energy Independence and Security Act, which had 

the fuel economy standards, which has the appliance standards 

and lighting standards, we do see—and also our projection of prices 

with real energy prices in our reference case rising. We see per capita, which has been relatively flat since 1990, falling a little bit. We 

do see a continued decline, and you are exactly right, per dollar of 

GDP, it has been falling steadily and we see that continually. So 

we do see some growth in energy demand. 

One of the differences between the U.S. and maybe Europe is 

that there is still population growth in the U.S. So, even with per 

capita declining a little bit, our overall energy use is growing a little bit, where in Western Europe, population is relatively flat or declining in many countries. And there are a lot of details, but I 

think that is the answer to your question. 

Mr. HOLT. I think my time has expired. 

Mr. COSTA. Thank you. I think we have all enjoyed the testimony 

here this afternoon. We may want to look for an opportunity to revisit this, because I think this is the thoughtful way we try to formulate policy, and I appreciate everybody’s efforts. 

Our last questioner is the gentleman from Louisiana. Am I to determine that your answer to the question—is long term by your 

definition as 10 years? 

Mr. GRUENSPECHT. Oh. I am an economist, I have two hands. 

But I think 1 year is short term in the oil market, I think 20 years 

is long term, and somewhere between 1 year and 20 years, which 

I have arbitrarily defined as 10 years, is a good way to think about 

it. 

Mr. COSTA. OK. Gentleman from Louisiana, Mr. Fleming. 

Mr. FLEMING. Thank you, Mr. Chairman. Am I to understand 

that I hear today that there is perhaps a consensus emerging that 

62 

we need to move more toward nuclear energy which will help us 

out in the long run. Am I correct on that? 

Mr. BIROL. I think this will be a very good choice for both of the 

challenges we are facing, both security of supply and climate 

change. I look at the countries outside the United States. There is 

a change of wind, direction of wind. In last 3 or 4 years, mainly 

for two reasons, many countries in Europe are changing their nuclear policy. Italy, for example, which banned nuclear power in 

1992, is going back to nuclear power. Finland is building a new nuclear power plant. U.K. is changing its nuclear policy. And many 

developing countries want nuclear power because it produces electricity cheap without having security of supply problems and they 

deduct emitting in the carbon dioxide emissions. 

Mr. FLEMING. Do other panelists agree with that? 

Mr. GRUENSPECHT. Well, I am not really in a position to agree 

with it. All I would say is that certainly if you are interested in 

reducing greenhouse gas emissions and baseload power generation, 

your two kinds of options are nuclear and coal with carbon capture 

and sequestration, if that comes into being. Whether nuclear is 

cheap or not, I think people would have—it is compared to what 

else you could do if you weren’t worried about greenhouse gas emissions. It is probably less economic. But that is a policy call, not my 

call. 

Ms. PIERCE. And policy aside, all those factors are very true. I 

would just ask people to keep in mind it is still a resource. You still 

have to have the basic resources to run these nuclear power plants. 

And so again we need to understand where they are, at what cost 

they are provided, do we need to import those, do we have those 

resources. It is another thing to keep in mind. 

Mr. FLEMING. Well, it kind of gets back to the cost of energy. So 

I am very concerned we have got—as my friend from Wyoming just 

mentioned, we have this idea in the Fiscal Year 2010 budget to remove incentives for drilling, which is going to add cost to oil and 

gas companies, which is going to hurt jobs. Then we are talking 

about $646 billion impact which regard to cap and trade, which is 

going to impact cost to the consumers and it could well hurt the 

poorest or working poor more because a higher percentage of their 

budget is going to be fuel oil and electricity warming their homes. 

Mr. FLEMING. So I am very concerned about some moves that 

we’re making here. I believe that the more we replace coal with 

things like nuclear energy and also the more we produce oil and 

gas, and also, Ms. Pierce, you mentioned that there is actually 

more and more stores of natural gas being found. We have the 

Haynesville Shale in our area, and apparently they have underestimated what that can produce. 

With all of that, it seems to me that if we provide increase in 

supply and reduction in demand by moving into more efficiency 

and more alternatives like nuclear energy, that the costs will come 

down. It seems like to me—I worry some that there seems to be 

a goal to increase the cost. And I think our constituents, particularly the working poor and the poor are going to be the ones to hurt 

the most. 

So, and also, it is kind of a second unrelated question but I will 

let you all address both of these, is what are other countries doing? 

63 

I see us potentially doing a whole lot but, of course, we are not producing all of the CO2 going into the atmosphere. So we can do a 

lot. But is that really going to have a big impact when other countries aren’t? 

I would love to have a response from any of the panel on these. 

Mr. BIROL. In terms of cost, it is too general to say that it depends on what we understand about the cost. But if we just look 

at the electricity generation cost, and natural gas and nuclear, if 

you compare this, too, if the oil prices were about $60 and above, 

nuclear power seems to be an economic choice. And in the absence 

of any carbon tax or anything. But if you have a carbon tax this 

would definitely favor, or any cap-and-trade whatever the system, 

this would definitely favor nuclear power or other carbon free 

sources. 

But another thing for nuclear—we shouldn’t think of nuclear 

only as a source of electricity generation. Today almost all the oil 

in the world, in the U.S. and other countries are used in the transportation system, cars, trucks. If you want to in the future move 

toward plug-in hybrids at electrical vehicles, we need electricity in 

order to feed those cars. And nuclear can also play a crucial role 

in that respect if we are forward looking in energy policy. 

In terms of the carbon dioxide emissions initiatives, you are perfectly right, sir. As I tried to say, if the U.S. emissions tomorrow 

would be zero, European emissions would be zero, Japanese emissions would be zero and if it was to remain zero 20 years, no economic activity in the U.S., Europe or Japan, therefore no carbon dioxide emissions, if China, India, and Russia would continue with 

their policies we cannot make any significant improvement in the 

climate change. This is the point, unfortunately. 

Mr. FLEMING. Any other comments? 

Mr. GRUENSPECHT. A short comment. You know, the relevant position of natural gas versus nuclear, I think there is a difference 

from looking at things from a world perspective or a U.S. perspective. In the U.S.-North American market we would expect the price 

of natural gas to be separated significantly from the price of oil in 

energy terms in part because of the unconventional resource that 

we have, which I don’t think is fully reflected in the IEA’s analysis. 

And certainly with oil at $60 a barrel we do not think nuclear 

would be competitive with natural gas. 

And I guess this other point I would make is I agree with Fatih 

in many respects. There are synergies between these goals of 

energy security and climate change in some respects. But let’s be 

serious. There are also conflicts as well. Something like coal to liquids in a country like the United States, very attractive for energy 

security given our coal resource, a disaster perhaps—I don’t want 

to get carried away because you could have sequestration, but it 

could help you on one issue and hurt you on another issue. Something like biomass, do we use it as a source of a substitute for oil, 

which helps us maybe on energy security, or you could take the 

same biomass and use it to back out coal, which actually gives you 

a bigger carbon dioxide bang for the buck. 

So I think you do have to—you know, sometimes there are 

synergies, sometimes there are conflicts. And we have to be kind 

of honest about what issues we care about. And again, the EIA 

64 

doesn’t have a position in how we prioritize those various concerns 

because it isn’t like we are all going to hold hands and go down 

the street and everything will be a win-win because life is not really that way, as we all know. 

Mr. COSTA. We are trying. 

Mr. GRUENSPECHT. Whatever. 

Mr. FLEMING. Mr. Chairman, I know I am out of time. I would 

like if it’s OK—— 

Mr. COSTA. You are out of time. What would you like to do? 

Mr. FLEMING. I want to enter into the record a letter from the 

Louisiana Oil and Gas Association President regarding this issue 

of the lack of incentives. 

Mr. COSTA. Without objection. 

Mr. FLEMING. Thank you. 

Mr. COSTA. Gentleman from Colorado, wind up here. 

Mr. LAMBORN. With leave of you as the Chairman, I would like 

to just ask just one very quick question of Ms. Pierce. 

Mr. COSTA. If she can give us a quick answer. 

Mr. LAMBORN. We have talked about other sources of energy, nuclear has come up briefly. What kind of supply does the U.S. have 

domestically for uranium? 

Ms. PIERCE. That is a good question, I don’t think there has been 

a recent assessment. We are gearing up to look at doing a resource 

assessment. But there is not a current assessment on uranium. 

Mr. COSTA. Good question, gentleman from Colorado. If you could 

respond to the Subcommittee as to how that assessment is going 

to take place and what timeline we can determine the proven reserves, I don’t know if that is a term of art or not, proven reserves 

of uranium that would be available for what type of nuclear expansion might be contemplated, that would be helpful. We would like 

you to do that. 

Mr. COSTA. We are going to close here. I just want to mention 

to members of the Subcommittee that you have not seen. Dr. Birol, 

who has done such a good job, produces this World Energy Outlook 

every year, the international consortium that he is a part of, and 

so I would urge members of the Subcommittee to get this in your 

office. It is, I think, a helpful resource material. I am not plugging 

it for any reason. Dr. Birol and I don’t have anything going. But 

I do find this helpful, and we do appreciate the good work you do, 

the good work that all the witnesses who testified here this afternoon do. 

I want to thank the members of the Subcommittee for your focus, 

your attention, and your interest. We will continue to try to work 

on this effort so that, as Dr. Gruenspecht referenced, that maybe 

we can somehow find a way, all going down merrily that same 

road. Because certainly our Nation depends upon it. 

Thank you very much. This hearing is adjourned. 

[Whereupon, at 4:05 p.m., the Subcommittee was adjourned.] 

[Additional material submitted for the record follows:] 

65 

[The letter submitted for the record by Mr. Don G. Briggs, 

President, Louisiana Oil and Gas Association, follows:] 

Æ 


47755.006.eps