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RETAIL GAS PRICES (PART II): 

COMPETITION IN THE OIL INDUSTRY 

HEARING 

BEFORE THE

TASK FORCE ON COMPETITION POLICY 

AND ANTITRUST LAWS 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

MAY 22, 2008 

Serial No. 110–180 

Printed for the use of the Committee on the Judiciary 

( 

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

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

BETTY SUTTON, Ohio 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

TASK FORCE ON COMPETITION POLICY AND ANTITRUST LAWS

JOHN CONYERS, JR., Michigan, Chairman 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

BETTY SUTTON, Ohio 

ANTHONY D. WEINER, New York 

DEBBIE WASSERMAN SCHULTZ, Florida 

STEVE CHABOT, Ohio 

RIC KELLER, Florida 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

BOB GOODLATTE, Virginia 

CHRIS CANNON, Utah 

DARRELL ISSA, California 

TOM FEENEY, Florida 

LAMAR SMITH, Texas, Ex Officio 

PERRY APELBAUM, Staff Director and Chief Counsel 

SEAN MCLAUGHLIN, Minority Chief of Staff and General Counsel 

(III) 

C O N T E N T S 

MAY 22, 2008 

Page 

OPENING STATEMENTS 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Chairman, Task Force on Competition Policy and 

Antitrust Laws ..................................................................................................... 1 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Member (Ex Officio), Task Force on Competition Policy and 

Antitrust Laws ..................................................................................................... 2 

The Honorable Sheila Jackson Lee, a Representative in Congress from the 

State of Texas, and Member, Task Force on Competition Policy and Antitrust Laws ............................................................................................................. 6 

The Honorable Steve Chabot, a Representative in Congress from the State 

of Ohio, and Ranking Member, Task Force on Competition Policy and 

Antitrust Laws ..................................................................................................... 7 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Member, Task Force on Competition Policy and Antitrust 

Laws ...................................................................................................................... 9 

The Honorable Ric Keller, a Representative in Congress from the State of 

Florida, and Member, Task Force on Competition Policy and Antitrust 

Laws ...................................................................................................................... 10 

The Honorable Betty Sutton, a Representative in Congress from the State 

of Ohio, and Member, Task Force on Competition Policy and Antitrust 

Laws ...................................................................................................................... 10 

The Honorable Chris Cannon, a Representative in Congress from the State 

of Utah, and Member, Task Force on Competition Policy and Antitrust 

Laws ...................................................................................................................... 12 

The Honorable Debbie Wasserman Shultz, a Representative in Congress from 

the State of Florida, and Member, Task Force on Competition Policy and 

Antitrust Laws ..................................................................................................... 14 

The Honorable Darrell Issa, a Representative in Congress from the State 

of California, and Member, Task Force on Competition Policy and Antitrust 

Laws ...................................................................................................................... 15 

The Honorable Tom Feeney, a Representative in Congress from the State 

of Florida, and Member, Task Force on Competition Policy and Antitrust 

Laws ...................................................................................................................... 16 

WITNESSES 

Mr. John Hofmeister, U.S. President, Shell Oil Company 

Oral Testimony ..................................................................................................... 18 

Prepared Statement ............................................................................................. 21 

Mr. Peter J. Robertson, Vice Chairman of the Board, Chevron Corporation 

Oral Testimony ..................................................................................................... 34 

Prepared Statement ............................................................................................. 36 

Mr. John E. Lowe, Executive Vice President, ConocoPhillips 

Oral Testimony ..................................................................................................... 53 

Prepared Statement ............................................................................................. 55 

Mr. Robert A. Malone, Chairman and President, BP America 

Oral Testimony ..................................................................................................... 107 

Prepared Statement ............................................................................................. 109 

Page

IV 

Mr. J. Stephen Simon, Senior Vice President, Exxon Mobil Corporation 

Oral Testimony ..................................................................................................... 132 

Prepared Statement ............................................................................................. 134 

APPENDIX 

Material Submitted for the Hearing Record .......................................................... 215 

(1) 

RETAIL GAS PRICES (PART II): 

COMPETITION IN THE OIL INDUSTRY 

THURSDAY, MAY 22, 2008 

HOUSE OF REPRESENTATIVES, TASK FORCE ON COMPETITION POLICY

AND ANTITRUST LAWS

COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Task Force met, pursuant to notice, at 11:12 a.m., in room 

2141, Rayburn House Office Building, the Honorable John Conyers, 

Jr. (Chairman of the Task Force) presiding. 

Present: Representatives Conyers, Jackson Lee, Waters, Cohen, 

Sutton, Wasserman Schultz, Smith, Chabot, Keller, Cannon, Issa, 

and Feeney. 

Also present: Representative Peterson. 

Staff present: Anant Raut, Majority Counsel; and Stewart 

Jeffries, Minority Counsel. 

Mr. CONYERS. Good morning, ladies and gentlemen. We are 

ready to begin. 

We welcome you all here again. Many of you have almost become 

professional witnesses, you have been here so many times. 

This is the second hearing that the Antitrust Task Force has 

held, but I am putting in the record all the hearings that have been 

held on the Hill with the Senate and the House, with our various 

Committees. It comes to a very large number. 

The reason these hearings are called, gentlemen, is that every 

one of my colleagues on this Committee join with me in wanting 

to figure ways to bring the price of gas down at the pump. We all 

want to do it. 

The question is how do we do it. And it is not that you are the 

ultimate resolvers of this issue, but certainly you are among the 

major players. And it is in that sense that we begin these hearings. 

On May 7, when we had our first hearing on this subject, the na- tional average price of gas was $3.66. Today, it is $3.81. In Washington, DC, it is $4. In other places, it is just as much. 

So we come here to explore this. We thank you so much for your 

cooperation. 

I wanted to just recognize my colleagues for a couple minutes for 

them to bring their welcome and identify the key point that is on 

their mind when they come today. 

I will start with the Ranking Member of the full Committee, Mr. 

Smith of Texas, for his comments, and then I will go to Steve 

Chabot. 

2 

Mr. SMITH. Thank you, Mr. Chairman. 

Mr. Chairman, fuel prices at the pump have caused a significant 

strain on individuals’ and businesses’ finances across the nation. 

This week, the average price for gallon of gas hit $3.84, a new high. 

Unfortunately, some people are playing a blame game when it 

comes to prices at the pump, often pointing fingers at big oil. According to the Federal Trade Commission, though, there is no collusion to fix prices in the retail sale of gasoline. 

So what can Congress do to reduce fuel prices? 

Congress should be working to expand the domestic supply of energy. House Democratic leaders have rejected opportunities to increase that supply, which would result in a drop in prices at the 

pump. 

For example, last August, 95 percent of House Democrats voted 

against a proposal that would have opened up the outer continental 

shelf and the Arctic National Wildlife Refuge to drilling for oil and 

natural gas. 

Only one-tenth of 1 percent of ANWR would be impacted. The 

area is frozen tundra, not exactly where the caribou roam. There 

may be as many as 86 billion barrels of oil in the outer continental 

shelf and Arctic National Wildlife refuge, enough oil to keep America going for 5 years, with no foreign imports at all. 

Drilling in ANWR alone would increase U.S. crude oil production 

by 20 percent of today’s levels, which would mean lower gas prices 

in the future. 

While no one contends that opening up the OCS and ANWR to 

drilling will make United States energy independent overnight, it 

is a step in the right direction. 

Many believe that alternative fuels are the solution to gas prices 

and while alternative sources of energy are important, including 

solar and wind, they account for only 6 percent of U.S. energy consumption. 

Even if we doubled our reliance on these types of energy, increasing 100 percent, it would hardly be noticed at the gas pump. 

With fossil fuels constituting so much of our energy consumption, 

both now and in the future, expanding our access to oil and natural 

gas must be a part of the solution in reducing gasoline prices. 

An excess profits tax on the oil companies has been proposed. 

While it is true that these companies have strong profits, profits 

are necessary for companies to expand, produce and create more 

jobs. 

To put these profits in perspective, last year, oil and gas companies had a profit margin of 8.3 percent, lower than the 8.9 percent 

profit margin enjoyed by all manufacturing sectors and significantly lower than the 13 percent profit enjoyed by computer companies and the 18 percent profit in pharmaceuticals. 

Do we really want to start punishing any business that makes 

more than an 8 percent profit? 

Regarding energy companies, an excess profits tax would only 

serve to discourage them from investing more in their exploration, 

production and refining capabilities. This is not the way to reduce 

the price of gas. 

Not only would an excess profits tax not produce an extra drop 

of oil, it would drive down the value of oil company stocks, which 

3 

are owned by millions of Americans and their pension funds, retirement funds and mutual funds. In fact, all Federal employees who 

participate in the thrift savings plan have a stake in the energy 

companies. 

There is an old cartoon in which the character, Pogo, says, ‘‘We 

have met the enemy and he is us.’’ 

It is Congress who needs to be held accountable for not supporting policies that would increase the supply of oil and reduce 

the price of gas. 

There are no short-term fixes to this problem. But over the long 

term, Congress can help reduce the cost of gas at the pump. 

Mr. Chairman, one final request, a unanimous consent request to 

have an editorial that was in ‘‘Investor’s Business Daily’’ today 

made a part of the record. 

And I will yield back the balance of my time. 

Mr. CONYERS. Without objection. 

[The information referred to follows:] 

4 


IBD-1.eps
5 


IBD-2.eps
6 

Mr. CONYERS. I am pleased now to recognize the gentlelady from 

Houston, TX, Sheila Jackson Lee. 

Ms. JACKSON LEE. Mr. Chairman, let me, first of all, express my 

appreciation to you and this Committee for the insight of convening 

such a very important hearing and previous hearing that we have 

had. 

I think it is well known that Houston claims and still remains 

the energy capital of the world. Many of these companies are my 

constituents and I proudly represent their employees, and I know 

that they are hardworking and patriotic Americans. 

But as we proceed in this hearing, I hope that the approach will 

be a collective and collaborative effort of solutions. We already 

know the core principals and proposals of the industry, which is 

that this Congress has not worked effectively—when I say that, 

this bipartisan Congress—over the long term and that the answers 

to our problems are at our feet. 

I would turn the cards back toward the industry and hope, in 

this process, this hearing, that you will offer creative solutions. 

Frankly, I believe that the issue of speculators, which many Americans are unaware of, add to the price. 

I think the structure of OPEC, which many of you believe cannot 

be touched, adds to the price. 

I do think that we have to be broad-based in our thoughts about 

how we secure more resources. I am a champion of drilling offshore 

of Texas and Louisiana. Why? Because there is a consensus. You 

have done it well. You have done it an environmentally safe manner. 

I think the other interest that I have, and I do want to make 

mention of your colleague, Mr. Hofmeister, avocation in the road, 

and I am going to extend an invitation for a roundtable discussion 

in our city by all of you, at my invitation, on the question of solutions. 

But this is an antitrust Committee. So we will be asking the 

hard questions. What is impacting these prices? Are there collusions and price fixing, in the ultimate results of the truck drivers 

who we heard from who are losing their business or to the moms 

and pops who are trying to go on a limited vacation over the summer or carpools. 

All of this has a major impact on the mindset and the attitude 

that Americans have about how their country is treating them. 

I think all of us, regardless of whether you are in the private sector, you are, in fact, public servants. You have a utility, a need that 

we cannot survive without. 

Yes, we can look alternatively and we have done a good job. This 

Committee, the Energy and Commerce, the leadership of this Congress, Democratic leadership, looking at R&D and looking at alternatives, but, Mr. Chairman, I do believe that we have to have a 

balanced energy policy that includes a variety of resources, which 

these gentlemen represent. 

Let us find a way that the callers that spoke to me this morning 

ask, and that is to relieve the pain. There may not be a short term 

if we think narrowly, but there may be a short term if we think 

broadly. 

7 

And I do think we have ideas that would warrant that and I 

hope to pose questions, Mr. Chairman, along those lines. 

I yield back. 

Mr. CONYERS. I thank you, Sheila Jackson Lee. 

We would now turn to the Ranking Member of the Antitrust 

Task Force, Steve Chabot of Ohio. 

Mr. CHABOT. Thank you, Mr. Chairman. I would like to thank 

you for holding this hearing, with our nation facing record high gas 

prices and energy prices. 

And as we were preparing this speech, this was the part in the 

speech where we had a number and, over the past week to 10 days, 

since we knew we were going to have this hearing, we had to keep 

revising this figure and we have been scratching it out and putting 

it in. 

And now, this morning, my staff gave me this morning’s ‘‘Cin- cinnati Enquirer’’ article saying that ‘‘gas zips past $4 mark.’’ So 

it is now $4 or higher than $4 in Cincinnati, Ohio. 

And there is not an issue that we hear more about from our constituents than when is Congress going to do something about the 

high gas prices and how they are affecting their lives. 

The public is demanding answers to questions such as, ‘‘Are we 

going to make energy more affordable in the short term? How are 

we going to make our nation more energy independent in the long 

term? What will be our primary source of energy in the future and 

how are we going to get there?’’ 

In response, this Congress gives them legislation that purports 

to fix our energy problems simply by raising taxes by billions of 

dollars on domestic energy companies and hoping for the best. 

That is not an energy policy. That is what amounts to a tax increase on every American family. And let’s face it. For the most 

part, the oil companies are going to pass that cost on to the consumers at the gas pump. So they are basically just taxing the public. 

We should be debating legislation to streamline the Federal permitting process that has stifled construction of new refineries. We 

haven’t built one in about 32 years, the last one back in 1976. 

We had 324 oil refineries back then. We have got fewer than 150 

now, 30 years later. 

We should be talking about benefitting consumers by simplifying 

our nation’s fragmented gasoline supply. The number of regional 

boutique fuels restrict the movement of our fuel supply and raises 

costs on Americans at the pump. 

And as Lamar Smith indicated before, we should be opening up 

Alaska’s Arctic National Wildlife Refuge, ANWR, and the outer 

continental shelf for energy exploration. And all indications are 

that, combined, there is approximately 16 billion barrels in ANWR 

and 86 billion barrels in the outer continental shelf; so the two together, about 100 billion barrels of oil and, also, millions of cubic— 

excuse me—trillions of cubic feet of natural gas. 

Previous Congresses made the decision to keep these vast reserves off limits. I know I personally voted 11 times since I have 

been here to open up ANWR. We had the votes to pass it in the 

House, but, unfortunately, it would go over in the Senate and be 

killed over there. 

8 

Of course, the price of a barrel of oil was much less then, too. It is now about $100—well, here we go again—$130 a barrel, $135 

a barrel, and that is since yesterday, and reports indicate that it 

may reach $150 a barrel at some point this summer, this says. God 

only knows where it is going to be this summer at this point. 

It is time we revisit this very important issue. What about encouraging the construction of nuclear power plants? We began that 

process in 2005 with the passage of the Energy Policy Act, but as 

we sit here today, we haven’t built a new plant in decades. 

European and Asian nations are building them by the dozens. 

India has nine new plants under construction. Japan has built five 

more and China is—they plan to build dozens of new reactors. 

Let’s talk about how we intend to compete with China, who is 

canvassing the globe in its quest to ensure a reliable supply of oil. 

Reports indicate that the Chinese are forming energy partnerships 

with rogue nations like Iran and Cuba, and Cuba is planning to 

work with China to drill of the Florida Keys. 

So we are not going to go after that oil, but Cuba and China are. 

It is an absolute outrage. 

Shouldn’t we be talking about boosting domestic production simply so we wouldn’t have to rely on the mood of third world dictators 

like Hugo Chavez? Wouldn’t it be nice if prices didn’t spike at our 

neighborhood gas stations when unrest in nations such as Nigeria 

occur and they impact us here directly? 

Now, some may argue, and they might well be right, that oil isn’t 

the long-term answer. It is a finite resource that may be exhausted 

or very scarce some years down the road, and China and India continue to develop and to soak up more of the oil that is available 

out there. 

So maybe oil isn’t the energy of the future, but shouldn’t we consider boosting our oil and natural gas supplies, increasing our energy independence, that might just buy is the time necessary to develop the next fuel source? 

Perhaps hydrogen fuel cell technology will take us into the next 

century or maybe other renewable resources that could be a combination of both or maybe something that we haven’t even discovered yet? We don’t know. 

But we do know that America has substantial reserves of oil and 

natural gas that we have locked up, that this Congress has locked 

up. We have placed it off limits. 

These resources could be the bridge that allows America to cross 

over the choppy waters of OPEC and third world dictators to the 

secure footing of affordable and secure energy sources of tomorrow. 

Just as no nation has ever taxed itself into prosperity, it is simply not plausible to believe that we can tax and regulate our way 

to energy independence. Yet, that has been the majority’s prescription and it is clearly failing. 

As we all know, we remember this, we have heard it before, that 

Speaker Pelosi said 18 months ago that she had a plan, that they 

were going to—that prices at the pump were outrageous. They 

were $2.30 a gallon, $2.30. That was 18 months ago. Now, in my 

district, they are $4 a gallon, getting close to double what they 

were 18 months ago. 

That was one heck of a plan. 

9 

I yield back the balance of my time. 

Mr. CONYERS. Thank you. 

Steven Cohen, Memphis, Tennessee. 

Mr. COHEN. Thank you, Mr. Chairman. 

And thank the panel here for coming before us. 

Years ago, I think it was said, in Jefferson’s time that the economy basically was grounded in land and farming and that agriculture was important, that the land was the foundation of society, 

and indeed it was, but that the land really belonged to everybody, 

because society was based upon it. 

Today, oil is really what the economy is based on and, accordingly, everybody has an interest in oil, because society itself is so 

wedded to it. 

You, as the leaders of the companies that produce and sell the 

oil, in my opinion, and I hope you agree and, in your remarks, will 

comment on this, have a duty to all of society to do the utmost to 

make this society a part of the riches that you have, to see that 

the price doesn’t go up and people are not being economically 

stretched, as they are, and to find alternatives to fossil fuels so 

that we don’t endanger greater than we already have the planet 

which we live and the very existence of man and all other species 

and the flora and the fauna that we presently have, some of which 

are threatened because of global warming. 

You have a responsibility, a great responsibility, almost like a 

government unto yourself, to see that society is furthered and is 

perpetuated in a way that does not jeopardize the planet or does 

not jeopardize everybody’s opportunity to have a share. 

The price of gas is a regressive economic factor and poor people suffer more than a wealthy person does. I can afford $4 gas. But 

most people in my district cannot. 

I heard something on ‘‘NPR’’ today that airlines can’t continue with this $125 a barrel, and that is why they are charging people 

to put luggage on the airplane. 

A lot of society and a lot of things we are used to are changing 

and I would just submit to you, while you have a duty to your 

stockholders, and I am one of them, that you have a greater duty 

to the planet and to the people, American people, people on this 

earth, because society has such an investment in what you have as 

your business interest. 

And I would urge you to think about some social policies and to 

try to understand the responsibility you have to everybody to be 

cautious in the way that you operate your companies. 

What happened in Alaska with the Valdez is unforgiveable and 

environmental disasters can’t really be compensated. Their damage 

is never undone. But the damage you are doing to the economy can 

be corrected and I would just ask you to look within your own mortal souls and try to do something to help everybody out there and 

to help us get off of our reliance on oil and find alternative energy 

sources, which I know you can. 

And I hope that we hear some responses to this in your testimony. 

Thank you, Mr. Chairman. 

Mr. CONYERS. Thanks, Steve Cohen. 

From Florida, Ric Keller? 

10 

Mr. KELLER. Thank you, Mr. Chairman. 

I am going to make my remarks very brief. I have got a ton of 

questions for our oil company executives and I want to get to them 

as soon as possible by waiting to let them testify. 

So let me just briefly say that in terms of solutions, which is 

where we are all going right now, I firmly believe that we do need 

more exploration in ANWR, more exploration of our deepwater oil 

reserves, more refineries, more alternative energy solutions, like 

nuclear energy. 

On the conservation side, I think we do need better conservation 

efforts, like higher fuel efficiency standards and tax incentives for 

hybrids. 

I believe the oil company executives, from their testimony yesterday, have done a good and credible job of explaining that crude oil 

increases are the main reason driving the higher gas prices. I think 

they have done a good and credible job of explaining that the crude 

oil prices are governed by the law of supply and demand, and the 

one law we can’t change here in Congress is the law of supply and 

demand. 

I believe, however, on the flipside, that the Achilles heel of what 

I have heard from their testimony is the somewhat exorbitant pay 

that some of these executives have received in retirement packages 

and otherwise, as well as the failure of these companies to build 

any new refineries in the United States over the past 32 years. 

And I want to give them the opportunity fairly to address both 

of those questions, because those are some of the perceptions that 

are on people’s minds that they need to address, even though they 

may not directly impact the price of crude oil that we are going to 

pay. 

So I will give them the chance to address those perceptions when 

I get to my questions. But as Woody Allen said, ‘‘Eighty percent of 

life is showing up,’’ and I thank you for showing up. 

And I yield back the balance of my time. 

Mr. CONYERS. Thanks, Ric Keller. 

Betty Sutton, Ohio? 

Ms. SUTTON. Thank you, Mr. Chairman, for holding this important hearing today. 

We began the discussions of what we can do in this Committee 

to address outrageous gas prices 2 weeks ago. And I know the 

American people have several questions they would like to ask our 

nation’s oil executives, so I thank our witnesses for appearing here 

today. 

When we met 2 weeks ago, and this has been alluded to by my 

colleague from Ohio, gas prices stood at a record national average 

of $3.61 a gallon. Today, the national average is $3.81 per gallon— 

rising a penny a day for the past month, surpassing, as he indicated, $4 in many part of our country. 

There is no issue that I am hearing more about from my constituents than gas prices. They are outraged by what they are paying and, frankly, so am I. 

Throughout the President’s term of office, he has consistently 

claimed that all is well with the economy. My constituents know 

this is not the case. People are losing their jobs and those who 

11 

manage to hold on while the manufacturing base has collapsed 

around them have seen the value of their wages diminish greatly. Now, people are spending up to $70—my colleague from Florida just told me she spent $68 to fill up her tank—to drive to work, 

to take their children to school and to go about their daily lives. 

The trucking industry is suffering. A single fill-up costs truckers over $1,000. That is astonishing. 

We heard in our last hearing about the trickle-down effect that 

diesel prices have on American consumers, leading to increases in 

food prices and other necessities that truck drivers and retailers 

live on. 

The President says the cost-benefit analysis of taking immediate 

action to assist American consumers does not persuade him. Luckily for the American people, a veto-proof majority of Congress has 

disagreed. 

Last week, Congress passed legislation, which the President has 

now signed into law, that requires the President to suspend purchases of oil for the strategic petroleum reserve through the end of 

2008, so long as prices remain above $75 a barrel. 

I would also like to thank Chairman Conyers for introducing the 

NOPEC Act, which passed the House earlier this week and will 

eliminate protection for OPEC-controlled entities to allow the Department of Justice to bring lawsuits in U.S. courts against cartel 

members. 

We have heard a little bit about one measure supported by some 

of my colleagues across the aisle and our witnesses today to drill 

for oil in ANWR. Yet, the Department of Energy has concluded 

that opening up the Arctic for drilling would reduce the price of 

gasoline by approximately one penny per gallon 20 years from now. 

The debate over drilling in ANWR has spanned decades, always 

resulting in the same answer—drilling in ANWR is simply not the 

answer to either what we hope is a short-term crisis or to our nation’s long-term energy needs. 

I often say that my top priorities as a Member of Congress are 

jobs, jobs and jobs. This morning, I heard one of my colleagues on 

this Committee say that our energy future needs to be green, green 

and green, and I could not agree more. 

This Congress has enacted landmark legislation to take necessary steps toward a greener and cleaner future for America’s energy policy, first, by passing the Energy Independence and Security 

Act that was signed into law in December and to set new fuel 

standards for cars and trucks. 

Yesterday, we passed the Energy and Tax Extenders Act, which 

will retain and create hundreds of thousands of green energy jobs 

and provide tax credits for the production of renewable energy 

sources, like solar, wind energy and incentives for the production 

of renewable fuels and energy-efficient products. 

In 2007, the oil industry recorded record profits of $150 billion, 

75 percent which was earned by the companies we have represented before us today. 

Exxon Mobil alone made $40 billion last year. It is the prerogative of the American people to know how these companies are possibly in need of the subsidies that the Administration has lavished 

upon them, while they themselves are suffering to make ends meet. 

12 

At our last hearing, I expressed concern about the Administration’s energy policy, written in secret, in my view, by Vice President Cheney. 

I look forward to hearing from you the details and the nature 

and extent of the involvement of the companies you represent, 

about your participation in those meetings which led this Administration’s energy policy. 

I thank the Chairman and yield back the balance of my time. 

Mr. CONYERS. Thank you very much, Ms. Sutton. 

Chris Cannon of Utah? 

Mr. CANNON. Thank you, Mr. Chairman. 

I appreciate your holding this hearing. I want you all to know 

that I agree entirely with Ms. Sutton that my constituents are outraged. I couldn’t disagree more about the reasons for the outrage. 

This is complicated subject. I am not sure that America and 

American citizens understand it, but they are learning. They are 

figuring it out. And what I hope they understand, very quickly, is 

that the price of oil is going to be a function—and I hope we hear 

from our witnesses today about this—that oil is going to be—the 

cost of gas is going to be derived by the availability of oil and the 

cost of making that oil available. 

And the Democrats have, in fact, interfered continuously with 

our ability to make resources available so that the price will come 

down. They voted continuously as a body against drilling in ANWR, 

continuously as a body against drilling on the outer continental 

shelf. 

We have had a regulatory proliferation under their period of control that has led to a diminishing of our ability to drill in the intermountain west. That has expanded, I think, somewhat significantly 

under the current President, but not nearly enough to keep up with 

the demands and the growing demand. 

On the other hand, if we are going to get out of the problem of the cost, the $4 a gallon cost of gasoline today, we have to have 

another resource. We have to have something new. 

We have a great deal—and I think we will hear some information about some of the unconventional sources, but there is a vast 

source of oil that is available to Americans and most people just 

don’t understand that technology has caught up to the point where 

we can produce oil out of shale in the intermountain west. 

Colorado has the largest amount, Utah the next, and Wyoming 

the third largest amount, and these amounts are in the neighborhood of 20 times as much as all the other conventional resources 

combined. 

And, in fact, the amazing thing is that the conventional resources 

are very expensive to get. Technology has brought down—and I 

think several of the companies that are here represented today will 

testify about—or at least I will ask some questions about their 

technology for getting oil out of shale. 

It is a matter of cost and a matter of availability. How do we reduce the cost? Well, you reduce the cost by having a programmatic 

approach to leasing shale from BLM public land. 

But the Democrats have eliminated that program that we instituted as Republicans, when Republicans controlled the House and 

the bill that the President signed. 

13 

That is gone. In addition, we have to have the money available 

to BLM to promote the development of oil shale and to deal with 

the issues and the problems, and the Democrats, in their appropriations bill last year, included a rider that prohibited spending 

any money by BLM on development of shale oil or developing the 

opportunity to do shale oil. 

One of the employees of one of the witnesses came in my office 

the other day. He is a guy who worked in Utah, I know him well, 

and he is now running one of these programs, and he handed me 

a list, two sheets of paper that had 42 to 46 agencies listed on it, 

many with multiple permits per agency. 

And he said, ‘‘You know, Chris, we have got an 8-year lease on 

shale oil. The permitting is going to take us 7 years. How do I tell 

my board of directors they should invest in this 7-year process 

when the lease is 8 years?’’ 

If we want to reduce the cost of oil, as a Federal Government, 

we have to get out of the way of industry, which now has, by the 

way, the capital available to, I think, pursue these alternatives, get 

out of the way of industry and let them get on with producing oil 

so that we can reduce the costs. 

And the availability of oil is vast. It is vast. It is available in 

shale in America today. I think most of the people here that are 

going to be witnesses know, and I want the world to know, that we 

have the first commercial test in about 30 years going on to develop 

or yield oil out of shale today in Utah. 

It is not done on Federal lands, because we can’t do it on Federal 

lands. It is being done on school trust lands and I believe that by 

about mid-September, you are going to see that they are able to get 

oil out of shale. Based upon their tests, they believe that that could 

be done for about $30 a barrel. 

Thirty dollars a barrel in a world where we are paying $4—for oil, we are paying about $138 yesterday. It is obscene that we have 

an environment where we are grilling these gentlemen because 

their companies, competing with each other, are trying to get the 

better share of the market in a world where they are constrained 

by resource. 

And America has vast resources on its public lands, which it has 

locked up and kept from getting to the gas pump, kept from getting 

to poor people. 

You know, Mr. Chairman, you and I have worked on many issues 

together where the commonality has been the regressive cost of 

Internet or taxes on telephones and other things like that. 

We have a great deal of commonality. It is a crime, it is immoral 

to have the kind of policies that rob food from people in the third 

world, rob food from the poor people in America, because we are 

doing ethanol, and, on the other hand, locking up our resources and 

not letting people develop those resources so that we can bring that 

down cost from $4 a gallon to where it ought to be, a $1 a gallon 

or, frankly, less, but we would have to get rid of Federal taxes to 

bring it down, I think, below that level. 

So, Mr. Chairman, this is an issue that I am excited about, I am 

concerned about. We need to change. We can do this as Democrats 

and Republicans and make the world a better place, but we have 

to change policies, and that is within our power to do. 

14 

And I thank the Chairman and yield back. 

Mr. CONYERS. Well, I am glad this subject has attracted the gentleman’s attention. Thank you very much. 

Mr. CANNON. I would tell the Chairman that I have lived in 

shale oil Utah for my whole life, but $4 gas has finally got the attention of the American people, and I hope that we can be common 

in our views about it here. 

Thank you, Mr. Chairman. I actually yield back this time. 

Mr. CONYERS. Thank you. 

I am pleased to recognize, from Florida, Debbie Wasserman 

Schultz. 

Ms. WASSERMAN SCHULTZ. Thank you, Mr. Chairman. 

You know, saying that Americans don’t understand how oil impacts the price of gas, it is that kind of patronizing attitude that 

has shaken the confidence of the American people in their government. 

With all due respect, the whole point of this hearing is so that 

we can identify ways that we can dramatically reduce the cost of 

gas or even maybe reduce the cost of it a little bit, because I am 

a mom with three young kids who just filled up my minivan the 

other day for $68. 

That is real money. I mean, it might not be real money to the 

five people right in front of us, because $68 is like a nickel, based 

on the income that you all earn. But we cannot continue to expect 

to drill our way out of the cost of gas problem. 

And I am a Floridian, and I oppose drilling off the coast of the 

outer continental shelf. But we need to understand several things. 

Since 2000, the amount of drilling that we have done has actually 

increased dramatically, exploded over the last 4 years. 

Has the price of gas done down because of that? No. In fact, as 

drilling has increased, the price has just kept going up. 

The Federal Government has given oil companies more drilling 

permits than they know what to do with. Since 2003, the Federal 

Government has consistently issued far more permits than the oil 

companies have acted on. 

Are we tying their hands from continuing to drill? No. We are 

certainly not. Of the 42 million acres of Federal land that is currently being leased by oil and gas companies, only about 12 million 

acres are actually being produced. 

Oil companies don’t need new areas to drill. They need to use the 

ones we have already given them. And for all the talk from Republicans about how the Democratic Congress has stopped the drilling 

and that we have said no throughout the process, there hasn’t been 

one acre closed to more drilling for oil or gas. 

So if you could drill it under the Republican Congress, you can 

still drill it under the Democratic Congress. 

And at the end of the day, what I would love to hear during the 

course of this hearing is a solution that does not involve more drilling. 

I also find it baffling that we continue to give you subsidies and 

forgive royalty payments for an industry that makes record profits, 

that is the most profitable industry in America. 

And on top of that, I have to tell you, it is very difficult to stand 

in front of our constituents, where you are an industry that is reapVerDate Aug 31 2005 17:06 May 14, 2009 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\052208\42511.000 HJUD1 PsN: DOUGA
15 

ing record profits, while charging record prices, and it becomes difficult to answer the question that inevitably comes up that you are 

not manipulating the prices, which there is a strong suspicion that 

you are. 

So those are the kinds of things that I would like to hear from 

you today. 

And thank you, Mr. Chairman. I yield back the balance of my 

time. 

Mr. CONYERS. Thank you, Debbie. 

Darrell Issa, California? 

Mr. ISSA. Thank you, Mr. Chairman. And thank you for putting 

me after the gentlelady from Florida. 

Her comment is true. America, over decades, has been habitually 

being a NIMBY nation. Well, we ask you to go to Kazakhstan for 

joint ventures, Venezuela, and many countries, some of them, quite 

frankly, less reputable when it comes to keeping their promises, 

some of which have nationalized resources, some of which, like 

Russia, fail to reinvest in their natural resources so that although 

today they have record profits, there is no likelihood of record profits in the future. 

I am not ashamed to be a Republican. I am proud to be a Republican. I am proud to be for all energy solutions and for all reasonable energy savings, and I am happy that we are having this discussion today, because, in fact, whether or not there has been any 

manipulation in process, I think, those of us at the dais have to be 

part of the solution to make sure that there is surplus of opportunities and options to compete with real energy alternatives. 

You in front of us represent one energy source or one group of 

energy sources. The truth is that this Congress has, in fact, taken 

many areas of potential new development off limits, when we had 

$9 or $10 or $20 a barrel oil. 

Perhaps some of those didn’t make sense. I, for one, have 

watched T. Boone Pickens reinvent himself and become the smartest guy going, because he went to Canada, where it takes $30 or 

$40 a barrel to lift or to extract, if you will, from the sands, and 

he now, of course, is making a killing. 

He is making a killing because prices have gone well above 

where they were in the past and where they would be today if, in 

fact, we had a glut rather than a shortage around the world. 

So I, for one, want to hear what we can do to enable you to have 

better access here, which I believe, unlike the gentlelady from Florida, a State like mine that has simply said we don’t want it in our 

backyard, more available. 

I also would like to and, with my questions, will ask about each 

of your company’s worldwide efforts to find and extract oil from 

around the world. I don’t expect you to give us all the answers on 

wind energy, although many of your companies have invested in 

that. 

I do expect you to have a plan to reinvest the profits that you 

are earning today into future energy. I am confident you will, in 

fact, have a plan to do that, that unlike the gentlelady and the gentlemen, in some cases, on this dais, that you will show us where 

these funds are not simply being sent out to stockholders, although 

16 

well deserved, because many of them waited for a long time for 

these windfall profits, but, in fact, reinvest it in future energy. 

For that, I hope the Chairman will be as receptive as I will be. 

Mr. CHABOT. Would the gentleman yield? 

Mr. ISSA. And I would yield to the gentleman from Ohio. 

Mr. CHABOT. I thank the gentleman. I will be very quick. 

The gentleman made the comment about America being a 

NIMBY nation, and NIMBY, of course, is ‘‘not in my back yard.’’ 

I would just note, when it comes to ANWR, which is in Alaska, the 

overwhelming number of Alaskans are in favor of drilling in 

ANWR. 

I yield back. 

Mr. ISSA. Thank you, and reclaiming my time. 

It is very clear that some people in America are not in anyone’s 

back yard. That is not true of Hugo Chavez, who will drill where 

he needs to drill. It is certainly not true of the Chinese, who were 

today in preparation for drilling off of Cuba’s coastline, far closer 

to the gentlelady from Florida’s district than, in fact, any of you are 

allowed to drill. 

So, Mr. Chairman, I do look forward to it. I do believe that we 

have to be vigilant against price manipulation. I also think we 

have to recognize that in absence of sufficient supply and too much 

demand is, in fact, what we also have an obligation from this dais 

to deal with. 

With that, I would happily yield back. 

Mr. CONYERS. Thanks, Darrell. 

Tom Feeney, Florida? 

Mr. FEENEY. Thank you, Mr. Chairman. 

Congress has had some 45 hearings recently on gas prices and 

energy applications. 

I would say that the essence of these hearings has proved two 

of my favorite maxims. Number one, no situation is so bad that 

Congress can’t make it worse, and, two, that Congress is constantly 

trying to repeal the laws of supply and demand and economics as 

though we could reverse gravity by passing a law. 

And I would predict that the more hearings we have and the 

more policies based on the attitude of the liberal leadership, the 

higher prices of gas will go. 

I think it ought to be liberal leaders in Congress that are answering questions about how our policies have led to $138 a barrel 

oil. 

Any of you that have had a third grade economics class or the 

first week of economics in high school or college can talk about the 

fundamental laws of supply and demand. 

We can’t really impact or stop India or China or much of the developing world that 40 years ago was walking around, they were 

rich if they had a bicycle. The demand for energy is increasing 

worldwide and there is simply nothing that the American Congress 

can do about that. 

What we can have an impact on is supply. What have we done 

for 35 years? Energy includes a basket of viable ways to produce 

energy that we need in our personal lives, our families, for businesses and for prosperity. 

17 

Yet, for 35 years, we have said that not one nuclear power plant 

can be built to provide energy to Americans. All of our nuclear experts went to France. I hate to point out that France has a better 

common sense policy toward energy than the United States, but all 

of our technology and experts went to France. 

They now get 80 percent of their energy needs from clean, renewable and affordable nuclear power. We have got 26 percent of the 

world’s coal supply right here in the United States, and yet we 

have largely said we are not going to build any new coal plants, 

even though liquefied or gasified coal is cleaner than ever. 

We have done this to ourselves. We have stopped any new drilling in the Gulf. The oil in shale, as Congressman Cannon pointed 

out, in ANWR, we have deliberately done everything we can to reduce the supply of domestic energy. 

And, yes, it is great to talk about long-term needs that I support, 

wind and solar and biofuels are all great potential one day opportunities, but in the short run, we have done this to ourselves with 

policies. 

And, finally, I would like to say a word about the speculators 

that supposedly are driving up the cost of gas at the pump. Speculators are nothing but sophisticated bettors and they are betting on 

what is going to happen in the future to supply and demand. 

They are watching the United States Congress crush ourselves in 

every way that we produce a new policy of taxes or regulation or 

killing supply, and they are betting that this Congress will take $4 

a gallon gas to $8 or $10 or $12 a gallon gas, and I would say if 

we don’t change directions dramatically, the speculators are right. 

They are not responsible. They are betting on the 

misperformance and the negligence of the United States Congress. 

With that, I will yield back the balance of my time. 

Mr. CONYERS. Thank you very much. 

We welcome John Peterson of Pennsylvania sitting with us. 

You have given us an idea, Tom, that I have been talking about 

with Mr. Chabot and Mr. Smith. Maybe we should hold a hearing 

someday and we will be the witnesses and let those we have invited ask us the questions, which has what has started out this 

morning. 

We have finished now. We have got three quick votes. We will 

stand in recess and we will resume. 

Thank you for your patience. 

[Recess.] 

Mr. CONYERS. Our witnesses are Steve Simon, Senior Vice President of Exxon Mobil Oil; Bob Malone, Chairman and President of 

BP America; John Lowe, Executive Vice President, ConocoPhillips; 

Peter Robertson, Vice Chairman of the Board of Chevron; and, our 

lead-off witness, Mr. John Hofmeister, U.S. President, Shell Oil 

Company, who we note has been active with the National Urban 

League, who is stepping down soon and who we wish well in his 

future endeavors. 

Please start us off. 

18 

*Note: The December 2004 report, ‘‘Environmental Policy and Regulatory Constraints to Natural Gas Production,’’ has been made a permanent part of this record and is archived at the 

Task Force. The report may also be viewed on the Internet at: 

http://www.ipd.anl.gov/anlpubs/2004/12/51652.pdf 

TESTIMONY OF JOHN HOFMEISTER, U.S. PRESIDENT, 

SHELL OIL COMPANY 

Mr. HOFMEISTER. Thank you, Chairman Conyers, Congressman 

Chabot and Members of the Task Force. I appreciate the opportunity to testify today. 

In addition to my formal written statement, I welcome the 

chance to share some additional thoughts. 

This is an era of remarkable capital expenditures for major new 

projects and infrastructure, strong investments in technology and 

the aggressive pursuit of energy alternatives. 

We are setting records in one of the most expansionary periods 

the industry has known. Yet, in the face of this sustained record 

spending, the relentless increase in the price of a barrel continues. 

As repetitive and uninteresting as it may sound, the fundamental laws of supply and demand, I believe, are at work. Oil exporting nations are managing their natural resource development 

and production to supply their local and global markets in their 

own self-interest. 

While all oil importing nations buy oil at global prices, some, notably, India and China, subsidize the cost of oil products to their 

nation’s consumers, feeding the demand for more oil, despite record 

prices. 

They do this to speed economic growth and to ensure a competitive advantage relative to other nations. 

Meanwhile, in the United States, access to our own oil and gas 

resources has been limited for the past 30 years, prohibiting companies such as Shell from exploring and developing resources for 

the benefit of the American people. 

According to the Department of the Interior, 62 percent of all onshore Federal lands are off limits to oil and gas development, with 

restrictions applying to 92 percent of all Federal lands. 

In addition, the outer continental shelf moratorium on the Atlantic Ocean, the outer continental shelf moratorium on the Pacific 

Ocean, the outer continental shelf moratorium on the eastern Gulf 

of Mexico, congressional bans on onshore oil and gas activities in 

specific areas of the Rockies and Alaska, and even a congressional 

ban on doing an analysis of then resource potential for oil and gas 

in the Atlantic, Pacific, and eastern Gulf of Mexico prevent us from 

bringing new supplies to the American people at a time when they 

desperately need new supplies. 

The Argonne National Laboratory, in addition, produced a report 

in 2004 that identified 40 specific Federal policy areas that halt, 

limit, delay or restrict natural gas projects. 

I urge you to review it. It is a very long list. If I may, I offer it 

today, if you would like to include it in the record.* 

Mr. CONYERS. I do and so ordered. 

Mr. HOFMEISTER. When many of these policies were implemented, oil was selling in the single digits, not the triple digits we 

now see. The cumulative effect of these policies has been to discourVerDate Aug 31 2005 17:06 May 14, 2009 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\052208\42511.000 HJUD1 PsN: DOUGA
19 

age U.S. investment and send U.S. companies abroad to produce 

new supplies. 

As a result, U.S. production has declined so much that nearly 60 

percent of daily consumption now comes from foreign sources. 

Alternative and renewable energy sources play a role and will 

grow substantially, and Shell is playing a key part in the expansion of such technologies. 

But nonetheless, leading experts forecast that by 2030, we are 

still expected to import more than half of our oil. 

The problem of access can be solved in this country by the same 

government that has prohibited it. Congress could, if it chose, to 

lift some or all of the current restrictions on exploration and production of oil and gas. 

If the nation set a goal, Mr. Chairman, of increasing domestic 

production by 2 to 3 million barrels a day, by opening up new 

sources for exploration and production, in addition to recent laws 

you have passed to increase the production of renewable fuels and 

to increase miles per gallon in the vehicles that we drive, we could 

demonstrate to the world that we are in control of our own destiny. 

If we did this, it would be unnecessary for our national leaders 

to ask the rulers of other sovereign nations to produce more oil for 

U.S. consumers and risk the discomfort of an unresponsive reply. 

Instead of continuing the 30-year pattern of limiting access, let’s 

implement a national policy that expands access where appropriate, and Shell is prepared to participate in such a plan. 

In addition to more access, we do need more refining capacity. As 

you know from my written testimony, Shell is a 50 percent participant in the $7 billion expansion of the Motiva Refinery in Port Arthur, Texas. 

This project will expand production of finished products by more 

than 300,000 barrels per day and, when completed, will be one of 

the largest refineries in the United States and in the world. 

Refining capacity is particularly critical when it comes to the demand for diesel, aviation fuel and heating oil, all products that we 

in the industry refer to as the middle of the barrel. 

At home and around the world, demand for these middle distillates is growing faster than the demand for gasoline. Due to the 

sustained demand for diesel mobility and air travel, prices for these 

products are also rising faster than other products. 

There is simply no way for us to keep up with demand or get 

ahead of it without producing more oil and more refining capacity. 

Higher taxes would only serve to diminish the expansion capacity 

of this critical capital investment, and I urge you to resist such punitive policies. 

We are making significant capital investment to produce more 

energy and more kinds of energy to meet global demand. Enormous 

amounts of capital are required and will continue to be required to 

fund our huge scale projects and cutting-edge research. 

This year, Shell will spend more than $28 billion, the largest capital expenditure in our history and perhaps in the oil and gas industry, and this investment includes significant investments in 

wind, solar, hydrogen and biofuels. 

20 

In conclusion, Mr. Chairman, the United States has the natural 

resources, it has the technology, the financial capital, the human 

capital, and the desire to be more energy self-sufficient. 

It consecrates the future of new alternatives and more traditional 

hydrocarbons. It can also address the CO2 reductions that we need 

for the future. It can continue to assure a quality of life for its citizens. It can deliver more affordable energy and affordable ways to 

U.S. consumers. 

By addressing our challenges by considering them as short-term, 

medium-term and long-term opportunities, the U.S. can move beyond its current dilemma and build a new era of sustainable, affordable energy security. 

I look forward to your questions. 

[The prepared statement of Mr. Hofmeister follows:] 

21 

PREPARED STATEMENT OF JOHN HOFMEISTER


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———— 

Note: The attachments submitted with the prepared statement of John Hofmeister, 

are not reprinted here but are on file with the Task Force and can be viewed on 

the Internet at: 

http://www.ipd.anl.gov/anlpubs/2004/12/51652.pdf 

http://www.shell.com/static//usa/downloads/energylsecurity/pdf/shelllfinall 

report.pdf 


JH-13.eps
34 

Mr. CONYERS. Thank you so very much. 

We have all of our resumes, accomplishments and present activities that will be in the record. 

Mr. Robertson, welcome. 

TESTIMONY OF PETER J. ROBERTSON, VICE CHAIRMAN OF 

THE BOARD, CHEVRON CORPORATION 

Mr. ROBERTSON. Good morning, Mr. Chairman, Ranking Member 

Chabot and Members of the Committee. 

My name is Peter Robertson. I am Vice Chairman of Chevron 

Corporation, and I am here today proudly representing our 59,000 

employees. 

I appreciate the opportunity to discuss the energy issues facing 

consumers. We know Americans are frustrated and concerned 

about prices at the gas pump. They are looking for answers, and 

rightly so. They deserve answers from us and answers from Congress. 

Last week, the average price of gasoline was $3.72 a gallon, up 

$0.62 from a year ago. Increased crude oil costs made up all of the 

increase and now account for 71 percent of the price, or $2.65 a gallon. 

Global issues affecting the supply and demand of crude oil are 

driving prices up to new records. The world is consuming oil at an 

ever increasing rate and it is projected to continue. 

There is dramatically reduced spare supply and no room for 

error. Any disruption or perceived threat of disruption sends oil 

prices up. Oil prices have doubled over the last year due to this 

highly volatile environment. 

So what are we doing about rising oil prices? We are reinvesting 

our record income at record rates in future energy supplies, including renewables, and we market energy efficiency services. 

This year, we are spending $7.1 billion to develop U.S. energy 

projects, triple what we spent in 2004. In the precious 5 years, we 

spent nearly $20 billion in the U.S. 

When it comes to refining and gasoline marketing, we are spending $2.3 billion this year on our American facilities. 

Recent upgrades to our U.S. system have added 1 million gallons 

per day and we are working to add more. 

We now produce more than 6 billion gallons of gasoline each 

year, a large number, but that is less than 6 percent of the U.S. 

refining capacity, and, in fact, we own just five of the 150 U.S. refineries. 

And when it comes to selling gasoline at the street corner, we are 

the fourth largest U.S. retailer, but our market share is less than 

7 percent. 

There are 168,000 retail sites across the country. We have fewer 

than 10,000 sites, most of which are owned and operated by independent businessmen and women. 

Given the number of players involved, there can be no doubt 

competition for sales is fierce. Consumer demand has fallen in the 

first 2 months of this year. 

U.S. gasoline production has been at record levels for over the 

first 4 months. Gasoline inventories have recently been pushed to 

35 

their highest levels in a decade. The market is well supplied. That 

is why the current high price situation is so confusing. 

Americans are right to ask. With ample supplies of gasoline and 

weak demand at home, why are prices at the pump continuing to 

climb? 

The tension is with crude oil supplies. America is the world’s 

largest consumer. We important 10 million barrels a day, which is 

double our domestic production. 

We are in competition for these imports with developing economies around the world, many of which subsidize their domestic fuel 

prices. This puts more pressure on limited spare capacity. 

To ease this tension, massive investment is needed around the 

world. This is where companies such as Chevron play a critical 

role. 

American energy companies are large compared to most U.S. 

businesses, but relatively small compared with national oil companies competing with us for supplies. 

These companies have control over most of the world’s known reserves and many enjoy the unqualified support of their national 

governments. 

Punitive measures, such as windfall profits taxes, will hamper 

our ability to invest in badly needed supplies. They will weaken 

our competitiveness in this volatile atmosphere and increase our 

dependence on foreign supplies. 

Our solutions need to focus on the basics of crude oil supply and 

demand. When it comes to demand, we need less. We need to value 

energy as a previous resource and use our ingenuity and advanced 

technology to use energy more wisely across the economy. 

When it comes to supply, we need more of all forms, oil, natural 

gas, biofuels and other renewables. Last year, the National Petroleum Council study reinforced this need to deal with supply and 

demand. It emphasized strategies for achieving American energy 

security through smart policies and investments. 

We strongly urge you to implement its recommendations. We 

know that high prices are forcing consumers to make hard choices 

on how they use energy. 

We are making hard choices to mobilize more people and more 

money to increasingly remote locations in the world for more supplies. Chevron employees understand the enormous responsibility 

that they have to deliver energy reliably. I can personally attest to 

their strong commitment. 

Congress has recently made some hard policy choices on renewables and energy efficiency that will make a difference. But we 

can’t expect other countries to expand their resource development 

to meet our increasing needs as we limit our development without 

good reason. 

We welcome the opportunity to work with you to ensure the responsible development of this country’s substantial untapped potential resources in a way that respects the environment and delivers badly needed energy supplies to Americans. 

Thank you. 

[The prepared statement of Mr. Robertson follows:] 

36 

PREPARED STATEMENT OF PETER J. ROBERTSON

Chairman Conyers, Ranking Member Chabot, Members of the Committee. My 

name is Peter Robertson, and I am vice chairman of Chevron Corporation. I am here 

to represent the more than 59,000 Chevron employees (of whom 27,000 work here 

in the U.S.) and more than 1.5 million stockholders who put their trust in our company each day. I am proud to be a part of an industry so vital to every American’s 

way of life and to the development and growth of economies around the world. 

Given the many challenges our country faces on the energy front, I appreciate the 

opportunity to appear before you today. I will address the factors behind rising oil 

and gasoline prices, discuss some realities of the highly competitive global energy 

market, and outline what Chevron is doing to ensure reliable supplies of energy to 

U.S. consumers. 

Although Chevron has been firmly rooted in California for almost 130 years, our 

operations and customers span the globe and extend across the entire energy spectrum. Globally, we produce approximately 1.7 million barrels of crude oil per day— 

less than 2 percent of global demand. Chevron’s U.S. production of approximately 

410,000 barrels of crude oil per day represents about 8 percent of U.S. total. 

We refine, transport and sell petroleum products. Chevron is the sixth-largest refiner in the U.S., producing about 5.8 percent of the country’s refined products. And 

we blend ethanol into almost 40 percent of the gasoline we sell in the U.S. 

Chevron is a leading producer of renewable energy. We’re the world’s largest producer of geothermal energy (operating 1,250 megawatts), and we’re pursuing nextgeneration biofuels and other alternatives with a number of important strategic 

partnerships. 

Chevron is unique among major oil companies as a leading provider of energy efficiency services and clean energy solutions in the nation. Our subsidiary, Chevron 

Energy Solutions, has a strong track record of providing solar power to large commercial clients across the country. To date, it has handled more than 800 projects, 

helping clients lower their energy consumption and costs by nearly 30 percent on 

average. 

Chevron strives to be a strong partner in the communities where we operate. Our 

company supports more than 11,000 large and small businesses throughout the 

country. Last year alone, we spent $10.8 billion with our business partners in the 

U.S. and supported 2,000 charitable organizations across 43 states and the District 

of Columbia. 

It is precisely Chevron’s size and scope that allow us to successfully compete for 

the energy resources the world and America needs. 

Strong global demand, weak U.S. dollar have driven up oil prices 

As we meet today, the question on the minds of most Americans is, ‘‘Why are gasoline prices so high?’’ The short answer? Because global crude oil prices are so high. The price of oil has risen recently to above $125 a barrel—a record level and double its price at this time last year. Given that the largest portion of the cost of gasoline is crude oil, gasoline prices have risen to record heights. According to the Department of Energy, a gallon of regular gasoline retailed on average for $3.72 in the 

first week of May, with the price of crude oil accounting for about $2.65 of this 

amount. Federal, state and local taxes averaged 47 cents per gallon, making the 

combined effect of crude costs and taxes $3.12 per gallon or 84 percent. (See Appendix chart #1). While the price of crude oil has soared, it is important to understand 

that the market forces of demand, supply and competition have prevented gasoline 

prices from keeping pace. That average gasoline price for the first week of May rose 

20 percent over the price for the same week last year—a relatively small amount 

compared to the jump crude has experienced. 

Consumers and businesses feel the effects of high crude oil and gasoline prices 

from the supermarket to the airport. Chevron is both a producer and a user of energy, and we are concerned about escalating oil prices just as any other energy consumer is. To address these concerns going forward, it is important to understand 

the many factors affecting the price of oil—and, therefore, the price of transportation fuels. 

There are fundamental factors affecting the current price of oil, including rising 

demand, the reduction in the supply system’s spare capacity to deal with unforeseen 

disruptions, the value of the U.S. dollar and the associated flight to commodities, 

and rising risk—both above ground and below ground. 

We have reached a point where worldwide demand is straining the global energy 

system. Demand in non-OECD countries—what we typically think of as developing 

nations—is experiencing robust growth, pushing up overall global demand despite 

essentially flat or slightly lower demand in OECD countries. In fact, growth in nonVerDate Aug 31 2005 17:06 May 14, 2009 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6621 H:\WORK\ATRUST3\052208\42511.000 HJUD1 PsN: DOUGA
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OECD regions has accounted for over 80 percent of the rise in oil demand since 

2000, including rapidly increasing demand throughout Asia, particularly in China 

and India. The expansion has been driven by exports and infrastructure investment, 

and has consumed commodities at an unprecedented rate. It is important to highlight that in many important energy-consuming non-OECD countries government 

treasuries have subsidized price (Appendix chart #2)—a factor that has contributed 

to additional stress on supplies and price. 

The Middle East is also in the middle of a substantial investment cycle, a process 

that has kick-started oil product demand growth in the face of rising oil prices. Thus 

far, non-OECD oil demand growth has shown few signs of softening despite the U.S. 

economic slowdown. 

It is this economic growth overseas, especially in India and China that has helped 

hundreds of millions of people to rise above the poverty level to a better quality of 

life. These basic human aspirations and the resulting energy demand growth are 

forecasted to continue. Global energy demand is projected to increase roughly 50 

percent by 2030, with demand in the Asia-Pacific expected to grow 90 percent over 

the same period (See Appendix chart #3). And, according to the Department of Energy, demand in the U.S. is also forecasted to grow by 16 percent over the next 20 

years. 

The accelerated increase in demand since 2004 has reduced the global spare capacity of crude oil, creating a tighter relationship between supply and demand and 

heightened concerns in markets around the world (See Appendix chart #4). Falling 

or flat U.S. production is a contributing factor and adds to these pressures. According to the Department of Energy, U.S. crude oil production has fallen approximately 

40 percent since 1985, while U.S. consumption has grown more than 30 percent to 

more than 20 million barrels per day today. In real barrels, U.S. oil production is 

now approximately 5 million barrels per day—down from approximately 9 million 

in 1985. The narrowing of spare production capacity in the world means that even 

when a relatively small amount of resource is at risk of disruption due to a variety 

of factors, it can affect the price of oil. 

This heightened market sensitivity is exacerbated by other risks. ‘‘Below ground 

risk’’ is increasing as energy is harder to find and more expensive to produce. 

‘‘Above ground risk’’ is also occurring around the world. At home and abroad, access 

to new supplies has been restricted, making it increasingly difficult for the energy 

industry to invest and expand operations. And calls for increased taxation only 

serve to shrink the capital base available for energy development. As the recent National Petroleum Council study pointed out, our country’s greatest concern relative 

to future supplies stems not from a lack of hydrocarbon resource but, rather, from 

the risks to our ability to expand production in a manner timely enough to meet 

growing demand. Policies restricting access to new areas with resources in the 

United States combined with naturally declining mature crude oil and natural gas 

fields have increased U.S. reliance on imports from international sources. (See Appendix chart #5). 

Demand and supply pressures on oil prices are compounded by the weakening of 

the U.S. dollar. The higher oil price is in part a market adjustment that reflects 

the weakening purchasing power of oil exporting countries that sell their oil in U.S. 

dollars but buy goods with stronger currencies such as the euro. Additionally, the 

weak dollar—and concern by stock investors over the subprime issue and its impact 

on the stock market—has contributed to a flight to commodities by investors seeking 

better returns (See Appendix chart #6). Oil has gone up along with many other commodities such as gold, corn, copper and even coal. 

In the U.S., consumers have begun to respond to the high fuel prices by using 

less. Recent figures from EIA suggest that petroleum product demand in the U.S. 

has fallen 1.4 percent over the first two months of the year, compared with the same 

period last year. Gasoline production at U.S. refineries was at record levels over the 

first quarter of 2008, leaving inventories at their highest levels in a decade. Capacity increases at existing refineries have added the equivalent of 10 new refineries 

over the past decade. Overall refining capacity has increased by 20 percent since 

1985 even though there are 57 fewer refineries (See Appendix chart #7). That retail 

fuel prices still remain high underscores the fact that many factors are in play, and, 

unfortunately, there are no short-term fixes to today’s price levels. 

Finally, it is important to note that the U.S. transportation fuel markets are not 

only well supplied but also highly competitive. We are the sixth largest U.S. refiner 

and operate five of the nation’s roughly 150 refineries. Our market share is less 

than six percent. Marketing operations are similarly competitive. Chevron is the 

fourth largest U.S. branded marketer operating under the Chevron and Texaco 

brands. We have roughly 9,700 of the country’s 168,000 branded stations. And it’s 

38 

1Federal Trade Commission, ‘‘The Petroleum Industry: Mergers, Structural Change and Antitrust Enforcement,’’ August 2004 

important to note that 95 percent of our stations are operated by independent business people, who must compete aggressively against at least 40 other companies. 

Energy companies are making very little money on retail gasoline sales despite 

the high price environment. Energy company earnings from the first quarter of 2008 

tell the tale. Chevron’s U.S. downstream operations—that part of our business responsible for refining, marketing and transportation of gasoline and other refined 

products—effectively broke even. That portion of our business lost money over the 

last six months of 2007. 

Over the years the Federal Trade Commission has scrutinized our industry carefully. Summarizing its oversight of the industry in 2004, FTC concluded: ‘‘In sum, 

mergers have contributed to the restructuring of the petroleum industry in the past 

two decades but have had only a limited impact on industry concentration. The FTC 

has investigated all major petroleum mergers and required relief when it had reason 

to believe that a merger was likely to lead to competitive harm. The FTC has required divestitures in moderately concentrated markets, as well as highly concentrated markets.’’ 1 (See Appendix chart #8) 

Energy challenges are immense—so is the infrastructure 

needed for supplies 

To understand today’s energy reality, I would emphasize that the energy system 

is global, vast and complex. For each minute we spend here today, the world will 

consume the equivalent of 7 million gallons of oil-equivalent. For decades it also has 

delivered energy to over a billion people around the globe efficiently and reliably. 

The infrastructure that produces energy in one part of the world and delivers it to 

another is highly interconnected—physically and to the global markets that set oil 

prices. Each depends upon the other. Although the United States is a key producer 

and the leading global consumer, we are only one part of this global system and cannot be isolated or immune from issues that either shape or upset global market dynamics. 

There has never been a more urgent need to be realistic about the energy system’s 

interdependence and its size and scale. We also need to recognize the magnitude of 

resources—both financial and organizational—needed to keep it running. Today’s 

energy infrastructure requires substantial ongoing investment to sustain production, 

tap new sources and meet growing demand. In fact, in its 2007 Energy Outlook, the 

International Energy Agency has projected that the world will require $22 trillion 

in new energy investments by 2030, with $7 trillion needed to produce the resources—the crude oil, natural gas, coal and biofuels—needed to meet demand. 

Nearly half of these investments will be in developing countries. 

As we strive to meet demand, we are overcoming increasingly extreme and remote 

environments while responding head-on to the challenges posed by climate change. 

Our industry has evolved over the last 100 years from drilling with relatively simple 

wooden derricks that barely scraped the earth’s surface to complex offshore platforms that produce oil from reservoirs located miles below, where pressures can exceed 20,000 pounds per square inch and temperatures can surpass the boiling point. 

One new crude oil project on the frontiers of the Gulf of Mexico can cost more than 

$5 billion and take more than 10 years to bring onstream. A recent expansion of 

production at the Tengiz field in Kazakhstan which added less than one percent to 

global oil supplies took more man hours of labor than the construction of the Panama Canal. We will need as many of these projects as we can get. 

And costs are escalating. The competition for resources to meet that demand has 

resulted in rising costs for our industry. Costs in the upstream sector have doubled 

since the year 2000, reflecting higher prices for everything from steel, drilling rigs 

and offshore vessels to bulk materials, engineering, construction and labor. Similarly, the capital costs for our downstream refining, processing and chemical businesses are sharply higher. 

Today’s environment illustrates an industry truism: The era of easy access to 

cheap oil is over. 

There are significant challenges and paradigms about energy that need to be resolved so that we can generate the kind of production at a scale needed to meet U.S. 

demand. These challenges will take time, money, new infrastructure and advanced 

technology to solve. For the foreseeable future it also will take contributions from 

all energy sources—traditional energy, renewables and energy efficiency. 

39 

Competing in the global marketplace requires scale and strength 

Today’s global resources are increasingly nationalized, and single crude oil and 

natural gas development projects run in the billions of dollars. The search for the 

next source of energy and delivering it to markets on six continents—whether oil 

or next-generation fuels from renewable sources—takes enormous capital, specialized expertise, advanced technology and human energy that characterizes Chevron. 

From a global perspective, sovereign states and their national oil companies own 

the majority of the resources consumers need. Chevron ranks 18th in terms of its 

access to oil reserves. (See Appendix chart #9). U.S. energy companies need the scale 

that is necessary to partner and compete with these large national oil companies 

to gain access to critically needed energy resources that fuel America’s cars, heat 

America’s homes and power America’s businesses. 

The U.S. is advantaged by having large, well-capitalized oil and gas companies 

that can partner and compete with this group of national oil companies. And, policies that disadvantage U.S. companies’ ability to compete in the global marketplace—such as proposals to levy addition taxes on the industry—diminish our ability to provide new sources of energy. 

Chevron is aggressively investing to develop new energy supplies 

We are actively responding to the energy demand of the United States and countries around the world—investing aggressively to develop energy supplies to meet 

today’s and tomorrow’s needs. Our activities span a diverse portfolio of energy interests, including traditional oil and gas, renewables, alternatives, energy efficiency 

services, and research and development in future energies. Between 2002 and 2007, 

Chevron invested approximately $73 billion back into the business to bring new energy supplies to market—investing what we earned. Some $22 billion of that sum 

was invested in our U.S. operations. Our capital program for 2008 is close to $23 billion, an increase of nearly $3 billion over our 2007 investment, and nearly triple what it was in 2004. Globally, 

Chevron currently has 40 major capital oil and natural gas projects in the planning, 

engineering or development stage, each with a net Chevron share of the investment 

over $1 billion. These projects are critical to supplying the energy that the world 

needs and will be important to closing the gap between supply and demand, which 

is key to addressing the challenge of high prices. Out of this queue of 40 major supply projects, eight are located in the United States. And there are many other upstream projects under $1 billion that will have significant production once they come 

onstream. 

A number of these projects are situated at the forefront of development and employ leading-edge technology. As alluded to earlier, factors such as size, organizational capability and the ability to assume the inherent risks in developing technology and undertaking large investments are essential assets when competing in 

today’s global energy environment. Even though Chevron is relatively small compared with its nationalized competitors, it is a strong competitor. This is an industry 

in which size, technological capabilities and financial strength are the new ‘‘price 

of entry,’’ and large-scale and frontier energy developments are the norm versus the 

exception today and in the future. 

Let me highlight an example to illustrate what we do. We are working on several 

deepwater crude oil and natural gas projects in the U.S. Gulf of Mexico. One of 

these, known as Tahiti, offers a typical case study in the risks facing this business 

today in terms of timing, scale and cost. We acquired the Tahiti leases in the 1990s. 

In 2002, we used leading-edge technology to drill in 4,000 feet of water and found 

an estimated 400 million to 500 million barrels of recoverable resources. It will take 

seven years to build the infrastructure required to produce the oil and gas more 

than a 100 miles offshore. When Tahiti finally comes online next year, we will have 

invested $4.7 billion—and dedicated personnel and resources for over a decade to 

manage exploration, permitting, engineering and development—before realizing $1 

of return on our investment. Once in production, Tahiti is expected to produce for 

up to 30 years. Tahiti is expected to add 125,000 barrels of oil and 70 million cubic 

feet of gas per day to the U.S. domestic supply. 

Today in the United States, the major oil and natural gas projects we have under 

construction have a total peak production capacity of 420,000 barrels per day of oilequivalent. All these projects are expected to be in production by 2010. 

We are also aggressively developing and applying new technologies to extend the 

life of existing fields. This year we expect to spend nearly $1 billion on the sophisticated technology and ongoing development activities required to produce as many 

barrels as possible out of our 100-year-old Kern River field in California. This investment in our base business is a very important. Aside from sustaining our capaVerDate Aug 31 2005 17:06 May 14, 2009 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 H:\WORK\ATRUST3\052208\42511.000 HJUD1 PsN: DOUGA
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bility to provide oil today, these efforts help us understand how complex oil reservoirs work—knowledge and technology that we can apply around the world so 

that our partners also can enhance their oil recovery from known resources. In fact, 

one of the reactions to high oil price has been a renewed focus on existing fields 

industrywide, a trend that is helpful in the near term and should be encouraged. 

Chevron is investing in critical downstream refining and 

marketing infrastructure 

We are also investing in our refineries and marketing business to continue to im- prove our ability to supply the products U.S. consumers need. We are investing $2.3 

billion in 2008 in our U.S. downstream assets. Since 2002, we have invested $5.2 

billion and we have developed additional production capacity of more than 1 million 

gallons of transportation fuel production per day. Our investment in U.S. downstream refining and marketing assets in 2007 accounted for almost half of our 2007 

global downstream capital expenditures, even though our U.S. operations only accounted for about a quarter of our downstream business earnings. We also are investing in refineries outside the United States, such as Pembroke, Wales, which can 

produce gasoline to meet U.S. and California specifications. 

Chevron’s refinery investments have focused on achieving several goals, including 

upgrading our capability to provide more transportation fuels from more diverse 

crude oil feedstocks, improving reliability and energy efficiency, enhancing environmental performance of our facilities, and producing cleaner burning fuels. 

At present, we are working on major projects at each of our big three U.S. refineries. We are advancing through the permitting process for projects at our El 

Segundo and Richmond refineries in California. At Chevron’s Pascagoula, Mississippi, refinery, construction began this year on a new gasoline production unit. 

The project will improve equipment reliability and utilization and allow the refinery 

to optimize product yields. Gasoline production at the refinery is expected to increase by approximately 10 percent, or about 600,000 gallons per day, upon completion of the project in mid-2010. 

Focusing on the longer term, we have recently announced a research and development project to further advance refining technology. Known as VRSH, which stands 

for Vacuum Resid Slurry Hydrocracking, this technology will help us produce transportation fuels from heavy crude oil otherwise used for other lower-grade petroleum 

products. We spent almost five years working on the project in a lab setting testing 

the technology. We announced in March that we are beginning work on a pre-commercial plant at our Pascagoula refinery that will take two years to construct. We 

will learn more about the technology for a few years before we will be able to confirm whether we can build one of these plants at full scale. Once that decision is 

made, it will take another several years after that to complete. This kind of stepby-step process is needed to ensure we are making the right decisions. They take 

time. 

We are committed to remaining a reliable supplier to our customers, but it is important to remember that investments are sensitive to local permitting decisions 

and market forces. For example, we hope to soon finalize the plans for the Richmond refinery project The process of obtaining these permits has already taken 

more time than constructing a new state-of-the-art refinery we are investing in with 

partners in India or completing a major refinery expansion in at our joint-venture 

refinery in Yeosu, Korea. 

At a more fundamental level, government policies—such as the recently passed 

energy bill with its very ambitious program for renewable fuels—have created new 

uncertainties over how much additional U.S. refining capacity may be needed to 

meet future U.S. demand. Nonetheless, we are aggressively investing in the critical 

energy infrastructure this nation needs to continue to reliably supply fuels to customers. 

Diversifying energy and fuel sources 

At the same time that we are investing at the forefront of traditional energy such 

as oil and gas, we also are pursing advances in renewable technologies that are 

needed to help diversify supply and meet the challenges of tomorrow. To add to domestic energy resources, Chevron and many other companies are making investments in renewable energy. Since 2002, Chevron has spent more than $2 billion to 

develop renewables and energy efficiency services. Between 2007 and 2009, our 

spending on renewable technologies and energy efficiency solutions will be an additional $2.5 billion. 

Chevron is investing in new technology to unlock the enormous potential of cellulosic ethanol. In 2006, we formed a biofuels business to advance technology and 

41 

pursue commercial opportunities related to the production and distribution of ethanol and biodiesel in the United States. We recently announced a joint venture with 

Weyerhaeuser Corporation to pursue the research necessary to commercialize production of biofuels from nonfood sources. Catchlight Energy will work to develop 

technology that will lead to commercial biofuels production. 

And more research is needed. We have strategic biofuels alliances with Georgia 

Tech, UC Davis, Texas A&M, the U.S. Department of Energy’s National Renewable 

Energy Lab and the Colorado Center for Biorefining and Biofuels. We also are participating with AC Transit in the San Francisco Bay Area (California) on a zeroemission hydrogen bus project. 

Chevron is taking aggressive steps to increase energy efficiency 

The energy challenges we face, globally or in the United States, cannot be met 

by addressing only the supply side. It is also important for all of us to realize that 

the most readily accessible source of new energy is conservation and efficiency. At 

Chevron, we embrace conservation as an important business strategy, and we are 

in our 17th year of a focused effort to increase our own energy efficiency. Since 

1992, we have increased energy efficiency by 27 percent. 

And through Chevron Energy Solutions (CES), we are delivering energy efficiency 

projects that benefit federal, state and local governments; the public; and the environment. CES has completed over 800 projects involving energy efficiency and renewable power in the United States. These projects have accounted for over $1 billion in energy and operational savings, helping clients lower their energy consumption and costs by nearly 30 percent on average. 

Chevron Energy Solutions has implemented energy efficiency, energy management and related energy improvements at government facilities across the United 

States. These projects include U.S. military bases such as: Beale Air Force Base, 

California; Department of the Navy, Marine Corps Logistics Base, Georgia; Department of the Army, Picatinny Arsenal, New Jersey; and the Department of the Army, 

Corpus Christi Army Depot, Texas. CES also has developed energy efficiency, solar 

power and clean energy projects for the U.S. Postal Service, including its Processing 

and Distribution Center in Oakland, California, and Mail Processing Facility in San 

Francisco, California. Another California solar project at Contra Costa Community 

College near San Francisco is the largest of its kind at an institution for higher 

learning in North America. The project, when completed, will generate 3.2 

megawatts of solar power and will save the college $70 million in energy costs over 

25 years. 

The National Petroleum Council Study: Urgent action is needed 

There is no single or short-term solution to satisfy the world’s growing appetite 

for energy—or to prevent the United States from being affected by the global energy 

dynamic. We are in a new energy era, one defined by increased demand and constrained supply. 

We need a range of realistic solutions, and we need them at scale. 

We literally need all the energy we can develop and to use energy more wisely. 

This includes oil, natural gas, coal and nuclear power. It also includes renewables. 

And, just as important, it includes a focus on energy efficiency. The U.S. Energy 

Information Agency forecasts that over the next 25 years oil, coal and natural gas 

will provide roughly the same 86 percent of the world’s total energy mix as they 

do today. The energy industry and other parties are making investments in all these 

areas, and it is important that they continue. All are needed to provide important 

additions to our energy supply portfolio. And all will play an important role in meeting increased energy demand. 

At a time when more supply is needed, the United States has been reluctant to 

access some of its own resources. Chevron and others have been talking about the 

constrained supply-demand dynamic for the last several years, urging greater access 

to U.S. resources, onshore and offshore—especially given the time it takes for 

projects to come onstream. Instead, we have been increasing our demand on exporting countries because of policy decisions made here at home. Any serious measures 

toward energy security must seek to reverse this equation. As the world’s largest 

consumer of energy, actions we ask of other producers must be matched at home. 

Energy underpins every aspect of our society and our growing economy. The scale 

and breadth of the U.S. energy system is unsurpassed in the world, as is our energy 

demand, which is forecast to soon to need 1 million barrels of oil an hour of supplies. A sustained, reliable supply is essential, and that is achieved by bolstering 

supplies and moderating demand. The Energy Independence and Security Act of 

2007 had important measures to moderate demand. However, it missed taking the 

42 

additional step we believe is also urgently needed—improved access to ‘‘off-limits’’ 

oil and natural gas resources that we will need 10, 20 and 30 years from now. 

Last summer, the National Petroleum Council (NPC) issued a sobering study 

called ‘‘Facing the Hard Truths About Energy,’’ which outlines a comprehensive, integrated approach to U.S. energy security. The NPC study is a broad-based consensus effort representing the views of an impressive range of experts and stakeholders. Input was sought from more than 1,000 other stakeholders, in the U.S. and 

abroad; there were 350 participants with backgrounds in all aspects of energy including efficiency, economics, geopolitics and environment; 65 percent of participants 

were from outside the oil and gas industry, including nongovernmental organizations, academia, government, environmental and financial. 

The NPC study highlights the need for an integrated national strategy given accumulating risks to the supply of reliable, affordable energy. The study highlights a 

number of ‘‘hard truths’’: 

• Coal, oil and natural gas will remain indispensable to meeting total projected 

energy demand growth. 

• The world is not running out of energy resources, but there are accumulating 

risks to continuing expansion of oil and natural gas production from the conventional sources relied upon historically. These risks create significant challenges to meeting projected energy demand. 

• To mitigate these risks, expansion of all economic energy sources will be required, including coal, nuclear, renewables, and unconventional oil and natural gas. Each of these sources faces significant challenges—including safety, 

environmental, political, or economic hurdles—and imposes infrastructure requirements for development and delivery. 

• ‘‘Energy independence’’ should not be confused with strengthening energy security. The concept of energy independence is not realistic in the foreseeable 

future, whereas, U.S. energy security can be enhanced by moderating demand, expanding and diversifying domestic energy supplies, and strengthening global energy trade and investment. There can be no U.S. energy security without global energy security. 

• A majority of the U.S. energy sector workforce, including skilled scientists 

and engineers, is eligible to retire within the next decade. The workforce must 

be replenished and trained. 

• Policies aimed at curbing CO2 emissions will alter the energy mix, increase 

energy-related costs and require reductions in demand growth. 

The NPC study sets forth five core strategies to assist markets in meeting the energy challenges to 2030 and beyond. The United States must: 

1. Moderate the growing demand for energy by increasing efficiency of transportation, residential, commercial and industrial uses. 

2. Expand and diversify production from clean coal, nuclear, biomass, other renewables, and unconventional oil and natural gas; moderate the decline of 

conventional oil and natural gas production; and increase access for development of new resources. 

3. Integrate energy policy into trade, economic, environmental, security and foreign policies; strengthen global energy trade and investment; and broaden 

dialogue with both producing and consuming nations to improve global energy security. 

4. Enhance science and engineering capabilities and create long-term opportunities for research and development in all phases of the energy supply and 

demand system. 

5. Develop the legal framework to enable carbon capture and sequestration 

(CCS). In addition, as policymakers consider options to reduce CO2 emissions, provide an effective global framework for carbon management, including establishment of a transparent, predictable, economy-wide cost for CO2 

emissions. 

The study further recommended that markets should be relied upon wherever 

possible to produce efficient solutions. Where markets need to be bolstered, policies 

should be implemented with care and consideration of possible unintended consequences. 

The study is a catalyst for action. And action is needed now on all of the recommendations. 

43 

2 (Salvatore Lazzari, ‘‘The Crude Oil Windfall Profit Tax Of The 1980s: Implications for Current Energy Policy,’’ Congressional Research Service, 3/9/06) 

Changing the conventional wisdom on energy 

We welcome serious dialog about measures that can be taken to help the consumer deal with these rising energy and fuel prices and develop a comprehensive 

energy policy. 

Let me reiterate that the NPC study has given us sound, sensible and achievable 

solutions. To successfully implement these recommendations, we need to change our 

conventional wisdom about energy development and its use. 

First, we need to value energy as a precious resource. Energy efficiency is the 

most immediate and important action that each of us can take to contribute to rising energy prices. The United States must become a nation of energy savers. In 

short we need a ‘‘Made in America’’ solution enabled by everything from human ingenuity, to ‘‘smart’’ buildings, to advanced vehicles and transportation systems. Increased energy efficiency and conservation will help reduce demand for energy and 

will reduce pressures on the system. Markets are indicating U.S. consumers are already taking action. Congress has a critical role to play to engage the U.S. public 

and put the United States at the forefront of responsible energy use. 

Second, we need all the energy we can get from every available source. We must 

continue to bring traditional energy supplies to market, and invest in the critical 

energy infrastructure this nation needs, even as we are developing alternatives 

sources of energy. 

Third, on the supply side, we need your help to open up the 85 percent of the 

Outer Continental Shelf that is now ‘‘off limits’’ to environmentally responsible oil 

and gas exploration and development. We cannot expect other countries to expand 

their resource development to meet America’s needs when our government limits development at home. Along with access, it is also important to streamline permitting 

processes to enable new resource development, additional recovery in existing fields 

and continued investment in critical downstream infrastructure to progress in a reasonable timeframe. 

Fourth, I would encourage careful evaluation of policies that can lead to unintended consequences and create inefficiencies in the gasoline supply system. Today 

we have 17 ‘‘boutique’’ fuel requirements across the country, requiring us to blend 

unique gasoline products for different states and different localities. More requirements on fuels are being added through renewable fuel mandates and proposed climate policies. For example, we are under a mandate to include rising levels of cornbased ethanol in our gasoline products and, over time, add significant quantities of 

cellulosic ethanol. At the same time that we are accommodating these new mandates, policymakers have proposed legislation to reduce greenhouse gas emissions 

that again is disproportionately burdensome on the transportation fuels sector. We 

urge you and your colleagues to reflect on how to advance these important national 

policies without inadvertently disrupting our ability to provide the gasoline and 

transportation fuels that the United States needs. Rationalization of these multiple 

requirements will create greater efficiencies in the fuel supply system. 

Finally, we urge you to reject punitive measures on our industry. Regardless of 

intent, these will diminish our ability to invest in the long term solutions critical 

to maintaining this country’s energy infrastructure and supplies, as well as our ability to develop diverse energy resources for the future. As reported recently by the 

Congressional Research Service, a similar measure in the 1980s resulted in lower 

domestic production and increased dependence on foreign sources.2 Put simply, actions drawn more from emotion than sound policy will hurt everyone. 

American energy companies operate at the frontier of geography, geology and 

technology. As the world’s largest energy consumer, and as a country blessed with 

rich natural resources, Americans need our ingenuity and your leadership. With 

your help we can continue to develop the critical energy supplies and infrastructure 

needed to supply this nation and support this economy. Our collective actions today 

will demonstrate leadership on issues that are within our control. They will bolster 

us today, prepare us for tomorrow and set in motion a wave of innovation and responsible development for many years to come—to help us weather the powerful 

forces we cannot control. 

How we as a country deal with our energy future is nothing less than an urgent 

matter of our energy and national security 

Ultimately, polices should recognize the interdependence of the United States 

within the global energy system, while at the same time capitalizing on our country’s own extensive energy endowment. These are not insignificant challenges, and 

44 

they will require leadership and collaboration. We look forward to working with you 

to address these challenges. 

Chevron will continue to do its part. 

Thank you. 

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Mr. CONYERS. Thank you so much. 

John Lowe? 

TESTIMONY OF JOHN E. LOWE, EXECUTIVE VICE PRESIDENT, 

CONOCOPHILLIPS 

Mr. LOWE. Good morning, Chairman Conyers and the Committee. 

We share the public’s concern about rising energy prices and appreciate the opportunity to present our views on what is driving 

the increase, what our company is doing to respond, and what we 

believe Congress can do. 

Crude oil represents over 70 percent of the current cost of gasoline. So higher crude prices are driving higher gasoline prices. 

So why have crude oil prices increased so dramatically? There 

are numerous factors, the biggest contributor being a long period 

of strong global economic growth, particularly in developing Asia. 

Limited access to resources, both here and abroad, also constrains the growth in supply. In addition, higher taxes, service cost 

inflation, little excess production capacity, and high geopolitical 

risk also contribute. 

Adding to this are the investor funds flowing into oil futures as 

a hedge against credit risk, inflation and dollar devaluation. 

I cannot overemphasize the access issue. Access to resources is 

severely restricted in the United States and abroad and the American oil industry must compete with national oil companies who are 

often much larger and have the support of their governments. 

We can only compete directly for 7 percent of the world’s available reserves, while about 75 percent is completely controlled by 

national oil companies and are not accessible. 

ConocoPhillips is working to bring more energy to the market. 

Over the past 6 years, we have reinvested, on average, 106 percent 

of our income. In 2007, we earned $12 billion, but reinvested $13 

billion, and we have over $15 billion in investments planned this 

year. 

This investment includes finding added supplies of oil and gas, 

expanding refining capacity and continuing to research and bring 

renewable and alternative fuels to the market. 

Here in North America, we are drilling exploratory wells, developing the Canadian oil sands, and building infrastructure. But we 

want to do more, such as explore the vast areas of the U.S. that 

are off limits due to drilling moratoriums. 

These areas could more than double the nation’s oil and gas reserves. 

Downstream, we are increasing our refining capacity and ability 

to process lower quality crudes. Unfortunately, our efforts here in 

the U.S. have been met with continuing opposition. 

At our Wood River, Illinois refinery, the 10th largest in the 

United States, we are experiencing long permitting delays via the 

appeals process that are blocking our expansion plans. 

In California, a project to make ultra low sulfur diesel fuel has 

been threatened by permit challenge for 4 years. 

We are working hard to bring renewable fuels into the market 

by looking at ways to process them at traditional refineries and researching new technologies. 

54 

Fifty-five percent of our U.S. gasoline volumes contain ethanol. 

E-85 and biodiesel are being marketed at our branded facilities. We 

are producing renewable diesel fuel and researching next generation biofuels, like cellulosic ethanol, and we are developing better 

materials for the lithium ion batteries and electric vehicles. 

So what can Congress do to help address energy concerns? 

Congress can enact a balanced national energy policy that encourages development of the conventional fuels that power our 

economy, clears the permitting logjam, encourages alternative 

sources, including all forms of biofuels, and removes the current 

tariff on imported ethanol, encourages high energy efficiency, and 

accelerates technological innovation. 

Meanwhile, we urge you not to pass measures that have public 

appeal, but would be counterproductive, such as tax increases that 

diminish our investment capabilities, reduce the attractiveness of 

high cost domestic production, or disadvantage the U.S. oil and gas 

companies. 

This has been tried before with extremely negative results, reducing supplies, eliminating jobs, and resulting in higher prices. 

The nation cannot afford to make that mistake again. 

The U.S. is in a global race for energy. We are competing against 

national oil companies that are far larger and that enjoy preferred 

access and governmental cooperation. 

We must move beyond today’s adversarial relationship and start 

working together to find real solutions. U.S. oil companies should 

be viewed as the key to the energy solution, not as scapegoats, but 

as assets in this global energy race. 

We must be allowed to compete on level ground for the benefit 

of our country. 

Mr. Chairman, that concludes my statement. Thank you. 

[The prepared statement of Mr. Lowe follows:] 

55 

PREPARED STATEMENT OF JOHN E. LOWE


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Mr. CONYERS. Thank you very much. 

We are pleased now to recognize Rob Malone, Chairman and 

President of BP America. 

TESTIMONY OF ROBERT A. MALONE, 

CHAIRMAN AND PRESIDENT, BP AMERICA 

Mr. MALONE. Thank you, Mr. Chairman, Ranking Member 

Chabot, Members of the Committee. Good afternoon. 

We know that high energy prices are having an adverse effect on 

our economy and on our workers and families across this nation. 

Not a week goes by that I don’t receive letters from consumers 

about the impact that they are feeling from high energy prices. 

Unfortunately, I cannot and we cannot change the world market 

on which this nation now relies for 60 percent of the oil it consumes every day. But what we can do is to work together with this 

Congress, with the Administration and with governments and consumers to move toward greater energy security and a lower carbon 

energy future. 

Today’s high prices are linked to the failure both here and 

abroad to increase the supply of oil and gas and renewables and 

to reduce demand through conservation and energy efficiency. 

The oil market is tight. Geopolitical risk and concern about future supply have had a big impact on price. We are working hard 

to expand and diversify U.S. energy supply. We are the nation’s 

largest producer of domestic oil and gas and one of the nation’s 

largest energy investors. 

In the last 5 years, we have invested $31.5 billion in development of U.S. energy supply, almost dollar for dollar of our net income. 

We expect to spend $30 billion over the next 5 years to maintain 

production of natural gas from the Rocky Mountain area, to renew 

critical infrastructure in Alaska, to continue development of the 

deepwater Gulf of Mexico, and to increase gasoline production at 

two of our Midwest refineries. 

We are nearly doubling the capacity of our Frederick, Maryland 

solar plant and, by the end of this year, we expect to have 1,000 

megawatts of U.S. wind power capacity online, increasing to 2,400 

megawatts by the end of 2010. 

We are already one of the largest blenders of ethanol in the nation. However, over the next decade, we will invest more than $500 

million in the search for a new generation of biofuels that contains 

more energy, has less impact on the environment, and which is not 

made from a food crop. 

Together with my colleague here from ConocoPhillips, we have 

recently announced the largest private sector investment ever in 

the United States, the Denali, Alaska gas line project. 

Our investments across the entire energy spectrum are huge, but 

the hard truth is that even with major improvements in energy efficiency and the rapid growth of solar, wind and biofuels, the 

United States is going to need more oil, more natural gas, more 

coal and more nuclear power in 2030 than it does today. 

The United States, with 5 percent of the world’s population, is 

consuming 25 percent of daily world oil production. The U.S. has 

108 

to produce more of the energy it consumes and it has a responsibility to use the energy wisely. 

On the supply side, we support incentives for alternative energy. 

But taxing one form of energy to encourage production of another 

will reduce our ability to keep up with the growing U.S. energy demand. 

The results will be less investment, less production, tighter energy markets, and potentially even higher prices at the pump. 

This nation should be encouraging production of all forms of energy, especially oil and gas. But adopting measures that limit access to U.S. resources, that dampen investment in infrastructure, 

discourage trade with our Canadian neighbors is going to make it 

increasingly difficult and make our economy more vulnerable to 

market influences. 

My company is serious about bringing new sources of oil and gas 

to the U.S. market. We are also serious about building a sustainable, profitable alternative energy business that is capable of delivering the clean and affordable power that consumers want. 

My company is ready to work with you and others to address the 

energy and environmental needs of this nation through a bipartisan and comprehensive energy policy. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Malone follows:] 

109 

PREPARED STATEMENT OF ROBERT A. MALONE


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Mr. CONYERS. Thanks so much. 

Senior Vice President, Exxon Mobil, Steve Simon? 

TESTIMONY OF J. STEPHEN SIMON, SENIOR VICE PRESIDENT, 

EXXON MOBIL CORPORATION 

Mr. SIMON. Thank you, Chairman Conyers, Ranking Member 

Chabot, and Members of the Task Force. 

Energy is essential to the U.S. economy and is a topic on many 

Americans’ minds. They are raising important questions about how 

our industry is helping meet their vital energy needs. 

I welcome the opportunity to respond to these questions and to 

clear up some misconceptions regarding our industry and to this 

end, I would like to make two points during my allotted time, similar to those I made before the Senate Judiciary Committee yesterday. 

First, the prices Americans pay at the pump reflect the dynamics 

of an enormous international market for energy, which means that 

in order for American energy companies, like Exxon Mobil, to successfully compete, it is vital that we have sufficient financial 

strength and scale. 

The crude oil used to manufacture the fuel Americans consume 

may have been produced in the United States or in any one of more 

than 35 countries. Within this vast global marketplace, competition 

is fierce. Exxon Mobil is the largest U.S. oil and gas company, but 

we account for only 2 percent of global energy production, only 3 

percent of global oil production, only 6 percent of global refining capacity, and only 1 percent of global petroleum reserves. 

With respect to petroleum reserves, we rank 14th. Governmentowned national oil companies dominate the top spots. 

For an American company to succeed in this competitive landscape and go head-to-head with huge government-backed national 

oil companies, it needs financial strength and scale to execute massive, complex energy projects requiring enormous long-term investments. 

To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion a day. Over 

the past 25 years, we have invested $355 billion in new energy 

projects, which is more than we earned during the same period. 

Over the next 5 years, we plan to invest at least $125 billion 

more. Our profitability, in absolute terms, is large. But it must be 

viewed in the context of the massive scale of our industry and our 

dependence on high earnings in the current up-cycle to sustain the 

huge investments required over the longer term. 

The second point I would like to make addresses the concerns 

your constituents and our customers have about where their gas 

dollars are going. 

Last year, the average price in the United States of a gallon of 

regular unleaded gasoline was around $2.80. On average, in 2007, 

approximately 58 percent of the price reflected the amount paid for 

crude oil. 

Consumers pay for that crude oil and so do we. Of the 2 million 

barrels per day Exxon Mobil refined in 2007 here in the United 

States, 90 percent were purchased from others. Last year, we spent 

133 

over $40 billion ourselves buying crude oil and feedstock on the 

open market to fill our U.S. refineries. 

Fifteen percent of the average price Americans paid at the pump 

last year reflected the amount collected in Federal, State and local 

taxes. The remaining 27 percent reflected refining, marketing and 

transportation. 

For our refining and marketing business, that 27 percent would 

be more than 23 percent cost and less than 4 percent earnings, 

which translates to earnings of only about $0.10 per gallon of product sold. That is about one-quarter of the amount claimed by taxes. 

Now, since last year, the increase in gasoline price and more can 

be attributed to the rise in the cost of crude oil. Product prices have 

not risen as much as crude oil. So industry margins have been reduced. 

In fact, our U.S. refining and marketing earnings have actually 

been cut by more than half compared to last year to approximately 

$0.04 a gallon sold. 

Our margins are tight because our industry is very competitive. 

The Federal Trade Commission and other government agencies 

have repeatedly confirmed this fact. 

When energy prices are high, the urge to point fingers at oil companies is strong. But undercutting the ability of American companies, like Exxon Mobil, to compete in a huge global marketplace 

only makes it harder for Americans to secure the energy they need 

at competitive prices. 

We should instead work together to strengthen U.S. competitiveness and meet the needs of the American people we all serve. 

Thank you. 

[The prepared statement of Mr. Simon follows:] 

134 

PREPARED STATEMENT OF J. STEPHEN SIMON


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Mr. CONYERS. Thanks so much, Mr. Simon. 

Sheila Jackson Lee? 

Ms. JACKSON LEE. I believe this process is constructive and I 

hope, as we proceed with our questions, that each of you will find 

our inquiry going down a pathway that would lead us to solutions. 

My first question is very simple. I indicate my interest in this 

when we first started and I had my opening remarks, and I will 

just simply ask each of the gentlemen here to say yes or no, and 

that is the invitation for a roundtable discussion that is outside the 

realm of these very important congressional hearings in Houston 

on the question of solutions, which I believe is key to really explaining to the American people how we can work together. 

Mr. Hofmeister? 

Mr. HOFMEISTER. Congressman, provided we could do it in the 

next 35 days. Otherwise, I can’t. I am sure my successor would be 

interested, as well. 

Ms. JACKSON LEE. Mr. Robertson? 

Mr. ROBERTSON. We would be pleased to participate and if I can 

do it, I would like to be there. 

Ms. JACKSON LEE. Mr. Lowe? 

Mr. LOWE. ConocoPhillips actually did a 35-city conversation on 

energy last year. We would be delighted to participate. 

Ms. JACKSON LEE. Thank you. 

Mr. Malone? 

Mr. MALONE. We would be happy to participate. 

Ms. JACKSON LEE. Mr. Simon? 

Mr. SIMON. We would welcome the opportunity. 

Ms. JACKSON LEE. Thank you. 

Mr. Simon, I am going to start with you, because there is a question of buying product on the market, the international market, 

and I don’t take to calling names to our international partners, but 

Exxon had a very strong presence in Venezuela, a market that is 

much closer than the North and South America. 

What happened with that and what is the status of the product 

coming from Venezuela? 

Mr. SIMON. Well, as I think you know, Congresswoman, our assets in Venezuela were expropriated and we are currently in arbitration regarding the value of those assets. 

We are hoping for an amicable solution to that and constructive 

discussion, and we will see how that plays out. 

Ms. JACKSON LEE. Does that mean now that the working entities 

that you had in Venezuela are no longer operable? You are no 

longer receiving the product? 

Mr. SIMON. The Venezuelan government—PDVSA, the government company there, is operating those facilities today. 

Ms. JACKSON LEE. And there was no—putting aside the arbitration—no way that you thought you could effectively negotiate a 

compromise in the new attitude of the new government or the existing government. 

Mr. SIMON. We worked very hard to do so, but, thus far, have 

been unsuccessful. But as I said, we are still hoping for an amicable solution. 

Ms. JACKSON LEE. And how many barrels were you getting out 

of that production area? 

140 

Mr. SIMON. We were bringing into the United States somewhere 

around 100,000 barrels a day. 

Ms. JACKSON LEE. Thank you very much, Mr. Simon. 

Mr. Hofmeister, would you explain how you put the partnership 

together for Motiva and how you overcame the regulatory maze 

that I hear members of the panel speaking to? 

Mr. HOFMEISTER. Congresswoman, there is a long history of relationships between Saudi Aramco and, at that time, Texaco, and towards, I would say, about the 1996-1997 timeframe, Shell Oil Company entertained discussions with both Texaco and Saudi Aramco 

to form a series of joint venture companies in order to reduce costs 

and in order to bring, frankly, more product to America. 

The relationship between Saudi Aramco and Shell has continued 

in the aftermath of the sale of the Texaco assets to Shell in the 

early 2000 period. 

Ms. JACKSON LEE. Motiva came online when? 

Mr. HOFMEISTER. Motiva was formed, I believe, about 2001. I 

would have to check the date to be precise. But today it is a 50- 

50 joint venture between Saudi Aramco and Shell Oil Company. 

Ms. JACKSON LEE. The focus of my question is how you managed—did you get through the regulatory construct quickly or not 

quickly? Would you be prepared to do another refinery, since that 

is one of the issues that we are discussing? 

Mr. HOFMEISTER. If you are referring to the refinery expansion 

of—— 

Ms. JACKSON LEE. Yes. 

Mr. HOFMEISTER [continuing]. The Motiva Refinery in Port Arthur, the State of Texas was very helpful and very useful in helping to speed up the process and the Federal regulations, also, that 

we had to deal with—— 

Ms. JACKSON LEE. So it can be done. 

Mr. HOFMEISTER. It can be done and it was done. We now have 

all permits and we are beginning construction. 

Ms. JACKSON LEE. If you had to estimate, how many more refineries do you think—if we looked at a balanced energy policy that 

didn’t rule out fossil fuels, what would be an optimum in terms of 

moving the technology forward and creating increased proficiency 

in our refineries? How many more would we need? 

Mr. HOFMEISTER. Well, I can really on speak for Shell in that re- gard and I think with the $7 billion, $3.5 billion Shell share, that 

will take care of our expected demand for some time to come. 

Ms. JACKSON LEE. So you wouldn’t build another one at these 

point. 

Mr. HOFMEISTER. Not at this point. But we never stop looking at 

options and depending upon our market share, in which we would 

decide to—instead of buying, on a third party market, finished 

products, we always keep options open for further expansions. 

Ms. JACKSON LEE. Mr. Chairman, I had a question for Mr. Malone. I didn’t know where we were. 

Mr. CONYERS. Okay. 

Ms. JACKSON LEE. Thank you. 

Mr. Malone, BP has been known—has a long history in promoting conservation and biofuels, and, frankly, I believe that recognizing the need for heavy crude, if the energy industry would emVerDate Aug 31 2005 17:06 May 14, 2009 Jkt 000000 PO 00000 Frm 00144 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\052208\42511.000 HJUD1 PsN: DOUGA
141 

brace its name, which is energy, which is diverse and doesn’t have 

a definition to it, and begin to promote these alternative fuels, and, 

I must say, that I know some of the testimony did not reflect. 

But we have passed legislation in this Congress, the 110th Congress, that is focused on R&D, that has tried to turn money back 

in to research development to improve the status of our energy policy, if you will. 

What has BP done currently to promote not only conservation, 

but this alternative fuel, and how much more can we expect from 

the energy industry, including BP, on giving us the roadmap to alternative fuel? 

Mr. MALONE. I am not going to try to speak for the entire industry, but I think you have heard that all of us have some degree of 

work that we are doing in alternatives. 

As I said in my statement, the incentives that were included in 

the energy bill have allowed us to actually bring on additional wind 

generation capacity. 

It would not be economical if it had not been for those encouragements, because we are building a market. We are going to have to 

get a lot of wind generation to make that profitable and competitive. 

But an example is Texas went one step further and also put an 

encouragement in by requiring renewable energy into their system, 

and, right now, is now the largest wind producer in the United 

States. 

So it is usually a combination of Congress and the States. So in 

wind energy, we are seeing it working. 

Solar is a lot more difficult. We have been in the business a long 

time. Actually, our biggest solar market out of our Maryland plant 

is California, where, again, a combination of Federal and State has 

allowed that market to grow. 

On the biofuels side, again, we are a big blender, but what we 

have got to look for and what we are spending money on is on research into the next generation of that biofuel and, as I stated, it 

doesn’t compete. 

And one other thing I would mention is we are working in California at the capability to generate hydrogen from the bottom of 

the barrel and it would be clean hydrogen, where we could sequester the CO2 in existing oil fields, increase the production from the 

field, sequester the greenhouse gases and produce clean energy 

from hydrogen. 

Ms. JACKSON LEE. I thank the Chairman and I thank you for allowing me these questions, and I will even hang around for an abbreviated second round. 

But I yield back, Mr. Chairman. 

Mr. CONYERS. Steve Chabot? 

Mr. CHABOT. Thank you, Mr. Chairman. 

It is my belief that the greatest question in the economy right 

now, whether we go into a recession and if so, how deep it is, is 

the energy crisis that we have in this country now. 

And they say you will reap what you sow and it is my belief that 

what Congress has sown is the inability of the necessary exploration and drilling in areas like ANWR and the outer continental 

shelf that has been mentioned by myself and others previously, and 

142 

that was terrible policy in not allowing this country to go into those 

areas. 

And one of the key problems that we face right now, and I would 

invite any of the members of the panel to address that issue relatively briefly, how significant is walling off those areas, specifically ANWR and the outer continental shelf? 

And I will start with you, Mr. Hofmeister. 

Mr. HOFMEISTER. I think, Congressman, the first thing that has 

to be understood is that for 30 years, we have been building business plans that have not included major potential resource development projects in the Atlantic, Pacific, eastern Gulf of Mexico, as 

well as, as you say, ANWR. 

So we have had 30 years of training to look elsewhere. And so 

we don’t have a good handle on what is possible in the outer continental shelf, which is why I think it is long past time to at least 

map and understand what are the resources that are there so the 

nation could then make very informed decisions. 

I think that the drilling that we are currently doing on existing 

leases, many of which are marginal leases, is not yielding sufficient 

new energy, new oil into the economy to make up for persistent decline in existing fields. 

That then drives us to very expensive projects in the deepwater 

or ultra deepwater Gulf of Mexico, where we are allowed, which 

costs us an awful lot more money, which then, of course, gets built 

into the whole cost equation, which goes to American consumers. 

So my point of view is this persistent denial of access is costing 

American consumers right out of their pocketbook. 

Mr. SIMON. Congressman, can I add to that? I think there are 

estimates and in the estimates I have seen is about 30 billion barrels of oil and about 125 trillion cubic feet of gas that are declared 

off limits. 

When you look at that and put it into perspective, that is enough 

oil to back out our current level of imports for more than 8 years 

and enough natural gas to heat 15 million U.S. homes for a period 

of over 100 years. This is the only government in the world who 

denies its citizens access to known recoverable significant quantities of oil and gas. 

Mr. CHABOT. Thank you. 

Mr. Robertson? 

Mr. ROBERTSON. Congressman, we have the most dynamic, technologically advanced energy companies in this country and our production used to be 9 million barrels a day. It is now 5 million barrels a day of oil in the United States. We now import 10 million 

barrels a day. 

We are, as has already been said, exploring the most difficult 

places in the world. We have heard from some of the Committee 

Members this morning about some of the forms of energy that exist 

in the United States, whether it be coal, whether it be oil, whether 

it be gas, whether it be other forms of energy. 

And with the determination to address some of these permitting 

and some of these access issues, that production decline could be 

turned around significantly. 

143 

It takes long periods of time, but our domestic resources are very 

important and we have the capability to produce more in this country. 

Mr. CHABOT. Excuse me. We have got votes on the floor. I only 

have a couple more questions. So let me get to the others very 

quickly, and I will ask Mr. Lowe and Mr. Malone on these. 

One of the solutions that this current Congress believes to be 

helpful in this effort is to raise taxes. What effect does that have 

on exploration for additional oil and how much of the tax increases, 

were they come, ultimately just get passed along to the consumer? 

Mr. MALONE. Well, as I said in my oral statement, Congressman, 

I think the important thing right now is my company is investing 

ever dollar it makes back into energy development in the United 

States, and the simple result of that is if you take a dollar away 

from me here, I am not going to have it to reinvest in energy here 

in the United States. 

Mr. CHABOT. Mr. Lowe? 

Mr. LOWE. I would just echo the same comment, that it is going 

to reduce supply, which is going to end up ultimately in higher 

prices for the consumers. 

Mr. CHABOT. Mr. Chairman, I think in the interest of time, since 

we have votes on the floor, I am going to yield back, because I 

know the red light is ready to come on here. 

Can we finish? 

Mr. CONYERS. If you need any more time, we will go ahead. 

Mr. CHABOT. Since we do have just a moment here, Mr. Cannon 

is very excited about shale and, obviously, they have got a lot out 

there. 

How about when we come back? Because we are going to run out 

of time here. We have only got 4 minutes, I think, to get to the 

floor. 

Mr. CONYERS. We will recess and any of the witnesses who want 

to join us at the deli in the B level, Attorney Raut will show you 

how to get there. 

We will be right back. 

[Recess.] 

Mr. CONYERS. The Chair recognizes the gentleman from Ohio, 

Mr. Chabot. 

Mr. CHABOT. Thank you, Mr. Chairman. And I will try to be relatively brief, since I started my questions prior to the votes. 

And we want to apologize to folks here for having a break, but 

obviously this happens during the course of one of these hearings, 

the votes that we have. 

Mr. Lowe, you had mentioned in your testimony that you were 

attempting to—going back a little bit—clearly having sufficient refinery capacity, if we have enough crude to be able to refine it in 

a product we can actually put into our cars in a timely manner, is 

important. 

And it is my understanding that you are trying or, in fact, are 

still trying to expand the capacity of one of our refineries and I 

think you mentioned, in the permitting process, you have had lawsuits filed against you and that has been a holdup to being able 

to expand this refinery, to be able to put out more product. 

Is that correct, you did say that? 

144 

Mr. LOWE. Yes, sir. Actually, at a number of different refineries, 

we have had significant issues with permitting. The one that I specifically mentioned was Wood River, Illinois, where it is a very important project to expand the capacity to produce significantly more 

clean fuels, and it really ties in with the Canadian oil sands development. 

So this refinery will be capable of running those heavier Canadian oil sands. It has been about 2 years now and we still haven’t 

gotten the permits. 

Mr. CHABOT. And who or what organizations are filing such lawsuits to prevent you from expanding to be able to put out more gasoline that we can put in our cars? 

Mr. LOWE. These are primarily environmental groups, who I 

think their primary interest is to block the development of the Canadian oil sands. 

Mr. CHABOT. Now, as I was mentioning here when we broke for 

the vote, Mr. Cannon, for the second time that I have seen him 

quite animated about the future of shale oil and the potential to 

be able to go after that, and it sounds very interesting to me. 

I am just wondering—he also mentioned that one of the problems 

has been the government and the example he used, I believe, was 

that it takes 7 years to develop the plant and move ahead, and yet 

they give them an 8-year lease. 

So it makes no sense to make that investment if you are going 

to be shut down potentially after a year. 

How real is that and is that something that we ought to be looking at in the future, that we are looking at in the future? Anybody 

that has any experience with this. 

Mr. Robertson? 

Mr. ROBERTSON. Well, shale is a real resource. I mean, there is 

supposed to be about a trillion barrels or something like that, 

which is bigger than a lot of the Middle Eastern oil put together 

in the three States that he mentioned. 

Chevron and Shell both are working on projects with the DOE 

on different forms of producing that shale in an environmentally 

acceptable manner, focusing on an in situ process where we put 

chemicals or heat or whatever into the ground to produce this material without tearing up the surface, like we used to do in mining 

projects and those kinds of things. 

So this is real. It is too big of a resource for the United States 

to ignore. It is going to take a determined effort over a period of 

time, but our companies are working on that today. 

So we just need to make sure that there are no barriers to us 

continuing to go forward with this project. It is a multiyear project, 

but we need to start now. It is a huge opportunity for the United 

States. 

Mr. CHABOT. And we have talked a lot about gasoline here today, 

which is critical, because a lot of people being hurt right now at 

the high prices at the pump. 

But we haven’t talked too much about diesel and, obviously, 

trucks are what take our products around the country and as diesel 

has been going up, all consumers are going to see this reflected in 

the price of goods that we purchase, whether it is at the grocery 

145 

store or the furniture store or anywhere else, and diesel is even 

higher than gasoline at this point. 

What are the prospects for diesel in the near term and perhaps 

long term? 

Mr. Hofmeister? 

Mr. HOFMEISTER. Thank you. I think the point that many people 

do not realize is that if you have a 42-gallon barrel of crude oil, you 

cannot produce 42 gallons of diesel from that. 

In other words, the way the cracking process works on the molecules, you can get, at best, with the right kind of crude and the 

right kind of production process, maybe 50 percent can be turned, 

at the most, turned into diesel or aviation fuel. More likely, you 

will get about a third. 

We like to talk about a barrel in terms of three thirds, a bottom 

third, a middle third and a top third. And what is pushing up the 

price of diesel today is not just U.S. demand, but global demand, 

where Europe, for example, has a concentrated strategy to convert 

their fleet of private automobiles, not just their trucks, to dieselrun products. 

Asia, all the construction, all of the major activities that are expanding economies in Asia are consuming diesel, as well as aviation fuel. 

So there are only two ways to get more diesel into the marketplace. The first thing is to get more barrels. If you don’t get more 

barrels, you don’t have the opportunity to create that third or 

whatever it is into diesel, and then you need manufacturing or refineries in order to produce it. 

In the U.S., we tend to concentrate the design of our refineries 

around gasoline more than diesel, because that is what the market 

has demanded. 

So for this country, we would have to do some considerable retrofitting of refineries in order to produce more diesel. In the new expansion I have mentioned in Port Arthur, Texas, we are actually 

designing it in such a way that we can reconfigure quickly for more 

diesel as the market wants it. 

Mr. CHABOT. Thank you. And, finally, one last question. 

Mr. Hofmeister, I will address this to you, as well. 

This Congress has put a lot of confidence on ethanol to get us 

out of this mess that we are in for a lot of reasons that have been 

self-imposed, as far as I am concerned and as I have already mentioned. 

But ethanol is the thing that people are relying upon and, obviously, it has been driving up the cost of food stuffs and animal feed 

and everything else and we are paying for that in other ways. 

But is it a fact that the energy that is expended to produce a gallon of ethanol is virtually the same as the ethanol that you ultimately get out at the end of the process? 

Mr. HOFMEISTER. Well, I think it depends on the type of ethanol 

you are producing. Corn ethanol is one of the least efficient forms 

of ethanol, as we do our own research in this area, in that the coefficiency of energy in for energy out is fairly close to a one-to-one 

relationship. 

146 

Mr. CHABOT. Let me stop you there, if I can. So are you saying, 

in essence—is it generally gasoline that you are using or is it another type of fuel? 

Mr. HOFMEISTER. If you compare the BTU content of what you 

get out of a gallon of ethanol with the BTU energy content to make 

that gallon of ethanol, it is fairly close to a one-to-one relationship. 

Mr. CHABOT. So the energy expended to produce the energy that 

you get out the other side, what you are going to put in your car, 

is almost the same. Is that correct? 

Mr. HOFMEISTER. That is correct. What many people don’t recognize is that the ultimate BTU content of a gallon of ethanol is considerably less than a gallon of gasoline. 

So it could be as much as 25 percent less than a gallon of gasoline. 

Mr. CHABOT. So it could even be less. 

Mr. HOFMEISTER. So you actually have to use more ethanol to get 

the same energy usage that you would—25 percent more ethanol 

to get the same energy usage as you would from the same gallon 

of gasoline. 

Mr. CHABOT. Does that make any sense? 

Mr. HOFMEISTER. Well, the reason Shell is pursuing all of its research in what we call second generation or cellulosic ethanol, we 

prefer not to put investment dollars into corn ethanol. We will let 

others do that. 

But we believe that there is a much richer energy content to be 

had from ethanol that might come, for example, from algae or from 

wood chips or sawdust or other kinds of grasses that are not in the 

food chain. 

So we have major projects ongoing with third parties to test the 

validity of that science. 

Mr. CHABOT. Thank you. 

Mr. Chairman, I yield back the balance of my time. 

Mr. CONYERS. The Chair recognizes the distinguished gentlelady 

from California, Maxine Waters. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

I thank you for using the Task Force to attempt to get some of 

the questions answered that we have all been asking and try and 

deal with the concerns of our constituents that we face on a daily 

basis. 

I have listened to the testimony of our presenters here today, and 

I have been trying to read about what was done over on the Senate 

side, and we ask the same questions. 

We ask a lot about profitability and in all of this testimony, we 

see where there are explanations of profitability and, basically, 

what the presenters are saying to us is, in essence, ‘‘we make a lot 

of money and we spend a lot of money,’’ that we have to spend 

money on exploration and investments in everything from refineries, trying to expand them, to development of new sources of energy. 

So we never really learn anything different when our presenters 

are here. 

Let me try and frame some of these questions a little bit differently. 

Exxon Mobil is represented by whom? 

147 

Mr. SIMON. By Steve Simon. 

Ms. WATERS. Thank you very much, Mr. Simon. 

It shows that $40.6 billion were your profits in 2007, the largest 

corporate profit in American history. 

Now, with $40.6 billion in profit, are you saying that every time 

the price of oil per barrel increases, that you have to keep increasing the price at the pump in some way? 

Mr. SIMON. Well, I think it helps to break that profitability down 

to where people understand the components of it. 

Ms. WATERS. Okay, do that. 

Mr. SIMON. If I could, please. 

Ms. WATERS. Sure. 

Mr. SIMON. When you look at that $40.6 billion, if you put that 

on a cents per gallon basis, on a global basis, it would be about 

$0.10 per gallon. 

Ms. WATERS. So what did you spend that money on? 

Mr. SIMON. Well, if I could just finish my point here and then 

I will come back to that. 

Ms. WATERS. Sure. 

Mr. SIMON. When you come back to the United States and then 

you look at the cents per gallon on the piece of the business where 

we produce products, last year, it was $0.04 per gallon and this 

year it is $0.014. 

Now, in terms of where we are spending that in the United 

States, one thing we are doing is we are expanding our refineries 

to meet the demands of our customers and your constituents. 

Ms. WATERS. Of the $40.6 billion, how much did you spend on 

refinery expansion? 

Mr. SIMON. In the last 5 years, we have spent about $3.5 billion 

on refining here in the United States. 

Ms. WATERS. In 2007, your profits were $40.6 billion. How much 

did you spend on refinery expansion in 2007? 

Mr. SIMON. In 2007, it was probably about $1 billion, $1.5 billion. 

Ms. WATERS. Okay, all right. 

Mr. SIMON. Now, again, that is here in the United States and 

you have got to be sure that you are talking about profitability 

here in the United States. 

Ms. WATERS. I am talking about $40.6 billion, wherever it was 

earned. Was that earned internationally or here in the United 

States? 

Mr. SIMON. About 75 percent of that profitability was earned outside of the United States, so about 25 percent here in the United 

States. And, again, then when you look at what amount of that was 

earned the refining and marketing business, it was about 10 percent last year. 

Ms. WATERS. Of the $40.6 billion, where you spent about $1.5 billion on refineries, how else did you spend $40.6 billion? 

Mr. SIMON. Well, part of that goes back to the shareholder in 

terms of dividends, paid back the—— 

Ms. WATERS. What did you pay in 2007 in dividends? 

Mr. SIMON. In dividends in 2007, we paid about $7.6 billion on 

a global basis. 

148 

Ms. WATERS. And how much did you pay on product promotion 

and advertisement, however that is framed in your company? I am 

just trying to get an idea of how it works. 

Mr. SIMON. About $100 million. 

Ms. WATERS. Is that all, $100 million? 

Mr. SIMON. And that is everything in terms of advertising, product promotion, yes. 

Ms. WATERS. I won’t ask the amount of your compensation, but 

do you receive bonuses? 

Mr. SIMON. If you looked at my total compensated granted last year, it was $12.5 billion. If you include a 1-year accrual of my pension fund, that would take it up to $15 billion. 

Ms. WATERS. In 2007, how much—— 

Mr. CHABOT. Would the gentlelady yield? 

Ms. WATERS. Yes. 

Mr. CHABOT. He just said $12 billion. 

Mr. SIMON. No, million. Million. I am sorry. 

Mr. CHABOT. $12 million? 

Mr. SIMON. $12.5 million. 

Mr. CHABOT. Million. 

Mr. SIMON. And then $15 million. 

Mr. CHABOT. I thank the gentlelady for yielding. 

Mr. SIMON. Thank you very much, Congressman. 

Mr. CHABOT. It is all right. 

Ms. WATERS. I am sorry. Let me go back. I just want to deal with 2007, because that is the $40.6 billion. Is that number correct? 

Maybe it is not the right number, $40.6 billion. 

Mr. SIMON. $40.6 billion (sic) was the correct number. 

Ms. WATERS. And how much in compensation? 

Mr. SIMON. Out of that, I don’t have that answer, Congresswoman. 

Ms. WATERS. Okay. 

Mr. SIMON. But when you look at how much we invested, I think 

is one of the things you are driving at—— 

Ms. WATERS. What does investment mean? We don’t know what 

that means. We understand that you have to invest in ways that 

will improve the profitability of the company, that you have got to 

invest in, as you say, refinery expansion, you have got to do a lot 

of things. 

But we don’t know, when you say investment, whether or not the 

investments are realistic as it relates to how much you end up with 

and how much you have to charge at the pump. I mean, I could take $40.6 billion and invest it all, I suppose, or 

somebody could. Not me, I couldn’t. 

But I want to know whether or not there is a percentage of that 

earnings that is reasonable for investments or whether or not when 

you come here and you talk to us and you tell us investment, we 

don’t get the picture. 

What did you invest in? 

Mr. SIMON. Well, if you look at it over a longer period of time—— 

Ms. WATERS. Yes. 

Mr. SIMON [continuing]. We have invested more than we have 

earned. 

Ms. WATERS. Oh, so you are operating at a deficit. 

149 

Mr. SIMON. When you look at earnings, we have invested more 

than what we have earned over a longer period of time. 

Ms. WATERS. But we can’t deal with that. You know why we 

can’t deal with that? Because I don’t know what period of time you 

are talking about. I don’t know how much investment. That is a 

nice general statement. 

But the fact of the matter is we know you are not broke. We 

know that the compensation of the executives is very high. We 

know that you get your bonuses. We know that you spend a lot on 

promotion. 

So we don’t like to hear that you are broke and that you have 

spent more money than you are earning. It just doesn’t sit well 

with us. 

Mr. SIMON. And I wasn’t trying to—— 

Ms. WATERS. It certainly doesn’t sit well with me. 

Mr. SIMON. I certainly wasn’t trying to imply that we are broke, 

Congresswoman. 

But if you looked at last year and looked at—I said we invested 

about $21 billion. Now, let me explain what that is. 

That is investing in projects to bring on oil and gas supplies 

around the world, to expand our refineries, to expand our chemical 

plants and meet our chemical customers’ requirements. It all goes 

into that. 

Ms. WATERS. But it says profits. After all of that was done in 

2007, you earned $40.6 billion, after all of that was done, $40.6 billion. 

Mr. SIMON. $40.6 billion was the profitability. That is correct. 

Ms. WATERS. That is right. So let’s deal with that. You earned 

$40.6 billion, but you continued to raise prices at the pump. 

Why is it necessary, when you have that kind of profit, that you 

increase the price at the pump to our constituents and to your customers? 

Mr. SIMON. Okay. Well, let’s come back and talk about that, 

which is what I was trying to do initially. 

When you look at—— 

Ms. WATERS. No, I know what you did. I don’t want you to tell 

me about the penny. 

Mr. SIMON. I am going to, Congresswoman, if you would give 

me—— 

Ms. WATERS. No, you are not. I want to—— 

Mr. SIMON. If you will give me an opportunity—— 

Ms. WATERS. I want to know—— 

Mr. CONYERS. Would you like another round of questioning? 

Ms. WATERS. Yes. 

Mr. CONYERS. We have already given you more time. 

Ms. WATERS. I appreciate that, Mr. Chairman, but let me just 

say this. 

I appreciate your generosity, and I am going to yield back my 

time, because this is an exercise in futility. 

And our constituents are angry, and they are knowing now that 

we are not going to get any new information out of these presenters. 

I thank them for coming. 

150 

Mr. CONYERS. He is doing pretty well. I don’t think it is futile 

at all. 

Ms. WATERS. Let me yield my time before I step outside of this 

box. 

Mr. CONYERS. You don’t have any time to yield. 

Ms. WATERS. Thank you, Mr. Chairman. Thank you, thank you, 

thank you very much. Thank you. 

Mr. CONYERS. But I would like to invite you to another round of 

questions. You are just getting warmed up—— 

Ms. WATERS. I appreciate that. 

Mr. CONYERS [continuing]. It sounds like to me. 

Ms. WATERS. I appreciate that. Thank you. 

Mr. CONYERS. All right. 

Ric Keller? 

Mr. KELLER. Thank you very much, Mr. Chairman. 

I want to thank all our witnesses for being here today. 

Mr. Simon, I will begin with you for a few questions for Exxon. 

Let me state that, preliminarily, I agree with much of your testimony before the Senate. 

Specifically, I agree that the principal component of the price of 

gasoline is the price of crude oil. I agree that crude oil is determined by the law of supply and demand and that nothing we can 

do in Congress can alter that fundamental law of supply and demand. 

I agree with you that there are things we can do to help influence it by drilling in ANWR and by providing more drilling for the 

deepwater oil reserves. 

I think those are good steps. 

One of the things you just testified about, however, is that you 

wanted to clear up some misconceptions and I want to give you 

some straight talk about the two issues that, from an appearance 

perspective, you may feel helpful you would like to address, and I 

will give you both issues and then give you a chance to fairly go 

through and give your side of both of them. 

Let’s first address the issue that you might want to address from 

an appearance perspective. 

Moms in Orlando, Florida are paying $3.75 a gallon today at the 

local Exxon Mobil gas station. Exxon paid its former CEO, Lee 

Raymond, $400 million in retirement compensation. 

This situation is unacceptable. People in central Florida are hurting and they want a hand, not a finger. 

Now, you all are nice guys, you are respectful. I would not dare 

suggest any of you, just like me, wouldn’t give them a finger. But 

I want to convey the anger and frustration that I hear from them 

on a regular basis at town hall meetings and give you a fair chance 

to respond to it. 

The second issue that I would like you to address from a perception perspective. You just testified today that Exxon’s profit margins are tight and that your long-term investments are huge. 

It appears to some people that it is your profits that are huge 

and your long-term investments in building new refineries in this 

country are tight. 

151 

Specifically, Exxon just recorded a profit of $40.6 billion in 2007, 

the single largest annual profit in U.S. history for any U.S. company. 

To put that in perspective, Wal-Mart is number one on the Fortune 500 list. Exxon’s profits are literally more than triple those of 

Wal-Mart’s in 2007. 

At the same time, Exxon has not made any long-term investments in new refineries in the United States in the past 32 years, 

beyond the expansion of existing ones. 

So I want to give you a chance to respond to those. I have some 

very detailed questions for you on the refineries. 

But first, in fairness to you, do you have any response to clear 

up any misconceptions that you feel are out there with respect to 

what some believe to be exorbitant pay that you are using this 

money for? 

Mr. SIMON. Well, it was our former Chairman. I think that number, we have tried to clarify that. That number itself, when you 

look at the $400 million, about 10 percent of that was associated 

with the 1 year and the rest of it was what was earned over many 

years, and a lot of that did not pay out until much later. 

I would, however, say we recognize that is a large amount of 

money. It is determined by independent directors. It is not management that makes those determinations. And we pay our executives 

based upon that and that is where you look at competition and 

what others with comparable responsibilities and authorities are 

paid. 

It is a lot of money, I know that. 

Now, let’s come back and talk about—— 

Mr. KELLER. Do you stand by that? Do you think that is a fair 

level of compensation, $400 million for one individual? 

Mr. SIMON. Well, again, let’s put it into perspective. That wasn’t 

$400 million in 1 year. About 10 percent of that was in that year. 

About 70-75 percent was not paid out until 5, 10 years into the 

future for that period and a lot of it was what was earned over a 

long career in terms of a pension payout, which was about 98 million. 

Mr. KELLER. But you understand, if you were at my gas station 

in Orlando and you saw a single mom there with her kids and she 

just paid 80 bucks to fill up the minivan, it would probably be a 

hard conversation for you to have to say, ‘‘Look, we paid our CEO 

400 million bucks. We just posted the largest profit in American 

history, and I need a hug here, because our margins are tight.’’ 

Mr. SIMON. I understand. I understand that fully. Again, that 

was a few years back. It, of course, has not an impact on this 

year—on last year’s profitability. 

But I recognize the point. 

The point I would talk about is when you look at the profitability 

on the gasoline that we sell at the pump, and let’s talk about that, 

again, when you look at the United States and the refining and 

marketing business last year, it was $0.04 on the dollar. 

Now, you compare that $0.04 on the dollar of revenue, as compares to about $0.078 cents on the Dow Industrial, so it was about 

half of that. 

152 

I recognize it is a big impact on consumers, but, again, when you 

look at what is driving that, it is not the profitability on that that 

is driving the higher price. 

It is the cost of the raw material that we have to buy in order 

to produce those products. We buy 90 percent of the raw materials 

that we use to produce those products on the open market. 

Mr. KELLER. Well, Mr. Simon, my time has expired. So in fairness to others who haven’t asked their questions, let me say this 

and wrap up, and I will defer to the Chairman. 

I raise those two issues, the executive pay and the failure to 

build a new refinery in 32 years, because you wanted to clear up 

some misconceptions, and I have got about 12 or 13 more questions 

about the refineries, to give you a fair chance to address the refinery issue, too, as well as to talk about solutions. 

So I just want you to know we want to be fair to you in raising 

these issues and when we come back to a second round of questions, we will be happy to ask you those questions and let you feel 

you got a fair shake and got your side out on those, as well. 

Mr. SIMON. I really would appreciate the opportunity to address 

refining. 

Mr. KELLER. Absolutely, and I promise you we will get to that 

in my first question when we get back. 

Thank you, Mr. Chairman, yield back. 

Mr. CONYERS. Betty Sutton? 

Ms. SUTTON. Thank you, Mr. Chairman. 

Were any of you or colleagues that you work with and communicate with participants in the energy task force meetings conducted by Vice President Cheney at the beginning of the Bush administration and if so, could you just share with the American people what role you played or they played? 

Mr. SIMON. In Exxon Mobil’s case, no, ma’am. 

Ms. SUTTON. No one was there. 

Mr. MALONE. In BP’s case, yes, there was a meeting with the 

Vice President. Whether you would call it the task force meeting, 

our chief executive met with Vice President Cheney. 

It was a general discussion, I am told, I was not there, around 

world oil production. 

Ms. SUTTON. And when was that? 

Mr. MALONE. Early 2001. 

Ms. SUTTON. Thank you. 

Mr. LOWE. No one from Phillips or ConocoPhillips was there. 

Mr. ROBERTSON. No one from Chevron participated in that. But 

at the time when the new Administration came aboard, we wrote 

a letter to the President of the United States and sent a copy to 

some Members of the House and every Senator on both sides of the 

aisle with our recommendations for energy policy, and, frankly, a 

lot of it is playing out exactly the way we had described. 

Mr. HOFMEISTER. I was working overseas during the early years 

of the Bush administration, so was not a party to any. 

We looked into the history of Shell’s involvement with the White 

House and we do know that, on a periodic interval, my predecessors would brief various members of the White House on energy 

matters, but were not part of a task force. 

153 

Ms. SUTTON. I have a question. Mr. Simon, you had the opportunity to talk to Representative Waters about the profit and the 

breakdown. 

Today, I think it was, there was a story in the Washington Post, 

and I just want to see if this is accurate. It says that Exxon Mobil made a $40 billion—I understand it is $40.6 billion—profit last year, repurchased $31.8 billion of stock. Is 

that correct? 

Mr. SIMON. I am sorry. Thirty? 

Ms. SUTTON. $31.8 billion of stock. 

Mr. SIMON. Right. 

Ms. SUTTON. Gave out $7.6 billion in dividends. Is that correct? 

Mr. SIMON. That is correct. 

Ms. SUTTON. Paid its top five executives $76 million. Is that correct? 

Mr. SIMON. I have not checked that number. I don’t know if that 

is correct or not. 

Ms. SUTTON. What do you think? Is it in the neighborhood? Would you know if it is in the neighborhood, $76 million? 

Mr. SIMON. I would have to check, Congresswoman. I just don’t 

have the answer to that. 

Ms. SUTTON. Were you asked this question by the Senate? 

Mr. SIMON. The question I was asked by the Senate was what 

was my compensation and I answered that earlier in this hearing, 

as well. 

Ms. SUTTON. Right. That was $12.5 million. 

Mr. SIMON. $12.5 million granted in compensation, including 

stock and everything else, last year. And then there was an additional increment if you allocated back 1 year accrual of my pension 

and that would take it to $15 million, but that doesn’t pay out until 

after I retire. 

So I did not mention that. I mentioned the $12.5 million in terms 

of my compensation granted last year. 

Ms. SUTTON. Do you have any idea how many people with Exxon 

Mobil make more than you? 

Mr. SIMON. I would have to check on that. 

Ms. SUTTON. No idea. How many people are in positions above 

yours? 

Mr. SIMON. Well, I am the number two in the company in terms 

of I am a director, and we have got one other director, and, of 

course, that is our chairman. 

Ms. SUTTON. And it says that the top five executives, $76 million. 

If you could get back to me—— 

Mr. SIMON. I would. 

Ms. SUTTON [continuing]. With the answer to that question, I 

would appreciate it. 

And that you invested roughly $10 million in renewable energy. 

Mr. SIMON. No, that number is not correct. And if you would give 

me the opportunity, I would like to talk about our renewables approach. 

Ms. SUTTON. What I would like to know, and not just from you, 

but from all, because I heard a lot of discussion about the investments that you are making in new energy projects, what is the percentage that you are investing in renewable energy? 

154 

Mr. SIMON. Could I? 

Ms. SUTTON. You can start. 

Mr. SIMON. When you look at what we are doing in order to do 

what I think to be our mutual objective of reducing the amount of 

fossil fuels that we consume and mitigating greenhouse gas emissions, when you look at what we are doing to accomplish that objective, it is somewhere around $2 billion over the last 4 years. 

Now, that is a three-pronged strategy. One is to improve efficiency in our own operations, refining and chemicals operations, 

where we are improving efficiency at two to three times the rate 

of the average of industry, and there we are putting about $1.5 to 

$2 billion over the last 4 years into that. 

The other prong is how do we help our customers to utilize our 

products more efficiently. And when you look at what we have developed right now, if applied in the U.S. vehicle fleet, would save 

about 5 billion gallons of gasoline and that would be equivalent to 

removing 8 million cars off the road. 

When you look at our own operations, it was equivalent to removing about 2 million cars off the road when you look at what we 

have done since 1999. 

Ms. SUTTON. But, Mr. Simon, all I am asking for is the percentage that you are investing in renewable energy in the projects that 

you are talking about putting investment in. 

And if you could just get back to me with that number, too, that 

would be great. 

Mr. SIMON. All right, I will. 

Ms. SUTTON. Mr. Malone? 

Mr. MALONE. Last year, it was about 10 percent of our capital, $750 million. This year, it will exceed that. It will be something in 

excess of 10 percent. 

Mr. LOWE. ConocoPhillips’ investments are primarily in the re- search phase. Spent about $150 million last year. But if those research things, such as carbon capture and storage, if those come to 

fruition, those would be multibillion dollar projects. But they are 

in the research phase at this point. 

Mr. ROBERTSON. In the renewables area, Chevron is the largest 

geothermal energy company in the world. We just announced a 

joint venture with Weyerhaeuser to develop cellulosic non-food ethanol. So that is a serious project. 

We have a company that sells energy efficiency and shows customers how to become more energy efficient by putting in either 

good practices or putting in solar panels or fuel cells or whatever 

fits that particular customer, and their experience has been reducing energy costs by 30 percent. 

On those three areas, ethanol, second generation ethanol, geo- thermal energy and energy efficiency, we will spend $2.5 billion 

over the next 3 years. We spent about $2 billion over the last 5 

years. 

Ms. SUTTON. And you guys can’t tell me what percentage it is 

that you are putting into these projects based upon all the money 

that you are saying that you are investing? 

Mr. ROBERTSON. I can tell you that we are going to spend this year $23 billion. I can’t tell you what we are going to spend in capital beyond that. But I can tell you that we are going to spend $2.5 

155 

billion on alternative energy and when and if some of these things 

prove out, like cellulosic ethanol, we are quite prepared to spend 

a lot more on it. 

So we are at a phase in that work, that it is not an issue of how 

much money you spend on it. It is an issue of what you spend it 

on to try and develop some technology that will work. 

So we are not constrained by money in terms of these projects. 

Ms. SUTTON. So encouraging you to spend it there—— 

Mr. ROBERTSON. We are going to spend it. We are going to spend 

it and we are serious about the non-food ethanol. We are serious 

about the geothermal. We are serious about energy efficiency. That 

is the biggest opportunity we have. 

On average, in over 800 projects, Chevron’s energy efficiency customers, universities in California, military bases, post offices, they 

average, over 800 projects, 30 percent energy savings. 

That is a lot bigger source of fuel for the economy by saving energy than most of these other things that I have talked about. 

Ms. SUTTON. Sir? 

Mr. HOFMEISTER. Shell has spent approximately $1 billion over 

the last 5 years on renewable energies. We believe that that is a 

prudent amount given the maturity of the technology. 

For that $1 billion, there is a negative return on investment, 

which actually prompts us to think very seriously about how quickly we could spend more. 

We do believe we can commercialize in time and this year we are 

continuing to spend. On a percentage basis, it is very small, it is 

less than 1 percent. 

And at the same time, we are learning about what we need to 

do if we were to spend more in the future. 

Ms. SUTTON. I really appreciate that you used the percentage, 

less than 1 percent. Thank you. 

And, Mr. Chairman, I will yield back and wait for the next 

round. 

Mr. CONYERS. Thank you so much. 

I am pleased now to recognize Chris Cannon, the gentleman from 

Utah, who apparently has cooled down quite a bit now. 

Mr. CANNON. I try to always have a cool exterior, but the inner 

furnace is always pumping, and especially when we are talking 

about these kinds of points. 

To follow up on the gentlelady’s questions about where we are 

spending money, can we start, Mr. Hofmeister, with you and go 

down the panel and could you tell me how much money, if you 

know, that you have spent on shale oil development as a subset of 

the unconventional? 

Mr. HOFMEISTER. Congressman, I would have to confirm that 

number. I don’t have it at my fingertips. 

I think it is public record that between oil sands in Canada, Alberta, Canada, and oil shale, we are spending in the billions in 

order to develop projects. 

But the Colorado effort is currently a research effort, so it is in 

the hundreds of millions. But I would have to check to confirm the 

number. 

Mr. CANNON. Thank you. Hundreds of millions is actually quite 

a good number for this purpose. 

156 

I know that the chairman has also been investing in technology 

and recognizing the difference between production, which could be 

very large numbers, the question is just how much have you put 

into shale oil technology development, if you have a sense. 

Mr. ROBERTSON. I can’t tell you the answer to that. I can tell you 

that it is a significant research project that is going on using chemistry to try to figure out how to breach this stuff cleanly, and we 

have a joint project with the DOE and we are a large shale oil 

owner and have been for many years. 

So we have put a lot money into the technology development. I 

will get back to you happily with the number. 

Mr. CANNON. My sense is it has been hundreds of millions of dollars, just having looked at some of the material that you have out 

there. 

Mr. ROBERTSON. It is probably in that range, but it is certainly 

not a lot more than that. 

Mr. CANNON. We don’t really want to nail anything down here, 

just to get a sense that this is an important project. 

Mr. ROBERTSON. It is a very important project to Chevron and it 

has been for many years. 

Mr. CANNON. I love the idea that you are not using brute force, 

but rather some—— 

Mr. ROBERTSON. I think in many places, that is something that 

is happening. We are partners with Shell in a project up in the oil 

sands in Canada, but the next generation of projects up there, too, 

will be in situ projects. 

We use steam flooding around the world to produce oil through 

wells. In the future, we will be finding ways to put heat into the 

ground to produce oil sands through wells and, similarly, in the 

shale, it will be different technology, different chemistry, but essentially we will be putting something into the ground to be able to 

push that through wells. 

So the technology is moving forward and we are deeply involved 

in this important project. 

Mr. CANNON. Mr. Lowe, before you go ahead, let me just point 

out that we keep hearing this statement and it is quoted in the 

Desert News, I think, today. There is a statement Nick Rahall, the 

Chairman of the Resources Committee, ‘‘We simply cannot drill our 

way to lower prices at the pump.’’ 

But, of course, that is true if you think of drilling as a traditional 

function, but if you think of it in the unconventional sense, I think 

that that actually changes that analysis. 

So I appreciate your reference to the kind of drilling that you 

would be doing, Mr. Robertson. 

Mr. Lowe, is ConocoPhillips doing any oil shale development? 

Mr. LOWE. The oil sands, in particular, but also the oil shale are 

a very important part of our growth story in the future. 

We acquired most of our shale position when we acquired Tosco, 

which was mainly a refiner, but Tosco actually stood for ‘‘The Oil 

Shale Company.’’ 

Mr. CANNON. Do you have any sense of what the commitment 

has been historically—— 

157 

Mr. LOWE. Sorry. I know that we invested a lot of money back 

in the 1970’s. It is mostly in the research side up to this point, and 

it continues today. 

Mr. CANNON. And let me just point out that that investment is 

vastly important, because we take that base of understanding and 

add the new technology that has developed over the last 30 years 

and it changes the nature of the calculation of what is available at 

what cost. 

Mr. Malone, do you have a sense of what BP has done? 

Mr. MALONE. I am not aware of any development opportunities 

that we have in the shale oil. But in the oil sands in Canada, we 

just announced a joint venture with Husky Oil, $5.5 billion. 

We will bring oil to our Toledo refinery, Toledo, Ohio refinery 

and we will invest in the refinery, as well. It should be 600,000 gallons a day additional gas. 

Mr. CANNON. Well, we appreciate that. That is a big chunk of 

new resource coming in, which makes a big difference. 

Mr. Simon, could you tell us a little bit about what Exxon Mobil 

is doing? 

Mr. SIMON. Yes. What we have done at this point is, again, mainly in the research area, although we have a technology that I know 

my colleagues wouldn’t agree with that we think is superior in 

terms of developing shale oil resources. 

That is an important resource. It should be made available and 

let us all of us apply our technologies and see how it works out. 

Mr. CANNON. Let me just ask one final question. My governor, 

John Huntsman, has recently submitted a letter to the Senate asking that it lift the moratorium on the development of Utah oil 

shale, which, of course, is on BLM land, and I am thinking about 

introducing a bill that would allow the President to cut through the 

permitting process by drawing together groups of people that understand what needs to be done or what the environmental problems could be. 

Is that something that your companies or those of you who are 

interested in oil shale would invite and if so, would you actually 

pursue development of oil shale properties? 

Let me start with Mr. Hofmeister again. 

Mr. HOFMEISTER. I think, Congressman, it would be a tremendous improvement which would enable us to get to a commercial 

decision on such projects in a much faster timeframe. 

Mr. ROBERTSON. I am not familiar with the details, but the way 

you described it, it sounds like something we ought to support. 

Mr. CANNON. May I ask, would your company pursue development if the permitting period was shortened? 

Mr. ROBERTSON. Our company is pursuing, obviously, the technology, the development of the technology and as soon as we can 

make that commercial, we would certainly pursue it, yes. 

Mr. LOWE. Certainly, we are in favor of access and we are very 

much in favor of having a clear permitting process. 

Mr. MALONE. As I said, we don’t have an active, but we never 

say never. And at one time, our predecessor company was in White 

River oil shale there in Utah. 

At the current oil price, we couldn’t make it economical. But we 

are always watching. 

158 

Mr. SIMON. Certainly, anything I believe that would open up that 

and allow access to it and allow commercial applications of whatever technologies we have would be very welcome, Congressman. 

Mr. CANNON. Thank you. 

Mr. Chairman, I recognize my time has expired, but if I could 

make one more comment. 

That is, Mr. Malone referred to the White River mine. That cost 

$330 million, as I understand, to develop in 1977, over $1 billion 

today to duplicate that. 

When I came to Congress, the first thing I did was to try and 

stop BLM from shutting that mine down. It is now up and available, but it is taken over 2 years to get the permits that we 

thought were going to happen in 6 weeks. 

The permitting process has become a terrific problem and an impediment. The way we solve the problem of $4 a gallon oil is by 

making more resource available, which can deliver oil at a lower 

cost. 

That is the only way we are going to do it and, in fact, we have 

those resources. And I wish we could also talk about coal to liquid, 

but that probably goes beyond the course of this. 

So I thank you, Mr. Chairman, for your indulgence and yield 

back. 

Mr. CONYERS. Thank you. 

The distinguished gentlelady from Florida, Debbie Wasserman 

Schultz? 

Ms. WASSERMAN SCHULTZ. Thank you, Mr. Chairman. 

Mr. Simon, I want to direct my questioning mostly to you. 

As I mentioned in my opening remarks, I paid $68 at the beginning of this week to fill up my minivan that I drive my family 

around it, and $68 isn’t real money to someone who makes $12.5 

million, but it is certainly real money to working families in America who are struggling to make their mortgage payments and pay 

for their groceries and make sure that they can afford to pay the 

copayments on their health insurance, if they even have health insurance. 

And so when faced with the insensitivity that it appears the oil 

industry has for the plight of Americans who are struggling to fill 

the gas tanks of their minivans, it is really hard for me to understand and it is difficult when I stand in front of my constituents 

at a town hall meeting and they throw at me that the oil industry 

is making record profits and that you are charging record prices. 

It is difficult for me to explain to them how you are not manipulating the price of gas and manipulating the price that is paid at 

the pump. 

So, in fact, I probably want all of you to answer this question. 

But I can’t say that there is evidence that you are manipulating 

the price, but I believe that you probably are. 

So prove to me that you are not. 

Mr. SIMON. Well, Congresswoman, I can assure you that we are 

not doing anything to manipulate prices. Now, how I can convince 

you of that, I am not sure, other than to say—— 

Ms. WASSERMAN SCHULTZ. Well, you have got to go beyond your 

word and show me. 

159 

Mr. SIMON. I give you my word and I would also comment that 

the FTC has investigated our industry more than any other that 

I know of, on the average of about three times per year over the 

last 35 years, and have never found in one of those any evidence 

of anticompetitive behavior. 

I fully understand, and I know it is hard for you think that I 

empathize with the consumer, but we do and I do and we are doing 

all we can to try to put downward pressure on the prices. 

We can do that in two ways. 

Ms. WASSERMAN SCHULTZ. What are you doing to put the downward pressure? Because you are not expanding capacity. 

Mr. SIMON. Yes, we are, Congresswoman. I did want to make 

that point. When you look at what industry has done, let me talk 

about industry first and then let me talk about what we have done 

as a corporation. 

The industry, over the last 10 years, has brought on the equivalent of one new refinery every year by incrementally expanding existing capacity. 

Ms. WASSERMAN SCHULTZ. How many has your company brought 

on? 

Mr. SIMON. We have expanded capacity at a rate 40 percent 

above the industry average. 

Ms. WASSERMAN SCHULTZ. How many refineries have you opened 

in the last 10 years? 

Mr. SIMON. We have not opened any new refineries, but we have 

brought on the equivalency of new—— 

Ms. WASSERMAN SCHULTZ. Why not? 

Mr. SIMON. We don’t need new refineries, Congresswoman. What 

we can do is we can take what we have and incrementally expand 

that and do that at a lower cost and do it much more rapidly than 

we could by bringing on a new refinery. 

Ms. WASSERMAN SCHULTZ. Well, the third grade economics that 

was referred to earlier, I have two third graders and there is not 

a whole lot of economics that they are learning, but the law of supply and demand is pretty basic. 

And it is hard for me to understand how the prices keep going 

up and up and up if you are expanding capacity in a great enough 

proportion to bring down the price. I assume you are not. 

Mr. SIMON. When you look at what has happened between last 

year and this year, price of the product has gone up. When you look 

at what is behind that, our profitability in the refining and marketing business has gone down. 

Why is that? Because crude price has gone up about 80 percent. 

Ms. WASSERMAN SCHULTZ. Your profitability has gone down, but 

you made $40.6 billion last year. 

Mr. SIMON. The profitability in the refining and marketing business here in the United States, which is making those products you 

are talking about, has gone down. It is about 40 percent this year 

of what it was last year. 

Why is that? It is because the price of the raw materials, crude 

oil, has gone up about 80 percent. The products you and I are talking about, when you look at diesel fuel, it is gone up about 52 percent and motor gasoline up only 60 percent. 

160 

Ms. WASSERMAN SCHULTZ. Mr. Simon, how many gas stations 

have you opened in the last 5 years in America? 

Mr. SIMON. I wouldn’t have that number. But when you look—— 

Ms. WASSERMAN SCHULTZ. I am talking—— 

Mr. SIMON. But when you look at the number of gas stations in 

this country, about 165,000, the number that we own and operate 

and, therefore, set the price in is only about a half a percent of 

that. 

Most of those outlets are owned by independent businessmen and 

businesswomen. 

Ms. WASSERMAN SCHULTZ. So while we open up more—but they 

are affiliated with your company. I mean, they might be owned and 

operated by the independent businessmen and women, but they 

have your company’s name on them. 

Mr. SIMON. They are branded. They are branded Exxon Mobil 

and, frankly, our market share has actually dropped since the 

merger. It is dropped from 14 percent down to 10 percent. 

Ms. WASSERMAN SCHULTZ. Before I yield back, so the bottom line 

here, which is indisputable, is that you have opened no refineries. 

You say you have expanded capacity in the existing refineries. 

Yet, the price has continued to go up. Your profits continue to go 

up and you have absolutely—and if you could get back to me with 

the number of gas stations that you have opened in the last 5 years 

in America, I would appreciate it. 

You have expanded the asset point exponentially. So we are 

making the gas—the place you can get gas more available, but we 

are not making more gas available, and the price is going up and 

your profits, as well as your salaries of your top tier executives are 

going up. 

That is inherently unfair and it causes the Members of Congress 

in front of you to stand in front of our constituents and have to defend how it is we are going to address the rising cost of energy, and 

you have no solutions. 

I yield the balance of my time. 

Mr. SIMON. But I did mention that our refinery capacity has expanded, Congresswoman, whether we brought on new refineries or 

not. 

Ms. WASSERMAN SCHULTZ. But it isn’t doing us any good, because 

the prices are not coming down. 

Mr. SIMON. Oh, I think it has done some good. As mentioned before, the price—— 

Ms. WASSERMAN SCHULTZ. Really? What? 

Mr. SIMON [continuing]. Of products relative to crude oil has 

come down. But the raw material behind it—— 

Ms. WASSERMAN SCHULTZ. The only thing that matters is that it 

costs almost $70 to fill up a minivan. 

Mr. SIMON. I understand that. 

Ms. WASSERMAN SCHULTZ. That is the price that matters. 

Mr. SIMON. And that is because of the raw materials that we 

have to buy in order to produce those products. 

Ms. WASSERMAN SCHULTZ. Well, you need to be more a part of 

the solution than you have been, and you can say that you have 

been, but it isn’t working. So it is time to go back to the drawing 

board. 

161 

Yield back the balance of my time. 

Mr. CONYERS. The distinguished gentleman from California, Darrell Issa. 

Mr. ISSA. Thank you, Mr. Chairman. 

And thank you, Ms. Wasserman Schultz. 

I couldn’t have asked for it to be better set up for the debate that 

was really going on here. I am listening and saying, ‘‘Okay, we 

have established through years of hearings that it is incredibly expensive and just about impossible to open a new refinery.’’ 

We established during the Jimmy Carter era there was this incentive to open a bunch of small, inefficient refineries and, over the 

years, they have gone away in favor of larger, more efficient refineries. 

And we have established that there is a risk of these large refineries because they are better targets for terrorists. They have other 

fundamental problems. But that is the world that we live in. 

Let me understand. That was the world we lived in with $29 oil. 

That was the world we lived in $2 ago in gas and oil prices. Isn’t 

that true? 

Okay. So all of those truisms of 30-40 years of bad or no energy 

policy haven’t changed. I just want to make sure that I understand 

that 7 minutes-plus was used to berate you, Mr. Simon, on what 

I think was a very unfair tact, because you don’t control retail 

prices. 

We have had hearings to make it very clear. As a matter of fact, 

we have had hearings about the question of whether the interchange fees from credit card companies are more profitable than 

your gas revenues at the retail. 

So having gone through that, let me move on to a couple of other 

areas and I will give you a break, Mr. Simon. Quite honestly, I 

think you need the glass of water and a little moment. 

Mr. Malone, British Petroleum, I was in Baku when the pipeline 

was opened. 

Would you tell us a little bit about your global activities? In 

other words, how much new capacity as a world company have you 

brought on outside the U.S. which goes into the same pool of available oil and then how much have you been able to bring on net inside the U.S. during that same period of time? 

Mr. MALONE. Thank you, Congressman. We have been bringing 

on projects all over the world. You mentioned the one in Baku. 

Mr. ISSA. I am going to Kazakhstan tomorrow night. Trust me, 

I am very interested in the place that brought on more than one 

ANWR in the time we have been arguing about voting on it. 

Mr. MALONE. We have also been extremely active off the west 

coast of Africa. Angola, in particular, has been a real opportunity 

for us. Of course, development continues in the North Sea, just 

about geographically all around the world. 

We have been investing at the rate of about $19 billion a year. 

Mr. ISSA. Right. And shorten it down. You brought on, if I understand correctly, more outside the U.S., where you had opportunity, 

than you have been able to in the U.S. on a net basis. 

Mr. MALONE. Yes. Our production has been declining in the U.S. 

We are now just roughly a half a million, 500,000. 

162 

Mr. ISSA. Mr. Lowe, same sort of a question. I know that you 

spent some time and energy in a number of markets that became 

off limits or unavailable to you. 

If I remember right, you were involved in Syria, hoping to develop those oil wells that have never been properly developed. But 

how do you view U.S. versus the rest of the world and how much 

would you say you have brought on net in each place? 

Mr. LOWE. Well, I think one of the items that does seem to get 

lost in all this is we deal with a depleting resource and so it is very 

challenging, particularly here in the U.S., where the depletion 

rates oftentimes are double digit. 

So your production is going down, all other things being equal, 

by 10 percent or more a year. And so it is very difficult to keep production anywhere near flat here in the United States. 

We are the largest producer in Alaska. Production continues to 

go down there. 

Mr. Malone mentioned earlier the Denali, Alaska pipeline. That would be a $30 to $40, possibly even higher than that, billion investment to bring that natural gas down to the lower 48. 

So the scale of our businesses is very large, very challenging to 

keep our production flat, let alone grow it. 

Mr. ISSA. And, Mr. Robertson, you are California-based. California, if I understand it, is about a million barrels a day of production, about 2 million barrels a day of consumption. 

How much opportunity have you had in California to have access 

to any new fields at all in order to try to take that reducing 

amount that is being produced in California and get it reversed? 

Mr. ROBERTSON. Congressman, not much in California. Our biggest investments in California are in the same old place, in the San 

Joaquin Valley, where we have put an enormous amount of money. 

In fact, just in the last few weeks, we produced the two billionth 

barrel from an old field that was started up in 1899 called Kern 

River. 

We have put billions of dollars into that field over the years. But 

the new access has been almost nothing. 

Globally, we are going to be increasing production. We have, over 

this 5-year period, we are in the middle of increasing about 3 percent a year in terms of our production. 

Decline rates are about 4 percent. That means you have got to 

have about 7 percent. We produce about 2.6 million barrels a day. 

The opportunities we have in the U.S. are primarily the deepwater Gulf of Mexico. We have had some major projects, one coming on this year, one coming on next year. 

Just one of those is a $4.7 billion project in 5,000 feet of water. 

So the places where we can invest in the United States, we are. 

We would love to invest more in the U.S.. Two thirds of our capital 

is outside the United States. We would love it to be a lot more in 

the United States, but the opportunities just haven’t been there. 

Mr. ISSA. That is a decision that we can make from the dais. 

Mr. ROBERTSON. That is a decision that can be incredibly 

changed by policy in the United States. 

Mr. ISSA. Mr. Hofmeister, Shell is certainly known as a global 

leader in many ways, known less as a U.S. company than as a 

global leader. 

163 

How do you find opportunities in the U.S. versus elsewhere when 

it comes to us being part of the solution of new production? 

Mr. HOFMEISTER. Well, fortunately, Shell was a leader in the 

deepwater Gulf of Mexico and continues to produce in the Gulf of 

Mexico and invest in those areas where we have leases. 

So we see the Gulf of Mexico as a continued growth opportunity. 

More recently, we have taken a very, very big bet on offshore Alaska, with multiple leases in the Beaufort Sea and the Chukchi Sea. 

Regrettably, we are seeing tremendous legal action trying to stop 

every move we make in trying to get to a drilling season, which, 

of course, is limited in the amount of time we have to drill, and 

this is not an area that is off limits. 

So Chukchi Sea and Beaufort Sea are not off limits, but there are 

others who are trying to prevent it from occurring by testing in the 

courts whether the EIS that has been done by the Department of 

Interior is adequate for the purposes of our prospective drilling. 

But our growth primarily is coming from outside the U.S. at the 

moment. 

Mr. ISSA. Well, I would like to thank you for continuing to try 

to produce in the U.S. I think that is important. Hopefully, we will 

recognize that we are part of the problem unless we allow you the 

opportunity to be part of the solution inside the U.S. 

And I yield back, Mr. Chairman. 

Mr. CONYERS. Thank you very much, Darrell. 

Sheila Jackson Lee? 

Steve Cohen of Tennessee? 

Mr. COHEN. Thank you, Mr. Chairman. 

Gentlemen, I missed some of this and I might have missed it. I 

would like to see—I read the Congressional Quarterly today. Mr. 

Coral Davenport said that, I guess it is Mr. Robertson there, that 

you might have earned as much as $50.6 million last year. 

Is that anywhere near accurate? Are you Tiger Woods? 

Mr. ROBERTSON. That is nowhere near accurate. What I earned 

last year I got in my pay and bonus. I got $2.5 million. 

Mr. COHEN. Where would they have gotten—— 

Mr. ROBERTSON. In addition to that, I got some stock options and 

some performance shares, the value of which depends entirely on 

the performance of the company 100 percent. They were valued last year in the proxy statement at $5 million. So if you add those two together, I got $7.5 million last year. 

Mr. COHEN. Where do you think he got 50 or she got $50.6 million? 

Mr. ROBERTSON. I have no idea. 

Mr. COHEN. It is a lot of money without playing golf well. But 

thank you, sir. 

Mr. Simon, you did pretty good, too, last year, if I understand it. 

How much did you say you made last year, was it $12 million? 

Mr. SIMON. $12.5 million in terms of compensation granted last 

year, although some of that pays out over time. And then if you 

were to take a 1-year accrual of the pension fund, it would actually 

take it up to $15 million. 

Mr. COHEN. And how much did you make the previous year? 

Mr. SIMON. The previous year, I don’t remember. 

Mr. COHEN. Would it have been that much? 

164 

Mr. SIMON. It could have been that much, and it could have been 

less. 

Mr. COHEN. It would have been less. How much less would it 

have been? 

Mr. SIMON. I don’t know. I would have to get back to you on that. 

Mr. COHEN. Could it have been $6 million? 

Mr. SIMON. I don’t believe it was that low, but I just don’t recall. 

Mr. COHEN. So it may be double. 

Mr. SIMON. It wasn’t that low, no. 

Mr. COHEN. Could it have been double? Six is not double. 

Mr. SIMON. No, it would not be double. 

Mr. COHEN. Not double. 

Mr. SIMON. No. 

Mr. COHEN. Would it be 40 percent more? 

Mr. SIMON. No, I don’t believe so. But, again, I will get back to 

you on that. 

Mr. COHEN. But it was more. 

Mr. SIMON. It was more. 

Mr. COHEN. How much more did you work this year than the 

previous year? 

Mr. SIMON. I worked probably about the same this year as I have 

other years. 

Mr. COHEN. So why did you make more money? 

Mr. SIMON. The money that I get is, again, not determined by 

management inside our corporation. It is determined by a committee of independent directors. 

They look at my responsibilities and my accountability—— 

Mr. COHEN. I understand all that. 

Mr. SIMON [continuing]. And then compare that with others on 

the outside and then—— 

Mr. COHEN. I got that. 

Mr. SIMON [continuing]. We pay competitively. 

Mr. COHEN. I got that. But this is what confuses me. You are 

saying that the price of oil is determined by supply and demand 

and you said that you are 80 percent less profitable. Is that correct? 

Mr. SIMON. Not on a total worldwide basis, no, I didn’t say that. 

Mr. COHEN. Is that just on American? 

Mr. SIMON. That is talking about within the U.S. on refining and 

supply, which is part of the business that makes the products that 

we are talking about. 

Mr. COHEN. So where are you making all this record profit? 

Mr. SIMON. Most of the profitability that we make is outside of 

this country. This year, in the first quarter of this year, about 81 

percent of our profitability was outside the United States. 

Last year, of that $40.6 billion, 75 percent of it was outside the 

United States. 

Mr. COHEN. And then that is just on the sale of gas? 

Mr. SIMON. No. That is in terms of producing oil and gas, also, 

running our refineries, producing product, selling those and, also, 

our chemical operations. 

Mr. COHEN. If the profit percentages—the profit percentage must 

have gone up, obviously. So profit at Exxon Mobil is not based on 

supply and demand. 

165 

Mr. SIMON. I think the profit of Exxon Mobil is based on supply 

and demand, because the market is what determines the price that 

we get for the commodities that we sell. 

Mr. COHEN. Well, it does, but it doesn’t—the profit margin, isn’t 

that something different? I know that you sell different to the public, but your profit is figured differently, isn’t it? 

Mr. SIMON. No. The profit, the way you determine profit is, first 

of all, look at the price that you get for the products that you sell. 

Mr. COHEN. Right. 

Mr. SIMON. That is determined by supply and demand and then 

you look at the cost of producing those products. You subtract the 

cost from the revenues and that gives you the profit. 

Mr. COHEN. But couldn’t you sell your gas at a lesser price and 

still be higher than your cost? And by setting your price where it 

is, producing record profits, you are setting the price at the pump 

and not supply and demand setting it. 

Mr. SIMON. No, I don’t agree with that, Congressman, because, 

again, the price that is established for the products that we sell is 

established by the marketplace. 

Let’s take this year and let’s look at the profitability on a gallon 

of gasoline. This year, first quarter, it was $0.014 for every dollar 

that we collected in revenue. 

Now, that is down from last year and it is down because the cost 

of raw materials has gone up that we had to buy to produce those 

products and the price of the products that we sell have not gone 

up as much as crude oil. So the margin has actually been squeezed 

year to year. 

Mr. COHEN. But your profit is up. 

Mr. SIMON. The overall global profit this year is not up. It is 

about, I would say, roughly where it was last year. Last year, 

$40.6, first quarter of this year, $10.9. 

Mr. COHEN. But if you charge less for gasoline, you wouldn’t be 

making a $40.6 billion profit. You could maybe make a $20 billion 

profit, if you charged less. 

Mr. SIMON. Gasoline is only a small component. When you look 

at what we make on refining and marketing, this year, it is about 

4 percent of what our first quarter profitability was. Last year, 

about 10 percent when you look at what the downstream piece was 

here in the U.S. 

Mr. COHEN. So what are you making the money on, lottery tickets? 

Mr. SIMON. No. It is producing and selling oil and gas. When you 

look here in the United States, we produced about 300,000 barrels 

a day of crude oil. We actually run 2 million barrels a day. 

And of that we produce, we only take 1 million of that and run 

it in our own refinery. So what we are doing is producing oil and 

gas and we are selling most of that on the open market. 

For example, we run about 5.5 million barrels per day in our refineries around the world. We produce 2.4 million barrels a day of 

oil and only half of that goes into our own refineries. 

So most of the refineries that we operate around the world, we 

are buying raw materials on the open market. 

Now, the biggest piece of our profits is producing oil and gas and 

selling that oil and gas on the market. 

166 

Mr. CONYERS. Does the gentleman need additional time? 

Mr. COHEN. I would like just another minute or 2, if you don’t 

mind. 

The gentleman from Shell, is it Mr. Hofmeister? 

Mr. HOFMEISTER. Yes, sir. 

Mr. COHEN. How much money did you say you all put into renewable energy sources in solar and wind last year? 

Mr. HOFMEISTER. I said $1 billion over 5 years. 

Mr. COHEN. One billions dollars over 5 years. 

Mr. HOFMEISTER. It varies from year to year. 

Mr. COHEN. How many of the other gentlemen on the panel are 

putting anywhere near that much into those areas? 

Mr. Robertson? 

Mr. ROBERTSON. I think I just described it. I think I said $2.5 

billion over 3 years. 

Mr. COHEN. Over 3 years. 

Mr. ROBERTSON. In geothermal energy, non-food cellulosic ethanol and energy efficiency services for our customers. 

Mr. COHEN. Mr. Simon, the report in Mr. Dana Milbank’s story 

this morning said that your company put $10 million into renewable energy last year. Is that accurate? 

Mr. SIMON. No, that is not correct. That was one piece of one 

project. But what we are doing is trying to accomplish what I think 

you are driving at and that is how do we reduce the amount of fossil fuels that we consume, lessening our dependence, and how do 

we reduce greenhouse gas emissions. 

And what we are doing primarily is focusing on 60 percent of the 

equation and that is oil and gas. Oil and gas is going to continue 

to be the dominant source. 

How do we use that more efficiently in our own operations 

and—— 

Mr. COHEN. How much did your company invest in renewables 

last year? 

Mr. SIMON. In what you would call renewables, it would probably 

be about $100 million. 

Mr. COHEN. And that is compared to $2.5 billion over 3 years. 

Mr. SIMON. Because, again, we have looked at all current technologies of renewable fuels. These are current technologies. We 

have not identified any that have any appreciable impact in terms 

of adding supplies or reducing greenhouse gas emissions. 

The $100 million I am talking about is looking at that next generation and we are funding all of the opportunities and leads that 

we have there and we think we have some very promising leads. 

Mr. COHEN. Mr. Lowe and Mr. Malone, are your companies more 

in line with the two gentlemen to your right or with Exxon Mobil? 

Mr. MALONE. Well, last year, we invested, in 2007, $750 million, 

10 percent of our capital. This year, we will invest $1 billion, something in excess of 10 percent. 

Mr. COHEN. And, Mr. Lowe? 

Mr. LOWE. Ours is primarily on the research side, about $150 

million last year. 

Mr. COHEN. Thank you. 

167 

Do any of you have any solace or any hope you can offer the 

American public for what they are going to be paying for your 

record profits this year? 

Mr. SIMON. I would say there are two things that we can do. One 

is work on supplies, and we have already talked about that. 

Mr. COHEN. What do you mean work on supplies? 

Mr. SIMON. Get access to supplies. And the other aspect is how 

do we produce more product and we are looking at expanding our 

capacity. We have already expanded it considerably already in 

terms of refining. And when you look at the industry, it is projected 

that about the equivalent of five new refineries will be coming on 

stream between now and the year 2012. 

And to put that five into perspective, that is about three refineries more than is required to meet projected demand growth. 

The point is the market is working. I know it is painful, but the 

market is working and it will work to the ultimate benefit of the 

consumer if we don’t put additional tax burdens on the industry, 

let the market work, and don’t put in place additional mandates for 

subsidies. 

Mr. COHEN. Anybody have any better hope for the consumer than 

just the market is working and $4 is good? 

Mr. HOFMEISTER. Congressman, in my opening statement, I said 

if this nation, led by the Congress, the Administration, set a goal 

of producing 2 to 3 million more barrels of oil a day in the near 

future, over, let’s say, the next 10 to 15 years, plus the renewable 

fuels mandate that we have from last year’s energy bill, plus the 

efficiency standards of the miles per gallon improvement, we could 

knock this issue of ever higher futures on its head. 

Futures are based upon the prediction of more supply and by the 

United States of America coming to grips with the fact that it was 

now beginning to address the issue it has not addressed in years 

gone past, we could say to the world we are not going to come ask 

you for more production, we are going to do our own production. 

That, in my opinion, would give immediately relief to the American consumers, knowing that this government was focused on solving the problem together with the industry. 

Mr. COHEN. The solution is getting away from gasoline and getting into hybrids, getting into something that we don’t have to depend on the folks in the Middle East or anybody else and be concerned about both the consumers and their pocketbooks and the 

planet, and that is not going to work by simply more drilling and 

more drilling and more drilling. 

You can’t drill yourself out of this problem, because the problem 

is bigger than that. And it goes back to my opening statement 

about the land belonging to the—is a title to the farmer, but the 

reality is society rests upon the land, so all people own it. That was 

Jefferson. 

And an analogous situation could be made to oil and there are 

some ways that people think about—you might have title to the oil 

right now, but really, since society rests on it, you have a duty to 

the rest of the folks on this planet. 

And the profits you all are making are unconscionable and to 

continue—and I have listened to all this and maybe I didn’t do that 

third grade economic course, but I think there is something wrong 

168 

when you all are increasing your profits so much and your salaries 

so much and all you tell us drill, drill, drill, drill, drill. 

You all are gouging the American public and it needs to stop and 

you are going to look for windfall profits tax and anti-gouging and 

competition and antitrust and there is a whole lot of other ways 

that this can happen, because it is obvious you all don’t have the 

American public at heart whatsoever. 

Mr. SIMON. I disagree with that, Congressman. I do think we 

have the American public’s interest and we are doing all we can 

to produce as much supplies as we can, to put downward pressure 

on prices for the American consumer and other consumers around 

the world. 

Mr. CONYERS. Well, I have had a discussion up here. There are 

five of you and five of us. 

Steve Simon, I would like to invite you to my next town hall 

meeting. Who would you like to bring, since I have got the top guy 

here? 

Mr. COHEN. I would like to bring you back again. 

Mr. CONYERS. Not for a gas price town hall meeting. Who among 

these witnesses would you like to bring with you? 

Mr. COHEN. I am going to pass. 

Mr. CONYERS. Well, you have never been reluctant about anything before since I have known you in the Congress. I don’t know. 

I think there would be a great advantage to have one of these 

executives with you at the next town hall meeting. I will bet you 

get more people out than you have gotten out lately. 

Mr. COHEN. Mr. Chairman, you are probably right and I guess 

the best person would be Mr. Hofmeister, because he is doing more 

with solar and renewable energy and I think that is what the people in my district want to hear about, and they wish that each of 

these individuals, particularly Exxon Mobil, which I have to admit 

I have got stock in and I have had it forever, but you should be 

doing more in alternative energy and trying to see if the public is 

served. 

And I just really can’t believe that the profit is just supply and 

demand. The profit is taking advantage of a situation. 

Mr. CONYERS. Do your stockholders meetings go like this, Steve 

Simon? 

Mr. SIMON. They go a little bit smoother, Mr. Chairman. 

Mr. CONYERS. Ms. Sutton, who would you nominate to join you 

in Ohio? 

Ms. SUTTON. Well, I would just like to comment that my colleague from Tennessee, when he mentioned that he would like Mr. 

Hofmeister because they were doing more with renewables, and 

you were out of the room when he said that they were using less 

than 1 percent of their investment money in renewables. 

So if they are doing more and it was less than 1 percent, that 

is a bit of an issue. 

But I think I would invite any of them, all of them. All of you 

come. Come to the 13th district, talk to my constituents. And I 

would also like to invite my colleague from across the aisle who 

said that the American don’t understand. 

Thank you. 

169 

Mr. CONYERS. Could I ask Sheila Jackson Lee whom among 

these distinguished witnesses she would like to bring to her next 

town hall meeting on the price of gas? 

Ms. JACKSON LEE. Every one of them, Mr. Chairman. I believe 

they each have a perspective that should be heard and when I pose 

my questions, I hope I will get some of that perspective out as relates to this hearing. 

Thank you, Mr. Chairman. 

Mr. CONYERS. And now we recognize Ric Keller for his choice and 

his questions. 

Mr. KELLER. Thank you, Mr. Chairman. They are all welcome at 

my event. With this affluent gentlemen, I don’t have to pay for 

valet parking. So I can save some money here. 

But I would love to have them here, because I think even though 

they are on the hot seat today, they have been very cool under 

pressure and respectful and I admire that. 

Whatever we may think about the board of directors’ decision at 

Exxon to pay $400 million to one individual at a time when people 

are hurting, Mr. Simon, your salary today, based on $12.5 million, 

is $34,246, and most folks out there watching this probably think 

you earned it and we appreciate you being here under these trying 

circumstances. 

I raised a couple of issues that I gave you a chance to clarify. Executive compensation, I think you had a chance to deal with that 

issue. And I promised that I would come back and talk about refining. You remember that line of questioning. 

Would you agree with me that refining capacity has not kept 

pace with demand for gasoline? 

Mr. SIMON. When you actually look at it, Congressman, and you 

look at it over the last 10 or 5 years, the refining industry has expanded capacity commensurate with demand growth. 

Mr. KELLER. Do you think refining capacity has kept pace with 

the demand for gasoline? 

Mr. SIMON. Yes, I do. Yes, I do. 

Mr. KELLER. You are familiar with the National Petrochemical 

and Refiners Association, which includes Exxon Mobil as a member. 

Mr. SIMON. Yes, I am. 

Mr. KELLER. The executive vice president, Charlie Drevna, of the 

National Petroleum and Refiners Association said, ‘‘Consumer demand just continues to grow, and we can’t grow as fast at the refining level.’’ 

Do you disagree with that statement, as a member organization? 

Mr. SIMON. Let me make a comment and then you decide whether I am disagreeing or not. 

When you look at what we have done in the refining industry, 

we have grown capacity at about 1.1 percent per year. Demand has 

grown 1.1 percent per year. 

So what we have got now, and I will say this, is we have got a 

much tighter supply-demand situation in refining than we have 

had for many, many years, and it started about 2003. 

If you go back before 2003, we had a big surplus in the refining 

industry and now it is tight. 

170 

Mr. KELLER. You just proudly told us that you are going to put 

online the equivalent of five new refineries through expansion of 

the next 5 years. If refining capacity has kept pace with the demand for gasoline, why in the world you would be expanding these 

refining—— 

Mr. SIMON. I didn’t say Exxon Mobil. I said the outlook and this 

is the EIA’s outlook, is looking at what all everybody is planning 

and looking at what is going to be coming on stream, the equivalent of five new refineries for the industry are projected to come on 

stream between now and the year 2012. 

If you look at projected demand growth, that is three refineries 

more than what we need. We will return to the same kind of environment in refining over the next several years that we had prior 

to the year 2003. 

Mr. KELLER. Well, thank you. And since you cited the EIA—and 

for those watching this, that is the government’s Energy Information Administration, and I happen to have an article from 

cnnmoney.com and I will quote it for you, April 17, 2007, from that 

very organization, ‘‘There have been calls every year this decade for 

new refining capacity, yet no new projects initiated,’’ said Jeff 

Sundstrom, a spokesman for AAA, the motorist organization. 

‘‘Refining capacity has not kept pace with demand for gasoline. 

Numbers from the government Energy Information Administration 

proved Sundstrom correct. In 1995, American drivers burned about 

17 million more gallons of gasoline a day than the country produced, according to the government’s Energy Information Administration. The difference was made up for by imports. By 2005, the 

latest figures available, the gap had widened considerably to about 

36 million.’’ 

So we have the government’s Energy Information Administration 

saying refinery capacity has not kept pace with demand for gasoline. We have the National Petroleum and Refiners Association, for 

which you are a member, saying refining capacity has not kept 

pace with demand for gasoline. 

We have the government’s Energy Information Administration 

saying refining capacity has not kept pace with demand for gasoline. We have you saying that you are going to expand capacity, 

and yet everything is fine because refining capacity has kept pace 

with the price of gasoline. 

And it is just dumbfounding me, and you are more of an expert 

than I am, to hear the conflict. 

Mr. SIMON. Well, again, when I was talking, it was total product. 

It is true that imports of motor gasoline have gone up. That is true. 

They are low cost imports out of Europe, much cheaper than what 

we could produce here in the United States by expanding capacity. 

That is part of our supply chain. But when you look at total 

products, refining capacity has grown commensurate with demand. 

Mr. KELLER. When was the last year that Exxon built a new refinery as opposed to expanding an existing one? 

Mr. SIMON. Well, over 35 years ago. But we don’t need to build 

a new refinery. 

Mr. KELLER. So 1973. 

Mr. SIMON. Prior to that even. 

171 

Mr. KELLER. Okay. You haven’t built a new U.S. refinery in 35 

years. Have you asked for a permit to build a new U.S. refinery in 

the last 35 years? 

Mr. SIMON. Not to my knowledge, because we haven’t needed to. 

We can take what we have and expand it more than what is needed to keep pace with demand. 

Mr. KELLER. President Bush has said that new refineries need 

to be built and he proposed to allow the oil companies to build 

these new refineries on old military bases. 

As of today, isn’t it fair to say that you have declined to take him 

up on his offer? 

Mr. SIMON. I do not agree that we need a new grassroots refinery 

in this country. 

Mr. KELLER. As of today, you have not taken the President up 

on his offer to build a new—— 

Mr. SIMON. No, we haven’t. 

Mr. KELLER [continuing]. U.S. refinery. 

Mr. SIMON. No, we haven’t. 

Mr. KELLER. Okay. You are proud of the fact that you have expanded existing refineries. And I want to be fair to you, if you want 

to tell us what you are proud about in terms of the last few years 

and what you have done and where you see us going in the future. 

I think that is only fair, and I will be happy to defer and listen 

fully to your answer. 

And then I will yield back the balance of my time. 

Mr. SIMON. As I mentioned before, when you look at what the industry has done, it has expanded capacity commensurate with demand for total product. When you look at what our corporation has 

done, we have expanded capacity at a rate 40 percent higher than 

the industry in terms of distillation capacity. 

I am proud of that. I think our employees are doing everything 

they can to produce as many products as we can for the American 

consumer and I think they are doing a very good job of that. I am 

proud of it. 

Mr. KELLER. Thank you, sir. 

Mr. Chairman, my time has expired. I have more questions on 

refineries, but I will yield back in respect to the other witnesses 

here. 

Mr. CONYERS. Thank you very much, Ric Keller. 

Sheila Jackson Lee? 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman. This 

has been a very interesting discussion. 

But I hope the witnesses who have been here before, been before 

a variety of Committees over the last couple of months, can understand the enormity of the frustration and, frankly, I think, the 

challenge. 

And maybe the disappointment is that as we continue to listen, 

we are still sort of striking in the darkness to look for a real answer that, as you walk out of this room, this Committee can come 

together and say there is one focal point that we need to do for immediate relief, and I think that is the distinction, gentlemen, between the questioning of our colleagues who have shown some degree of frustration, because you have not answered the immediate 

question. 

172 

And I pose the immediate question in the context of a hypothetical that I saw rendered on one of our cable stations that indicated that suppose there was a Hurricane C which wreaked havoc 

in the Gulf. We lost many of our drilling rigs and we wound up 

with a $12 per gallon cost of gasoline. 

It would jeopardize our national security, certainly our economic 

security, and it would be a crisis. And, frankly, all of you would be 

called upon to respond in a crisis mode. 

Well, with not with Hurricane C, but we are in a crisis mode, by 

definition of many Americans, and it is not all your fault, because 

certainly the dollar is weak and it adds to the cost, I imagine, in 

the national cost, as well as the cost to consumers. 

But what I am trying to press you for is immediate answers, and 

I would suggest responding to this. Why couldn’t there be a moratorium in gasoline prices, for example, from June to October, moratorium on gasoline taxes, and the expense of that tax be paid by 

the profits that you have earned? 

What would harm your overall bottom line profits? I assume, as 

a private entity, that would be something that your board would 

need to approve. Shareholders range from my good friend to the 

right to retirees and others who probably look to you for the fiduciary responsibility of ensuring they can stay above the water during their retirement. 

But you are not giving the American people, if you will, direct 

and immediate relief. 

So I pose that question to you as I show you that the Minerals 

Management Service of 2006 says that we have about 79 percent 

of land open to leasing, and, therefore, a smaller percentage not. 

So it seems that we have a sufficient amount of our leasing properties available for drilling. 

And then this is another one that is prepared that says that as 

we look at the prices of gasoline, they actually lead to higher profits, and that is, of course, what provoked the American people 

when it comes to asking Congress to find a solution. 

Now, let me pursue just another point before I yield to you for 

questions. 

This is an Antitrust Task Force and you have already seemed to 

refute the idea that there is collusion. But let me give you a definition. Collusion is a will for subversion of a normal operation of free 

market and could result in serious harm to consumers, suppliers 

and the economy. 

It virtually always results directly in inflated prices to consumers 

and denial of choices in the marketplace. Indeed, that is its purpose. 

Now, for non-lawyers, they saw and heard this being read, the 

word collusion. They make a simple assessment that I am being 

hurt, there is inflation, I am paying a higher price for gasoline, 

there must be collusion. 

So I think what we are trying to generate here today is some 

small measure that refutes the collusion theory requiring investigation by the Department of Justice, a collaborative effort with us. 

And, Mr. Lowe, I am really going to start with you, because I 

look at your list here, and I agree with everything that you have 

said. I wear somewhat of a different hat from the region that I 

173 

come from, and I am somewhat at a loss as to what Congress has 

not done. 

And I will read it quickly, and I have asked several questions 

and so I beg your indulgence. 

But Mr. Lowe has, in his statement, encouraging conventional 

supplies, optimizing biofuels production, encouraging alternative 

and unconventional sources, lowering the carbon intensity of energy supplies, improving energy efficiency, and encouraging technology innovation. 

What has Congress not done? That is what I understand. We 

have tried to do everything that we could. 

And I would say to you, and I will yield to you for your answers 

on this, but one thing we have to get away from is the Republicans 

have the answers and the Democrats don’t. And I, frankly, believe 

that that is what you have been operating on for a number of years 

and there is a new day in Congress. 

Your representatives who are here in this room barely see us. We 

don’t even know their names, hardly, and I will qualify those that 

I do, BP and Shell. 

But any others, we don’t know. There is no interaction. There is 

no sense that we are in this together, that there are those of us 

who look different from you who know energy, care about it and 

want something good to happen. 

You don’t respect us. So I don’t think there is a coming together 

and a meeting of the minds, because you are not broadening those 

who you are discussing this issue with. 

Shell got a wide view from your roving tour. ConocoPhillips did 

the same thing. I assume you saw the man and woman of America 

and got an earful, but also probably found some common ground. 

So I am going to yield to Mr. Simon first on the question that 

I posed originally as refuting this question of collusion and the idea 

that you don’t have enough places to drill. 

According to our Federal resources here or documentation, you 

are drilling in a large part of this country. And then why we seem 

to have a policy that is single in answer. 

And then don’t forget my gasoline taxes, if you would. 

Mr. SIMON. Well, thank you very much, Congresswoman. 

When you, first of all, talk about collusion, let’s examine a little 

bit about the industry. Let’s take refining, first of all. There is 55 

different refinery companies. There are about 145 individual refineries in the United States. 

We are one of the largest refiners. We have seven refineries. We 

have 11 percent market position and that is actually down from 

where it was at the time of the merger. 

So usually, in a concentrated market, that would not be the case. 

Also, when you look at independent marketers, their market 

share has actually grown from 8 percent up to 25 percent. 

Ms. JACKSON LEE. Mr. Simon, the American people don’t really 

define it that way. They look at the fact that you have got Exxon 

Mobil, BP, ConocoPhillips, you have got Chevron, you have got 

Shell, and after that, then you get second tier, maybe there is 

somebody else that I missed, and there are domestics. 

They look at you as an entity that is now merged, two huge companies, and they ask the question whether the small numbers that 

174 

have now gone down in size from 20 years ago are not actually engaged in making sure that the prices are being set at a certain 

amount. 

Mr. SIMON. And that is what I am trying to get across here. I 

understand the perception, but the facts are not that. In other 

words, we have actually lost market share, not gained it, since the 

merger. 

When you look at the retail side of the business, there are 

165,000 retail outlets. Exxon Mobil owns and operates and, therefore, sets the price in only a half a percent of those. 

Our market share, again, has gone from 14 percent down to 10 

percent. We have lost market share and so have all of the majors. 

Ms. JACKSON LEE. But does losing market share impact on still 

the opportunity to set prices, even though you have lost market 

share? That is the perception that the American people have. 

New energy companies, merged energy companies, prices go up. 

Mr. SIMON. But the concentration of the industry, when you compare the concentration of our industry versus others, it is one of 

the lesser concentrated industries in the United States. It has been 

repeatedly investigated by the FTC and not a single one of those 

investigations, which have been 100 over the last 35 years, an average of about three per year, not a single one of those have found 

any evidence whatsoever of price collusion or anticompetitive behavior. 

Ms. JACKSON LEE. Here, today, you have offered us a presentation that doesn’t seem to pinpoint, in an effective way, I appreciate your response, as to why this price keeps accelerating, short 

of the idea that the industry agrees with the price set. 

Now, I am not suggesting that it would be proven. I am saying 

that it would be suggested and it seems to be that there are a 

smaller number of companies and the price has gone up. 

But let me let you move on quickly to your other questions so the 

others could answer about the gasoline tax and calling a moratorium and having the energy companies pay for that tax moratorium from, say, June to September out of your profits. 

Mr. SIMON. Did you want me to address the drilling aspect? 

Ms. JACKSON LEE. If you can do it quickly. 

Mr. SIMON. When you look at that chart you had, that is—unfortunately, I wish we were developing more, but oil isn’t everywhere 

we have leases. 

Where there is oil, we are developing that. These are mature, 

well established areas, where the prospects are a lot lower and, 

therefore, you don’t find the oil everywhere. 

We need access to those areas that are promising, lesser developed, where we know there is good prospect for oil and gas. 

Ms. JACKSON LEE. You didn’t answer the gasoline tax. 

Mr. SIMON. When you look at the gasoline tax, again, you asked 

the question why the prices are going up. 

Ms. JACKSON LEE. No. What I would like to ask is the question 

of whether or not you would absorb that in a moratorium on gasoline taxes, would you absorb that through you profits. 

Would you be willing to do that if you were asked on behalf of 

the American people? 

175 

Mr. SIMON. What you would see, Congresswoman, if you eliminated that tax, you would see a drop in the price. But what would 

happen then is you would have an increase in demand. That price 

would go back up and I think it is impossible for any of us to say 

that the price wouldn’t recover to where supply and demand would 

get back in balance. 

Ms. JACKSON LEE. I would say this. I would venture and be willing to try it in the instance, let the market play as it would in that 

instance, and then come back again in September, since it would 

be a moratorium only briefly, and reorder it. 

But I think some relief is owed and the question is whether you 

would be willing to pay those taxes so that the highway trust fund 

is maintained. 

Mr. SIMON. No, we couldn’t pay those taxes. When you look at 

our profitability, it is $0.014 this year on a dollar, whereas taxes 

are somewhere up around $0.15. 

Ms. JACKSON LEE. Well, your profits show that they are a little 

larger than that. But let me yield to Mr. Malone. 

Mr. MALONE. Let me not try to repeat, because I agree with a 

lot that Mr. Simon said. 

On the issue of collusion, most of our retail outlets are not owned 

by us. They are owned by independent individuals. 

Ms. JACKSON LEE. I am aware. 

Mr. MALONE. I would also reinforce that we have investigations 

even going on now and have had continuously and they have yet 

to ever find that there was an issue on the market. 

There is a point I would like to bring up, because I think it keeps getting lost in this. If you would just say today gasoline is $4 a barrel—— 

Ms. JACKSON LEE. A gallon. 

Mr. MALONE. A gallon, excuse me. 

Ms. JACKSON LEE. We would like the $4 a barrel. 

Mr. MALONE. Is $4 a gallon, my apology. If you take that a barrel 

of oil is 42 gallons, right? At today’s price, just to buy that barrel 

is about $3.20 a day to buy that barrel of oil. Roughly, the retail outlets, we talked about this yesterday, $0.08 to $0.10. So now you are at about $3.30. Taxes, State, Federal, 

local, are about—let’s use $0.50. You are now at $3.80. 

That is built into this system. At $3.80, we are going to have to 

get that barrel of oil on a ship, a train, a boat, a plane, get it to 

our refineries, refine it, and then distribute it and market it. 

And this is getting lost that the big piece is the $3.30 a gallon 

due to the rise in the price of crude oil. It is an enormous piece. 

On your question about a tax holiday, we believe, first of all, 

street price is not set by us and even if there was a moratorium, 

I can’t say that the retail outlets wouldn’t keep the price up, because it is a commodity. 

Let’s say they did bring the price down. I think it would be very 

short-lived and that we could actually see a run on those kind of 

stations. Soon, the supply is gone and it is going to come in from 

overseas. It is just the supply-demand economics are at play here. 

On the access, I will only make one point and, that is, when Congress opened up the deepwater Gulf of Mexico, and you and I have 

talked on many different times, I just want to use the example that 

176 

the price of oil was so low that it was not economical for many of 

us to go into the deepwater Gulf of Mexico. 

Congress provided royalty relief. It encouraged us to go in at 

very low prices. We are just bringing on one of our platforms, a 

multibillion dollar platform and it is coming up with—we have 

partners in this—7,000 feet of water and 5 miles we go down below 

the surface. 

It is a multibillion dollar one. We are now flowing about 150,000 

barrels a day and it should flow as much as 250,000. 

Access to where the source of oil is does work and there have 

been times government has helped. We don’t need the subsidies, 

royalty relief in the Gulf of Mexico. In fact, they have gone—— 

Ms. JACKSON LEE. Are you at capacity in the Gulf of Mexico? 

Mr. MALONE. No. I am building more platforms. 

Ms. JACKSON LEE. Is the energy industry at capacity in the Gulf 

of Mexico? 

Mr. MALONE. No. We are all out there trying to develop. Remember, we are pushing the frontiers of technology. 

Ms. JACKSON LEE. And we agree with this and I don’t know why 

we are complaining about supplies and access, because there you 

are in the Gulf and there is more that can come on line. 

Mr. MALONE. That same Gulf, that same geology appears to go 

right around Florida and up the east coast and right around—— 

Ms. JACKSON LEE. And as you well we know, we will not be able 

to drill there without consensus in those areas. Where we have consensus is off the Gulf, and I say come one, come all. 

But the point that is being represented is that we don’t have 

enough, but we are not at capacity in the Gulf off of Texas and 

Louisiana. 

Mr. MALONE. I would be happy to—I know what we are doing 

on our leases. I can’t speak for anyone else. We are utilizing our 

leases and developing across our lease base and we would love to 

see more available to us. 

Ms. JACKSON LEE. Mr. Lowe, you had a whole list and you say 

we are not doing—and we are doing all of that. And why wouldn’t 

ConocoPhillips want to give relief to the American people by taking 

some of their profits and paying down on the gasoline taxes from 

June to September? 

Mr. LOWE. I will try and address each of your points. 

ConocoPhillips has essentially exited—we are in the process of 

exiting the retail gasoline business. So that has been our strategy 

and we are really in the finalization of that. 

On the access issue, I would say that there is plenty of evidence 

that the companies represented here are starved for access. 

ConocoPhillips, just in the past 6 months or so, the last 3 bid 

rounds, Chukchi Sea and the 2 Gulf of Mexico bid rounds, has been 

high bidder on more than a $1 billion worth of leases and we have 

been outbid by our peers on well over $1 billion of other money 

that we were willing to put at stake. 

So we are starved for access. We are not making that up. It is 

a fact. We do need more access to more prospective acreage. 

On the gas tax, I would just echo the comments earlier that the 

concern—I do believe that supply and demand works and that we 

have seen a reduction in gasoline demand with the higher prices 

177 

and my concern would be that if we lower the prices, that that 

would reverse itself, and we would actually exacerbate the problem. 

So that would be my concern on the gas tax. 

If I could just mention one other thing. I participated—— 

Ms. JACKSON LEE. I am smiling because I would want you to give 

that gift to the American people and let them decide that for a period of time. But let me yield back to you. 

Mr. LOWE. ConocoPhillips did 35 of these what we call conversations on energy. I did a number of them, Reno, Nevada, Scranton, 

Pennsylvania, Richmond, Virginia, and it is a very healthy debate. 

Ms. JACKSON LEE. It didn’t hurt you, did it? It did not hurt you, 

did it? You came away okay. 

Mr. LOWE. Absolutely, it was very educational, I think, on both 

sides and I would actually appreciate the opportunity to do one of 

your town halls. You are extremely thoughtful. I think it would be 

very good for both of us. 

And when you ask kind of, well, what aren’t we doing, I think 

my feeling is that there seems to be a lack of a recognition of how 

big this business is and how much it is a global business. 

The U.S., people in America, we enjoy a great quality of life and 

that quality of life has come a lot, foundational, really from energy. 

Other people around the world want that same quality of life and 

so we are engaged in a real competition for energy. 

So we are competing every day, whether it is crude prices, 

whether it is natural gas prices. You see we have an empty LNG 

port in the Gulf Coast because the price of natural gas in the 

United States is well below what the natural gas price is in Asia 

and Europe. And so we cannot compete for that natural gas, the 

LNG, away from elsewhere in the world. 

So we need to recognize that we are—it is a global economy. This 

is a global business and we can do things here at home to provide 

more access, to provide more supply, to also work on the efficiency 

side. 

We need to do everything and we need to work on that together. 

Thank you. 

Ms. JACKSON LEE. Thank you. 

Mr. Robertson? And while you are answering, Mr. Robertson, 

what did you do in Venezuela? 

Mr. ROBERTSON. Well, let me start with Venezuela. We stayed 

there. We negotiated an agreement that was acceptable to us and 

so we remain a producer in the Boscan field and we remain a producer in the heavy oil sands. 

Ms. JACKSON LEE. And how much product do you get out of 

there? 

Mr. ROBERTSON. We produce over 100,000 barrels a day in the 

Boscan field and, to be honest, I don’t remember how much we 

produce in the Hamaca field. 

Ms. JACKSON LEE. But that gets to the United States or it stays 

in South America? 

Mr. ROBERTSON. A lot of it comes to the United States. But we 

have been in Venezuela since 1946, with a hiatus in between, and 

we expect to be there for a long time to come. 

I think in these hearings the last couple of days, I hope one thing 

that has maybe become evident, is that the current situation is not 

178 

really about refineries in the United States. It is not really about 

whether we have enough service stations. It is not really about 

whether the market is well supplied with gasoline. 

It is well supplied with gasoline, inventory is up. There is plenty 

of gasoline. 

The problem is, again, what others have been saying, it is in the 

crude oil feedstock. So that all of a sudden becomes as bigger issue 

in the United States. 

One out of every 4 barrels of oil in the world is consumed in the 

United States. So we are competing with the world. One of the 

things that I know is we have got 27,000 employees here in the 

United States that are doing everything they know how to continue 

to look for, develop and produce energy for people in the United 

States, and we have got lots of other American employees around 

the world in all kinds of difficult circumstances, and you can start 

to list off the countries. 

I mean, Venezuela, Nigeria, Kazakhstan, Australia, Burma, a 

whole host of countries producing oil and gas, one-fourth of which, 

on average, comes to the United States. 

So we are in this competition with the rest of the world and we 

can’t get away from it. We are using one out of every 4 barrels that 

is produced in the world. 

So we are part of that system and as a result of the fact that 

many other—and it has been mentioned before—many other economies are growing rapidly and in many of the large population centers of the world, our products are subsidized. I mean, not just subsidized, people are paying very, very low prices for gasoline and 

diesel and those other products. 

So they are not even seeing the market price signals today. 

Those economies are moving forward and they are continuing to 

use these products and we are competing with those people for 

products in the United States. 

So the issue is what can we do, and there are only two things 

we can do. We can either reduce the demand, the use of these products, and the American people, frankly, are reducing the use of 

these products. We have been looking at data. The first couple of 

months this year, U.S. gasoline demand was down 2 percent. 

It is down, right now, looking at our service station sales, probably down 6 or 7 percent. So the demand is going down. 

The other thing we have to do or the other part of it is increasing 

supply. I don’t know whether you saw on ABC News last night, 

there was a clip from the deepwater Gulf of Mexico, showing what 

some of our folks are doing to bring on new supplies in deepwater 

Gulf of Mexico, just like was described, miles deep, incredible technology, incredible effort. 

So we have got an enormous number of people working, Americans working very hard every day to supply energy to the American people and they are competing with the rest of the world and 

they are doing a heck of a good job. 

And what we need to do is allow them to do more of what they 

are doing in the United States. 

Ms. JACKSON LEE. Would you pay for the gasoline taxes for a period of time to give Americans immediate relief? 

Mr. ROBERTSON. I can’t—— 

179 

Ms. JACKSON LEE. Representations of the witnesses is very complex for anyone to understand. You try to decipher between the retail upstream and downstream, and you are trying to suggest you 

don’t have any gasoline stations, so it is not your fault. 

You are not giving any relief. What would be the wrongness of 

this moratorium and the energy companies paying for these taxes 

out of their profits? 

Mr. ROBERTSON. With respect, I would say we are giving relief 

in the sense that we are working every day to bring supply and we 

are working every day with our energy efficiency customers to 

make them more energy efficient and more profitable. 

Ms. JACKSON LEE. So if we reduce need or reduce usage, you say 

that the gasoline per gallon would go down. 

Mr. ROBERTSON. I am saying that if demand in the world and demand in the United States goes down, that will have an effect on 

price. 

Ms. JACKSON LEE. And that is the crux of the issue, whether the 

demand in the world will go down. 

Mr. ROBERTSON. Well, ours is a big part of the demand in the 

world. So it will have an effect on price. 

Ms. JACKSON LEE. That would be the key, whether or not our 

going down reflects on the overall world price. 

Mr. ROBERTSON. We are only part, but, again, we are 25 percent 

of the world’s total demand. So if our demand goes down dramatically, prices will—— 

Ms. JACKSON LEE. But we have to wait that long, which will be 

a long time. 

Mr. ROBERTSON. Well, I think the consumers have made a big 

change in the last few weeks. Our service station sales are down, 

as I said, 6 or 7 percent year over year. There is a dramatic change 

in the United States. 

Ms. JACKSON LEE. Will we see a decrease then? Will it come back 

to the consumer? Will we see a decrease over these summer 

months? 

Mr. ROBERTSON. It will certainly influence the price of gasoline. 

Ms. JACKSON LEE. Do you think we will be down to $3? 

Mr. ROBERTSON. I have no idea. I can’t tell you that. I can tell 

you, on the gas tax, it was said already, I think reducing tax for 

a short period of time, reducing the price for a short period of time 

will increase the usage of the product and, frankly, compound the 

situation, because that will increase demand and increase the need 

in the United States for crude oil and increase the price of crude 

oil, and that is not what really, frankly, needs to happen here. 

Ms. JACKSON LEE. I don’t know if the minivan drivers are understanding that. 

Mr. Hofmeister? 

Mr. HOFMEISTER. Congresswoman, I don’t think my company is 

qualified to get into national tax policy. I think that is for government to manage. 

I do think, however, that a temporary suspension with a springback that would affect families at the end of the summer season 

would have as much negative impact on perception of what has 

been occurring. 

180 

But really, if you want to reduce the price of gasoline at the 

pump, the most dramatic step that this government could take is 

to commit to the United States people that we will solve this problem of restricting supply for once and for all. 

This nation has for 30 years told us, ‘‘Go away, oil companies, go 

elsewhere, go to Kazakhstan, go to Brazil, go to Africa, go to Nigeria, go anywhere but the United States,’’ except in that 15 percent 

of the outer continental shelf where we are doing everything we 

can to maximize production in that 15 percent. 

If this nation said to the world and to its own citizens, ‘‘We want 

a dramatic increase in the quantity of production that is possible 

from America’s own natural resources,’’ it would knock the futures 

market on its head. 

It would be unprecedented and traders would immediately get 

discouraged about bidding up the price, knowing that additional 

supplies would be coming into the market in the coming years, 

which would cause them to begin taking other positions rather 

than simply bidding up the price. 

It would tell the world the U.S. is serious about its own supply. 

I think the tax idea is not a good idea. 

Mr. KELLER. Would the gentlelady yield? 

Ms. JACKSON LEE. I would be happy to yield. 

Mr. KELLER. One of the things my friend from Texas said is that 

there needs to be a consensus about drilling in the outer continental shelf, and I happen to be from Florida. 

And I would just like to ask you a question so you can speak to 

the Florida people on this issue. 

I personally happen to be in favor of drilling for the deepwater 

oil reserves, but you hear two objections from Florida, and I would 

like each one of you to just briefly give us your response. 

Number one, they don’t want to see the oil rigs. So I would like 

to ask you how many miles off the coast to you have to be in order 

to not see the oil rigs. Is it 20 miles, 30 miles, 50 miles? You tell 

me. 

And then the number two issue is they don’t want to risk their 

tourism-based economy because of an oil spill that might happen, 

albeit even though it is unlikely. 

So I would like you to address whether there has ever been such 

an oil spill by any of your companies that ended up with oil on the 

beach and then what solutions or what comfort you can give to the 

folks that there wouldn’t be in the future. 

So the three questions: how far does the rig have to be so you 

don’t see it? Has your company ever had a spill that resulted in it 

coming on the Florida beaches? And, three, what assurances can 

you give that that wouldn’t happen in the future? 

Mr. Hofmeister? 

Mr. HOFMEISTER. I would just respond very quickly. I think the 

curvature of the earth would be at 14 miles and most of the drilling 

would be well beyond 14 miles, as far as I could tell. 

The question of—I am not aware of any oil spills on the beaches 

of the Gulf of Mexico that have come from any Shell Oil wells. We 

went through the summer of 2005 with seven named hurricanes. 

We shut down platforms seven times in one summer. 

181 

We had Katrina and Rita in the same year coming through nearly the same region of the Gulf of Mexico and although we took sustained damage and although the industry lost some 90 platforms, 

there were no spills on the beaches of Louisiana or Texas or Alabama. 

The technology that did not exist when the Santa Barbara blowout occurred many years ago has improved dramatically to the 

point that shut-in valves and the manner by which we design rigs, 

design the sub-surface and the sea surface equipment, including 

the pipelines, is such that it—while nobody could ever say there 

would never be a spill, because we can’t control nature, it is hard 

to imagine such equipment failure that we would have a spill. 

Mr. KELLER. Are you saying you couldn’t see the rigs at 14 miles 

visually? 

Mr. HOFMEISTER. That is my understanding. 

Mr. KELLER. Is that because they are mostly underwater? 

Mr. HOFMEISTER. No. It is because the curvature of the earth 

means that the height of the rig above the surface of the water 

would be invisible. 

Mr. KELLER. Thank you. 

Mr. Robertson? 

Mr. ROBERTSON. We haven’t had a spill in Florida, to your question. Just to build on a comment that was made, I think during 

these hurricanes, 1,000 wells in the Gulf of Mexico were destroyed, 

ripped up, torn up, bent over, and not one, to my knowledge, leaked 

significantly. 

So the technology is here to withstand serious natural disasters. 

With regard to Florida, offshore, several years ago, we actually 

did drill offshore of Florida, in an area called Destin Dome, and did 

discover a fair amount of natural gas. In today’s values, it would 

have been a tremendous value. 

We could not get permission to develop it, after spending lots of 

money to get the leases and lots of money to drill exploratory wells. 

We could not get the money to develop. We eventually ended up 

having to turn the leases back. 

So what is happening? We have rigs offshore in Angola and the 

people there support rigs offshore. We are developing LNG and we 

are going to bring it to a terminal in the Gulf Coast other than 

Florida and we are going to put it in a pipeline and send it to Florida. 

Mr. KELLER. Understood. So do you agree with the 14 miles, you 

can’t see it after 14 miles? 

Mr. ROBERTSON. I don’t have a better answer than that. It 

sounds about right. 

Mr. KELLER. Mr. Lowe? 

Mr. LOWE. Our work that we have done is in synch with the 14 

miles. I don’t have any knowledge, I don’t believe we have ever had 

any spills that would affect the Florida coast, and I agree with the 

updated technology on the impact to the environment. 

Mr. KELLER. Mr. Malone? 

Mr. MALONE. Nothing to add, Congressman, to the others on 

what they have said. 

Mr. KELLER. Has BP ever had a spill that ended up on the Florida beaches? 

182 

Mr. MALONE. No. 

Mr. KELLER. Mr. Simon? 

Mr. SIMON. Nor has Exxon Mobil. I would echo what my colleagues have said. I would make one more point. 

Mr. KELLER. Yes, sir. 

Mr. SIMON. And that is that we are developing oil and gas all 

around the world elsewhere in environments much more difficult, 

much more challenging than we would find here in the United 

States in a very environmentally responsible fashion and we are 

absolutely convinced we could do it here, as well. 

Mr. KELLER. So to sum up, before I yield back to my good friend 

and colleague from Texas, you make up five of the largest oil companies in the United States. It is your collective opinion that with 

respect to drilling off Florida’s coast, you wouldn’t be able to see 

the rigs past 14 miles. 

There has never been an oil spill from any of your major companies landing on the Florida beaches, to your knowledge, and you 

believe it can be done safely and secure and in an environmentally 

friendly manner, because you went through Hurricane Katrina, 

and even though that was so devastating, you had no oil spills 

show up on beaches there, and you have also had drilling in the 

past in places like Destin Dome without oil spills and you are comfortable it can be done in the future. 

Is that a fair summary? 

Mr. SIMON. Absolutely. 

Mr. KELLER. I yield back to my colleague from Texas and thank 

her. 

Ms. JACKSON LEE. I thank you. And I will include, because the 

Chairman has been enormously generous. 

But this hearing was to provoke, if you will, and to probe the 

idea of collusion and the, if you will, fixing of prices and it doesn’t 

mean that we—some of us here were predisposed to answers that 

would suggest that was happening. 

But it is a hearing, as well, to find solutions and I would argue 

that you have given some, but they are not sufficient to give an immediate relief. 

And I do believe that this will require more heads than one and 

a bipartisan approach. The gentleman from Florida is a Republican 

and I am on the other side, and I happen to agree with him that 

there can be safe and secure drilling in places that there is not. 

But I can assure you that none of that will occur unless there 

is continued explanation and interaction with this bipartisan body 

politic here in the United States Congress going forward. 

And though this is an aside, it has not occurred and I believe we 

are going to change minds and really understand whether prices 

are fixed, really understand whether there is connection to your 

compensation to fix prices or high prices, and this will have to be 

an ongoing dialogue even beyond a Committee hearing, because the 

DOJ can investigate, we can call for an investigation, but parallel 

to that, prices will continue to rise. 

So I hope that we will have these gatherings that the Chairman 

has so generously offered to various Members, because I happen to 

believe that a moratorium on gasoline prices is not fixing prices, 

183 

but it has a real perspective to it, and I have gotten answers that 

say quite the contrary. 

But I hope that out of this will come the opportunity to really 

get down to how we can lower these prices, and I thank the gentlemen for their answers. 

I yield back. 

Mr. CONYERS. I thank the gentlelady. 

Did Steve Cohen want a follow up or is he going to wait for Maxine Waters? 

Mr. COHEN. I will always wait for Maxine Waters, Mr. Chairman. 

Mr. CONYERS. That is a wise move. I commend the gentleman for 

his soundness and experience in less than 2 years. 

Ms. WATERS. Thank you, Steve. 

Thank you, Mr. Chairman. 

First of all, let me just say this. To Mr. Simon, I appreciate what 

is in your bio that indicates that you work with the National Action 

Council for Minorities in engineering. 

Mr. SIMON. That is correct. 

Ms. WATERS. That is very important. 

To Mr. Hofmeister, that you serve on the board of the Urban 

League. 

And to Mr. Robertson, I guess I want to ask you, at some point, 

what do you do with the U.S.-Saudi Arabian Business Council? 

But I want to say thank you for your volunteerism and your contributions dealing with social issues and helping our neighborhoods 

and with our nonprofits. 

And I just want you to know this is not personal. Thank you very 

much for being here. 

Now, having said that, I want to get back to all this money you 

are making and I want to talk with you about whether or not there 

are acres of Federal land currently leased by oil and gas companies, 42 million acres and only 12 million acres are actually being 

drilled to proceed with oil and natural gas. 

Someone may have asked this already, but is that a true statement? 

Mr. SIMON. Ms. Waters, may I take that on? 

But before I do, I would like to apologize for a number that I 

gave you earlier that was incorrect on what we are spending in 

terms of promotion and sponsorships and advertising. 

I think I gave you—— 

Ms. WATERS. That $100 million? 

Mr. SIMON.—$100 million. It is actually $270 million. So I did 

want to correct that number. 

Ms. WATERS. Yes. I knew it was more than that. But I thought 

maybe you just didn’t have it at your fingertips at the time. 

Mr. SIMON. Well, thank you for giving me the opportunity to correct that. 

Ms. WATERS. Sure. 

Mr. SIMON. When you look at we currently have about 7 million 

acres under lease and on every one of those leases, we either have 

evaluated or are evaluating or have specific plans to evaluate, and 

every one of those that have prospects, commercial prospects, we 

are developing or are in the process of developing. 

184 

The problem is a lot of the acreage that we have is mature acreage. A lot of that will not have oil and gas prospects. 

Ms. WATERS. How long have you had this 7 million acres? 

Mr. SIMON. It varies. It varies depending upon the lease terms. 

We wish we were successful—— 

Ms. WATERS. Tell me, what is the amount of your oldest lease? 

Mr. SIMON. I am sorry? 

Ms. WATERS. I want to know how long you have had the leases 

and I want to understand, to the best of my ability, how long have 

you had—you say they vary. Some of them you may have had 10 

years, some you may have had 15 years. 

What is the longest period of time you have had these 7 million 

acres? 

Mr. SIMON. I am informed that they are 1998-1999 and they are 

10-year terms and most of them are toward the end of that. 

Ms. WATERS. So if you have had them around 10 years, you have 

been exploring and researching to see what they could produce. 

Mr. SIMON. And those that we have found that have prospects for 

commercial volumes, we are developing. So those that aren’t are 

those that we have not found commercial prospects for and, again, 

these are established mature areas where you would expect to have 

a lower rate of prospects. 

The access that we would like to get are those that are not developed, undeveloped, where we know the prospects are much greater 

than those that we have now in the mature developed areas. 

Ms. WATERS. Such as? 

Mr. SIMON. Like the parts that are currently off limits. 

Ms. WATERS. So if your 7 million acres, only about 2 or 3 million 

are worth drilling. 

Mr. SIMON. If that, if that. 

Ms. WATERS. All together, they said there are 42 million acres 

of Federal land currently leased for oil and gas companies. Can 

each of you tell me how much of that 42 million you have? You 

have got seven. 

If we could just start with Mr. Hofmeister, is it? How many acres 

do you have? 

Mr. HOFMEISTER. I am sorry, Congresswoman. I would have to 

get back to you with the number. I don’t know at my fingertips. 

Ms. WATERS. Right down the line. How many do you have? 

Mr. ROBERTSON. I do not know how many acres we have. Many 

leases that are producing have been around, we have had for 20 

or 30 years, because we are producing on them. So there are rules. 

The Federal Government has rules. So you can’t just hang on to 

a lease forever. You have to have a plan. You have to be doing 

something. And if it is a 10-year lease, when the 10 years expires, 

if you haven’t done the work that you committed to do, you lose it. 

So on all the leases that we have, we are paying rentals. So we 

pay to keep them and we don’t keep ones that we don’t need and 

the government won’t let us keep ones that we are not doing some 

work on. 

So it is an active program on all of them. 

Ms. WATERS. How many do you have, sir? 

185 

Mr. LOWE. A similar question came up yesterday and we are actually working to try and find that information, but I don’t have 

that at my fingertips. I am sorry. 

Ms. WATERS. Yes, sir? 

Mr. MALONE. Onshore, I think I have been told about a half-million acres, 95 percent of that acreage is in production. The remaining 5 percent are in development, exploration and development 

now. 

I don’t know the acreage in the deepwater Gulf of Mexico, but 

of the 658 leases there, 114 are producing and the rest are under 

exploration and development. 

Mr. SIMON. Congresswoman, I could add that we have 100 Federal lease blocks. Again, we gave you the acreage. And by the end 

of this year, only one of those will likely be producing and most of 

these will expire next year. 

Again, we have not found prospects on. There is a small handful 

that we still believe deserve study, but very little. 

Ms. WATERS. Again, you may have heard this information before. 

It is stated that the areas with the vast majority of oil and gas are 

already open to drilling. According to Federal Government surveys, 

82 percent of the gas in the outer continental shelf and 79 percent 

of the oil in the outer continental shelf is suitable for leasing. 

And this was before Congress opened more space in the Gulf of 

Mexico for drilling in 2006. 

Mr. SIMON. I am not sure what information you are talking about 

there. My information is that about 85 percent of the offshore is 

off limits and even onshore, about 75 percent is either off limits or 

severely restricted. 

So there is a significant amount of acreage that is unavailable, 

off limits, and there has been estimated it is about 30 billion barrels of oil and about 125 trillion cubic feet of gas. 

That is enough oil to back out imports for a period of over 8 

years and enough gas to heat—— 

Ms. WATERS. So you disagree with these information that I have 

that 82 percent of the gas in the outer continental shelf and 79 percent of the oil in the outer continental shelf is available for leasing. 

That is not something you are familiar with. You don’t know that. 

Mr. SIMON. Unless we have got different definitions. I can’t identify with those numbers, I am sorry. 

Ms. WATERS. Okay. When I first started the questioning, I asked 

about your need to—well, we are trying to find out the real relationship between the cost of a barrel of oil and the cost at the 

pump. 

Whenever the oil increases, a barrel of oil increases, we automatically get these increases and would have us believe that it is 

absolutely necessary to do, because—and we don’t know whether or 

not there is a direct connection. 

Ordinarily, in managing your budgets and managing your income, you would say that when the price of commodities increase 

and you have got to spend your money, you have got to earn more 

money or you lose, you spend more money in order to do it. 

But I don’t see that connection yet with the barrel of oil and this 

increase at the pump. 

186 

Tell me one more time why it is, when the cartel—and let me 

just ask whether or not—is Angola in the oil cartel? 

Mr. ROBERTSON. Angola is a member of OPEC, yes. 

Ms. WATERS. And Nigeria and Venezuela, they all are. Okay. 

Tell me, when they have increased the price of a barrel of oil, 

how does that increase get all the way down to the pump past all 

of your profits? 

You have $123 billion in profits collectively and you have had, in 

2007, that $40.6 billion that I keep getting back to. And so what 

if they increase the price of a barrel of oil? You still have big profits. Why do you have to—why does that translate automatically 

into an increase at the pump? 

Mr. SIMON. Well, again, we have got different components of our 

business. When you look at the piece of the business here in the 

United States that produces those products, we have to buy that 

raw material on the open market. 

Ninety percent of what we refine here we buy on that open market. And so we refine it and market and then we sell it. So if the 

price of that raw material goes up, if we don’t pass that through, 

the profitability on that piece of the business goes down, and, indeed, it has this year. 

Ms. WATERS. So instead of making $40.6 billion, what if you 

made $25 billion? Would that be enough for you? 

Mr. SIMON. Well, we are going to—— 

Ms. WATERS. Because I understand what you are saying. You 

have got to go out on the open market and buy that raw material. 

Mr. SIMON. Right. 

Ms. WATERS. I understand that. You have got to refine it. You 

have got to do all of these things. But in the final analysis, after 

you do all of that, you had $40.6 billion. 

Mr. SIMON. That is correct. 

Ms. WATERS. And what I am asking you is this: in the name of 

patriotism, why can’t you just have $30 billion or $25 billion for 

that year that you make $40.6 billion? 

You have bought all your materials. You have done all your investing. You have explored. You have drilled. You have done everything and you have got $40.6 billion left. 

Why does that price at the gas pump have to increase? 

Mr. SIMON. Over the next 5 years, we are going to be investing 

over $125 billion. If we are not strengthening our balance sheet 

now, we are not going to be able to sustain long-term investments 

of that level—— 

Ms. WATERS. Give me the projection of your profits, just like you 

give me the projection of your investments. 

Mr. SIMON. I don’t have a projection. 

Ms. WATERS. But you can give me, you can tell me how 

much—— 

Mr. SIMON. No, honestly—— 

Ms. WATERS [continuing]. It is going to cost you to invest. Tell 

me what your projections are for profits, given everything that you 

know. 

Mr. SIMON. We are investing over $125 billion over the next 5 

years, regardless of what our profitability is, because we don’t 

187 

know what our profitability is going to be. We invest as much in 

low profitability—— 

Ms. WATERS. Let me just say this. 

Mr. SIMON [continuing]. As we do in high profitability. 

Ms. WATERS. Let me just say this. I cannot believe that you don’t 

have the ability to do projections on your profits, given everything 

that you know and everything that you build in, everything you 

speculate that you build in. 

You guys are very, very good. You have some of the best technologies for research and you do know and you do have projections 

about what your profits will be in the next 5 years. 

So I don’t want to hear about the investments over the next 5 

years without hearing about your projections for profits over the 

next 5 years. 

Mr. SIMON. Congresswoman, I can assure you we do not have 

projections of our profitability over the next 5 years, because we 

don’t know what the price of crude oil is going to be. We do not 

know that. 

Ms. WATERS. Yes. But what I am saying is you certainly don’t 

now, but you see how it has been increasing and if you take the 

history of the increase and if it keeps going in that direction, you 

should be able to say if this continues to happen, this is what is 

going to happen to our profits and we are going to either reduce 

our investments so that we can maintain this huge profit that we 

have or we recognize that we are not going to make as much 

money and we will continue to invest. 

I know that you do that. 

Mr. SIMON. But what we do is we have a long-term outlook and 

we are not assuming that prices are going to stay where they are 

today. I cannot tell you when they might come down, whether they 

are going to go up higher. 

But we have got a long-term projection. We are investing, and we 

don’t change that investment whether we are in good times or bad 

times. If you go back to 1998 when crude was $10 a barrel, we 

were investing as much in that year as we were in the years before 

and after when crude was much higher. 

We have a long-term outlook. That $125 billion that I talked 

about, we will be doing that regardless of what the profitability is 

over those next 5 years, because we are in a 10 to 15-year business 

here. 

Ms. WATERS. You can’t, in my estimation, run a business without 

projecting and without anticipating that you have to do cutbacks, 

perhaps, depending on how much money you want to make and 

how much you want to pay your dividends, you want to pay your 

investors. You have got to do that. 

And so to say to me our investments are constant and we don’t 

care if we lose all the money, all the profits, we are going to continue to invest, now you know that does not make good sense. 

Mr. SIMON. No, and I agree with that. 

Ms. WATERS. And you can’t do that. 

Mr. SIMON. I agree with that nor do we expect that we are going 

to be losing money. But I am telling you that we don’t expect to 

be where we are now either and we map out that and we look at 

it over a 10-year period. 

188 

We don’t look at it next year or the following year. That has 

nothing to do with what we are investing over those 5 years. 

Ms. WATERS. How much money have you lost over the past 10 

years? 

Mr. SIMON. We have only lost money in the U.S. one time 

and—— 

Ms. WATERS. No, no, no, no. I don’t want to know. I am talking 

totally. When I talk about—— 

Mr. SIMON. We have not lost money. We have not lost money. 

Ms. WATERS. Of course, you have not. 

Mr. SIMON. No. I admit that. 

Ms. WATERS. So you have not lost money over the last 10 years. 

Mr. SIMON. And or do we—— 

Ms. WATERS. As a matter of fact, the profits continue to climb. 

They didn’t even dip in the past 10 years. They just kept going up 

and up and up until you get to 2007 with $40.6 billion, and you 

cannot tell me how to reduce the price of that gas at the pump. 

Mr. SIMON. Well, the way we can reduce the price of the product 

is to work on raw materials and, also, to reduce the demand for 

product. We either supply more or we reduce demand. 

And the way we supply more product, again, is to have access 

to bring on more so we can impact the price of those raw materials 

and reduce demand. And it has been pointed out—— 

Ms. WATERS. But even with the price that you pay for raw mate- rials, you made $40.6 billion in 2007. 

Mr. SIMON. We did not make $40.6 billion on the part of the 

business where we bought the crude and processed—— 

Ms. WATERS. But it doesn’t matter, because in the final analysis, 

whether you do your accounting so that you separate out how much 

you are spending on one aspect of it, like your raw materials, or 

in other ways, the bottom line is $40.6 billion. That is what you 

made. That is what your overall profit was. 

Mr. SIMON. No. And I understand where you are coming from, 

but each one of our pieces of the business has to stand on its own 

or we go out of that business. 

We could be out of the refining business. We could be out of the 

marketing business and just sell the crude and gas, and natural 

gas—— 

Ms. WATERS. Well, the business decision would be if you can contract with somebody who can refine it for you cheaper, you ought 

to do that and you would do that. 

Mr. SIMON. And if we could do that, we would. In fact—— 

Ms. WATERS. You would. 

Mr. SIMON [continuing]. In some areas, in the retail business 

now, we are actually moving distributors—— 

Ms. WATERS. Why didn’t you take that part of that $40.6 billion 

and expand refinery capacity? 

Mr. SIMON. We have expanded refining capacity at a faster rate 

than demand has grown. There is no shortage of products today in 

the United States. 

Ms. WATERS. Well, why don’t you just keep on expanding your 

refining capacity? That brings down the cost, is that right? 

Mr. SIMON. We are expanding our refining capacity at a rate 

faster than demand is growing and if you look at the refining and 

189 

marketing business over the next several years, the outlook is we 

are going to be back into a surplus situation here. 

And so the refining and marketing business will be surplus. 

What I cannot tell you is what is going to happen to the raw material. But the outlook in refining and marketing is we are going to 

be in a surplus situation. It is going to be a sloppy market. That 

is the outlook. 

Now, whether that materializes, I don’t—that is our outlook and 

that is other people’s outlook. It is the price of the raw materials 

that we have to buy to produce those products. 

Ms. WATERS. I understand that very, very much. 

Let me say this. I am considered a liberal. I am one of the persons who want to protect the environment, I want to do good for 

a lot of poor people, I want to make opportunities available, because I am one of those liberals who think the government has a 

responsibility to come to the aid of the people. Now, as I watch gas go up past $4 per gallon at the pump and 

I watch people who are pawning their possessions in order to purchase gas and people on fixed incomes who can’t get to work, who 

can’t get their children to school, I am prepared to talk about doing 

whatever it is necessary to keep that from continuing to climb. 

I am not going to be happy or sympathetic to the oil companies at all while people cannot afford to pay $5 a gallon for gas and you 

are making $40 billion, collectively, $123 billion in profits. You 

have got to know that. 

And so Mr. Hofmeister says we can bring down the cost of this 

if you just let us drill where we want to drill. What guarantees are 

you going to give this liberal about how that will reduce the cost 

of gasoline at the pump if we let you drill where you say you want 

to drill? 

What guarantees do you give me? 

Mr. HOFMEISTER. Congresswoman, it has worked for 100 years in 

our industry that wherever there was adequate supply, there were 

reasonable prices. This price escalation is being driven not just by 

U.S. lack of supply, but global lack of supply. 

Ms. WATERS. Point to the areas where you would like to drill, 

how much you would get from that drilling, over what period of 

time, and tell me how much that is going to reduce the cost of gas 

at the pump. 

Mr. HOFMEISTER. Well, we are actually pursuing areas where we 

are allowed to drill and we are being stopped by lawsuits from 

doing that. 

Ms. WATERS. I don’t want to hear that. I am saying let’s go to 

your idea. 

Mr. HOFMEISTER. Let’s go first to the eastern Gulf of Mexico. 

Ms. WATERS. How much can you get? 

Mr. HOFMEISTER. Don’t know yet. We have to have a seismic 

analysis, a seismic survey, but we are not even permitted to do 

that—— 

Ms. WATERS. Tell me where you know that there are gas deposits 

or oil deposits that would reduce the cost of the gas at the pump. 

Tell me where you know it. 

Mr. HOFMEISTER. We have a general knowledge that off the middle Atlantic states, there are prospective opportunities. 

190 

Ms. WATERS. How much do you think you can get out of there? 

Mr. HOFMEISTER. Don’t know yet. We would have to do an awful 

lot of analysis to be able to identify—— 

Ms. WATERS. So after all is said and done, there is nothing that 

you can tell us here—— 

Mr. HOFMEISTER. But in the meanwhile—— 

Ms. WATERS [continuing]. About how you could guarantee a reduction of the price at the pump if you were given the ability to 

go and drill where you say there is oil deposits. 

Mr. HOFMEISTER. On the contrary, I can guarantee to the American people, because of the inaction of the United States Congress, 

ever increasing prices, unless the demand comes down, and the $5 

will look like a very low price in the years to come if we are prohibited from finding new reserves, new opportunities to increase supplies. 

Ms. WATERS. Well, everything that I see shows me that there are 

still areas under lease that have not been explored by you. I see 

that you have the money to, as you say, increase refinery capacity. 

You have the money for exploration and investment. 

And I think that you could do a better job than you are doing. 

Because the American people over the years keep absorbing this 

price, they cry and they scream and somehow they continue to absorb it, while wages are going down or at least are stagnant. 

There is going to come a point in time when it is not going to 

work and the American people are not going to be able to absorb 

$5, $6, $7, $8, $9, $10 gasoline. 

And guess what? This liberal, who would be willing to entertain 

drilling in places that are protected now in the interest of protecting my constituents and the American people, don’t feel so good 

if you don’t take some steps now to guarantee us that you could, 

in fact, reduce the price at the pump. 

And guess what this liberal would be all about? This liberal 

would be all about socializing—would be about basically taking 

over and the government running all of your companies, and that, 

I tell you, is an extreme position. 

Mr. HOFMEISTER. Venezuela is a nationalized—what was a free 

market has been nationalized and we see what is happening under 

the government’s leadership in Venezuela. 

Ms. WATERS. Yes, but you are still working with them. You are 

over there with them. 

Mr. HOFMEISTER. We are. 

Ms. WATERS. And you are buying from them—— 

Mr. HOFMEISTER. We would like to work—— 

Ms. WATERS. And you are supporting them. 

Mr. HOFMEISTER [continuing]. With this Democratic government 

in the United States. 

Ms. WATERS. So I don’t want to hear—I don’t want to hear about 

Venezuela. They are your friend. You don’t care what they do as 

long as you are able to get that oil from them. 

So don’t talk about what they are doing. What I am telling you 

is you don’t want to see that happen in the United States. You 

guys have got to get off of this. You cannot keep coming in here 

with all of these profits and tell us you can’t give us any guaranVerDate Aug 31 2005 17:06 May 14, 2009 Jkt 000000 PO 00000 Frm 00194 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\052208\42511.000 HJUD1 PsN: DOUGA
191 

tees, even if the liberals are convinced that you should go into some 

of the protected areas. 

What do you expect us to do? 

Mr. SIMON. Congresswoman, I don’t think any of us can guarantee what is going to happen in the future. But what I think we 

can guarantee you is that if we have access to those supplies, it 

will put a downward pressure on prices, whatever they are at that 

point in time. 

I wish there were some silver bullets here. I wish there were 

something that we could tell you today that if you did or we did 

tomorrow would make a difference. 

The issue we have got and the challenge we have got is that ours 

is a long-term business. The things we are doing today don’t really 

show up until 5 or 6 years. 

But what we can do is we can work to help our consumers to use 

less of our product, to take some of the burden off of them. And, 

for example, we are working on technology and we already have 

technologies available right now that we can that we can show to 

our consumers to help them use less of our product, to take the cost 

burden off of them, and also put downward pressure on prices. 

If you applied those in the vehicle fleet today, it would save 5 billion gallons of motor gasoline, and that is a significant amount. 

And these are things like this: when you look at we have a new 

tire inner liner which, if applied, keeps tires inflated. Over a billion 

gallons of gasoline every year are consumed because consumers’ 

tires are under inflated. 

Ms. WATERS. So how do you advertise that? How do you—— 

Mr. SIMON. We are advertising. We are putting it in our op-eds. 

We are working with tire manufacturers. We are sending this out 

to our consumers. We also have advanced economy engine oils now. 

Ms. WATERS. Anybody on this Committee heard of any of this 

stuff? 

Mr. SIMON. Well, I haven’t had an opportunity to say it yet. 

Ms. WATERS. But if you advertised it, we should have seen it 

somewhere. 

Mr. SIMON. Oh, no, it—— 

Ms. WATERS. We should have learned about it somewhere. 

Mr. SIMON. Well, it is advertised and we have Mobil One advanced economy engine oil, which improves the efficiency and that 

is now available and we started that in April. And if you put these 

into effect, it can have a big effect. 

That can have an immediate effect. These other things we are 

talking about are extremely important—— 

Ms. WATERS. How much money do you spend on advertising 

that? 

Mr. SIMON. Pardon me? 

Ms. WATERS. How much money do you spend on advertising 

that? 

Mr. SIMON. I have that now. That is that $274 million I was talking about earlier. 

Ms. WATERS. Well, no, most of that goes to the—— 

Mr. SIMON. I agree with you. I agree with you. 

Ms. WATERS [continuing]. The football games and stuff. You 

know what I am saying. That $275 million doesn’t include that. 

192 

Let me just say—— 

Mr. SIMON. It is about $100 million that we are—but, I mean, 

we—— 

Ms. WATERS. Gentlemen, the proof of the pudding is in the eating. All we know is this. You have a very complicated business. 

You make a lot of money. The profits are there. You are compensated well and you may well deserve it, I don’t know. 

But I know our constituents are hurting. They are hurting and, 

again, you have been able to ride this wave of increases for a number of years and people have absorbed those costs and I know that 

in the background, people are thinking, well, you know, if it goes 

up to $5, they will get used to it. If it goes up to $6, they will find 

a way to deal with it. 

But I don’t think so. I don’t think so. And I want to tell you I 

don’t see any effort to try and talk about how you either reduce 

your profits or how you utilize the space that you already have 

leased to do the investment to get the products out of the ground. 

I don’t know how you use your influence sitting with the Saudi 

Arabian Business Council to try to influence the oil cartel. I don’t 

know any of that. 

But I know one thing. Whatever you are doing, you are not helping the American people to be able to have access to a product that 

we have all learned to depend on and a product that people are 

willing not to have to depend on if there were legitimate, sustainable alternatives to gas as we know it. 

And so when you come here today and you put up with all of 

this, it is because, as legislators, we cannot abide this any longer. 

We cannot continue to do this. 

And so I am hopeful that you will come up with something that 

will help us to reduce the price of that gas at the pump. 

I am really hopeful that—Ms. Lee talks about, I don’t know, 

interacting with you, talking with you. I don’t need to do all of 

that. I just need for you to get it done. 

We are not going to learn—we don’t know how to do that. You 

know how to do that. And so I am hopeful that you will do that. 

I thank you for being here today. If you feel a little bit beaten 

up on, we all feel beaten up on. So just share the pain. We get our 

behinds kicked every day in our districts about what is going on. 

So, again, I thank you for the work that you do, the volunteerism 

and the help that you give with some of our nonprofits and the 

work that you do, but for that father that we are trying to train 

at the Urban League, it doesn’t do any good if he can’t get to work 

because he doesn’t have any money for gas. 

I yield back. Thank you. 

Mr. CONYERS. I thank the gentlelady. 

Does the distinguished gentleman from Tennessee want to yield 

to the gentlelady to his right? 

Mr. COHEN. Can I ask a couple of questions, Mr. Chairman, first? 

Ms. SUTTON. I will wait. 

Mr. COHEN. I will yield. 

Ms. SUTTON. I have hung in here this long. I certainly am not 

going to go anywhere. I thank the Chairman and I thank my colleague from Tennessee. 

193 

As has been mentioned here, obviously, this is an Antitrust Task 

Force and we are looking about probing collusion and a while ago, 

in the first round of questions, I asked you guys questions about 

whether or not you or any of the officials from your organizations 

had participated in the task force meetings, the energy task force 

meetings that Dick Cheney, Vice President Cheney held early in 

the Bush administration. 

And I just want to make sure that I understood what you all 

said, because this is great, but this hearing is taking place in the 

light of day so that the American people can have access to your 

answers to these questions and hear this exchange and see what 

is going on. 

When I asked you that question, I believe, Mr. Simon, and I 

want you to correct me if I am wrong, as we go down the line here, 

Mr. Simon, you said you didn’t participate and your organization 

did not participate. Is that correct? 

Mr. SIMON. That is correct. 

Ms. SUTTON. Mr. Malone, you said that your chief executive officer participated, but not necessarily in the task force, just had a 

meeting with the Administration. Is that correct? 

Mr. MALONE. Yes. And I have since been informed we also had 

one meeting with the task force from my company. So, yes, we did 

meet with the task force. 

Ms. SUTTON. We will come back to that in a minute, but thank 

you for that clarification. 

And, Mr. Lowe, you said that no one from your organization had 

participated, correct? 

And, Mr. Robertson, if I recall correctly, you said that while you 

didn’t participate, you sent some detailed policy recommendations 

or something to that effect, correct, and also to Congress? 

Mr. ROBERTSON. I said we did not participate and I said when 

the new Administration came in, we sent a letter to the President 

of the United States and a copy to some Members of Congress, both 

sides of the aisle, with some detailed recommendations on this impending issue that we have of the shortage of product in the world. 

Ms. SUTTON. That is what I recollect. Okay. 

And, Mr. Hofmeister, you said that your company did not participate, correct? 

Mr. HOFMEISTER. That is correct. 

Ms. SUTTON. Okay. The reason why I am perplexed and a little 

bit dismayed is as I look back and, as I said, it is so important to 

do this stuff in the light of day, way back in 2005, I am looking 

at an article from The Washington Post headline ‘‘Document Says 

Oil Chiefs Met With Cheney Task Force.’’ 

And I will enter this into the record, Mr. Chairman. 

Mr. CONYERS. Without objection. 

[The information referred to follows:] 

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Post-2.eps
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Post-3.eps
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Ms. SUTTON. Thank you. ‘‘A document obtained this week by the 

Washington Post shows that officials from Exxon Mobil Corporation, Conoco, before its merger with Phillips, Shell Oil Company, 

and BP America met in the White House complex with Cheney aids 

who are developing a national energy policy, parts of which became 

law and parts of which are still being debated,’’ and, of course, this 

was, again, an article that is a couple of years old. 

And on the point of Chevron, it says, ‘‘Chevron was not named 

in the White House document, but the Government Accountability 

Office has found that Chevron was one of several companies that 

gave detailed energy policy recommendations,’’ and that is consistent, I believe, with what you said, ‘‘to the task force.’’ 

And on BP, I think that maybe this is what you are referring to, 

‘‘Cheney has a separate meeting with John Brown, BP’s chief executive, according to a person familiar with the task force work.’’ 

I am concerned about what this says in relation to everyone, 

frankly, but Chevron, because I do have the underlying document 

here, too, about who was at the task force meeting and it is clear 

to me, it says Exxon, Jim Rouse. Do you know who Jim Rouse is? 

Mr. SIMON. Jim Rouse used to have our Washington office here. 

Ms. SUTTON. Jim Rouse obviously participated in this. Going on 

to BP, Mr. Malone, it actually says that you participated in a task 

force meeting. 

Mr. MALONE. That is not correct. I never met with the task force 

nor did I meet with—I met with a staff member after the task force 

report was written. 

Mr. SIMON. And I want to go on record as saying Mr. Rouse did 

not meet with the task force and if that is reported, that is inaccurate. 

Ms. SUTTON. Well, again, I am going to put this into the record 

and I would love to have you look at it, because it says that Mr. 

Rouse actually was there February 14, 12 p.m. 

With respect to BP, there were four people listed on this document, Bob Malone, Peter Davies, Deb Beaubien, and Graham Barr. 

Mr. CONYERS. Without objection, it is entered into the record. 

[The information referred to follows:] 

198 


Post1-1.eps
199 


Post1-2.eps
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Post1-3.eps
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Ms. SUTTON. With respect to Shell Oil, Sir Mark Moody-Stuart, 

Steven Miller. Do you know them? 

Mr. HOFMEISTER. Yes. And I said in my earlier testimony that 

there were meetings in the White House with my predecessors in 

the new Administration, but that had nothing to do with any task 

force. 

Ms. SUTTON. Okay. 

Mr. SIMON. And I think that might be the difference here, Congresswoman, is that there are meetings that take place between us 

and government official, but not in the capacity of that task force. 

Ms. SUTTON. So we are talking about semantics here. 

Mr. SIMON. No, no. 

Ms. SUTTON. What is called a task force and what isn’t. 

Mr. SIMON. I don’t think we are talking about semantics at all. 

I think what is referenced there is Mr. Rouse had presented our 

energy outlook, which was public knowledge. It was out in the public. It was shared with the press. It is shared with Congress. 

There was no intention there to try to influence policy in that 

task force. 

Ms. SUTTON. Okay. Well, I would disagree that that is the way 

that it appears to either certain Members of Congress, certainly, or 

the American people. And what this is entitled is ‘‘Energy Task 

Force Meetings Participants,’’ this document. 

So if you are telling me that this is different than the other 

meetings that you had and that you were having meetings, but we 

are calling them different things, and that is how you get all of this 

information to work out together in a way that, in some minds, 

might appear consistent, it just doesn’t look consistent to me and 

I am sure it doesn’t look consistent to a lot of people and the American public. 

And it is extraordinarily troubling, as we see this and then we 

see gas prices where they are and we have the answers during this 

hearing which has been, obviously, very long and I am sure not all 

that pleasant for you, certainly not all that pleasant for us, and 

certainly not all that pleasant for the American people given the 

subject matter of what we are doing here today. 

I just want to do this one more time. 

Mr. Simon, did somebody from Exxon Mobil meet in the White 

House as part of the Vice President’s energy task force or in other 

meetings that were going on simultaneously in the same time period early in the Bush administration to discuss energy policy? 

Mr. SIMON. We did not have any meeting in relationship to that 

task force. 

Ms. SUTTON. Did you hear my question? Or any other meetings 

that were going on—— 

Mr. SIMON. We had meetings all the time with government officials. 

Ms. SUTTON. In the White House during the early days of the 

Bush administration. 

Mr. SIMON. I think our Chairman had a meeting with Vice President Cheney at one time, but it wasn’t in connection with that task 

force. That is what I am trying to say, Congresswoman. 

Ms. SUTTON. Was there a separate subject other than energy policy and what the views of Exxon Mobil might be? 

206 

Mr. SIMON. It was to share a public document that is our energy 

outlook that we share with everybody every year. 

Ms. SUTTON. And that was all, it was just to—— 

Mr. SIMON. That is it. 

Ms. SUTTON [continuing]. Hand them a copy of that document 

and that was it. 

Mr. SIMON. That was it. 

Ms. SUTTON. How about you, Mr. Malone? Do you recall a meeting? 

Mr. MALONE. No, I do. Again, I was not there when our former 

chief executive had the meeting. It was not with the Cheney task 

force, but it was during that time period of your question. 

Our meeting that I was present at was not with the Cheney task 

force, but it was with a staff member. Peter Davies is our global 

chief economist. We were presenting our statistical review material 

with him. 

Ms. SUTTON. And the staff member that you met with was to the 

energy task force staff? 

Mr. MALONE. No. It was not a member of the energy task force. 

Ms. SUTTON. Just a member of the Vice President’s staff. 

Mr. MALONE. Correct. 

Ms. SUTTON. Sir? 

Mr. LOWE. No one from Phillips Petroleum Company at the time 

or, subsequent to that, ConocoPhillips. I think I have seen references to Conoco representatives, but I am not aware of those. 

Ms. SUTTON. Mr. Robertson, anything to add? 

Mr. ROBERTSON. I stand by what I have already said. 

Ms. SUTTON. Mr. Hofmeister? 

Mr. HOFMEISTER. Sir Mark Moody-Stuart and Steve Miller, in 

the normal course of business, did have discussions, as I have testified, and, subsequent to that, I have had meetings with my boss 

with the vice president. 

I think that is good business and I know of no prohibition in law 

that would prevent members of a company from meeting with elected officials in the White House. 

Ms. SUTTON. Thank you, sir. 

I yield back. 

Mr. CONYERS. The Chair recognizes the very polite gentleman 

from Tennessee, who has yielded to two Congresswomen in one 

afternoon. 

Mr. COHEN. Thank you, Mr. Chairman. I appreciate that description and, yes, I did yield to two women. I want that to be noted 

well. 

Just a couple of questions. Do any of you all—let me start with 

Mr. Hofmeister, just in general. 

Do you have any idea how much oil we use every day or in a 

year, what percentage of oil we use, that is consumed in this country, what percentage might be the oil that we use in the military 

in Iraq? 

Mr. HOFMEISTER. Well, I know that Americans use 10,000 gallons of oil a second in this country, which is about 20 million barrels a day. 

The amount of oil consumed in Iraq, I have no idea. 

Mr. COHEN. Anybody have any idea, any ballpark figure? No. 

207 

Do any of you drill any oil in Iraq? Nobody drills in Iraq. 

Do you know who is drilling in Iraq? 

Mr. Robertson? 

Mr. ROBERTSON. Well, the Iraqi oil company is a great big operation and they drill in Iraq. 

Mr. COHEN. Do you have any idea how much they drill? 

Mr. ROBERTSON. No. But I think they produce about—it is obviously been varying, but I think the produce up to 2 million barrels 

a day. 

Mr. SIMON. It is about 2.2 million barrels a day. 

Mr. COHEN. And where is that going? Is it being used there in 

Iraq, do you have any idea? 

Mr. SIMON. No. I think a good bit of that is being exported. 

Mr. COHEN. It is being exported. And so they would be making, 

theoretically, a lot of money on what they are making in oil, as you 

are, as well, the Iraqi government. 

Mr. SIMON. I have no way of knowing what their balance is or 

how much they are making on that. 

Mr. COHEN. But supply and demand is what determines what 

they are going to be making, isn’t that correct? And supply is down 

and demand is up. So they must be doing pretty good. 

Mr. SIMON. I would believe they would be getting market price 

for that. 

Mr. COHEN. You all are getting a whole lot of criticism from us 

and from the American public, but don’t you think a whole lot of 

that criticism that the American public has got in outrage about 

the price of oil should be directed toward the Middle Eastern 

sheiks and Saudis and the people we spend all the money and lives 

going over there? 

Mr. SIMON. No, I don’t believe that at all. When you look at our 

dependence on imports, again, about 60 percent of our petroleum 

consumed in this country is on imports. 

When you look at where that comes from, only about 15 percent 

of our imports come from the Middle East. But the rest of it comes 

from other parts of the world and when you look at the market 

today in contrast to what I think some people would believe, it is 

well supplied. 

We are not short of supplies. We have 35 refineries around the 

world and there is not a single one of those that is having any trouble finding the crude and feed stocks to fill up those refineries. 

So we can be angry about it and we can frustrated about it, I 

understand that, but I don’t think we point the finger at them. It 

is a world market situation. 

Mr. COHEN. Don’t they help set the price? 

Mr. SIMON. I think the market sets the price. 

Mr. COHEN. Okay. That is just a disagreement, I guess, we have. 

Let me ask you this. A few years ago, Mr. Raymond made $400 

million 1 year, Mr. Simon. 

Now, is that money you all have already paid out or are we still 

paying his $400 million for that year? 

Mr. SIMON. Well, we have the stock programs that we have pay 

out over 5 and 10 years. So all of that has not even been vested 

yet. So that is still being paid out. 

208 

And I think that was a misconception that he received $400 million in cash the year that he retired, and that just wasn’t accurate 

at all. 

About 10 percent of that, a little over 10 percent was actually applied to the year, that year, and much of that, about 75 percent, 

didn’t even pay out for 5 to 10 years. 

A lot of the rest of it was what he had earned over the previous 

10 years, which hadn’t vested yet, and then he had a pension that 

was calculated the same way that everybody else’s pension is calculated in our corporation. 

And people keep throwing that $400 million number up and, 

quite frankly, it is just misrepresented, and I think quite unfair. 

Mr. COHEN. And just for the record, what was his position? 

Mr. SIMON. He was the chairman of Exxon Mobil. 

Mr. COHEN. And he left in what year? 

Mr. SIMON. He left in 2005. 

Mr. COHEN. And he did get a package, though, however, if it is 

5 years or 6 years. The package, apparently $400 million, seems to 

be accepted. 

Mr. SIMON. No, that is not accurate. It wasn’t a package. It 

wasn’t a package. He received a pension of about $98 million, 

which was calculated based on his years of service and a formula 

that is applied to everyone else. That is not a package. 

He received compensation, cash compensation in that year. The 

total amount of compensation in that year was $42 million out of 

the $400 million that you are talking about. 

Seventy-five percent of that didn’t pay out for 5 or 10 years into 

the future. It was applied to a number of years. In that year, it was 

$42 million, not $400 million. 

Mr. COHEN. Well, to be honest with you, I think $42 million is— 

even if you are a baseball player or a rock star or whatever—— 

Mr. SIMON. Well, I understand that, but I do think—I just wanted to clarify that it wasn’t all in 1 year and was not a package. 

Mr. COHEN. Has Exxon done anything to assure that that won’t 

happen again, that that kind of payout package won’t happen? 

Have you reformed your pension package in any way or your compensation? 

Mr. SIMON. Again, it was not a package. It was a pension calculated the same way as everybody else’s is, and we have not modified that. 

Mr. COHEN. How was his pension calculated? 

Mr. SIMON. It is based on the years of service and then a multiple and I would be happy to give you that formula, if you would 

like it. It is calculated the same way mine is going to be calculated 

and everyone else. 

Mr. COHEN. Congratulations. 

Mr. SIMON. Believe it, it won’t be that high for me, but—— 

Mr. COHEN. It will be comfortable. 

Mr. SIMON. I am not saying—I am not underpaid. I am well paid, 

I am well compensated, and I understand that. But, again, when 

you look at our compensation and you look at other people in comparable positions of responsibility, an independent committee of the 

board determines that, looking outside, compensating our execuVerDate Aug 31 2005 17:06 May 14, 2009 Jkt 000000 PO 00000 Frm 00212 Fmt 6633 Sfmt 6601 H:\WORK\ATRUST3\052208\42511.000 HJUD1 PsN: DOUGA
209 

tives commensurate with what others are being compensated in 

similar positions. 

Mr. COHEN. What is the God pod? 

Mr. SIMON. The God pod? 

Mr. COHEN. Yes. 

Mr. SIMON. I am not sure. 

Mr. COHEN. It is an Exxon term, isn’t it? 

Mr. SIMON. I am not familiar with it. I guess I am not a part 

of it, I don’t know. 

Mr. COHEN. You are not a part of it. I think I saw something, maybe it is here. It is suggested that $50.6 million at 

ConocoPhillips and the gentleman from ConocoPhillips here, Mr. 

Lowe, you are the vice president, et cetera. 

This was the figure for the chief executive. Do you know what 

the chief executive at ConocoPhillips made last year? 

Mr. LOWE. No. I know it is on page 36 of the proxy, though, because I looked at my compensation last night on page 36 of the 

proxy. But I don’t recall what his compensation was. 

Mr. COHEN. Whatever they are, I think we have made our point 

through the day, Mr. Chairman, that the compensation—— 

Ms. JACKSON LEE. Would the gentleman yield? 

Mr. COHEN [continuing]. Compensation has been extremely good, 

the profits have gone up extremely high. 

I still have a problem understanding why the profits have to be 

that great if you are just saying that it is just supply and demand. 

Somewhere there is profit and the profit is paid for at the pump 

by the consumer, and that is what has got people and the airlines 

and business and folks buying food where the food prices have gone 

up. 

The price of gas has affected the entire economy and really we 

have to do something other than just the idea of drill, drill, drill. 

Ms. JACKSON LEE. Would the gentleman yield for a moment? 

Mr. COHEN. I will yield to the lady. 

Ms. JACKSON LEE. The crux of what we are all trying to get to 

is if we give you more, if we give you the drilling off of the Gulf, 

if there is some consensus between Mr. Keller and myself or Mr. 

Keller and Mr. Cohen from Tennessee that drilling can occur off 

the coastline of Florida, we are perplexed as to why then we can’t 

match that drilling, what you are asking us for, one of those points 

Mr. Lowe made, to a lower price of gasoline or gas at the pump. 

Then the second part of that is there is a war in Iraq. Has the 

war in Iraq helped generate a greater opportunity for access to resources to any of your companies and have the policies in Iraq, if 

you will, been such that it creates opportunities for American companies? 

Start with you, Mr. Simon, if the gentleman would yield for their 

answers. 

Mr. SIMON. I apologize, Congresswoman, I forget the first question. 

Ms. JACKSON LEE. The first one was if we give you the—if Republicans and Democrats, whoever agrees with drilling come together and say you now can go off the coast of Florida, I am compromising, I think ANWR doesn’t generate much, somebody said it 

lowers the price $0.01 if you go into ANWR. 

210 

But if you go off the coast of Florida, OCS off the coast of Florida 

and your supply goes up, are you going to tell me that we can get 

a lower price at the pump? 

And in Iraq, has the Iraq war contributed to better access to energies in Iraq? Is their policy such that you are getting a greater 

supply potentially out of Iraq? 

Mr. SIMON. In terms of access, first of all, I do not agree with 

the $0.01 associated with ANWR. I don’t know where that came 

from. 

Ms. JACKSON LEE. It is documented here and I don’t want to pursue that, but I believe it is 16 billion, I think, 16 billion barrels and 

they say over 20 years, it might lower it by $0.01. 

Mr. SIMON. But when you look at—— 

Ms. JACKSON LEE. There are 83 billion elsewhere. So let’s talk 

about the OCS. 

Mr. SIMON. When you look at what is off limits today, and I have 

seen numbers of 30 billion barrels of oil and 125 trillion cubic feet 

of gas, what I think we can assure you is, if given access to that, 

it will have downward pressure on the price paid at the pump. 

What I cannot tell you or guarantee you is it will be lower or 

higher than where it is today, but I can assure you it would be 

lower than it would otherwise be if we are not given access. That 

is what we all can say, because it would add plus supplies and plus 

supplies are going to put downward pressure on prices, because it 

puts downward pressure on the crude price, which today constitutes about 75 percent of the price that your constituents and 

our customers are paying at the pump. 

In terms of Iraq, I am not aware—I am not in a position to say 

whether it is helped or hurt us, what the policy is. I will say that 

we are currently in discussions of a technical agreement with the 

Iraqis, which we are in pursuit of. We will see how that plays out. 

Ms. JACKSON LEE. Mr. Malone? 

Mr. MALONE. Just to your last question, we are in the same 

place. It is competitive and we are having technical discussions. 

Ms. JACKSON LEE. But has the Iraq war contributed to your ability to get access to those resources? 

Mr. MALONE. Not that I am aware of. 

Ms. JACKSON LEE. And would the offshore Florida addition—you 

could not see a vision of lower prices because of the increased supply? 

Mr. MALONE. Again, it would clearly put downward pressure on 

the crude price with additional supply in the market, absolutely. 

Ms. JACKSON LEE. That is a lower price answer. You have just 

given me a potential lower price at the pump. 

Mr. MALONE. Yes. 

Ms. JACKSON LEE. A potential lower price at the pump because 

of that. And I have only said offshore Florida, by the way. I just 

wanted to make sure. 

Mr. Lowe? 

Thank the gentleman for yielding. 

Mr. LOWE. Getting access to the outer continental shelf would be 

extremely well received. It would generate hundreds of millions of 

dollars in lease sales and it would bring added supplies. 

211 

Iraq, while the opportunities are not there today, the resource 

potential there is enormous and if we would have access to Iraq to 

develop the oil there, that would be very substantial in helping. 

Ms. JACKSON LEE. But you would not—are you suggesting the 

war helps you get access? 

Mr. LOWE. At this point, we are in the same boat as everyone 

else. We are trying to look at signing technical agreements to help 

the Iraqis get their—— 

Ms. JACKSON LEE. I understand. But did the war contribute to 

helping you get access? 

Mr. LOWE. Well, we had no access before. 

Ms. JACKSON LEE. So you would have supported the war in order 

to get access to oil. 

Mr. LOWE. That is putting words in my mouth. I think that is 

inappropriate. No. All I am saying is—— 

Ms. JACKSON LEE. I am just asking if that is what you are saying. 

Mr. LOWE. No. What I am saying is we had no access to Iraq before and there is tremendous resource there, whoever develops it. 

There is tremendous resource there that could add to supply. 

Ms. JACKSON LEE. And did you tell me that the amount would 

go down at the pump if you had access in OCS off the coast of Florida? 

Mr. LOWE. That is correct. 

Ms. JACKSON LEE. Mr. Robertson? 

Mr. ROBERTSON. What I can tell you about Florida is I don’t 

know whether—I think it would be a great benefit to the America 

people to drill offshore of Florida. 

We have drilled offshore of Florida and we found natural gas. I 

believe that, from my knowledge, it is more natural gas offshore of 

Florida than oil. 

If we found oil, it would have the impact that the gentleman 

said. It would reduce the world market price of oil, I think. 

If we found gas, the same people that are paying the gasoline 

bills are also buying electricity and if we could produce gas offshore 

of Florida, which we plan to do, that would substitute for LNG that 

is being brought in from the rest of the world. 

The United States, natural gas market actually is pretty isolated. 

And so additional supplies in the U.S. will bring prices down. 

Bringing LNG from Angola is very expensive. So drilling offshore 

of Florida, finding natural gas would bring down electricity bills in 

Florida, which is the same kinds of consumers we are talking about 

that are paying for gasoline. 

So I think in both cases, in oil, it is a world market, it would depress the world market. In gas, it is much more of an American 

market and that would have a bigger impact and that would be 

very important. 

So drilling offshore of Florida would bring jobs to the United 

States, lots of them, would bring resources to the United States in 

the gas market and if we found oil, it would certainly help depress 

the price of gasoline. 

Ms. JACKSON LEE. And that all would be based on an agreement. 

You couldn’t go there if we didn’t get a consensus in this Congress 

and in the population. 

212 

Mr. ROBERTSON. Well, everywhere we go, we have to the agreement of the community before we can do it. 

Ms. JACKSON LEE. And Iraq? 

Mr. ROBERTSON. In Iraq, like everybody else, we are in discussions with the Iraqis in terms of technical support. The Iraqis, if 

and when they pass a petroleum law and allow people to compete 

for access there, then if the security situation is adequate, Chevron 

will certainly see whether we can do something there. 

I have no idea what the circumstances would have been had 

there not been a war and that is all I can say. That is all I know 

about that circumstance. 

Ms. JACKSON LEE. Mr. Hofmeister? 

Mr. HOFMEISTER. With respect to the potential of more access in 

the eastern Gulf of Mexico, I would stand by my prior statements 

that more supply would bring less pressure on future oil prices, 

and I believe that would have beneficial impact across the board, 

to the whole global supply chain, not only to the American. 

With respect to Iraq, Shell was in Iraq for many, many years, 

until the Iraqi government at the time nationalized the oil company in Iraq. Shell was asked to leave. We did leave. 

There is a new government today in Iraq. If that government invited us to participate in the oil industry, I think Shell would look 

forward to that opportunity. 

Ms. JACKSON LEE. I thank the gentleman for yielding. 

Mr. COHEN. Thank you. 

Let me just ask, how many of you all do business with Halliburton? All of you? 

Mr. SIMON. I am sure we do, as well. 

Mr. COHEN. What does Halliburton do for you all? 

Mr. Lowe? 

Mr. LOWE. They provide technical services. 

Mr. COHEN. How much do you think your contract with Halliburton is a year, approximately? 

Mr. LOWE. I don’t know for sure, but it would be a few hundred 

million dollars, I would guess. 

Mr. COHEN. Were you there when Vice President Cheney was involved with Halliburton? Were you with your company? 

Mr. LOWE. I was not part of the upstream part of the business. 

Mr. COHEN. Anybody part of the industry when Vice President 

Cheney—you were? 

Mr. SIMON. I was part of the industry, but I was not in the upstream part of the business. 

Mr. COHEN. You weren’t. 

Mr. Robertson, you were. How much business do you all do a 

year with Halliburton? 

Mr. ROBERTSON. I couldn’t tell you the exact number, but—— 

Mr. COHEN. Give or take. 

Mr. ROBERTSON [continuing]. I am sure it is hundreds of millions 

of dollars. 

Mr. COHEN. Hundreds of millions. And Mr. Cheney was involved 

at that time. 

Mr. ROBERTSON. He was the CEO of the company. 

Mr. COHEN. Right. So you dealt with him a bit. 

Mr. ROBERTSON. I don’t deal with him. 

213 

Mr. COHEN. You didn’t. Okay. We don’t either, but—— 

Mr. ROBERTSON. But we deal with Halliburton every day in hundreds of places around the world and certainly have dealt with him 

when he was the chairman and CEO of the company. 

Mr. COHEN. With the price of oil going up, the crude oil and the 

profits of the oil companies going up, does Halliburton necessarily 

make more money as part of this whole scheme? 

Scheme is the word, but—— 

Mr. ROBERTSON. Halliburton sells services. So to the extent that 

we contract to Halliburton to do oil field services, to help us 

produce wells, to help us in a myriad of different services, for every 

service they provide us, we pay them a contracted fee. 

So if there is more activity, if we are spending more capital to 

find more barrels of oil or TCFs of gas around the world and there 

is more production, Halliburton, certainly, that is their business. 

Mr. COHEN. So if we drill off of Florida or we drill in the ANWR, 

Halliburton is going to make a lot of money, aren’t they? 

Mr. ROBERTSON. Well, I don’t know whether it is going to be Halliburton. Service companies, whether it is Schlumberger or Halliburton or Baker Hughes or a myriad of others, they will compete 

for the business. 

Mr. COHEN. Is Halliburton the biggest of those three companies? 

Mr. ROBERTSON. No. 

Mr. COHEN. They are not. 

Mr. ROBERTSON. No. 

Mr. COHEN. But they are up there. 

Mr. ROBERTSON. Yes, they are up there, but they are not the biggest. 

Mr. COHEN. It is just kind of hard to believe, it is almost surreal 

that we are defending the salary and saying that this man didn’t 

make $400 million, he only made $42 million. 

$42 million comes to over $100,000 a day, even if you worked on 

Saturday and Sunday—$100,000 a day. 

There is something wrong with that type of salary and even if it is just $42 million, it is obscene when people are having to pay 

$4 a gallon. The whole salaries are just obscene. 

Does Halliburton do anything in renewables at all? Do you all 

have any idea? Are they strictly oil? 

Mr. ROBERTSON. I am certainly not aware of whether they do or 

do not, but, again, their business is a service business. They provide services on request and that is more of their business than 

producing a product by itself. 

Mr. COHEN. Who did Mr. O’Reilly work with? 

Mr. ROBERTSON. Who did he work with? 

Mr. COHEN. Is he still the CEO? 

Mr. ROBERTSON. Yes. 

Mr. COHEN. And what was his salary last year? 

Mr. ROBERTSON. Well, his salary, I just described my salary of 

$2.5 million in salary and bonuses. Last year, it was $5.2 million 

in salary and bonus. 

Mr. COHEN. O’Reilly’s? 

Mr. ROBERTSON. And on top of that, he got some options and performance shares that will be valuable depending on the performance of the company. 

214 

Mr. COHEN. When I read in the New York Times that maybe his salary was $37 million, when you put it all together, in 2006, would 

that be accurate? 

Mr. ROBERTSON. That number, $31 million, is the number in the 

proxy, but it includes appreciation of awards that he got previously. 

Mr. COHEN. And that is, again, about $100,000 a day. 

Mr. ROBERTSON. But he didn’t earn $31 million in—— 

Mr. COHEN. No, I am sure he didn’t earn it. Thank you. 

Thank you, Mr. Chairman. 

I want it to be noted that I yielded to three different beautiful, 

intelligent women. 

Mr. CONYERS. All in the same day. 

Mr. COHEN. That is right. It was a great honor. 

Ms. JACKSON LEE. We should end on that good note. When he 

says something like that, that should be for the record, Mr. Chairman. 

Mr. CONYERS. Well, I want to thank the witnesses for their experience and knowledge and, most of all, their endurance. We appreciate the testimony you have given and I think this is a very important hearing. 

And we look forward to you feeling free to make any additional 

communications with us to go into the record or not into the record, 

if there are any things that you want to amend or any corrections 

you want to make to your oral testimony, we will be happy to accept it. 

And, again, thanks for your contribution to the subject matter. 

And the hearing is adjourned. 

[Whereupon, at 4:51 p.m., the Task Force was adjourned.] 

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