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79–435 2013

AMERICAN ENERGY SECURITY AND INNOVATION: 

AN ASSESSMENT OF NORTH AMERICA’S 

ENERGY RESOURCES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

FEBRUARY 5, 2013 

Serial No. 113–1 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

STEVE SCALISE, Louisiana 

Vice Chairman 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

LEE TERRY, Nebraska 

MICHAEL C. BURGESS, Texas 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

BILL CASSIDY, Louisiana 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

EDWARD J. MARKEY, Massachusetts 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the State of Kentucky, 

opening statement ................................................................................................ 1 

Prepared statement .......................................................................................... 3 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 4 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 5 

Prepared statement .......................................................................................... 6 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 7 

Hon. Eliot L. Engel, a Representative in Congress from the State of New 

York, prepared statement .................................................................................... 180 

WITNESSES

Adam Sieminski, Administrator, U.S. Energy Information Administration ...... 9 

Prepared statement .......................................................................................... 12 

Answers to submitted questions ...................................................................... 189 

Daniel Yergin, Vice Chairman, IHS ....................................................................... 34 

Prepared statement .......................................................................................... 37 

Jennifer Morgan, Director, Climate and Energy Program, World Resources 

Institute ................................................................................................................ 45 

Prepared statement .......................................................................................... 47 

Answers to submitted questions ...................................................................... 193 

Mary J. Hutzler, Distinguished Senior Fellow, Institute for Energy Research . 78 

Prepared statement .......................................................................................... 80 

E. Harry Vidas, Vice President, ICF International .............................................. 115 

Prepared statement .......................................................................................... 117 

SUBMITTED MATERIAL

Map entitled, ‘‘Lower 48 oil and gas shale plays and federal lands,’’ by 

EIA, submitted by Mr. Doyle .............................................................................. 167 

IHS The Energy Daily, Friday, January 25, 2013, submitted by Mr. Pompeo .. 181 

Article entitled, ‘‘Windmills Overload East Europe’s Grid Risking Blackout: 

Energy,’’ Bloomberg, October 25, 2012, submitted by Mr. Pompeo ................. 185 

Statement of the National Petroleum Council, submitted by Mr. Whitfield ...... 187 

(1) 

AMERICAN ENERGY SECURITY AND INNOVATION: AN ASSESSMENT OF NORTH AMERICA’S ENERGY RESOURCES 

TUESDAY, FEBRUARY 5, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY AND POWER, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:08 a.m., in room 

2322 of the Rayburn House Office Building, the Honorable Ed 

Whitfield (chairman of the subcommittee) presiding. 

Members present: Representatives Whitfield, Scalise, Shimkus, 

Pitts, Terry, Burgess, Latta, Cassidy, Olson, McKinley, Gardner, 

Pompeo, Kinzinger, Griffith, Barton, Upton (ex officio), Rush, 

Tonko, Markey, Engel, Green, Capps, Doyle, Barrow, Matsui, 

Christensen, Castor, and Waxman (ex officio). 

Staff present: Nick Abraham, Legislative Clerk; Gary Andres, 

Staff Director; Charlotte Baker, Press Secretary; Mike Bloomquist, 

General Counsel; Sean Bonyun, Communications Director; Matt 

Bravo, Professional Staff Member; Allison Busbee, Policy Coordinator, Energy and Power; Patrick Currier, Counsel, Energy and 

Power; Tom Hassenboehler, Chief Counsel, Energy and Power; 

Heidi King, Chief Economist; Ben Lieberman, Counsel, Energy and 

Power; Jason Knox, Counsel, Energy and Power; David McCarthy, 

Chief Counsel, Environment/Economy; Gib Mullan, Chief Counsel, 

Commerce, Manufacturing, and Trade; Mary Neumayr, Senior Energy Counsel; Andrew Powaleny, Deputy Press Secretary; Krista 

Rosenthall, Counsel to Chairman Emeritus; Chris Sarley, Policy 

Coordinator, Environment and Economy; Phil Barnett, Democratic 

Staff Director; Alison Cassady, Democratic Senior Professional 

Staff Member; Greg Dotson, Democratic Energy and Environment 

Staff Director; Kristina Friedman, EPA Detailee; Caitlin 

Haberman, Democratic Policy Analyst; and Alexandra Teitz, Democrat Senior Counsel, Energy and Environment. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KENTUCKY 

Mr. WHITFIELD. I would like to call this hearing to order this 

morning, and I certainly want to welcome our panel of witnesses 

and also I want to welcome all the members back on the subcommittee. I look forward to another 2 years with the ranking 

member, Mr. Rush. And also, we are really excited to have three 

new members on the Republican side joining our subcommittee for 

2 

the first time, Mr. Latta of Ohio and Mr. Cassidy of Louisiana and 

also Mr. Kinzinger of Illinois. We are delighted that they are on 

this subcommittee and look forward to working with them on important issues facing our Nation in the energy sector as well as all 

the members of the subcommittee, Democrat and Republican. 

The title of today’s hearing is ‘‘American Energy Security and Innovation,’’ and we are going to focus on an assessment of North 

America’s energy resources. I think all of us agree that we have 

many problems facing our country today but one of the primary 

ones that we have is a sluggish economy and we want to be sure 

that we take every action possible to stimulate the economy and 

create more jobs. Certainly, we are very much aware in the last 

quarter our GDP decreased by .1 percent. Our unemployment has 

ticked up from 7.8 to 7.9 percent, and so we all face this challenge 

of adopting policies and taking actions that can help stimulate the 

economy. 

Certainly, one of the primary factors that affects the economy is 

energy policy, and certainly there are other factors as well but that 

plays a vital role. I was reminded as I read the testimony last 

night that it wasn’t too many years ago when people throughout 

the country, experts and otherwise, were talking about the United 

States fossil fuels, for example, their resources were being depleted. 

We were running out of oil, we were running out of natural gas 

and we were going to have to be importing more. As a matter of 

fact, in January 2007, a CEO of one of our largest utility companies 

made the comment that we were running out of natural gas, production was declining and demand growing so he expected that imports would go from 3 percent of our national needs to 24 percent 

in 2020. And then of course, we know what has happened. We have 

had all sorts of new discoveries—the Bakken field, the Eagle Ford, 

developments in Colorado—and most of these shale fields have 

been discovered on private lands, and even though the number of 

permits on public lands has gone down, the production on private 

lands has increased dramatically. 

So this is a real game changer, the possibility of a game changer 

in America. We have heard the term for many, many years, we 

have the opportunity to be energy independent, and that is actually 

the reality today, and I tell you what, people around the world are 

focused on it too because some of our witnesses today attended the 

World Economic Forum in Davos, and we know that many Europeans are expressing great concern about the abundance of energy 

that we have in America and their ability to compete in the global 

marketplace because their energy costs are going up in Europe and 

we have the opportunity to decrease our energy costs because of 

this abundance of fossil fuels that we have. 

Now, we all recognize that we have renewable that can play a 

role as well, but I am not going to be an alarmist about the increased use of fossil fuel because our carbon dioxide emissions 

today are lower than they have been in America in 20 years, which 

shows that the marketplace can continue to play a vital role, our 

expertise in technology continues to improve and so in oil, in natural gas and in coal, we have abundant resources that can meet 

the needs of this country on the electricity side and the transportation side for years and years to come. 

3 

So we have a unique opportunity and the policies that we adopt 

at the government level will determine whether or not we are going 

to be successful in America, and some of the policies, there is a lot 

of disagreement on this committee about aggressive EPA should be. 

I was reading some court decisions over the last couple of weeks. 

There were a total of eight of them in which the court language 

was very strong in chastising EPA for being overly aggressive and 

exceeding their legal authority, and yet they have had good policies 

as well and America does not have to take a back seat to anyone, 

to any country for our enforcement of environmental laws. But our 

objective is, we want a balanced approach. We don’t want to be an 

alarmist on climate change, for example, but we want to protect 

our environment and we want to fully explore the natural resources that we have which can go a long way toward stimulating 

our economy and creating jobs for Americans. 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

Today, we are going to kick off the subcommittee’s activities, and we are going 

to do so with a hearing on what many of us consider to be the most significant energy story to emerge in a long time—the potential to truly be more energy secure 

as a nation. We have long known that we possess an abundance of coal, but the 

news on oil and natural gas has been a very pleasant surprise. 

We have seen increases in domestic oil production since 2007 and natural gas production since 2006, according to the Energy Information Administration. And EIA 

predicts that these upward trends will continue for years to come. 

At the same time, Canadian oil production is growing so fast that we will need 

the Keystone XL pipeline expansion project to bring the additional output to American refineries in the Midwest and Gulf Coast. 

In fact, the news is so promising that some analysts are talking about the possibility of achieving North American energy independence by the end of the decade. 

Of course, experts may disagree as to just how much energy potential is out there, 

but none would have claimed just a few years ago that our nation would reverse 

course and have the potential to become a true global energy supplier and powerhouse. A quantitative assessment of the resource base is the topic of today’s hearing 

and what we will hear today shows how the impacts are profound and only beginning to be understood. 

I might add that we are seeing a truly dramatic shift away from long-held beliefs 

about domestic oil and natural gas supplies. So much of our existing legislation is 

rooted in the assumption of domestic energy scarcity, not energy abundance. Needless to say, a wholesale rethinking of energy policy is in order, and today’s hearing 

is the first step in that process. 

This domestic energy wealth brings with it many issues that will need to be addressed by this subcommittee in the months and years ahead. After all, an abundance of energy alone means little without the right policies in place. Just look at 

the nation’s abundance of coal, which in my view is being squandered thanks to a 

long and growing list of anti-coal regulations from the EPA. 

As we will soon hear from one of our witnesses, Mary Hutzler of the Institute for 

Energy Research, America possesses nearly half of the entire world’s coal reserves. 

This is enough coal to continue its use at current rates for 500 years. We should 

be making good use of this gift instead of strangling it in red tape. 

We want policies that enable our resources to be utilized for the benefit the American people. If we do this right, we can lower energy prices, create jobs, and 

strengthen national security. 

There will be issues related to access, issues related to infrastructure, and issues 

related to export, among other things that will need to be sorted out. But today, 

we will focus on the threshold question of how much potential is out there and how 

this knowledge can help shape the difficult, but remarkable choices we will have to 

make as a country on how best to use it all. 

This includes ensuring a diverse mix of our resources: coal, oil, gas, and renewables, continue to power America. But these and other policy considerations will be 

the subject of future hearings. We are pleased to welcome the EIA and all of our 

witnesses today. 

4 

The good news is that a future of plentiful, affordable, and reliable supplies of 

North American energy is no longer just a dream. With today’s effort to gain an accurate assessment of the resource base, we are taking the first step in what I hope 

will be a bipartisan initiative to help turn that dream into a reality. 

# # # 

Mr. WHITFIELD. With that, at this time I would like to recognize 

the gentleman from Illinois, Mr. Rush, for 5 minutes. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. I certainly want to thank you, Mr. Chairman, and Mr. 

Chairman, I also want to join you in welcoming all the new members of the subcommittee and those who are returning, and I want 

to especially welcome the new members on the Democratic side, 

Mr. McNerney, Mr. Tom Cole, and Mr. Barrow; Ms. Matsui and 

Ms. Christensen to this subcommittee. 

Mr. Chairman, I want to thank you for holding today’s hearing 

assessing North America’s energy resources. As we begin the subcommittee’s work for the 113th Congress, I would submit that it is 

critical for us as policymakers to understand the changing landscape of our Nation’s energy supplies, not only as we move away 

from policies guided by scarcity but also so that we can develop a 

comprehensive energy plan for moving this Nation forward. 

This subcommittee needs to get down to the serious business of 

enacting an energy blueprint that will move this country towards 

a truly all-of-the-above strategy that will follow four basic principles: one, to provide safe, reliable and affordable energy to all 

Americans; two, to provide additional jobs and economic opportunities to all segments of our population; three, a plan that will address the dire consequences of climate change that scientists have 

been warning us about for years now and which we have been seeing more and more firsthand evidence of across this Nation; and 

fourth, to set a path that would help us become self-sufficient and 

energy independent over the next few decades. 

Mr. Chairman, today we will hear from our expert witnesses that 

domestic crude oil production has increased significantly over the 

past few years with the EIA reporting that U.S. crude oil production has increased from 5.1 million barrels per day in 2007 to 6.4 

million barrels per day in 2012, the highest level since 1997. The 

EIA reports that in 2005, the United States imported 60 percent 

of the petroleum it consumed, and by 2012, that number had 

dropped to about 41 percent, the lowest level in decades. This decline can be attributed primarily to increased domestic oil production, the additional use of biofuels as well as the adoption of higher 

fuel efficiency standards for vehicles. The EIA also projects that the 

United States will reduce its reliance on imported oil to less than 

30 percent of consumption by 2035, and U.S. natural gas production will increase by 44 percent by 2040 due primarily to the projected growth in shale gas production. 

However, Mr. Chairman, in order to reach all the necessary objectives of providing reliable energy, creating new jobs, addressing 

climate change and also becoming energy independent, it is imperative for this subcommittee to also promote and to encourage reVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
5 

newable energy resources. The NREL estimates that we could supply 80 percent of total U.S. electricity generation from renewable 

energy generation through technologies that are commercially 

available by the year 2005. 

Mr. Chairman, I welcome today’s hearing, and we move legislatively, I will urge this subcommittee to promote a truly all-of-theabove energy policy that includes renewables and clean energy 

sources as well as traditional carbon-intensive fossil fuels before 

the time is too late, Mr. Chairman, too late to act. 

I thank you, and I really look forward to hearing from today’s 

witnesses and I yield back the balance of my time. 

Mr. WHITFIELD. Thank you, Mr. Rush. We appreciate that opening statement. 

At this time I recognize the chairman of the full committee, the 

gentleman from Michigan, Mr. Upton, for 5 minutes. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Well, thank you, Mr. Chairman. 

Certainly, this hearing is a welcome one to examine the positive 

developments resulting from advancements in innovation and technology, the game-changing potential for North American energy 

independence. What was once believed to be unthinkable is certainly now within our grasp. 

For 3 decades, 30 years, the American people have been told that 

we are a Nation of declining resources at the mercy of OPEC. The 

story was nearly as gloomy with natural gas with forecasts of dwindling domestic supplies, higher prices, and rising imports from the 

Middle East. In fact, in this committee, many may remember when 

we crafted a new title in the Energy Policy Act of 2005 to facilitate 

what we thought would be the new norm: pending reliance on imported gas from geopolitically unstable regions of the world, to add 

to our growing reliance on OPEC oil. What a bad thing. 

But thanks to American ingenuity and advanced technologies, 

the trends in domestic oil and natural gas production have in fact 

been turned upside down. In fact, the United States is now the 

world’s leading producer of natural gas, and the IEA is predicting 

that by 2020, U.S. oil production will exceed Saudi Arabia. 2020, 

let me repeat that, we are going to exceed the production in Saudi 

Arabia. 

Our overall energy landscape has changed dramatically in just a 

short period of time, and it is not only rewriting the economic outlook that we have as a Nation, but also beginning to change the 

geopolitical nature of global energy economics. 

Today, this subcommittee is launching a series of hearings on energy security and innovation to hear from experts who are working 

with the current realities. It is up to us to ensure that our federal 

laws are not continuing to introduce roadblock after roadblock to 

enhanced energy security. We have got to remain steadfast in our 

support for efforts to improve the infrastructure necessary to maximize use of these resources, including the Keystone XL pipeline. 

These issues are too important for our Nation to be looked at in 

a vacuum, and if we don’t take advantage of our energy abundance, 

6 

other nations are eagerly waiting to step in and use North American energy to fuel their own growth. 

The benefits of our emerging energy abundance are many, boosting our economy and creating jobs across the nation, a bright spot 

in the economic downturn. We have got to build upon that 

progress. Once we have a more accurate sense of North America’s 

energy potential, we can start the process of ensuring we have the 

proper vision for the future. 

I yield the balance of my time to—anybody? Mr. Barton. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Today’s hearing is a welcome one to examine the positive developments resulting 

from advancements in innovation and technology—the game changing potential for 

North American energy independence. What was once believed to be unthinkable is 

now within our grasp. 

For over 3 decades, the American people have been told that we are a nation of 

declining resources at the mercy of OPEC. The story was nearly as gloomy with natural gas—with forecasts of dwindling domestic supplies, higher prices, and rising 

imports from the Middle East. In fact, in this committee, many may remember 

when we crafted a title in the Energy Policy Act of 2005 to facilitate what we 

thought would be the new norm: Pending reliance on imported gas from geopolitically unstable regions of the world, to add to our growing reliance on OPEC oil. 

But thanks to American ingenuity and advanced technologies, the trends in domestic oil and natural gas production have been turned upside down. In fact, the 

U.S. is now the world’s leading producer of natural gas and the IEA is predicting 

that by 2020, U.S. oil production will exceed Saudi Arabia’s. Let me repeat that— 

by 2020, U.S. oil production will exceed Saudi Arabia. A remarkable turn of events. 

Our overall energy landscape has changed dramatically in just a short period of 

time, and it is not only rewriting the economic outlook that we have as a nation, 

but also beginning to change the geopoliticalnature of global energy economics. 

Today, this subcommittee is launching a series of hearings on American Energy 

Security and Innovation to hear from experts who are working with the current realities of this energy transformation. It is up to us to ensure that our federal laws 

are not continuing to introduce roadblock after roadblock to enhanced energy security. 

We must remain steadfast in our support for efforts to improve the infrastructure 

necessary to maximize use of these resources, including the Keystone XL pipeline. 

These issues are too important for our nationto be looked at in a vacuum, and if 

we don’t take advantage of our energy abundance, other nations are eagerly waiting 

to step in and use North American energy to fuel their own growth. 

The benefits of our emerging energy abundance are many, boosting our economy 

and creating jobs in Michigan and across the nation, a bright spot in the economic 

downturn. We must build upon our progress. 

Once we have a more accurate sense of North America’s energy potential, we can 

start the process of ensuring we have the proper vision for the future. I welcome 

our esteemed panel of experts here today, including Dr. Daniel Yergin. The domestic 

energy boom is good news—but only if we are wise enough to let it happen. 

# # # 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Well, thank you, Mr. Chairman. 

I want the record to show that I have my iPad and I am trying 

to do this electronically, so I am at least trying. 

I want to welcome our witnesses. I see former Congressman Martin Frost out in the audience. He knows a little bit about energy. 

We are glad to have you here, Martin. 

7 

Today is an important hearing, Mr. Chairman. I represent a Congressional district in Texas that at one time had it been a nation 

would have been the fifth largest oil-producing nation in the world. 

The first oil field west of the Mississippi was discovered in my Congressional district at Corsicana in 1895. As we speak today, in the 

Barnett shale, which is not totally in my Congressional district, 

there are over 16,000 producing natural gas wells, and last year 

they produced in the neighborhood of 2 trillion cubic feet of natural 

gas in that one field. 

With the miracle of hydraulic fracturing, we have unleashed a 

drilling and production revolution in this country, not only in natural gas but now that technology is being used in oil, and the State 

of North Dakota, which less than 10 years ago had probably fewer 

than 200 or 300 oil wells, is on track in that one State to produce 

over a million barrels of oil in the very near future, possibly this 

year. We can be energy independent if we want to. It is not a question of can we. It is a question of, is it in our economic and political 

self-interest to do so. 

So today’s hearing is an important hearing for the American people to see the energy abundance that our Lord blessed us with and 

the policymakers in this room and in this city can decide what we 

want to do with it. 

With that, Mr. Chairman, I yield back to you or any other person. 

Mr. WHITFIELD. Thank you, Mr. Chairman. 

At this time I would like to recognize the ranking member of the 

full committee, Mr. Waxman of California, for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. I appreciate that we 

are holding this hearing on North America’s energy resources. We 

are going to hear testimony about fossil and renewable energy supplies in the United States, Canada and Mexico. 

We are dramatically improving the efficiency of our use of oil, so 

we are using less of it. At the same time, we are producing more 

domestic oil, which means we are importing less oil from dangerous 

parts of the world. 

We are unlocking new reserves of natural gas, which is helping 

to limit the use of polluting coal, and to increase the competitiveness of our domestic industries. We have doubled our capacity to 

generate renewable electricity from wind and solar in just 4 years, 

which has cut our pollution and invigorated clean energy manufacturing. 

These are all positive developments. The question we must ask 

is whether we are on a sustainable course for the years to come. 

In his inaugural address, President Obama said that we must 

transition to a sustainable energy future. He said we must respond 

to climate change, because to do otherwise would ‘‘betray our children and future generations.’’ 

As we debate our energy future, this committee has a choice. It 

is an energy choice and a climate policy choice, and ultimately it 

is a moral choice. 

8 

The biggest energy challenge we face as a country is carbon pollution. We can’t have a conversation about America’s energy policy 

without also having a conversation about climate change. We have 

a rapidly diminishing window of time to act to reduce our carbon 

pollution before the catastrophic impacts of climate change are irreversible. 

In November, the International Energy Agency published its 

World Energy Outlook. IEA concluded that our current global energy system is ‘‘unsustainable.’’ The International Energy Agency 

found that ‘‘the climate goal of limiting warming to 2 degrees Celsius is becoming more difficult and more costly with each year that 

passes.’’ The International Energy Agency also concluded that if 

the world does not take action to reduce carbon pollution before 

2017, then ‘‘all the allowable CO2 emissions would be locked in by 

energy infrastructure existing at that time. 

That means that the energy policy decisions we make today will 

have a real and direct impact on whether we can limit climate 

change in the future. Every decision to build a new fossil fuel-fired 

power plant, or construct a pipeline to transport tar sands, or drill 

for more oil off our Nation’s coasts has climate risks. We need to 

understand and weigh those risks before we lock in infrastructure 

that will produce carbon pollution for decades to come. 

There is an appeal to the energy resources we are discovering. 

We are stronger when we produce oil in the United States than 

when we import it from Saudi Arabia. We are better off when we 

produce our own natural gas than when we import LNG. 

But we also must recognize that the world has far more proven 

reserves of oil, gas and coal than we can ever safely use. The atmosphere has a rapidly shrinking capacity to safely absorb carbon. 

In fact, if we want to have a reasonable chance of limiting average 

global warming to 2 degrees Centigrade, or 3.6 degrees Fahrenheit, 

there is an estimated five times more carbon in proven fossil fuel 

reserves than we can release into the atmosphere. If we burn all 

the known reserves of fossil fuel without new technologies to sequester the carbon, the damage to the planet would be immense. 

The future will belong to the country that leads the inevitable 

transition to the clean energy economy of tomorrow. It is our responsibility to figure out how we make sure our Nation is in the 

forefront of this change. 

Mr. Chairman, this is a new Congress. I want to begin it by offering to work with you as we grapple with these incredibly serious 

challenges. I look forward to this hearing and future hearings on 

this subject and to our cooperation to deal with these problems in 

a bipartisan and a balanced way. 

Thank you. I yield back the time. 

Mr. WHITFIELD. Thank you, Mr. Waxman. We appreciate your 

opening statement. 

I also want to welcome Joe Pitts of Pennsylvania, who is a new 

member of this subcommittee. As many of you know, he is the 

chairman of the Health Subcommittee, and we are delighted to 

have him on the Energy and Power Subcommittee as well. We do 

have a new vice chairman also, Steve Scalise, who was here but I 

think stepped out for just a moment. 

9 

Right now I would like to get our witnesses. We are thrilled with 

the panel that we have today. Each one of them are real experts 

in various fields of energy and we genuinely appreciate your testimony that you have prepared and that you are about to give, and 

I know that everyone will have questions for you, and at this time 

I would like to introduce our panel of witnesses. First we have 

Adam Sieminski, who has been here a number of times. He is the 

Administrator for the United States Energy Information Administration, and we welcome you. Dr. Daniel Yergin is Vice Chairman 

of IHS, and many of you know Mr. Yergin also because he wrote 

a book called The Prize, which won the Pulitzer Prize, so we are 

delighted that he is here. We have Jennifer Morgan, who is the Director of the Climate and Energy Program at the World Resources 

Institute, and we look forward to your testimony, Ms. Morgan. We 

have Mary Hutzler, who is a Distinguished Senior Fellow at the Institute for Energy Research. I read her testimony as well, and she 

has some great things to tell us today. And then we have Mr. 

Harry Vidas, who is Vice President for ICF International, and we 

appreciate your thoughtful testimony as well, Mr. Vidas. 

So each one of you will be given 5 minutes for your opening 

statement, and there are a couple of little boxes with lights, and 

when it is green that means go, and when it is red, it means stop, 

but we will give you some leeway because we do respect your being 

here and appreciate your expertise. 

So Mr. Sieminski, I will recognize you for 5 minutes for your 

opening statement. 

STATEMENTS OF HON. ADAM SIEMINSKI, ADMINISTRATOR, 

U.S. ENERGY INFORMATION ADMINISTRATION; DANIEL 

YERGIN, VICE CHAIRMAN, IHS; JENNIFER MORGAN, DIRECTOR, CLIMATE AND ENERGY PROGRAM, WORLD RESOURCES 

INSTITUTE; MARY J. HUTZLER, DISTINGUISHED SENIOR FELLOW, INSTITUTE FOR ENERGY RESEARCH; AND E. HARRY 

VIDAS, VICE PRESIDENT, ICF INTERNATIONAL 

STATEMENT OF ADAM SIEMINSKI 

Mr. SIEMINSKI. Thank you, Mr. Chairman and members of the 

subcommittee. I appreciate the opportunity to appear before you 

today to discuss American energy security and innovation. EIA is 

the statistical and analytical agency within the U.S. Department of 

Energy. By law, its data, analyses and forecast are independent of 

approval by any officer or employee of the U.S. government. 

My statement today summarizes recent trends in production and 

draws on EIA’s January short-term energy outlook, and also, I am 

going to talk about resource estimates for oil, gas, coal and renewables for the United States. 

As I discuss the different sectors, though, it is useful to keep in 

mind that the methodologies for developing reserve and resource 

estimates differ across the fuels. EIA estimates that U.S. total 

crude oil production averaged 6.4 million barrels a day in 2012, an 

increase of .8 million barrels a day. This is the largest annual increase since Colonel Drake drilled the first commercial crude oil 

well up in Titusville, Pennsylvania back in 1859. This growth is 

driven largely by tight oil production—that is in figure one of my 

10 

written statement. Drilling in tight oil plays in North Dakota, Montana, and Texas are expected to account for the bulk of the forecast 

production growth over the next 2 years. U.S. crude oil production 

could reach 8 million barrels a day in 2014, and with some very 

strong assumptions about how drilling could proceed and other factors, could get as high as 10 million barrels a day but that is not 

currently in our reference case. 

U.S. dry natural gas production has increased consistently since 

2005, mainly because of the production of shale gas resources. 

Total marketed production averaged about 69 billion cubic feet in 

2012, and EIA expects production will remain close to that level 

this year and next year. 

Crude oil and natural gas proved reserve additions in 2010 were 

the highest recorded since EIA began publishing those numbers in 

1977. Crude oil proved reserves increased by 12.8 percent, almost 

3 billion barrels, during 2010 to end the year at over 25 billion barrels. U.S. proved reserves of wet natural gas increased by almost 

12 percent, or 34 trillion cubic feet, during 2010, ending that year 

at well over 300 trillion cubic feet. 

Next, I want to speak to the issue of oil and natural gas resources. Estimates of technically recoverable resources, while inherently uncertain, are a common measure of the long-term viability of U.S. domestic production. U.S. crude oil and lease condensate 

resources in non-prohibited areas are estimated at 223 billion barrels in the Annual Energy Outlook that we just published in December up from EIA’s estimate of 140 billion barrels back in the 

year 2000. That is despite cumulative production since the year 

2000 of over 26 billion barrels of oil. U.S. total dry natural gas resources, 2,327 trillion cubic feet in the AEO2013 are up from our 

2000 estimate of nearly 1,600, maybe I should say only 1,600 trillion cubic feet, despite cumulative production between those years 

of 260 trillion cubic feet. The shale gas resource in the AEO2013 

is about 13 percent higher than what we estimated in 2012. 

Moving on to coal, domestic production decreased by 12 percent 

by over 1,000 million short tons between 2008 and 2012, half of 

this decline between 2011 and 2012, as electric utilities and the industrial sector cut back their purchases. EIA estimates that coal 

consumption in electric power in 2012 will total 829 million short 

tons, the lowest since 1992, due largely to competition from low 

natural gas prices. Coal exports in 2012 partially offset that decline 

in consumption. 

The largest category of coal resources, the demonstrated reserve 

base, represents coal in the ground, this resource base was originally estimated back in 1974 by the Bureau of Mines as part of the 

last comprehensive assessment. On January 1, 2012, the resource 

base was estimated to contain 483 billion short tons. That is a huge 

amount. Limited resources at EIA have prevented us from doing a 

full national reassessment but we have updated some of the regions. 

Finally, I would like to highlight developments in renewable resources. EIA estimates that production of renewables, most renewables, grew significantly in 2012, especially wind and solar. Hydropower production fell because of the drought. Even so, the overall 

growth in renewable energy consumption from 2010 to 2012 was 

11 

over 10 percent. Drought in the Midwest caused fuel ethanol production to fall by about 80,000 barrels a day in the second half of 

2012. We expect that production will pick back up again as the 

drought recedes and we will get back to pre-drought levels of about 

870,000 barrels a day of ethanol production. Biodiesel production 

averaged a billion gallons in 2012 and it is expected to meet the 

RFS requirements of 1.28 billion gallons that have been set for 

2013. 

That concludes my testimony. Thank you again, Mr. Chairman, 

for the opportunity to be here. 

[The prepared statement of Mr. Sieminski follows:] 

12 


79435.001

Summary of Statement of Adam Sieminski, Administrator, EIA, 

February 5,2013 

EIA estimates that U.S. total crude oil production averaged 6.4 million barrels per day (bbl/d) in 2012, an 

increase of 0.8 million bbl/d from the previous year driven largely by growth in tight oil production. 

Crude oil production is expected to increase to 7.9 million bbl/d EIA 2014 led by drilling in tight oil plays 

in North Dakota, Montana, and Texas. 

In 2012, U.S. natural gas production increased, primarily due to shale gas, to an average of 69.2 billion 

cubic feet per day. EIA expects U.S. natural gas production to remain close to its 2012 level in both 

2013 and 2014. 

EIA's most recent published crude oil and natural gas reserves report, as of year-end 2010, showed the 

highest year on year recorded increase since EIA began publishing proved reserves estimates in 1977. 

In its FY2013 budget, EIA has proposed to increase the timeliness and accuracy of both oil and natural 

gas production data by expanding the current natural gas collection to more states and adding collection 

of oil production. 

Between 2008 and 2012, domestic coal production decreased by 12 percent to 1,027 million short tons; 

over half of this decline occurred between 2011 and 2012. Lower natural gas prices led to a significant 

increase in the share of natural gas-fired power generation in 2012. Record coal exports partially offset 

declines in consumption in the power sector. 

The demonstrated reserve base (DRB), which represents coal reserves in the ground that have been 

identified to specified levels of accuracy and are in thickness ranges and at depths that are considered 

minable is estimated to contain 483 billion short tons. As of January 1, 2012, recoverable reserves at 

producing mines, which are reported to EIA annually by mine operators, stood at 19 billion short tons. 

In 2012, EIA expects the consumption of most renewable energy forms including wind, solar, and 

biofuels to have grown, wind by 17 percent and solar by 32 percent. EIA expects hydropower 

production will have fallen nearly 14 percent from the unusually high levels seen in 2011. Renewable 

energy consumption grew 10.3 percent from 2010 to 2012. In October of 2012, electricity generation 

from non-hydro renewables surpassed conventional hydroelectricity generation for the first time. 

EIA expects ethanol production will remain near current levels through mid-2013 before recovering to 

pre-drought production levels in 2014. 
13 


79435.002

STATEMENT OF ADAM SIEMINSKI 

ADMINISTRATOR 

ENERGY INFORMATION ADMINISTRATION 

U.S. DEPARTMENT OF ENERGY 

before the 

SUBCOMMITTEE ON ENERGY AND POWER COMMITTEE ON ENERGY AND COMMERCE 

U. S. HOUSE OF REPRESENTATIVES 

FEBRUARY 5, 2013 
14 


79435.003

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity to appear before you 

today at this hearing on American Energy Security and Innovation: An Assessment of North America's 

Energy Resources. 

The U.S. Energy Information Administration (EIA) is the statistical and analytical agency within the U.S. 

Department of Energy. EIA collects, analyzes, and disseminates independent and impartial energy 

information to promote sound policymaking, efficient markets, and public understanding regarding 

energy and its interaction with the economy and the environment. EIA is the Nation's premier source of 

energy information and, by law, its data, analyses, and forecasts are independent of approval by any 

other officer or employee of the United States Government. The views expressed herein should 

therefore not be construed as representing those ofthe Department of Energy or any other Federal 

agency. 

EIA provides a wide range of information and data products covering energy production, stocks, 

demand, imports, exports, and prices; and prepares analyses and special reports on topics of current 

interest. EIA prepares both short-term energy outlooks, examining monthly trends over the next one to 

two years, and long-term outlooks, with a nnual projections over the next 20-to-25 years. 

While my testimony will be focusing primarily on the most recent production and resource information 

and the short term energy outlook, I would like to briefly point to some key results from the Annual 

Energy Outlook 2013 (AE02013). The Reference case discussed in this testimony was released in 

December and is intended to represent an energy future through 2040 based on given market, 

technological, and demographic trends; current laws and regulations; and consumer behavior. EIA 

recognizes that projections of energy markets are highly uncertain and subject to geopolitical 

disruptions, technological breakthroughs, and other unforeseeable events. In addition, long-term trends 

in technology development, demographics, economic growth, and energy resources may evolve along a 
15 


79435.004

different path than represented in the projections. The complete AE02013, which EIA will release this 

spring, will include a number of alternative cases intended to examine these uncertainties as well as 

changes in law since the reference case was released. 

In the AE02013, the application of technology innovation has a notable effect on the productivity and 

development cost of certain areas across the energy resource base. Domestic production of crude oil, 

particularly from shale and other tight formations, increases sharply. Cumulative production of dry 

natural gas from 2011 through 2035 in the AE02013 Reference case is about 8 percent higher than 

in AE02012, primarily reflecting continued increases in shale gas production that result from the dual 

application of horizontal drilling and hydraulic fracturing. The share of electricity generation from 

renewables grows from 13 percent in 2011 to 16 percent in 2040. 

Electricity generation from solar and to a lesser extent wind energy sources grows as cost declines make 

them more economical. However, the AE02013 projection is less optimistic than AE02012 about the 

ability of advanced biofuels to capture a rapidly growing share of the liquid fuels market. Domestic coal 

production increases at an average rate of only 0.2 percent per year, from 22.2 quadrillion British 

thermal units (Btu) (1,096 million short tons) in 2011 to 23.5 quadrillion Btu (1,167 million short tons) in 

2040. Before I discuss the different resource sectors, I would like to clarify that the methodologies for 

developing reserve and resource estimates differ across fuels. For example, "estimated recoverable 

reserves" for coal reflect a different concept than "proved reserves" for 011 and natural gas. The EIA and 

the USGS both have a role with regard to 011, natural gas and coal. The renewable assessments are 

developed by the National Renewable Energy laboratory. The data and forecasts in the rest of my 

testimony are largely from EIA's most January Short Term Energy Outlook (STEO) which does not reflect 

the impact of the recent extension of various energy tax incentives. 
16 


79435.005

TRENDS IN U.S. CRUDE OIL AND NATURAL GAS PRODUCTION 

Crude Oil. EIA estimates that U.S. total crude oil production (which includes lease condensates) 

averaged 6.4 million barrels per day (bbl/d) in 2012, an increase of 0.8 million bblld from the previous 

year driven largely by growth in tight oil production (Figures 1 and 2). This increase in U.S. annual 

production is the largest since Colonel Drake drilled the first crude oil well in Pennsylvania in 1859. EIA 

forecasts that another record increase in production will occur this year, with domestic crude oil 

production expected to increase to 7.3 million bbl/d in 2013. The 7.9 million bbl/d EIA currently 

forecasts for 2014 would mark the highest annual average level of production since 1988. Central to this 

projected growth will be ongoing development activity in key onshore basins. Drilling in tight oil plays in 

the Williston Basin's Bakken formation in North Dakota and Montana, the Western Gulf Basin's Eagle 

Ford formation, and the Permian Basin in Texas is expected to account for the bulk of forecast 

production growth over the next two years. 

Natural Gas. U.S. dry natural gas production has increased since 2005 mainly because of production of 

shale gas resources (Figure 3). That upward growth trend has been a little bumpy reflecting economic 

factors affecting natural gas prices and weather events. Declining production from less-profitable "dry" 

natural gas plays such as the Haynesville Shale has been offset by growth in production from liquids-rich 

natural gas production areas such as the Eagle Ford and wet areas of the Marcellus Shale as well as 

associated gas from the growth in domestic oil production. Total marketed production averaged 69.2 

Befld in 2012. EIA expects overall U.s. natural gas production to remain close to its 2012 level in both 

2013 and 2014. 
17 


79435.006

CRUDE OIL AND NATURAL GAS PROVED RESERVES 

EIA's most recent published crude oil and natural gas reserves report is as of year-end 2010. For each 

fuel, net additions to proved reserves, which reflect the volume of reserves added during 2010 after 

subtracting the year's production, were - by a large margin - the highest ever recorded since EIA began 

publishing proved reserves estimates in 1977. I testified before this Subcommittee in some detail last 

August right after the report was released, but given the dramatic change in the U.S. crude oil and 

natural gas reserve profile, 'am repeating some of that information here for new members ofthe 

Subcommittee. EIA is catching up on the reserves reporting following the 2011 budget cuts that delayed 

the program. The year end 2011 proved reserves will be published in the coming months. 

Proved reserves are estimates of hydrocarbons that geologic and engineering data demonstrate with 

reasonable certainty can be recoverable from identified fields under existing economic and operating 

conditions. The data and estimates we develop and disseminate reflect a combination of survey data 

collected directly from operators and information provided by other Federal agencies and the states. 

Crude oil (includes lease condensate) proved reserves increased by 2.9 billion barrels (12.8 percent) 

during 2010, ending that year at 25.2 billion barrels (Figure 4). Texas, North Dakota, and the Gulf of 

Mexico Federal Offshore had the largest increases in oil proved reserves in 2010 (Figure 5). An increase 

in the oil price boosted oil reserves in states with large producing oil fields. 

U.s. proved reserves of wet natural gas increased by 33.8 trillion cubic feet (Tcf) (11.9 percent) during 

2010, ending that year at 317.6 Tcf (Figure 6). Texas, Louisiana, and Pennsylvania had the largest 

increases (Figure 7). 
18 


79435.007

CRUDE Oil AND NATURAL GAS RESOURCES 

Next, I want to speak to the issue of resources. Technically recoverable resources, also known as TRR, 

are an estimate of hydrocarbons that are producible using currently available technologies and industry 

practices from both discovered resources and estimated potential resources without regard to 

economic considerations. Estimates of technically recoverable resources, while inherently uncertain, 

are a common measure of the long-term viability of U.S. domestic oil and natural gas as an energy 

source and are an important input to EIA's energy projections. TRR estimates are a "work in progress," 

changing as more production experience becomes available and as new production technologies are 

applied to these resources. 

EIA's energy supply projections address the timing of economic production of oil and natural gas 

resources, which depend upon the production profile of individual wells overtime, the cost of drilling 

and operating those wells, and the revenues generated by those wells based on projected oil and 

natural gas prices. For these reasons EIA is primarily concerned with determining well drilling and 

operating costs, production decline curves, and other economic parameters, such as tax, depreciation, 

and royalty rates. Although TRR estimates provide a context for the size of the potentially available 

resource, this aggregate number says nothing about whether a large or small portion of the resource will 

be economic to produce in the foreseeable future. 

The EIA relies heavily on the expertise of the United States Geologic Survey (USGS) to develop many of 

the resource production characteristics and parameters that generate TRR estimates. The USGS 

estimates of TRR represent a snapshot of resource recoverability based on the wells drilled and 

technologies deployed prior to the assessment. The USGS re-estimates a formation's TRR, tYpically 

updating its estimates every 5 to 10 years, whereas EIA re-estimates initial production rates and 

production decline curves, and in turn, estimated ultimate recovery (EUR) per well and TRR for every 
19 


79435.008

Annual Energy Outlook. In EIA's annual re-estimation process, EIA emphasizes current well productivity 

data, which inherently incorporates the latest technology. EIA also develops estimates for those 

formations that have recently gone into production, but for which the USGS has not yet developed a 

resource estimate. 

Although each TRR parameter has some degree of uncertainty associated with it, the greatest 

uncertainty is associated with the determination of a formation's average initial production rate and 

production decline curve, which specifies a well's estimated ultimate recovery (EUR). 

EIA will continue to solicit input from geologists, petroleum engineers, statisticians, and other experts to 

improve the methodology for developing estimates ofTRR and to determine specific key assumptions. 

The ultimate goal is to establish a TRR methodology that is practical, reasonable, defendable, and uses 

the best available production data. Even so, EIA recognizes that even the best methodology and data 

will still result in highly uncertain TRRs that will change over time as more information becomes 

available and as management practices and technology evolve. 

DATA COLLECTION FOR CRUDE OIL AND NATURAL GAS PRODUCTION 

Finally, I want to raise an issue of importance to this subcommittee which has jurisdiction over EIA. As 

just discussed, the quality and timeliness of the data has become more important. EIA estimates for 

non-Federal oil production are based on monthly oil production data from state Government agencies 

and purchased third party data. Many of the states collect production data largely for revenue 

purposes, though some data are collected in order to regulate crude oil and natural gas production. 

Different data are collected by each state, and definitions vary from state to state on the most basic of 

questions and the lag from production to final reporting varies enormously. EIA currently collects 

monthly data on natural gas production from about 230 to 240 operators in five key states: Texas, 
20 


79435.009

louisiana, Oklahoma, New Mexico, and Wyoming. EIA started direct collection ofthis data in 2005, 

because of the growing importance oftimely and accurate monthly natural gas production data. 

Though more accurate than the oil production estimates, the current natural gas monthly production 

survey does not collect data for Federal lands or data on natural gas shale production, and it has not 

been expanded to identify and track major changes in natural gas production, such as the rise in shale 

gas production in Pennsylvania and Arkansas. 

In its FY2013 budget, EIA has proposed spending an additional $550,000 per year to increase the 

timeliness and accuracy of both oil and natural gas production data. Additional funds would allow EIA to 

expand the natural gas collection to 15 producing states and to add collection of oil production. (For the 

federal offshore EIA would continue to cooperate closely with the Department of the Interior.) The 

proposal would improve data quality as well as enable EIA to identify and report on trends sooner. 

COAL PRODUCTION, MARKETS AND RESOURCES 

After reaching 1,172 million short tons in 2008, domestic coal production decreased by 12 percent to 

1,027 million short tons by 2012; over half of this decline occurred between 2011 and 2012. In 2012, 

coal production decreased in the two top producing regions, Central Appalachia and the Powder River 

Basin (PRB), by 16 percent and 9 percent respectively. In contrast, 2012 coal production volumes in the 

Illinois Basin rose above its five-year range, up 9 percent from 2011. Illinois Basin coal has become more 

competitive as additional coal-fired power plants have installed scrubbers capable of reducing sulfur 

emissions by 90 percent or more. The increasing costs of mining Central Appalachian coal and the 

location advantages relative to PRB coal have had a positive impact as well. Regional coal production 

patterns from 2007 are illustrated in Figure 8. 
21 


79435.010

The decline in domestic production corresponds to a significant reduction in coal consumption by 

electric utilities. EIA estimates coal consumption in the electric power sector will total 829 million short 

tons in 2012, the lowest since 1992, and 21percent lower than in 2007. Domestic coal use outside of 

the electric power sector is estimated at 65 million short tons in 2012, also a 21 percent decline since 

2007. 

Coal's general competitiveness has also been affected by a steady increase in the delivered cost of coal 

over time, reaching a national average of $2.40 per million Btu in 2012. A key driver of delivered coal 

prices is the rail transportation cost. More than 70 percent of coal shipments to power plants are by 

rail. These costs increased by approximately 50 percent from 2001 to 2010 and account for 

approximately 40percent ofthe total delivered coal price on average. However, delivered price 

increases are moderating in response to the reduction in demand since 2008 affecting both 

transportation and commodity prices. 

Lower natural gas prices led to a significant increase in the share of natural gas-fired power generation 

in 2012. Wholesale (spot) coal prices across all basins fell during the first half of 2012 before stabilizing 

in the latter half ofthe year. Competition between natural gas and coal for electric power generation 

drove price declines in the Appalachian and Powder River Basins (PRB), two key sources for thermal 

coal, through the summer. Also, mild temperatures in the winter and high stockpiles at electric power 

plants limited demand for more purchases of coal in the second half of 2012. Spot prices represent a 

fraction of coal sales to power plants but do influence the setting of longer-term coal contracts, 

gradually affecting the delivered price of coal as coal supply contracts are renegotiated. 

Record coal exports and slowing coal imports led to a 20 million short ton increase in net exports, 

partially offsetting declines in consumption in the power sector. Export volumes are volatile from year 

to year and depend on world coal market conditions which favored increasing coal exports over the past 
22 


79435.011

few years. While the majority of U.S. exports are metallurgical coal, growing steam coal demand for 

power generation is also fueling 2012 exports to an ali-time high. 

U.S. coal exports are largely concentrated in a few facilities, with the leading seven ports accounting for 

93 percent of U.S. exports. Despite growing demand in Asia, the United States exports more coal to 

Europe (55 percent) than it sends to the rest of the world combined. About 82 percent of U.S. coal 

exports were shipped to Europe and Asia in the first eleven months of 2012. U.S. coal exports to Europe 

are primarily serviced out of the East Coast via Norfolk, Virginia (the largest coal export facility in the 

United States) and Baltimore, Maryland (the third largest). Exports to Asia originate mostly from the 

East Coast as well, primarily out of Baltimore. Among the top export faCilities, only New Orleans and 

Seattle primarily export steam coal. Figure 9 shows the distribution of export shipments by region of 

the world and the U.S. port of origin. (These changes in coal production and markets have been 

reported in Today in Energy, a relatively new EIA series of short analytical pieces posted daily on the EtA 

website.) 

There are three types of coal resource and reserves data at EIA: the demonstrated reserve base, 

estimated recoverable reserves, and recoverable reserves at producing mines. 

Demonstrated Reserve Base. The largest category of reserves is the demonstrated reserve base (ORB), 

which represents coal reserves in the ground that have been identified to specified levels of accuracy 

and are in thickness ranges and at depths that are considered minable. As of January 1, 2012, the 

demonstrated reserve base was estimated to contain 483 billion short tons. The ORB was originally 

estimated in 1974 by the U.S. Bureau of Mines as part of the last comprehensive assessment of U.S. coal 

resources and reserves. Because of higher priority needs, EtA has not completed a full national 

reassessment of the ORB, although it has made several new regional assessments over the years. 

10 
23 


79435.012

Estimated Recoverable Reserves. The actual proportion of coal reserves that can be produced from 

undisturbed deposits varies from less than 40 percent in some underground mines to more than 90 

percent at some surface mines. Because of property rights, land use conflicts, and physical and 

environmental restrictions, EIA has estimated that only about 50 percent of the DRB may be available or 

accessible for mining. Thus, EIA estimated that the remaining U.S. estimate recoverable reserves totaled 

259 billion short tons. 

Recoverable Reserves at Producing Mines. The smallest category of reserves is recoverable reserves at 

producing mines, which are reported to EIA annually by mine operators. These reserves essentially 

reflect the working inventory at producing mines. As of January 1, 2012, they were estimated at 19 

billion short tons. 

TRENDS IN RENEWABLE RESOURCE USE IN elECTRICITY AND LIQUID FUelS 

In 2012, the consumption of most renewable energy forms including Wind, solar, and biofuels are 

projected by EIA to have grown. EIA expects hydropower production will have fallen 

13.7 percent from the unusually high levels seen in 2011, leading to an overall decline of 2.5percent in 

renewable energy consumption. Even so, the overall growth in renewable energy consumption from 

2010 to 2012 was 10.3percent. In October of 2012, electriCity generation from Other Renewables 

(wood, black liquor, other wood waste, biogenic municipal solid waste, landfill gas, sludge waste, 

agriculture byproducts, other biomass, geothermal, solar thermal, photovoltaic energy, and wind) 

surpassed conventional hydroelectricity generation (Figure 10) for the first time. 

EIA projects that Wind-powered generation grew by 17 percent in 2012. According to a recent analysis 

by the National Renewable Energy Laboratory (NREL), the estimated annual domestic resource potential 

for wind (onshore as well as offshore) is 49,700 TWh. Onshore wind accounts for 32,700 TWh of the 

estimated resource potential, and is present in nearly every state, being largest in the western and 

11 
24 


79435.013

central Great Plains and lowest in the southeastern United States. Technical estimated potential for 

offshore wind power is 17,000 TWh, and is present in significant quantities in all offshore regions ofthe 

United States. 

Solar energy continues robust growth and is projected to grow by 32 percent in 2012. According to 

NREL, the estimated annual resource potential is 399,700 TWh, with the largest potential coming from 

rural utility scale PV (280,600 TWh). Concentrating solar power technologies also comprise a substantial 

segment of the total solar resource potential with an estimated annual potential of 116,100 TWh. 

Enhanced geothermal systems (EGS) have an estimated annual domestic resource potential of 31,300 

TWh. The vast majority of the geothermal potential for EGS within the contiguous United States is 

located in the westernmost portion ofthe country. The Rocky Mountain states, and the Great Basin 

particularly, contain the most favorable resource (17,400 TWh). 

Because of drought conditions depressing corn harvests throughout the Midwest, fuel ethanol 

production fell from an average of 900,000 bbl/d during the first half of 2012 to an average of 820,000 

bbl/d in the second half of the year. EIA expects ethanol production will remain near current levels 

through mid-2013 before recovering to pre-drought production levels, averaging 870,000 bbl/d (13.3 

billion gallons) for the year. Ethanol production is expected to rebound in 2014 as previously idled 

capacity comes back on line. Biodiesel production averaged about 65,000 bbl/d (1.00 billion gallons) in 

2012. Forecast biodiesel production averages 74,000 bbl/d in 2013 and 2014, with biodiesel blending 

meeting the RFS requirement of 1.28 billion gallons set for 2013. 

Finally, EIA has developed a new interactive energy mapping feature incorporating the various resource 

ranges and GIS data on energy infrastructure. The maps allow the user to select the layers to show 

resources and infrastructure at the national, state, or county level. We will soon add Congressional 

12 
25 


79435.014

districts. Figure 11 A-D demonstrates different resource and infrastructure combinations for several 

different states. 

Thank you for the opportunity to testify before the Subcommittee. 

13 
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79435.015

Figure 1. Crude oil production beginning to grow due to tight oil development, led by 

Bakken and Eagle Ford plays 

U.S. oil production 

million barrels of oil per day 

8 

7 

6 

5 

4 

3 

2 

Selected Tight Oil Play Production 

All Other Oil Production 

o 

2000 2002 2004 2006 2008 2010 2012 

Source: U.S. Energy Information Administration, Dril/inglnfo (formerly HPDI), Railroad Commission of 

Texas, and North Dakota Department of Mineral Resources, through August 2012 

Figure 2. Tight oil production for selected plays through August 2012 exceeds 1.8 million 

barrels per day 

tight oil production 

million barrels of oil per day 

2.0 

1.8 

1.6 

1.4 

1.2 

1.0 

0.8 

0.6 

0.4 

0.2 

0.0 

2000 

Eagle Ford (TX) 

Bakken (MT and NO) 

Granite Wash (OK and TX) 

Bonespring (TX) 

Monterey (CA) 

Woodford (OK) 

ill Niobrara-Codell (CO and WY) 

Spraberry (TX) 

ill Austin Chalk (TX) 

2002 2004 2006 2008 2010 2012 

Source: U.S. Energy Information Administration, Drillinglnfo (formerly HPDI), Railroad Commission of 

Texas, and North Dakota Department of Mineral Resources, tllrougll August 2012 

14 
27 


79435.016

Figure 3. U.S. shale gas production comprised over 35 percent of total U.S. dry production 

in 2012 

dry natural gas production 

billion cubic feet per day 

80 

70 

60 

50 

40 

30 

20 

10 

o 

2000 

Shale Production 

Non-shale Dry Production 

2002 2004 2006 2008 2010 

Source: U.S. Energy Information Administration and Lei Energy Insight through October 2012 

15 

2012 
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79435.017

Figure 4. U.S. crude oil plus condensate proved reserves, 1980-2010 

billion barrels 

35 

30 

25 

20 

15 

10 

5 

o 

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 

Source: U.S. Energy Information Administration 

Figure 5. Changes in oil proved reserves by state/area 2009-10 

billion barrels of crude oil and lease condensate 

OR 

WA 

mlliron barreis rS':8ter'area CDunt} 

+10"1 to +860 is) 

+1 to +100 (16) 

no change (24) 

-100 to -1 (3) 

MN 

WI M' +3 

VT 

NH 

f!A 

+11 NJ 

MD --DE 

VA 

NC 

sc 

G.A 

-sao to ·101 {Oi i Data witt,hek! to .)',Joid disclosure of ;!~dividuat comp.my ckIb 

Source: U.S. Energy 'n~n"n,,'inn Administration 

16 

ME 
29 


79435.018

Figure 6. U.S. wet natural gas proved reserves, 1980-2010 

trillion cubic feet 

350 

300 

250 

200 

150 

100 

50 

o 

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 

Source: US. Energy Information Administration 

Figure 7. Changes in wet natural gas proved reserves by state/area 2009-10 

billion cubic feet 

Source: US. Energy Information Administration 

17 
30 


79435.019

Figure 8. Weekly Coal Production by Basin, 2012 vs. 2007-2011 

Weekly coal production by basin, 2012 vs. 2001 ~011 range 

million tons 

12 

10 

B 

G 

4 

2 

0 Jan Dec Jan Dec 

C"mtraIA""alach'a" Basin 

G 6 6 

5 5 5 

4 4 4 

3 " 3 

2 2 2 

1 

0 0 0 Jan Dec ,Jan Dec Jan Dec 

Source: US. Energy Information Administration, Weekly Coal Production, based an MSHA 

Note: Data for January 2007 through September 2012 are revised to match the Mine Safety and Health 

Administration (MSHA), October 2012 through December 2012 are preliminary EIA estimates and 

denoted with dotted lines. 

Figure 9. U.S. Regional Coal Exports by Top Ports, January - November 2012 

U.S. region a' coal exports by top ports, January. November 2012 

•

'Ih 

¥a0{ 

'i~~\ ' 

North and Centr.1 

America 

11 

South America 

9 

Asia 

Australiaal1d Oceania 

02'11 

Source: US. Energy Information Administration based on US. Census Bureau data 

Note: For top seven ports totaling 93 percent of US. exports. Data for 2012 run through November. Due 

to limited volumes. Central America is combined with North America. 

IX 
31 


79435.020

Figure 10. Generation from conventional hydroelectric and other renewable sources 

thousand megawatlhours 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

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Source: u.s. Energy Information Administration, Electric Power MontMy 

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Note: Data for 2012 are preliminary. Other renewable sources include wood, black liquor, other wood 

waste, biogenic municipal solid waste, landfill gas, sludge waste, agriculture byproducts, other biomass, 

geothermal, solar thermal, photo voltaic energy, and wind. 

19 
32 


79435.021

Figure l1A-D. 

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20 
33 


79435.022

Mils" 

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iopographiCal Sources Esn, D8lorme, N.A.VTEQ, Tomiom,intBlmap, Irlcrement P Corp, GEBC'O,USGS, FAO,NPS, 

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21 
34 

Mr. WHITFIELD. Well, thank you. 

And Dr. Yergin, you are recognized for 5 minutes. 

STATEMENT OF DANIEL YERGIN 

Mr. YERGIN. Chairman Whitfield, Ranking Member Rush, members of the committee, I am pleased to be here—— 

Mr. WHITFIELD. Is your microphone on? 

Mr. YERGIN. I don’t think so. So I will start over with 5 minutes. 

Thank you. 

Chairman Whitfield, Ranking Member Rush, members of the 

committee, it is really an honor to be here to have the chance to 

share some thinking that fits into the framework of the discussion 

that the members have already laid out. 

It is indeed very timely because the United States is in the midst 

of an unconventional revolution in oil and gas that fits that all-ofthe-above strategy that Congressman Rush talked about and also 

becomes increasingly apparent, goes beyond energy itself, that is, 

it goes to the economy, and it has only become really apparent in 

the last year or two that this unconventional revolution is supporting currently about 1.7 million jobs in the United States and 

it is not only in the oil- and gas-producing States. There are 44,000 

jobs in New York, which doesn’t produce, 39,000 jobs in the State 

of Illinois. We think that overall job number will rise to 3 million 

by 2020. Last year, this unconventional revolution brought $62 billion in 

revenues to federal and State government. By 2020, that number 

could be close to $115 billion. It is helping to stimulate a manufacturing renaissance in the United States. We have noted something 

like $95 billion of plans for investment in the chemical sector in the 

United States. I don’t know if all of that will get done but that 

demonstrates it. It is certainly improving the competitive position 

of the United States in the world and beginning to affect global 

geopolitics. 

I think although great advances have been made in solar and 

wind—I talk about them in The Quest—the rebirth of renewables, 

those are really innovations from the last century. In terms of this 

century, what is happening in oil and gas is the biggest energy innovation so far of the 21st century. It has unfolded fast. Those of 

you who participated in hearings in 2008 remember those dark, 

dire days when, I think as Chairman Whitfield reminded, the 

world was going to run out of oil and the United States was going 

to run out of oil even more quickly. How that has changed. Shale 

gas now has gone from 2 percent of our supply to 37 percent of our 

supply, and what is really dramatic is what has happened on oil, 

which instead of continuing its long decline has increased dramatically by almost 39 percent since 2008. That increase is equivalent— 

because you say what does that mean. It is equivalent to the entire 

output of Nigeria, the 7th largest oil-exporting country in OPEC. 

It is almost equivalent to Iran’s total exports before sanctions went 

into place. Indeed, it is sobering to consider that without these 

technologies, and the oil output that has resulted from them, the 

sanctions on Iran might well have failed. 

The environmental aspects have been touched on. U.S. carbon dioxide emissions from energy consumption are down 13 percent 

35 

since 2007. I think in discussion we might get to some of the conclusions that we came to as the Deutch committee, the subcommittee of the Secretary of Energy Advisory Board set up at the 

behest of President Obama, on managing the environmental issues 

around this. One thing that did come out of that hearing is a focus 

on the role of the States and in particular the activities of 

STRONGER, the collaborative organization of the States that seeks 

collaborative benchmarking and standard setting. 

Let me come finally to something that is always contentious, 

which is imports and exports of oil and energy, which has been a 

major issue for the United States for about 70 years. Until the end 

of the last decade, it seemed that the question was only how fast 

would oil imports go up and how big would our imports of natural 

gas become, as the chairman referred to in his remarks. Well, this 

unconventional revolution has sure turned that around. Mr. Rush 

has cited the decline in our imports over the last 7 years or so, and 

this is the result both of surging production and greater efficiency. 

Moreover, the flow of imports has changed. Canada now supplies 

about 27 percent of our total. 

But what gets the most attention right now is the question of 

whether we are going to become an export of LNG, liquefied natural gas, and I think this needs to be looked at in terms of the 

overall U.S. supply and global competition. Our view, similar to 

others, is that the market in the United States is demand constrained, not supply constrained. Many LNG projects have been announced. We think only a handful will be built, these $10 billion 

projects. The reason is both cost and scale of global competition. 

Currently already, before any of these get going, already about a 

third, equivalent to a third of total existing capacity new projects 

are under construction or have been committed. So the United 

States capacity will be coming into a market in which there will 

be new supplies from Australia, new sources such as offshore East 

Africa and eastern Mediterranean and Canada. Just yesterday, 

Canada approved a major export project to Asia. Finally, the shale 

gas development that will occur elsewhere, so these will all be offsets. 

So let me just add one other thing. I think for decades, the 

United States has made the free flow of energy supplies really one 

of the corner principles of our foreign policy. It is the policy we 

have urged on many other nations. So to me, at least, it is puzzling 

how we can say to a close ally like Japan suffering energy shortages as a result of Fukushima that on the one hand we want you 

to import less oil from Iran, yet on the other hand we don’t want 

to consider new natural gas exports to Japan. So those are some 

thoughts for consideration on it. 

I will just conclude by saying certainly expanded domestic supply 

will add resilience to shocks and add to our security cushion. Moreover, prudent expansion of U.S. energy exports will actually add an 

additional dimension to U.S. influence in the world. However, there 

remains only one world oil market, and a disruption anywhere will 

be a disruption everywhere. 

So all together this unconventional oil and gas revolution has already had a major impact in multiple dimensions. Its significance 

will continue to grow as it continues to unfold, and these opportuVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
36 

nities certainly provide a timely opportunity for assessing the impact and significance in its many dimensions. Thank you. 

[The prepared statement of Mr. Yergin follows:] 

37 


79435.023

Subcommittee on Energy and Power of the House 

Energy and Commerce Committee 

Testimony submitted for Hearings on "America's Energy 

Security and Innovation" 

By Dr. Daniel Yergin1 

February 5, 2013 

It is an honor to appear before the Subcommittee on Energy and Power of 

the House Energy and Commerce Committee, and I do want to express my 

appreciation for the opportunity to participate in this important hearing. 

The United States is in the midst of the "unconventional revolution in oil 

and gas" that, it becomes increasingly apparent, goes beyond energy itself. 

Today, the industry supports 1.7m jobs - a considerable accomplishment given 

the relative newness of the technology. That number could rise to 3 million by 

2020. In 2012, this revolution added $62 billion to federal and state government 

revenues, a number that we project could rise to about $113 billion by 2020. 2 It is 

helping to stimulate a manufacturing renaissance in the United States, improving 

the competitive position of the United States in the global economy, and 

beginning to affect global geopolitics. This revolution has also engendered two 

debates -- about the environmental impact of shale gas development and about 

the role of U.S. energy exports. All this sets the framework for the 

Subcommittee's hearings. 

1 Dr. Daniel Yergin is Vice Chairman of IHS and founder of IHS Cambridge Energy Research 

Associates. He is author of The Quest: Energy, Security, and the Remaking afthe Modern Warld 

and received the Pulitzer Prize for his book The Prize. He serves on the u.s. Secretary of Energy 

Advisory Board. 

'IHS, America's New Energy Future: the Unconventional Oil and Gas Revolution and the United States Economy, 

vol. 1 National Economic Contributions (October 2012) and vol. 2, State Economic Contributions (December 2012). 

1 
38 


79435.024

Owing to the scale and impact of shale gas and tight oil, it is appropriate to 

describe their development as the most important energy innovation so far of the 

21st century. That is said with recognition of the major technological advances in 

wind and solar since 2000; but, as is described in The Quest, those advances are 

part of the "rebirth of renewables". As actual innovations, solar and wind 

emerged in the 1970s and 1980s.3 

The unconventional revolution has unfolded pretty fast. This Committee 

has held many important hearings on energy over the decades. Yet it is striking to 

think back to the hearings of even just half a decade ago, during the turmoil of 

2008, when it was widely assumed that a permanent era of energy shortage was 

at hand. 

How different things look today. Shale gas has risen from two percent of 

domestic production a decade ago to 37 percent of supply, and prices have 

dropped dramatically. U.S. oil output, instead of continuing its long decline, has 

increased dramatically - by about 38 percent since 2008. 4 Just the increase since 

2008 is equivalent to the entire output of Nigeria, the seventh-largest producing 

country in OPEC. 

People talk about the potential geopolitical impact of the shale gas and 

tight oil. That impact is already here. It is sobering to consider that, without this 

increase in oil output based on the same technologies as shale gas, the sanctions 

on Iranian oil exports might well have failed. 

Where did the unconventional revolution come from? 

This development is a story of entrepreneurship and innovation. Although 

hydraulic fracturing dates back to the late 1940s, it took from the early 1980s to 

the end of the 1990s, in the face of much skepticism and disappointment, to 

establish that natural gas could be economically extracted from shale rock using 

3 Daniel Yergin, The Quest: Energy, Security, and the Making of the Modem World (New York: Penguin Books, 

2012), updated edition, chapters 27, 29-30. 

4 Energy Information Administration 

2 
39 


79435.025

that technology. By 2003, it was successfully yoked with another technology, 

horizontal drilling, to provide proof of concept. 5 

Still, the dominant conviction for the next few years was that the United 

States was going to become increasingly short of natural gas and would become a 

large importer of liquefied natural gas (LNG). Only in 2008 was it observed that 

U.S. natural gas production was going up, instead of down. Many more 

companies entered into shale gas development, and the pace of effort intensified. 

Since then, output has grown rapidly, indeed well beyond the capacity of the 

current market to absorb it. It was not until the autumn of 2009 that the shale 

revolution became apparent to the policy community. And it was only around 

2010 that producers began to shift from focusing on gas production to producing 

oil and liquids-rich natural gas using the same techniques. 

What is the economic impact of the unconventional oil and gas revolution? 

While various states had begun to home in on the economic development 

aspects of shale gas and tight oil, it was only in about 2011 that its significance for 

the national economy started to come into focus. So far, this unconventional 

revolution is supporting 1.7 million jobs - direct, indirect, and induced. It is 

notable that, owing to the long supply chains, the job impacts are being felt 

across the United States, including in states with no shale gas or tight oil activity. 

For instance, New York State, with a ban presently in effect on shale gas 

development, nevertheless has benefitted with 44,000 jobs. Illinois, debating 

how to go forward, already registers 39,000 jobs.6 

The total revenues flowing to governments from unconventional 

amounted to $62 billion last year. Companies are now committing or planning 

investments that in total appear to go into the hundreds of billions of dollars. A 

large number of chemical companies, for instance, have announced plans to build 

or expand facilities in North America - with capital expenditures totaling close to 

5 Yergin, The Quest, chapter 16, "The Natural Gas Revolution". 

5 IHS, America's New Energy Future, vol. 2, State Economic Contributions, p. 14 

3 
40 


79435.026

$100 billion.7 Will all be built? Time will tell. But what is striking is that, half a 

decade ago, these companies would have scoffed if they had been told that they 

would be investing back into the United States. The investments are coming both 

from U.S. based companies, which are "on-shoring" in response to lower energy 

costs, and from foreign companies. Many other kinds of manufacturing firms are 

also investing and expanding based upon this growing business. 

The unconventional revolution was one of the major topics at the World 

Economic Forum two weeks ago in Switzerland. European business leaders and 

some European policymakers are realizing that United States' new energy 

situation greatly improves its competitive position vis a vis a Europe that 

desperately needs new jobs. When I was in China for the Chinese publication of 

The Quest, I repeatedly encountered discussions about how shale gas could 

change the global competitive playing field to the advantage of the United States. 

How to assess the environmental aspects? 

The most notable impact is in terms of C02 emissions. U.S. carbon dioxide 

emissions from energy consumption are down 13 percent since 2007. 8 The 

economic downturn is part ofthe story. But the most significant part is the result 

of natural gas supplanting coal in electric generation at a rapid rate. 

Hydraulic fracturing has been used since the late 1940s, as already 

indicated. However, it has only been recently applied at this scale and with this 

degree of intenSity in regions that are more densely populated and that are not 

accustomed to oil and gas development. Understandably, the environmental 

impacts need to be carefully assessed and monitored, and the public needs to be 

confident about these impacts. 

In March, 2011, President Obama spoke about how "recent 

innovations have given us the opportunity to tap" large reserves of natural gas 

'IHS, Energy and the New Global Industrial Landscape: a Tectonic Shift? (January 2013), p. 2 

, EIA, Monthly Energy Review, January 2013, Table 12.1 

4 
41 


79435.027

"perhaps a century's worth of reserves." But he added that the public needs to 

be assured that it is being produced safely.9 As a consequence, a subcommittee 

to the Secretary of Energy's Advisory Board was established to examine the 

environmental questions. I served on that committee under Chairman John 

Deutch of MIT.lO Our work identified three major environmental issues - water, 

local air pollution, and community impact. Each, the subcommittee concluded, 

needs to be managed with great attention and can be managed through best 

practices in operations and regulation, continuing technological innovation, and 

communityengagement.ll We see continuing effort going into these endeavorswith, for instance, recycling of water and new approaches to waste water 

treatment. 

One observation that came out of that study is what seems to be a 

mismatch between perceptions of regulation and actual regulation. Drilling is a 

highly-regulated activity, but it is mostly regulated at the state level. We 

identified the need to continue to support, with what amounts to very small 

funding, the activities of STRONGER - State Review of Oil and Natural Gas 

Environmental Regulations - a collaborative benchmarking and standard-setting 

organization that evaluates and promotes continuing improvement of regulatory 

activities among the states. 12 

9 "Remarks by the President on America's Energy Security," March 30, 2011, http://www.whitehouse.gov/thepress-office/2011/03/30/remarks-president-americas-energy-security 

10 Other members of the Subcommittee included Professor Stephen Holditch, chairman of the department of 

petroleum engineering at Texas A&M University; Fred Krupp, president of the Environmental Defense Fund; 

Kathleen McGinty, chairman of the Council on Environmental Quality in the Clinton Administration and former 

Secretary of the Pennsylvania Department of Environmental Protection; and Susan Tierney, former assistant 

secretary of energy in the Clinton Administration and former Secretary of Environmental Affairs and the Chair of 

the Water Resources Board for the State of Massachusetts and managing principal of the Analysis Group. 

11 Secretary of Energy Advisory Board, Shale Gas Subcommittee 90-Day Report, August 18, 2011. 

12 For STRONGER, http://www.strongerinc.org/ 

5 
42 


79435.028

What does the unconventional revolution mean for us imports and exports of oil 

and gas? 

U.S. imports and exports of energy have been a major issue for almost 

seventy years in the United States. Until the end of the last decade, it seemed 

that the main question about oil imports was how fast they would increase as a 

share of total consumption; and, for gas, how large the exports would become. 

This unconventional revolution has turned around the direction of imports .. 

U.S.net imports of oil have declined from a peak of 60 percent in 2005 to about 

40 percent today. That is the consequence of surging tight oil production, and 

reduced demand, owing to both greater efficiency and the weak economy. 

Moreover, the flow of imports has changed. Canada now supplies about 

27percent of total U.S. imports. 

Net imports of crude will continue to decline. But the United States will 

continue to remain a net importer for some time. Our import levels are still 

higher than they were at the time of the first oil crisis, in the 1970s. However, we 

will see the Western Hemisphere, and North America in particular, moving 

towards greater self sufficiency. At the same time, the very large, technicallyadvanced refining complex on the Gulf Coast -- along with the shifting domestic 

product demand -- will put the United States in the position to continue to 

expand exports of refined products. 

What, of course, gets most attention now is the potential for liquefied 

natural gas (LNG l exports. This needs to be looked at in terms of overall U.S. 

supply and global competition. Our view is that, owing to the very large resource 

base, the market in the U.S. is demand-constrained, rather than supplyconstrained. Larger markets - whether they be in electric power, industrial 

consumption, transportation, or exports -- are required to maintain the 

investment flow into the development of the resources. 

Many LNG projects for the United States have been announced. These 

would be expensive facilities to build -- $10 billion or more. Only a handful, in our 

view, are likely to end up being financed and built. The reason is both cost and 

the scale of global competition. Currently, 95 million tons of new annual capacity 

6 
43 


79435.029

around the world are either under construction or have been committed, which is 

equivalent to fully a third of existing capacity. Capacity in the U.S. that might be 

coming into a market late in this decade or early in the next will have to compete 

with new supply from existing exporters, such as Australia, and the new sources, 

such as off-shore East Africa and the Eastern Mediterranean. Moreover, western 

Canada is likely to become a major exporter of LNG to the main markets in Asia. 

This competition will create a global market offset on how many projects are 

actually built. 

While markets and economics will eventually determine the realistic scale 

of U.s. exports, one also has to take into account wider considerations in 

assessing policy regarding future LNG exports. For decades, the United States 

has made the free flow of energy supplies one of the cornerstones of foreign 

policy. It is a principle we have urged on many other nations. How can the 

United States, on one hand, say to a close ally like Japan, suffering energy 

shortages from Fukushima, please reduce your oil imports from Iran, and yet turn 

around and, on the other, say new natural gas exports to Japan are prohibited? 

What is the geopolitical impact of the unconventional energy revolution in the 

United States? 

This question has moved to the front of international discussion. Last 

Friday, at the venerable Munich Security Conference, a forum for leading defense 

and security officials from around the world, this was one of the main topics of 

discussion. This kind of question was never on that agenda before. 

One immediate impact has already been cited. Tighter sanctions on Iran 

have succeeded in taking half of Iran's oil exports out of the market, even as 

global demand for oil continues to expand. The increase in Saudi output was part 

of the formula. But also of great importance has been the growth in U.S. supplyat a rate higher than generally anticipated. 

Certainly expanded domestic supply will add to resilience to shocks and add 

to the security cushion. Moreover, prudent expansion of U.S. energy exports will 

7 
44 


79435.030

add an additional dimension to U.S. influence in the world. However, there will 

remain only one global oil market, and a major disruption anywhere would affect 

the entire market. The question as to how the unconventional revolution will 

affect U.s. involvement in the Middle East is moving to the fore. Current net u.s. 

imports from the Persian Gulf are equivalent to eight percent of total 

consumption, as it is. Even if that number goes down, the nature of U.s. interests 

in the region go well beyond direct oil imports to the importance of the region for 

the global economy and global security. 

Conclusion 

Altogether, the unconventional oil and gas revolution has already had 

major impact in multiple dimensions. Its significance will continue to grow as it 

continues to unfold. These hearings provide a very timely opportunity for 

assessing that impact and significance in its many dimensions, and I am pleased to 

respond to the committee's questions. 

8 
45 

Mr. WHITFIELD. Thank you, Dr. Yergin. 

Ms. Morgan, you are recognized for 5 minutes. 

STATEMENT OF JENNIFER MORGAN 

Ms. MORGAN. Thank you very much, Mr. Chairman, and thank 

you for the opportunity to testify here today. I work for the World 

Resources Institute, which is a nonprofit, nonpartisan think tank, 

and we focus on the intersection of environment and improving 

people’s lives. 

I am very delighted to speak here today about America’s abundant energy resources and the smart choices we need to make to 

deliver them, and I have two main points to share with you today. 

First is that an effective, durable and affordable energy strategy 

must consider the risks of climate change. Why? Well, our climate 

is changing. Each successive decade in the last 50 years has the 

warmest on record globally, and extreme weather events are on the 

rise with tens of billions of dollars in damages in the United States 

each year. A 2010 National Research Council report concluded that 

‘‘climate change is occurring, is caused largely by human activities 

and poses significant risks for, and in many cases is already affecting a broad range of human and natural systems.’’ This is the message of numerous comprehensive science assessments including the 

draft National Climate Assessment that was released last month. 

Directly relevant to this subcommittee are electric infrastructure 

and reliability are already being affected and are increasingly vulnerable to droughts and other disruptions caused by climate 

change. Current impacts on energy production are just the beginning. Unless we change course, these impacts will become more extreme, placing our energy infrastructure and our country at great 

risk, which brings me to my second point, which I think is very important. To avoid the most serious climate change impacts, our energy policy must drive low-carbon technologies forward now and 

build them out at a much larger scale. 

The good news is that we don’t have to choose between energy 

security and climate security. America is rich in renewable resources and has large opportunities to increase efficiency. According to the National Renewable Energy Laboratory, 80 percent of 

our electricity needs can be met in 2050 through renewable generation and existing technology. We can also improve our efficiency 

across the economy. The National Academy of Sciences found that 

the United States could save 30 percent of the energy used, and reducing methane emissions from natural gas and capturing and 

storing CO2 can put us on the cutting edge of technology development, which I think is a true win-win. 

If the United States, however, and we decide not to move forward 

with a low-carbon future now, we risk not only the severe impacts 

of climate change but also stranded investments from short-term 

poorly informed planning. Many utilities are already factoring climate change into their investment decisions, and they are looking 

for regulatory and climate policy certainty. Investments in highpolluting resources, I think, will prove to be a poor bet over time 

and these investments will be at direct physical risk from increasing impacts. 

46 

So without a rapid shift to a low-carbon economy, the United 

States is also going to miss out on the clean technology market 

around the world. The global market for low-carbon technology 

could double or triple by 2020. 

So in conclusion, Mr. Chairman, I think the United States has 

the opportunity to be both energy and climate secure in the future, 

and Congress can help and assist in that effort through policies 

that first ensure climate change risks are more directly incorporated into both public and private decision making; two, build 

out America’s clean energy sector through an approach that is comprehensive, long term, targeted and inclusive; three, increase energy efficiency across the economy; and four, provide funding and 

incentives for low-carbon and clean energy technologies. Ultimately, Congress will work together to build national energy policies that take these climate risks very seriously and take advantage of all the opportunities presented by our abundant clean energy resources. 

Thank you very much for the opportunity, sir. 

[The prepared statement of Ms. Morgan follows:] 

47 


79435.031

Hearing Before the U.S. House of Representatives 

Energy and Commerce Subcommittee on Energy and Power: "American Energy 

Security and Innovation: An Assessment of North America's Energy Resources" 

Testimony of Jennifer L. Morgan, Director, Climate and Energy Program, 

World Resources Institute 

February 5, 2013 

Summary of Key Points: 

Our energy choices need to factor in both opportunities and risks. This testimony gives 

particular attention to why we must consider the risk of climate change, both on our 

resources being developed and utilized today and on our choices for development into the 

future. It concludes with the following recommendations: 

1. Congress should request that the National Climate Assessment and Development 

Advisory Committee review the current authorities of federal agencies and national 

laboratories, and recommend how consideration of risks associated with climate 

change can be more directly incorporated into decision-making. 

2. Congress should support efforts to better assess the impacts of climate change on 

America's energy infrastructure and incorporate this into planning and investment 

decisions. 

3. Congress should keep in mind four important criteria in considering policies to drive 

more effective clean energy growth and competitiveness: any energy policy should be 

comprehensive, long-term, targeted, and inclusive. 

4. In capturing energy efficiency across the economy, Congress can playa constructive 

role in two key areas: 

• Infomled consumer choice: supporting and expanding programs to help 

ensure product labeling is accurate and publicly reported in a timely manner, 

to encourage energy-wise investment decisions throughout the U.S. economy. 

• Efficiency standards: supporting and extending the ability offedera! agencies 

to develop and update energy efficiency standards for vehicles, appliances, 

and other energy-consuming equipment that is sold into U.S. commerce. 

5. Congress must work toward reaching bipartisan agreement on national energy 

policies that encourage more efficient energy consumption, increase the diversity of 

domestic energy production, maximize deplo}111ent oflow-carbon energy 

technologies, and minimize environmental impacts throughout our energy systems. In 

the near-term, it is also critical tor Congress to provide funding and incentives for 

low-carbon and clean energy technologies. 

1 
48 


79435.032

TESTIMONY OF JENNIFER L. MORGAN 

DIRECTOR, CLIMATE AND ENERGY PROGRAM 

WORLD RESOURCES INSTITUTE 

HEARING BEFORE THE U.S. HOUSE OF REPRESENTATIVES 

ENERGY AND COMMERCE SUBCOMMITTEE ON ENERGY AND POWER: 

"AMERICAN ENERGY SECURITY AND INNOVATION: 

AN ASSESSMENT OF NORTH AMERICA'S ENERGY RESOURCES" 

February 5, 2013 

Good morning, and thank you for the opportunity to contribute to the deliberations of this 

Subcommittee. My name is Jennifer Morgan, and I direct the Climate and Energy 

Program at the World Resources Institute (WRJ). WRI is a non-profit, non-partisan think 

tank that focuses on the intersection of the environment and socio-economic 

development. We go beyond research to put ideas into action, working globally with 

governments, business, and civil society to build trans formative solutions that protect the 

eatth and improve people's lives. We operate globally because today's problems know no 

boundaries. We provide innovative paths to a sustainable planet through work that is 

accurate, fair, and independent. 

I am delighted to speak with you today about America's energy resources and the smart 

choices we need to make in developing them. We have been blessed with abundant 

resources - not just of fossil fuels, but also of solar, wind, and other renewable resources. 

We also have a vast untapped resource in energy efficiency: the value we place on our 

resources comes from the energy they can provide, and we increase that value by using 

energy wisely. 

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Our energy choices need to factor in both opportunities and risks. [n this testimony, I will 

give particular attention to why we must consider the risk of climate change, both on our 

resources being developed and utilized today, and on our choices for development into 

the future. America has a vast potential oflow-carbon energy resources; tapping these 

will allow us to increase our reliance on home-grown resources and still be "climate 

secure." Innovation in clean energy technology has already created jobs and spurred 

economic growth, not only through deployment in the United States but also through 

export into new markets. And in both cases, the potential for expansion is great. 

America's prosperity has long depended on our ability to rise above the challenges before 

us. The investment choices we make today will shape our energy and economic future for 

decades to come; thus we must deliberately think longer-term and consider the range of 

risks and costs that will be compounded iftoday's investments lock in a pollutionintensive energy future. 

I will conclude this testimony by recommending actions that Congress can take to ensure 

that our future is sustainable actions that will enable the United States to grow our 

economy and to lead globally on developing clean energy, fostering innovation, and 

realizing an energy-secure, climate-safe future. 

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The U.S. Must Integrate Climate Risks into Decision Making 

Our climate is changing. In addition to a clear long-term warming trend, extreme weather 

events are on the rise, with tens of billions of dollars in damages in the United States each 

year. 1 It is also clear that human activities are the main culprit. In 20 I 0,: at the request of 

Congress, the National Research Council of the U.S. National Academy of Sciences 

(NAS) published a report concluding that "Climate change is occurring, is caused largely 

by human activities, and poses significant risksfor--and in many cases is already 

qffecting-a broad range of human and natural systems. " The NAS study was one of 

several comprehensive science assessments to have been conducted in recent years -

including the recently released draft National Climate Assessment} all of which have 

reached scientific consensus on the reality of climate change and humanity's major role 

in it. 

Furthermore, the NAS4 has also urged immediate strong policy actions to curb emissions, 

concluding that "the risks associated with doing business as usual are a much greater 

concern than the risks associated with engaging in strong response efforts. ,,5 Current 

U.S. energy policy lacks a framework for prudently assessing and managing the risks of 

climate change. Yet all of the evidence suggests that every year of deferrcd action vastly 

increases the cost to future generations of investing in a course correction that puts us on 

a prudent path toward climate stabilization. 

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In assessing America's energy resources, we must take into account the impact that 

climate change is having now on our energy infrastructure, as well as how our energy 

choices should be informed by the need to avoid greater climate impacts in the future. 

Climate Change Impacts in the United States 

Around the country, we are increasingly seeing the effects of climate change. From sealevel rise to drought and extreme weather events, our changing climate is increasing the 

probability and intensity of many impacts. Climate instability directly affects the future 

security of our energy sector droughts and flooding threaten grid infrastructure and 

undermine the ability of power plants to operate; wildl1res and extreme storms damage 

transmission infrastructure; powerful coastal storms threaten our ability to safely develop, 

rel1ne, and deliver oil and gas to industry and consumers. 

Temperature rise 

Each successive decade in the last 50 years has been the warmest on record globally, and 

average global temperatures through the remainder of this century will continue to rise.6 

The average temperature in the United States has risen by 1.5°F since 1895, and in the 

absence of significant mitigation efforts the increase is projected to be 5-1 OaF by the end 

of the century.7 Last year was the warmest year in observed U.S. history.8 

8 hup://www.ncdc.noaa.gov/sotc/ 

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Sea-level rise 

It has been well established9 by scientific bodies such as the U.S. Global Change 

Research Program that global warming has resulted in rising seas. The 8-inch rise in 

average global sea level lo over the last century has exacerbated the impacts of storm 

surge in the United States and abroad. Interestingly, sea-level rise does not affect all 

coasts in the same way. In recent decades no other place in the world has experienced 

higherl! rates of sea-level rise than the northeastern coast of the United States.!2 

Sea-level rise and associated storm surges and coastal flooding have significant economic 

implications. For example, damage estimates from Hurricane Sandy have ranged from 

$30 to $50 billion. 13 [n Florida, already occurring sea-level rise impacts are forcing 

Miami Beach to spend more than $200 million l4 to overhaul its storm drainage system, 

and Hallandale Beach to spend $10 million 15 on new wells because of saltwater intrusion. 

Sea-level rise will requirel6 increased energy usage in the form of additional pumping for 

drainage and water supply, as well as for the energy-intensive process of desalinization. 

The vulnerability of the U.S. economy to sea-level rise is significant, with 41 million 

Americans living in coastal counties along the East Coast. 17 

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Drought 

According to the National Oceanic and Atmospheric Administration (NOAA), over 65 

percent of the contiguous United States experienced drought last September,18 causing 

widespread damage to the nearly $300 billion1q in annual agricultural commodities 

within the United States.co Recent scientific findings have strengthened our 

understanding of the link between climate change, heat, and drought. For example, the 

heat wave leading to the Texas drought was found in a recent study" I by NOAA and other 

institutions to be 20 times more likely to occur now than in the 19605. According to the 

recent draft National Climate Assessment, disruptions to agricultural production from 

climate change have increased in recent years and are expected to increase further over 

the next 25 years. 

Extreme weather and climate events 

According to NOAA, in 2012 the United States experienced II extreme weather events 

causing more than $1 billion in damages each?2 The economic losses from extreme 

events increased in part by the impacts of storm surge exacerbated by climate changeare significant. For example, hurricanes have cost the U.S. Gulf Coast alone an average 

of$14 billion in damages per year, and the region could accumulate $350 billion in 

cumulative hurricane-related damages over the next 20 years.23 The 150-percent"4 

6 
54 


79435.038

increase in population along the Gulf Coast over the last 50 years, to 14 million 

inhabitants, has fillther increased the potential for costly impacts from storm surge and 

associated hurricanes. 

The increase in frequency and cost of extreme weather events has caused ripple effects 

throughout the insurance industry, which recent research shows has experienced steadily 

increasing weather-related losses over the last two decades.25 Aggregate economic losses 

in 2011 attributed to extreme weather events were $55 billion,"6 and storms such as 

Tropical Storm Lee and Hurricane Irene were responsible for a combined $8.3 billion in 

damages that included coastal flooding. With the expectation that sea-level rise and 

future threats of storms such as Sandy will increase property losses. the financial risk will 

be transferred more to the public sector as the private sector cannot cover "high-risk" 

coastal properties.27 

Climate Cbange lmpacts on the Power Sector 

When considering energy resources, we should take into account how climate change can 

impact America's energy infrastructure. For starters, energy demand is directly affected 

by rising temperatures; a recent study by the state of Massachusetts:!8 estimates that rising 

temperatures could increase demand for electricity in that state by 40 percent by 2030, 

requiring substantial investments in increasing peak load capacity. 

27 Ibid. 

:8 b11Q;ll "" ~.}iJll~~S£Q..\i~~f1~QQ9~'i~£"~1l~L!D / ccal eca ~C iUIill! e~1!!J!JD.ll!liQll:I..~.DQJ1.J2QJ 

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Energy facilities will also likely be affected by sea-level rise. The contiguous United 

States has more than 280 electric power plants, oil and gas refineries, and other energy 

facilities which are situated on low-lying land and thus vulnerable to sea-level rise and 

episodic coastal flooding. 29 Sea-level rise poses especially substantial challenges for 

sustaining reliable energy inrrastructure in states such as Florida, where 26 energy 

facilities are located in especially vulnerable areas.30 

In addition, power sector reliability is affected by extreme weather events. For example, 

in the aftermath of Hurricane Sandy and the Nor'easter that immediately followed, more 

than 8 million customers lost power.3l Refineries, natural gas distribution systems, and 

petroleum terminals were also affected by these storms. Meanwhile, because the majority 

of U.S. oil production and refining occurs in the Gulf Coast, hurricanes can impact 

national energy availability and price, as Hurricanes Katrina and Rita demonstrated in 

2005. 

The nation's power sector is also highly vulnerable to extreme drought. Water scarcity 

has emerged as one of the defining challenges ofthis century, yet a significant amount of 

water is needed to extract energy resources and use them to generate electricity. Limits 

on availability of ground and surface water are shaping the current operation and future 

location of America's power plants. [n 2011, over 85% of total electricity generation in 

the United States was produced by thennoelectric power plants fueled by nuclear and 

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fossil energy sources,32 most of which rely heavily on substantial water resources for 

cooling, As fossil energy extraction trends toward unconventional resources and 

"enhanced" production, more water is needed relative to extracting the same amount of 

energy using conventional methods, According to the National Energy Technology 

Laboratory,33 there are 347 coal-fired power plants in 43 states vulnerable to water supply 

and/or demand concerns. In a future with increasing likelihood of droughts, our nation's 

ability to meet growing energy needs through thermoelectric power generation will be 

highly vulnerable to climate change.34 

Investment Risks and Stranded Assets 

Any company or government - at the national, state, or local level - that makes 

infrastructure investments needs to factor climate change into their decision-making, and 

many are already doing so, equating climate risks with those from traditional financial 

risks like liquidity or competition.35 Intelligent policies can mitigate investment risk by 

encouraging investment in the low-carbon technologies that will be a foundational part of 

a successful 21 sl century economy. Investor networks around the world recognize this, 

and are advocating for well-designed policies that can help get money off the sidelines 

and into climate-secure industries.36 

32mn~~£~~~'~~EUill~~1£~10.~Bill~bbl~mL~.~~~;~~S~f!m~!~grrrrt,.I~ 

3Jnru~~~J~dillWll~~~~~~~~~~~~~~xYillrr~QWygLllill 

J4 Tidwell, V.. G., and Castillo, C. (2012). "Exploring the Water, 

Thermoelectric PowcrNcxus." J Water Resol/I'. P/anl1. Manage., 138(5),491-501. 

http://ascelibrarv.org/doiiaos/I O. mQl1~1)28ASC[::%29 WR.1943 ,5452.00002.f6 

J5 See 

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According to LHS CERA,37 the U.S. power sector will require as much as $828 billion in 

capital investments and expenses before the end ofth15 decade. Many of these 

investments will be for very long-lived assets from power plants to transmission 

systems. U.S. energy companies making investments today are considering 40+ year 

operational horizons and cannot ignore the potential for a future where climate policies 

and environmental risks influence the bottom line. One of the surest ways to saddle 

customers with higher costs from major stranded investments is to ignore the need to 

factor climate impacts into today's decision-making proeesses. 

As a society, delaying the decision to act on climate change increases the overall cost of 

mitigating greenhouse gas (GHG) emissions.38 A recent study by KMPG found that the 

costs of environmental impacts for a wide array of industries are doubling operational 

costs every 14 years. The cost resulting from climate change, specifically, was estimated 

at one percent per year if early action is taken, but five percent per year of delay in 

establishing climate policy certainty.39 Other studies have found that climate change 

could put trillions of investment dollars at risk through 2030.40 

37 hnp://www.ihs.com/productsiccraicnerg.· -reporLaspx?i d--l 065970374 

)8 Rogelj. J .• McCollum, D. L.. Reisinger. A .• Meinshausen. M. & Riabi. K. Nature 493. 79-83 (2013). 

10 
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America's Clean Energy and Climate-Secure Future 

The United States cannot and should not make energy decisions without factoring in the 

risks associated with climate change. To avoid further climate impacts in the future we 

must lower greenhouse gas emissions by switching to clean energy and increasing energy 

efficiency. Scientists at the National Research Council (NRC) of the NAS have 

concluded that global carbon dioxide (C02) emissions need to be reduced in the coming 

decades by at least 80% below current levels to stabilize atmospheric COl concentrations 

and thus avoid the worst impacts of global warming.41 This has serious implications for 

the energy choices we make today. WRI published the chart below in 2008 to illustrate 

how various energy choices rate from both climate and energy security perspectives. 

Although some of the information is dated (i.e., today we talk about LNG exports rather 

than imports, and the Administration raised CAFE standards in2011), it provides an 

important framing in the context of this hearing. 

41 National Research Council, 2011. "Climate Stabilization Targets: Emissions, Concentrations, and 

Impacts over Decades to Millennia," ISBN: 0-309-15177-5, 298 pages. 

bl\l2,;limm&@,,",-clJJi.ffitah2g1.L2ciiI'ZJJlml 

11 
59 


79435.043

:0 

tleduu 

En.rgy 

S~turity 

lttl:f-Eiltt1' 

j,L~---.. e""rQY 

St:curity 

As the chart indicates, making energy- and climate-secure choices require shifting away 

from carbon-intensive energy sources such as coal, and moving toward zero and lowcarbon energy sources such as renewables as well as increased energy efficiency. It is 

worth noting that natural gas could play an essential bridging role in that transition, but, 

as outlined below. this requires both reducing the upstream GHGs produced during the 

extraction process, and - if gas-fired power plants are to be a part of a longer-term 

energy future - using carbon capture and storage (CCS) technology. 

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The good news is that the United States does not have to choose between energy security 

and a climate-secure future. Clean energy resources provide the opportunity to be energy 

independent and ensure economic grmvth while also protecting the climate. 

Natural Gas and Climate - Risk or Opportunity? 

The recent boom in producing natural gas from shale formations has transfonned and 

will likely continue to transform the way we generate electricity in the United States.42 

While there are a variety of issues related to shale gas development, for this testimony I 

am focusing specifically on the opportunities and risks natural gas presents in relation to 

climate change. 

Although natural gas burns cleaner than coal, upstream emissions of methane that occur 

during exploration and production threaten to reduce or eliminate any advantage natural 

gas has over coal from a lifecycle GHG perspective. Recent WRI analysis, to be 

published in a forthcoming working paper, examines the question of upstream methane 

emissions, evaluates the impacts of recent EPA rules4

.1 on those emissions, and looks at 

ways to further reduce natural gas's contribution to climate change. 

The Energy Information Administration's Annual Energy Outlook thr 2012 projects shale gas prodnction 

growing by 78% between 2012 and 2035 in the reference case scenario. with the share of total U.S. 

production fi'om shale gas increasing from one·third to roughly one-half over that period. Sec 

lJ.t1P-:H\l1 VI \ • .,ilbgQ_ill<:.crecilli\,'i'9niilLJlll,cfu:!. 56. 43 See text of llnal rule at: m![2;Lilli~c<aJj~,,"':.'.ill!]l1Lqlm:CQ!LaJJ!Q£:~I2Ql0L?_W~;1!jcLLllDi!'!'!]ll~l'..Q.! 

13 
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79435.045

The International Energy Agency has shown44 that as the upstream leakage rate of 

methane increases, natural gas's climate advantage over coal erodes and then disappears. 

Unfortunately, there is a paucity of measurement data for upstream emissions, making 

reliable estimates difficult to produce. However, current understanding is that leakage 

rates for both conventional and unconventional gas (Le., gas from shale, coal bed 

methane, and tight sands formations) are in the range of 1.5 - 3%. Several studies are 

currently underway that should provide more clarity as to the accuracy of these 

assumptions. 

200 

150 

~ ~ 100 

8 

"" 

50 

o 

Comparing shale gas to <oallifecycle GHG emissions 

(lOO-year global warming potential) 

x,; All upstream 

CombustJon 

Source: WRI analysis of Stephenson et al. (2011). Howarth ct al. (2011). Jiang et al. (2011). NETL (2011). 

Burnham et at. (2011) and Weber et al. (2012). 

14 
62 


79435.046

Recent EPA air pollution standards45 for the oil and gas industry help address upstream 

methane emissions from shale gas systems. The standards will reduce those emissions by 

40-45% below a business-as-usual baseline, and from all natural gas systems by 13-25%, 

according to WRI analysis (reductions increase over time as shale gas production 

increases). Yet much more can and should be done to further reduce methane leaks and 

vents. The EPA maintains a list oftechnologies46 that industry can use to reduce or 

capture leaking gas on a voluntary basis, though WRI analysis shows that implementation 

of many of these technologies should be required if leakage is to be successfully 

addressed. 

Yet even if upstream methane emissions from natural gas were eliminated entirely, 

combustion emissions \vhich make up approximately 80-85% of all natural gas 

emissions must be significantly reduced if natural gas is to play an effective role in the 

carbon-constrained economy ofthe near future. Natural gas still produces significant 

GHGs, and ifthe United States wants gas to be a long-term energy solution then it must 

find ways of controlling or eliminating GHG emissions from this source. 

America Is Blessed With Clean Energy Opportunities 

The United States is rich in clean energy resources and options, including renewable 

energy, energy efficiency, and know-how on CCS. Such capacity provides new and 

untapped opportunities to not only increase energy and climate security, but also to create 

American jobs and spur economic growth. 

15 
63 


79435.047

According to the National Renewable Energy Laboratory (NREL), the United States can 

meet 80% of its electricity needs in 2050 through renewable generation.47 However, if the 

United States wishes to harness its renewable resources it needs to put in place a set of 

clear incentives and frameworks for success.48 

The United States has immense remaining potential for improving efficiency in its 

industrial, transportation, and buildings sectors. The NAS found that energy efficiency 

technologies could save 30% of the energy used in the United States:9 A series of 

Department of Energy studics50 have concluded that significant energy efficiency 

potential exists across a number of key industrial sectors. as summarized in the table 

below from a forthcoming WRI report ("Can The u.s. Get There From Here? Using 

Existing Federal Laws and State Action to Reduce Greenhouse Gas Emissions"). 

prepared for the U.S. Department of Energy. are available here: 

llttp://\\ \\'V;' 1 ,g~X~~ll~rgxgQy,-'mJ!llUfactllring!tesourccs/encrgv analvsis.t!!ml 

Interlaboratory Working Group. 2000. Scenarios f()r a Clean Energy Future (Oak Ridge. TN; Oak Ridge 

National Laboratory and Berkeley. CA; Lawrence Berkeley National Laboratory). ORNLICON-476 and 

LBNL-44029. November. Available at: h\tpA"YmLQI!!LgQY!!iciL~IT!'.L<;,cjJ. 

16 
64 


79435.048

Source: WRI, "Can The US Get There From Here? Using Existing Federal Laws and State Action 10 

Reduce Greenhouse Gas Emissions", 

Integrating renewable energy with the existing electric generation fleet 

Renewable energy systems even those with intermittent generation, such as wind and 

solar can and should be integrated with the existing framework of primarily fossilbased electricity generation, The technical, regulatory, and economic barriers to such 

integration can be overcome. The technical barriers are being addressed through research 

and development, while the regulatory and economic barriers can be eliminated with 

straightforward policies that rev,'ard businesses for investing in renewable generation and 

set clear frameworks for integrating renewable electricity into the grid. Policies that 

provide transparency, longevity, and certainty - such as well-designed feed-in tariffs, 

renewable energy standards, or long-tenn power purchase agreements have a proven 

17 
65 


79435.049

track record of increasing renewable generation at Jow cost. a cost which is likely to 

decline over time as the price of renewable generation falls with increasing economies of 

scale.51 Distributed generation and integrating renewable energy systems with fossil 

generation can also enhance grid reliability, especially during times of natural disaster. 51 

Cost of clean energy 

Renewable energy (including hydropower) continues to grow by leaps and bounds 

around the world, increasing by 72% between 2000 and 2011; solar and wind saw the 

greatest growth over that period, with global wind generation growing by a factor of 13 

and solar photovoltaic generation by a factor of 51.53 Tn the United States, renewable 

generation has grown at an average rate of 4.2% per year between 2000 and 20 II, with 

wind and solar again representing the fastest growing renewable energy sectors. 54 lust 

last week, the American Wind Energy Association announced that more than 13,000 MW 

were installed in 2012, putting U.S. wind capacity at 60 OW. 55 This deployment has led 

to a dramatic reduction in the cost of electricity produced by these technologies, a trend 

51 See, for example, "The German Feed-in Tariff «lr PV: Managing Volume Success with Price Response" 

Irom the Deutsche Bank Group's DB Climate Advisors. Available at: 

Renewable Energy Laboratory's 2011 Renewahle Energy Data Book, available at 

http://www,nrel.gov/docs/fvI30sti/54909.Jl4('. 

54 Ibid. 

55hll~~~~~~lliWliill~~hllimllill@~Qtl:8u1~,~u~~::EQ~tl~ll~~~~~~ 

18 
66 


79435.050

that is expected to continue as technology improves and manufacturing achieves 

economies of scale. 56.57 

Currently, the average levelized cost of energy for wind energy is comparable to that for 

coal, though the low price of natural gas in the United States makes it difficult for any 

technology - renewable, coal, or nuclear - to compete on the basis of price alone.s859 

Renewable energy provides price stability, as it is not subject to volatile swings in the 

cost offuel.60 In fact, renewable energy systems - especially using several renewable 

technologies in conjunction with one another (for example, wind, solar, and hydropower) 

as well as energy efficiency - can reduce peak load and actually lower the overall cost of 

electricity, especially during times of high demand.61 

Figures 10-12 and 10·13 in Volume 2 ofNREVs Renewable Flectricity Futures Study, 

!illl'.1!}l:!~.Jl!:£L~iclQ£'ill:JlQ8li2±:!':tl:bl!ill, and NREL '5 "The Past and Future Cost of 

gas hl!jc;L:\n\''y.eia.Qov!91l'!xiDg!..!ll~Vn919Q]!';J.!11111m and historical 

coal prices here: http://\I·\lw.cia.govitotal "nerg,,! dalaiannualishoIl1cXLcfm.7t=ptbD709. 

61 See, for example, "Matching Hourly and Peak Demand by Combining Different Renewable Energy 

Sources: A Case Study for California in 2020" (available at 

http://mlw.staniclrd.eduiQ.fOupiefmh/jacobsoni/uticics/J!ComhiningRcncw!HosteFinaIDrafi) and 

"Examining the Peak Demand Impacts of Energy Et1iciency: A Review of Program Experience and 

Industry Practices" (available at 

hJ1pJ6)\lw.cpa. gO\istatclc)calciimak'JocUl11ClltS/pdll\('[k..m~U;_GJ>-,ak 4.c.mlmQ..:!.-12·2007.pd!). 

19 
67 


79435.051

The Role of Solar PV In reducing emissions 50% by 2050 

using past, present, and future technology 

Billion $IlUliRl meters of PV needed for 

3.1;;5 GWp ••• of installed tajlaci\y 

35.3 

Trillion dollars (2010$) needed to 

purchase 3,155 GW""a. of Installed l'V 

Source: WRI. bJIp-'!'!l,dCwri.orgfworkinQ-RJWJ'rsit\yo def'rees of inno\alio!lJLctJ: 

American jobs 

American exports of energy equipment and the high-skill jobs required to bring the 

American energy industry into the 21 st century will grow as the market share for 

renewable energy grows. The United States generated about 12% of its electricity from 

renewable sources in 20 11 ;6: at that level of generation. the Environmental and Energy 

Study Institute estimates that the renewable energy sector employed between 850,000-

950,000 people, as compared to 731,000 people in the oil, gas, and coal industries.63 

National Renewable Energy Laboratory's 201 I Renewable Energy Data Book, available at 

http://ww\\.nrel.Qov/docs/l\ 130stii5')909.pdf. 

63 Sources: For jobs in renewable energy. see: Coal mining 

employed 83.420 people in 2011. according to 

20 
68 


79435.052

According to the United Nations Environment Programme, there could be 8.4 million 

jobs in solar photovoltaic and wind energy, and 12 million jobs in biofuels, globally by 

2030.64 

In fact, transitioning from fossil fuels to renewable sources (or increased energy 

efficiency) for electricity generation can lead to significant growth in jobs. One recent 

study published in Energy Policy found that a 30% renewable portfolio standard, 

combined with aggressive measures to promote energy efticiency, could create over 4 

million jobs by 2030.65 The same study looks at average employment over the life of 

electricity generation facilities. normalizing this data by comparing job-years per 

gigawatt-hour across ten different generation technologies, as well as CCS and energy 

efficiency. The authors found that natural gas and coal both created 0.11 job-years per 

gigawatt-hour; the equivalent numbers for renewable technologies were 0.17 for wind, 

0.21 for biomass. 0.23 for solar thermal, 0.25 for geothermal, 0.27 for small hydropower, 

0.38 for energy efficiency. 0.72 for landfill gas, and 0.87 for solar photovoltaics. This 

study demonstrates that getting serious about reducing emissions, reducing peak load, 

enhancing grid reliability, and providing price stability through increased utilization of 

renewable energy and energy efficiency will not adversely impact employment. On the 

contrary, focusing on America's abundant clean energy resources will be a boon for both 

the environment and the economy. 

hltp:':;ww".hls.govioes/currcntinaics4 212 JO().htm. And 648.000 people were employed in oil and gas 

extraction. support activities. pipeline construction, petroleum rclineries and pipeline transportation see 

!illJ2:!/,\ww.h Is. coy/jag,', 

64 UNEP "Green Jobs: (o,Yard decent work in a sustainable, low carbon world" (24 Sep 2008) p.8. 

65 See "Putting Renewables and Energy Fntciency to Work: How Many Jobs can the Clean Energy 

Industry Generate in the US?" A vailahlc at: 

http://mel.herkelev.cdu!sitesi

Jefaulllliie'i[WeiPatadiaKammenCleanFnergYJobsEPolic''10 I 012df. 

21 
69 


79435.053

Global Perspective on the Way of the Future 

Throughout the world, countries are making significant investments in clean energy 

technology and infrastructure. Globally, clean energy investment in 2012 was $268.7 

billion, five times higher than in 2004. Approximately half of the estimated 208 OW of 

new electric capacity added globally in 2011 came from renewable energy sources.66 In 

2011, global investments in non-hydro renewable energy surpassed net investment in 

fossil-energy power plants.67 The market opportunities are significant. The global market 

for low-carbon technology could double or even triple, to between $1.5 and $2.7 trillion 

annually by 2020. 68 

WHERE NEXT FOR INVESTMENT? 

66 REN 2\. Rcnewables 2012: Global Status Report 

6J liNEP _ BNEF. Global Trends in RE Investment 

68 HSBC. "Sizing the Climate Economy." September 20W. These estimates include investment in energy 

emcicncy. accounting for roughly halfofall investment in the authors' "most likely" scenario. 

22 
70 


79435.054

Source: WRI. Stories to Watch 2013 

COUNTRIES WITH RENEWABLE 

ENERGY TARGETS 

WRI, Stories to Watch 2013 

How competitive is the US, in the clean energy race?69 

Source: 

The United States is the world leader in clean energy research and development (R&D) 

and has been among the top three countries globally in renewable energy investment for 

years, This could provide a good base for a strong U.S. renewable energy industry. 

However. the United States has been less successful relative to countries in deploying 

renewable energy technologies into the market and capturing these new industries and 

related jobs, because ofa lack of policy and regulatory certainty. 

69 WRI recently released a comparative study across five countries (U.S., China. India. Germany, Japan) to 

assess which countries have been most successful in deploying wind and solar energy domestically and also 

in capturing global markets through domestic This section of the testimony draws heavily 

on the study. For details. see htl~Y.'.}~:l~.miJ2[i~lJ.!.11.l£.gJls.rrli.illfugrill.&::!:l!1:.!b.£::£l£mll~'-!:!r~f.Q!JQl!lt 

23 
71 


79435.055

In terms of R&D: 

China's 12th Five Year Plan has a target for R&D expenditure in all industries to account 

for 2.2% ofGDP by 2015. By comparison, the United States and Germany both spend 

about 2.8% ofGDP on R&D. 7o Compared to health ($34 billion) or defense-related 

research ($81 billion), the amount spent by the United States each year on clean energy 

technology R&D ($4.7 billion) is small. 71 Nonetheless, the United States spends more 

than any other country on R&D, and public and private R&D spending on renewable 

energy in the United States accounts for 30% ofthe global total.E73 However, the clean 

energy innovations created in U.S. national laboratories and universities often do not get 

manufactured or deployed into the marketplace. For instance, a recent WRI report 

comparing clean energy industries across major countries highlighted that the United 

States had the highest public investments in wind energy R&D. Yet, it was the only wind 

energy market among the five countries analyzed that maintained a long-term trade 

deficit in wind equipment, importing more than it exports, due largely to the uncertainty 

surrounding the longevity of support policies. 74 

In terms ofinvestment: 

In 2012, $44.2 billion was invested in clean energy in the United States. a 32% decline 

24 
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compared to the record $65.4 billion invested in 2011.75 China led the world in clean 

energy investment with $67.7 billion in 2012, a 20% increase over 2011.76 China is also 

investing in clean energy abroad, and in joint ventures with global partners. Chinese 

firms invested $264 million in the U.S. clean energy sector in 2011, with an annual 

growth rate of J 30% over the previous tvva years.77 Although the United States has 

traditionally been among the world's top three clean energy investors, such investment in 

the United States has grown neither as steadily nor as Hlst as clean energy investment 

elsewhere in the world. The five-year rate of investment growth between 2006 and 20 II 

was 37% in China, 23% in India, 22% both in Japan and Germany, and only 12% in the 

United States. The United States does not even make the top 10 among the G-20 

economies in investment growth, and risks falling behind in the long run. 78 

In terms of installed capacity: 

Countries with comprehensive, predictable, and targeted policies have seen the biggest 

scale-up of domestic renewable energy installations. This trend is evidenced in both 

Germany and China, where supportive policy frameworks are integrated into national 

economic and energy plans that have at least a i1ve-year lifespan. Germany's 

comprehensive renewable energy law incorporates feed-in tariffs, and provisions for grid 

interconnection and priority power dispatch. This has been instrumental in providing fast 

project realization times. investment certainty, and lower overall transaction costs for 

25 
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installations. These policies have helped Germany become the country with the most 

solar photovoltaic capacity and the third-most wind and biomass capacity in the world. 79 

China has recently tied support policies into broader economic development goals in its 

5-Year Economic Development Plans. A package of renewable energy policiessupporting installations, domestic manufacturing, and R&D - all helped the industry 

triple its solar PV installations from 1 GW to 3 GW, and increase its on-shore wind 

capacity from 44 GW to 62 GW in 2011 alone. The United States, with a patchwork of 

national and state policies, has not seen comparable scale-up. 

In terms of manufacturing: 

In developing a domestic clean energy manufacturing industry, the United States has 

lagged behind those countries that have used the stable and predictable incentives 

highlighted above and supplemented this market creation with targeted support for 

innovative manufacturing. To date, the United States has had a largely passive approach 

to supporting renewable energy manufacturing, with short bursts of national investment 

and policy support (e.g., through the 2009 stimulus package). This seems to have been 

ineffective in the context of global competition. Meanwhile, in the realm of solar 

photovoltaics, Japan has the highest average module prices but has still managed to 

maintain module manufacturing production comparable with Germany (-2 GW) and 

twice that of the United States (-1 GW), due to a concerted focus on policy strategies that 

support quality and performance. This has been supported through collaborative 

innovation between industry. government, and academics. 

79 See the National Renewable Energy Laboratory's 2011 Renewable Energy Data Book, available at 

http://lIww.nrel. go\'1 docs/l\ 130stil5.l(1)jl.Qcjf. 

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In wind power, America has suffered from the fact that short-term policies have not sent 

a clear signal that there will be a market for wind turbines beyond the end of any calendar 

year. This has meant that equipment suppliers have preferred to import rather than to 

produce in the United States. As noted above, the United States was the only one ofthe 5 

major markets WRJ analyzed that maintained a long-term trade deficit in wind 

equipment. It is not just the size of the market that matters; predictability and investor 

certainty are crucial. 

Concluding Recommendations 

1. The risks associated with climate change and federal capacity to address these risks 

must be better understood. Congress should request that the National Climate 

Assessment and Development Advisory Committee review the current authorities of 

federal agencies and national laboratories, and recommend how consideration of risks 

associated with climate change can be more directly incorporated into decisionmaking. The recommendations should include actions that each agency can take to 

most effectively limit the magnitude of climate change and improve our ability to 

adapt to it. 

2. The impacts of climate change on America's energy infrastructure must be better 

assessed and incorporated into planning and current investment decisions. To support 

such efforts, Congress can: 

• Adopt policies that encourage hazard mitigation approaches which make the 

electricity and energy supply sectors more resilient to climate impacts. 

27 
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• Adopt policies that require a systematic assessment of climate impacts as part 

of the planning processes so that all new energy investments take into account 

climate risks. 

3. We must build out America's renewable energy sector. The United States is one ofa 

small set of countries that currently lack a federal renewable energy target. As 

Congress considers how to achieve growth in renewable energy, there are four 

important criteria for a policy to drive more effective clean energy growth and 

competitiveness;[11 

First, any energy policy should be comprehensive extending beyond 

deployment subsidies and incorporating support for manufacturing. 

Second. it should be long-term - with a predictable time horizon extending a 

minimum ofthree years, particularly for manufacturing. 

Third, it should be targeted - technology-neutral policies such as carbon prices 

need to be complemented with support that takes issues such as tradability of 

renewable energy components into account. 

Fourth, it should be inclusive ofthe complete value chain for renewable energy 

technologies since economic benefit opportunities extend beyond just the 

manufacturing sector. 

28 
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4. We must capture energy efficiency across the economy. The federal government can 

playa constructive role in two key areas: 

Informed consumer choice: the relative performance of energy services and 

energy-consuming products including vehicles, appliances, and buildings -

should be more visible to consumers so that they can make informed choices 

about the true cost and value of their investments. Congress should support and 

expand such programs to help ensure product labeling is accurate and publicly 

reported in a timely manner, to encourage energy-wise investment decisions 

throughout the U.S. economy. 

Efficiency standards: Several federal agencies have been charged by Congress 

with setting energy efficiency standards for vehicles, appliances, and other 

energy-consuming equipment that is sold into U.S. commerce. Congress should 

support and extend the ability of agencies to develop and update such standards, 

in the interest of consumer protection and to increase the energy productivity of 

the U.S. economy. For example, the recently finalized vehicle efficiency 

standards are projected to save consumers $1. 7 trillion at the pump while reducing 

U.S. oil consumption by 12 billion barrels of oil per year by 202SYl 

5. Finally and most importantly, Congress must work toward reaching bipartisan 

agreement 011 national energy policies that encourage more efficient energy 

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consumption, increase the diversity of domestic energy production, maximize 

deployment oflow-carbon energy technologies, and minimize environmental impacts 

throughout our energy systems. In the near-term. it is also critical for Congress to 

provide funding and incentives for low-carbon and clean energy technologies. The 

most effective way to achieve all these goals would be to move forward on 

comprehensive national energy and climate legislation. 

30 
78 

Mr. WHITFIELD. Thank you, Ms. Morgan. 

Ms. Hutzler, you are recognized for 5 minutes. 

STATEMENT OF MARY J. HUTZLER 

Mr. HUTZLER. Chairman Whitfield, Ranking Member Rush and 

members of the subcommittee, thank you for the invitation to participate in today’s hearing. 

The Institute for Energy Research is a nonprofit think tank that 

conducts research and analysis concerning global energy issues. In 

the last several years, IER has monitored closely the boom in energy production that is taking place in the United States, primarily 

on private and State lands. IER also tracks regulations and policies 

that limit the potential to reduce our dependence on overseas oil 

regimes, hinder our ability to generate much-needed revenues, and 

harm efforts to foster an energy-based economic recovery that creates jobs. 

Just this morning, we released a study on the economic effect of 

immediately opening federal lands onshore and offshore to energy 

production. According to our analysis, immediately opening federal 

lands that are currently unavailable because of statutory or administrative action would result in an additional $14.4 trillion to our 

GDP over the next 37 years. In light of the recent Commerce Department report, the GDP shrank for the first time since 2009. Our 

economy needs the lasting stimulus that robust energy development on federal lands and waters would provide. 

But today’s hearing is focused primarily on the resource availability and the potential under our feet and off our shores to 

achieve domestic energy goals, almost unthinkable just a few years 

ago. In fact, for decades Americans were asking the question, 

where we will get the energy we need to heat our homes, fuel our 

cars and meet the demands of a strong 21st century economy. Due 

to hydraulic fracturing and horizontal drilling technologies, we no 

longer question whether we have the resources. Rather, we question whether we will be able to develop them and thus reap the nationwide economic benefits such development would foster. 

The myth of energy scarcity that has plagued our national conversation has been exposed. Just in the last year, the misleading 

refrain that the United States only possesses 2 percent of the 

world’s oil reserves has been replaced by the mounting evidence of 

our Nation’s resource abundance. IER highlighted this in an inventory of North America’s energy resources. Using government information, we cataloged the vast resources of the United States and 

our neighbors. The United States has enough resources to provide 

reliable and affordable energy for centuries to come. The question 

is whether the federal government will permit us to access these 

abundant resources and not whether sufficient resources exist. We 

can now unlock our shale resources using technology proven for 

more than 60 years in over 1 million wells without a single confirmed case of contamination. 

Furthermore, while our use of fossil energy has dramatically increased over the last 50 years, our air quality has improved. According to the EPA, emissions from the six criteria pollutants 

under the Clean Air Act have decreased 68 percent since 1970, 

even though our energy consumption has increased by 45 percent. 

79 

Therefore, however troubling trends in policy that threaten to restrict access to our vast energy resources, which could make American-made energy less available, affordable and reliable. Oil shale 

development has all but stopped because Administration policy 

withdrew research in much-needed leasing activity that could bring 

these resources to market. 

Increased oil sands imports from our neighbor Canada could free 

the United States from energy dependence on foreign countries 

where American workers face increasing threats of kidnapping by 

terrorists and even murder. But we need the transportation infrastructure to get it here and the energy security this infrastructure 

would provide. Onshore development on federal lands, which is 

roughly estimated at 700 million acres of subsurface mineral estate, is extremely limited and is increasingly so. In fiscal year 

2009, for example, the current Administration leased fewer onshore 

acres for energy development than in any preceding year on record. 

Offshore development on 1.76 billion acres of mineral lands has 

suffered from the de facto Administration embargo with lease plans 

canceled, moratoria imposed and cumbersome regulatory activity 

that served to discourage exploration. 

Today, permitting delays by federal regulators have driven the 

wait to more than 300 days before drilling can begin on federal 

lands, about twice as long as it took in 2005. By contrast, States 

like North Dakota are now turning permits in 10 days, in Ohio, 14 

days, in Colorado, 27 days. Alaska’s energy resources lie dormant 

even though its pipeline has enough unused capacity to take twice 

the daily production of North Dakota. 

Decisions made today about access to energy resources affect energy production for years and decades to come. The more areas accessible to energy production today increases the likelihood of domestic production tomorrow, and with it, increased jobs, government revenues and economic activity. 

Thank you for the opportunity to testify today, and I look forward to your questions. 

[The prepared statement of Ms. Hutzler follows:] 

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Summary of IER Testimony before Subcommittee on Energy and Power, February 5. 2013 

The U.S. has a vast amount oftechnically recoverable oil. natural gas, and coal resources 

a Technically recoverable U.S. oil. natural gas, and coal resources can easily supply our energy 

needs for hundreds of years 

"Reseryes" do not measure resource capability 

a The term "reserves" only includes resources that have been discovered and are economical to 

recover at the current price with current technology on the lands current/v made available for 

industry to develop. 

a U.S. oil "reserves" in 1944 were 20 billion barrels but today they are larger even though we 

found, produced and consumed 167 billion barrels over that time period. 

Hydraulic fracturing and horizontal drilling dramatically increase the amount of oil and gas we can 

recover. 

a Between 1995 and 2008. the USGS estimate of technically recoverahle oil in the Bakken 

formation jumped by a factor of 25 due to hydraulic lracturing. 

a Hydraulic fracturing has heen used for over 60 years in over one million wells without a 

confirmed case of groundwater contamination. 

The U.S. is now the largest natural gas producer in the world and forecasters expect it to be the 

largest oil producer hy 2017 

o Shale oil production has increased by 400 percent oyer the past ten years. 

a Shale gas production increased by over 300 percent from 2007 to 20 I 0 

U.S. oil shale technically recoverable resources are nearly four times the amount of Saudi Arabia's 

proven oil reserYes; oil shale is a sedimentary rock that contains kerogen. an oil and gas bearing organic 

Federal land leases have declined continuously since the 1980's, putting extensive limits on our oil, 

natural gas~ and coal resources 

a The U.S. is the only developed country in the world that has banned access to its own 

offshore energy sources. 

96 percent of the increase in oil production between tis cal years 2007 and 2012 came from private and 

state lands. 

o It takes over 300 days to process a pemlit to drill on federal lands onshore. It takes less than 30 

days to process a pennit 101' pril ate and state lands. 

Opening federal lands to oil and gas leasing would add $14.4 trillion in economic activity and $3.8 

trillion in federal, state and local tax revenues over the next 30 years, according to a forthcoming study 

commissioned by IER. 

a 552,000 jobs annually over the next seven years. 1.9 mi1lionjobs per year in the long-run. 

Over the past 50 years, our use of coal, oil. and natural gas resources has dramatically increased and air 

quality improved dramatically. 

Emissions from the six criteria pollutants under the Clean Air Act have decreased 68 percent since 1970. 

o The Utility MACT rule would add $21 billion per year in compliance costs on businesses. 

destroy 183.000 jobs per year, increase electricity prices by 10-20% 
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BEFORE THE SUBCOMMITTEE ON ENERGY AND POWER 

COMMITTEE ON ENERGY AND COMMERCE 

HEARING ON American Energy Security and Innovation: An Assessment 

of North America's Energy Resources 

FEBRUARY 5, 2013 

TESTIMONY OF MARY J. HUTZLER 

THE INSTITUTE FOR ENERGY RESEARCH 

The Institute for Energy Research (IER) is a non-profit organization that conducts 

research and analysis on the functions, operations, and government regulation of 

global energy markets. IER articulates free market positions that respect private 

property rights and promote efficient outcomes for energy consumers and 

producers. IER staff and scholars educate policymakers and the general public on 

the economic and environmental benefits of free market energy. The organization 

was founded in 1989 as a public foundation under Section SOl( c)(3) of the Internal 

Revenue Code. Funding for the institute comes from tax-deductible contributions of 

individuals, foundations, and corporations. 

The United States is Energy Rich 

The United States has vast resources of oil, natural gas, and coal. In a few short 

years, a forty-year paradigm-that we were energy resource poor-has been 

disproven.lnstead of being resource poor, we are incredibly energy rich. The world 

1100 H Street NW . Suite 400 . Washington, DC 20005 . Phone 202.621.2950 . Fax 202.637.2420 

www.instituteforenergyresearch.org 
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is changing and the private sector in the United States is leading the way. In 

December 2011, IER published a report entitled North American Energy Inventory 

that provides the magnitude of these resources for the United States, Canada, and 

Mexico.1 As the report shows, the United States is vastly endowed in all three forms 

of organic fossil energy. In fact, the amount of technically recoverable oil in the 

United States totals almost 90 percent of the entire oil reserves in the world.z 

Technically recoverable resources are not equivalent to reserves, but comparing 

their magnitudes provides a way to measure size. Technically recoverable resources 

are undiscovered resources that are recoverable with existing drilling and 

production technologies, but may not be economic at today's prices. Reserves, on 

the other hand, are resources that are easily accessible and recoverable with today,s 

technology and at today's oil prices. IER's estimate of technically recoverable oil in 

the United States is 1,422 billion barrels. That amount of oil can satisfy U.S. oil 

demand for 250 years at current usage rates or it can fuel every passenger car in the 

United States for 430 years. It is also more oil than the entire world has used in all 

human history. 

The technically recoverable natural gas resources in the United States total 40 

percent of the world's natural gas reserves. At 2,744 trillion cubic feet, it can fuel 

natural gas demand in the United States for 175 years at current usage rates, or 

selectively, it can satisfy the nation's residential demand for 857 years or the 

nation's electricity demand for 575 years. 

2 
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The technically recoverable coal resources in the United States are unsurpassed and 

total 50 percent of the world's coal reserves. At 486 billion short tons, it can supply 

our country's electricity demand for coal for almost 500 years at current usage 

rates. In fact, the United States has the largest coal reserves of any country in the 

world with Russia and China rounding out the top three countries in ranking. While 

we have the largest coal reserves in the world, we do not consume the largest 

amount of coal. China consumes almost 4 times the amount of coal as we do here in 

the United States, although its coal reserves are much smaller than ours.3 In 2011, 

China consumed more than 3.8 billion short tons of coal while the United States 

consumed 1 billion short tons.4 Because government policies are making coal more 

difficult to use in the United States, some U.S. mining companies are exporting coal 

to China and elsewhere, in turn keeping mining jobs here at home. 

The reason why technically recoverable resources are important is that they 

become reserves when one or more of the following occurs: technology is developed 

that enables the resource to become economic such as with hydraulic fracturing, the 

price ofthe resource increases to enable production with existing technology, or 

more resource-rich lands or waters are made available to industry to develop. 

Historical production and reserve numbers provide documentation regarding the 

transition from technically recoverable resources to reserves. For example, in 1944, 

U.S. oil reserves totaled 20 billion barrels and yet our oil and gas industry produced 

167 billion barrels between 1945 and 2010-8 times the amount a/reserves 

available in 1944-and the amount of U.S. oil reserves in 2010 still totaled 20.7 

3 
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billion barrels. Thus, there was no reserve depletion; there was reserve 

replenishment. 

U.S. Crude Oil Replenishment 

Billion Barrels 

167 

8X 

20 IX 20.7 

1944 Reserves 1945-2010 Production 2010 Reserves 

The same is true for natural gas. In 1944, the United states had 147 trillion cubic feet 

of natural gas reserves, and yet had produced 1,041 trillion cubic feet between 1945 

and 2010-7 times the amount of reserves available in 1944. In this case, however, 

the U.S. oil and gas industry was able to double the 1944 natural gas reserve level 

with 318 trillion cubic feet in reserves in 2010. 

4 
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u.s. Natural Gas Replenishment 

(Trillion Cubic Feet) 

1944 Reserves 1945-2010 Production 2010 Reserves 

The Myth of Peak Oil, Natural Gas, and Coal 

For many years, we have heard of fossil fuels reaching their peak production levels 

or at the verge of being depleted. For instance in 1855, an advertisement for "Kier's 

Rock Oil" indicated " ... Hurry, before this wonderful product is depleted from 

Nature's laboratory!" and that was four years before the first U.S. oil well was 

drilled! And in 1919, David White, the Chief Geologist of the United States Geologic 

Survey stated ..... the peak of [U.S.] production will soon be passed-possibly within 

three years." But, instead, we find that our oil production is growing with 

forecasters such as the International Energy Agency now predicting that the United 

States will become the world's largest oil producer by 2017. 5 Further, the lEA 

predicts that the United States will become almost energy self-sufficient by 2035. 

5 
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And the peak production myth was not confined to just oil. For example, in January 

of 2007, Paul Hanrahan, the Chief Executive Officer of AES Power stated "The U.s. is 

running out of natural gas-production is declining and demand growing-so the 

expectation is that the import levels will go from 3 percent today to about 24 

percent in 2020." Forecasters such as the Energy Information Administration were 

predicting that there would not be enough North American natural gas to meet 

demand and that we needed to build facilities for importing liquefied natural gas. 

Just a few years later, we find instead a shale gas boom and economics dictating that 

those importing facilities will become terminals for exporting natural gas as long as 

the government approves. 

The same is true for the myth of 'peak' coal. In 2007, David Hughes, Geologist for 

the Geological Survey of Canada, stated, "Peak coal looks like it's occurred in the 

lower 48." And yet, the United States still has the largest coal reserves in the world. 

Rather than depletion effects, our coal industry is faced with overly broad and 

restrictive regulations on the use of coal and increasing restrictions on coal 

production from the U.S. Environmental Protection Agency. 

The U.S. Shale Oil and Gas Revolution 

The reason for the boom in both oil and natural gas production in the United States 

is that our oil and gas industry was able to revolutionize drilling and production 

from shale formations by combining hydraulic fracturing and horizontal drilling 

technology. Hydraulic fracturing uses water, sand, and trace amounts of chemicals 

to break apart the shale rock and horizontal drilling allows the oil to be produced 

6 
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from the shale formations which, vein-like, run parallel to the surface thousands of 

feet below. Hydraulic fracturing has been in use since the 1940s, but combining 

fracturing with horizontal drilling allows much more of the oil and natural gas to be 

extracted than if the hydraulic fracturing was only used in vertical wells. When 

combined with the incredible advances in computer interpretive capabilities, an 

energy miracle is afoot. 

That these technologies have combined to revolutionize the industry can be seen 

from the following example. In 1995, before hydraulic fracturing was being used in 

shale oil and shale gas drilling, the U.S. Geological Survey (USGS) estimated that the 

Bakken formation held 151 million barrels oftechnically recoverable oil. But in 

2008, after the impact of hydraulic fracturing and horizontal drilling was included in 

the USGS's assessment, the estimate of recoverable oil in the Bakken Jumped by a 

factor of 25. 6 The oil was always there, but it was human ingenuity, free enterprise 

and the application of technology-the things that have always made America 

great-that combined to free these energy riches. 

Ten years ago, shale oil formations produced about 200,000 barrels of oil a day. 

Today, these formations produce over one million barrels and production could 

reach three million barrels a day by 2020. This new oil production is occurring in a 

number of places around the country, including the Bakken formation in North 

Dakota, the Eagle Ford formation in Texas, and the Niobrara formation in Colorado. 

Unlike the large oil fields of the past few decades such as the fields in the Gulf of 

Mexico or Prudhoe Bay, Alaska, these new shale fields are mostly on private and 

7 
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state lands. As a result, total U.S. oil production has increased, in spite ofthe federal 

government leasing fewer and fewer acres for energy production. 

Shale gas has greatly increased the nation's supply of natural gas and has made the 

United States the largest natural gas producer in the world. In 2011, the United 

States out produced Russia by almost 5 trillion cubic feet (28.6 trillion cubic feet of 

natural gas produced here compared to 23.7 trillion cubic feet produced in Russia).7 

The U.S. Marcellus and Barnett shale formations are providing vast new natural gas 

reserves. U.S. proven reserves of shale gas increased from 21. 7 trillion cubic feet in 

20078 to 60.6 trillion cubic feet9 in 2010. Between 2007 and 2010, shale gas 

production increased by over 300 percent from 1.3 trillion cubic feet produced in 

2007 and 5.3 trillion cubic feet produced in 2010.10 

The outlook for natural gas production in the United States has dramatically 

changed over the last decade. Just a few years ago, U.S. manufacturing facilities were 

moving abroad to pursue more affordable gas. At the time, the U.S. had relatively 

high natural gas prices. Now, due to hydraulic fracturing technology, energy 

companies are considering building liquefied natural gas terminals to export natural 

gas and new manufacturing plants are springing up around the country. The boom 

in natural gas production has completely changed the natural gas landscape and has 

greatly lowered natural gas prices for consumers and industrial users. 

Lower energy prices benefit the entire economy, but especially the economically 

disadvantaged and those on fixed incomes. Expanded energy production resulting 

in lower prices is thus a benefit to society. 

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The increase in hydraulic fracturing, however, has led to attacks on natural gas 

production. Many special interest groups have launched anti-hydraulic fracturing 

campaigns, claiming that it is a new, dangerous technology that contaminates 

groundwater. But the reality is far different. Hydraulic fracturing has been used for 

over 60 years in over one million wells. Despite this widespread use-much of 

which occurred well before there were as rigorous state regulatory programs as 

there are today-there are no confirmed cases of groundwater contamination from 

hydraulic fracturing. If there was a problem, it would have shown up by now. 

Oil Shale 

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Another area of potential oil growth is oil shale, a sedimentary rock that contains 

kerogen, a solid organic material. When the kerogen is heated to high temperatures, 

it releases petroleum-like liquids that can be processed into liquid fuels. The USGS 

estimates that U.S. oil shale resources total 2.6 trillion barrels of oil; about one 

trillion barrels of which are considered recoverable under current economic and 

technological conditions.1! These one trillion barrels are nearly four times the 

amount of Saudi Arabia's proven oil reserves-a large enough supply for about 140 

years at America's current rate of oil use. Oil shale is concentrated in the western 

United States in Utah, Wyoming, and Colorado and mainly on Federal lands. 

Despite the great promise these resources hold, one of the first acts ofthe Obama 

administration was to withdraw the research and development oil shale leases that 

the Bush administration had offered consistent with the Energy Policy Act of 2005.12 

10 
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Private sector research and development is necessary to bring these resources to 

market. Without these leases and the potential to commercialize the energy 

resource, companies will not invest the hundreds of millions of dollars required to 

develop the necessary technology, In Jordan, for example, Shell pledged to spend 

$500 million in exploration ofthe country's oil shale resources in return for the 

right to develop these resources if the exploration was successful.l3 The potential 

that oil shale holds here in the United States can be seen by the following graph: 

Oil Sands 

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Another unconventional oil is oil sands. Oil 

which a found 

Om 

addition 

to 

The 

State 

its 

crossed an pn',llnnn;'" 

submitted us 

12 
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79435.075

but 

2 to in 

and been 

now 

with 

Production on Federal Lands 

The United States is an energy-rich country with large quantities of U.S. energy 

resources found on federal lands. The federal government owns 28 percent ofthe 

land in the United States, and a majority ofthe land in the energy-rich western 

states.15 The federal government also controls oil and natural gas leasing on the 

Outer Continental Shelf (OCS)-the submerged area between land and the deep 

ocean. Developing oil and natural gas production on federal lands is becoming more 

difficult and time consuming. As a result, oil production is decreasing in the 

13 
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federally-controlled offshore areas and Alaska, but increasing on state and 

privately-controlled onshore areas. 

Furthermore, the federal government offers very little of its land for energy 

exploration or production. In fact, the federal government has leased less than 2.2 

percent of federal offshore areas16 and less than 6 percent of federal onshore lands 

for oil and gas productionP The extent of the government's energy holdings is little 

understood. The United States owns roughly 700 million acres of subsurface 

mineral estate onshore throughout the nation. Additionally, it owns 1.76 billion 

acres of offshore mineral lands, for a total of 2.46 billion acres. The U.S. 

government's mineral estate acreage holdings therefore are larger than the land 

masses of all nations on earth except Russia and Canada. The extent to which this 

mineral estate has been examined for energy wealth for the benefit of U.S. citizens 

has been extremely limited and is increasingly so. If additional lands were leased, 

more domestic energy production, jobs and economic development could be 

pursued. 

In 2009, the Obama administration leased fewer onshore acres for energy 

development than in any other year on record,18 But the declining trend did not 

begin with the Obama administration. For example, President Bush leased less land 

than President Clinton. 19 The next graph shows the decline in federal lands leased 

by the Bureau of Land Management since the 1980s.20 

14 
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Average teases BtM Issued During Each 

Administration 

Part of the reduction in area offered for lease occurred because in 1982, Congress 

banned the development of oil and natural gas resources on most of the Outer 

Continental Shelf. America's OCS encompasses 1.76 billion acres of submerged, 

taxpayer-owned lands, with over 97 percent of these offshore lands not leased for 

energy exploration and development.2! 

The Bureau of Ocean Energy Management (BOEM), an agency ofthe U.S. Department 

of Interior, estimates that the OCS contains 86 billion barrels of technically 

recoverable oil (over 12 years of supply at current consumption rates) and 420 

trillion cubic feet of technically recoverable natural gas (about 18 years of supply at 

current consumption rates).22 The Congressional prohibition was reinforced by a 

15 
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presidential moratorium instituted in 1990 by President George H.W. Bush. These 

moratoria made the United States the only developed country in the world that 

comprehensively banned access to its own offshore energy sources. 

The moratoria remained in place until the price of oil rose to more than $145 a 

barrel in 2008, prompting a public outcry that led President George W. Bush to 

finally lift the presidential offshore ban. Congress followed by allowing its 

moratorium to expire on September 30, 2008. It was finally permissible for the 

United States to move forward with developing its offshore energy resources. 

Following the removal of the moratoria, the Department of the Interior issued a plan 

to lease newly opened offshore areas between 2010 and 2015, but this plan was 

quickly rescinded by the Obama administration. President Obama proposed opening 

a few additional offshore areas in March of 2010,23 but canceled those plans less 

than a month later, following the Deepwater Horizon accident in the Gulf of Mexico. 

Instead of offering more areas for energy production, the Obama administration 

halted all drilling in the Gulf, initially as a six-month moratorium. 

Later, the administration claimed to have relaxed the moratorium, but a de facto 

moratorium remained in place because the administration granted only a handful of 

the necessary government permits needed for drilling on federal land (including 

offshore areas). A federal judge eventually held the administration in contempt for 

their "determined disregard" to take action on drilling permits.24 

16 
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79435.079

After a disaster like the Deepwater Horizon, a review is understandable, but the 

response was considered by many experts as overblown. For example, the drilling 

moratorium and the subsequent de facto moratorium not only affected deepwater 

drilling, but also shallow-water drilling in the Gulf of Mexico. Yet shallow-water 

operators have a very impressive safety record. Over the last 15 years, 11,070 wells 

were drilled in shallow water and less than 15 barrels of oil were spilled. 25 

Since March 2011, the administration has been slowly issuing deep-water offshore 

permits for the Gulf of Mexico.26 The administration has also approved a few 

supplemental plans to applications for deepwater drilling that were originally 

submitted in the 1980s. But these moves were made too late for the deepwater 

drilling rigs that had already moved to Brazil, French Guiana, Egypt, and other parts 

of Africa. 27 

Additionally, the administration's proposed leasing plan for 2012 through 2015 is 

the most anemic 5 year OCS leasing plan since the Outer Continental Shelf Leasing 

Act of 1978 (OCSLA). In sum, the 5 year plan in place through 2017 includes 

virtually none ofthose areas removed from the moratoria by Congress and the 

President in 2008. Barring changes, the OCS moratorium will be 3S years old when 

it expires at the end ofthe current OCS lease plan in 2017. For two generations, the 

federal government has denied its citizens access to the energy resources they own 

on their own lands. 

Data from the Energy Information Administration (EIA) show that production in the 

Gulf of Mexico slowed significantly following the moratorium. In 2010, 1.55 million 

17 
98 


79435.080

barrels of oil a day was produced in the federal offshore Gulf of Mexico and only 

1.32 million barrels a day in 2011. Thus, after the moratorium and permitting 

difficulties, oil companies produced 15 percent less oil a day in 2011.28 In 2012, EIA 

expects oil production in the federal offshore Gulf of Mexico to drop further to 1.27 

million barrels per day before increasing to 1.37 million barrels per day in 2013. 

Even in 2014, the agency does not expect oil production from the Federal offshore 

Gulf of Mexico (1.44 million barrels per day) to reach the level of 2010 production.29 

The large increases in oil production that have occurred in the United States are 

mainly on private and state lands. found 

According to CRS, 96 

mCTP,,,,"n 11 percent () 

5,590,000 barrels 

Total natural gas production on federal and Indian lands has decreased each year 

since fiscal year 2003, the first fiscal year that EIA provides the information. In FY 

2011, production was 4,859 billion cubic feet-a 10-percent decrease from fiscal 

year 2010, and a 31-percent decrease compared with the fiscal year 2003 level. 

Offshore natural gas production has been on a consistent downward trend over the 

last 9 years, falling more than 60 percent.31 

18 
99 


79435.081

Oil 

it 

rfltpi'tlnn of 

now, it takes 

to 

Oil and gas production projects frequently have very long lead times, unlike some 

other businesses. We know, for example, the speed with which information 

technology progresses, and know that most high tech firms would quickly abandon 

19 
100 


79435.082

economic commitments constrained by government policies that take a decade or 

more before deployment. Multi-billion dollar projects, such as many ofthe large 

offshore oil projects, take years to plan and build the necessary infrastructure to 

bring oil to market. For example, the Thunder Horse field was discovered in the Gulf 

of Mexico in 1999, but the first barrel of oil was produced in 2008. This long lead 

time means that decisions made today affect oil production for years in the future. 

One frequent criticism ofthe development of the Alaskan National Wildlife Refuge 

(ANWR), for instance, is that it would take years to start producing oil. In 1995, 

President Clinton vetoed a bill to permit oil exploration and development in ANWR. 

If he had signed that bill, oil would be produced in ANWR today, and the Trans 

Alaskan Pipeline would not be running at about one quarter of its capacity. 

Meanwhile, Shell has paid the government over $2.5 billion and spent in excess of $4 

billion to explore for oil offshore Alaska, but has yet to receive permits from the 

government to drill for oil and gas. If more oil is not allowed to be produced soon 

from Alaska, the Trans Alaskan Pipeline System, one of North America's most 

valuable energy assets will be at risk. The pipeline, which once delivered 2.1 million 

barrels of oil per day to the West Coast, now has sufficient underutilized capacity to 

accommodate twice the amount of oil that is currently being produced in North 

Dakota, the second largest oil producing state in the Union. There is no lack of oil in 

Alaska or off its coasts; the problem is that government poliCies stand in the way of 

additional oil production in Alaska. 

that the 

20 
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79435.083

• The 8.6 of 

the 

of 

• The 

trillion 

the 

$8,6 

Congressional Budget Office (CBO) estimated 

Jnd 

21 
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79435.084

Partially in response but also for education purposes, IER commissioned a 

ground breaking paper that will soon be released highlighting the larger economic 

effects, including economic growth, wages, jobs, and federal and state and local tax 

revenues, of opening Federal lands and waters to oil and gas leasing. The IER paper 

relies on the CBO natural resource and oil and gas price estimates to maintain direct 

comparability with the CBO analysis while recognizing that those figures have 

historically been proven to vastly underestimate resources and revenues. The 

government's resource information is poor in large part due to the lack of 

exploration resulting from practices limiting access to federal lands such as the 

moratoria. 

The study finds that if the federal government opened up additional federal lands 

and waters to exploration and production, the increase to GDP would be $127 

billion annually for the next seven years, and $450 billion annually in the long run. 

Most impressively, the opening of federal lands would have a cumulative increase in 

economic activity of up to $14.4 trillion over a period of 30 years. And the ripple 

effect of that boom would be 552,000 in job gains annually over the next 7 years 

with annual wage increases of up to $32 billion over that time period and an 

increase of 1.9 million jobs annually in the long run with annual wage increases of 

$115 billion. Federal and state and local tax revenues would also increase to the 

22 
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79435.085

tune of $2.7 trillion in federal revenues and $1.1 trillion in state and local revenues 

over 30 years.34 

Coal is also produced on federal lands, but its production decrease has not been as 

great as that for oil and natural gas. Coal production on federal and Indian lands 

peaked at 509 million short tons in fiscal year 2008 and has been decreasing slightly 

each year since then. In fiscal year 2011, coal sales from production on federal and 

Indian lands reached 470 million short tons, a 2-percent decrease from fiscal year 

2010 and an 8-percent decrease since the peak in fiscal year 2008.35 

At to day's prices, the value of the government's estimated coal resources in the 

lower 48 states is $22.5 trillion for a total fossil fuel of$15{),5 

the resources in 

estimated to be 48 but 

not 

Coal's Environmental Issues 

Over 90 percent of coal in the United States is used for electricity generation. Until 

recently, coal had been used to produce 50 percent of the nation's electricity, but is 

losing market share to natural gas and renewable energy as natural gas prices drop, 

renewable energy is mandated and subsidized, and new environmental regulations 

take effect. The Environmental Protection Agency (EPA) has produced regulations 

that essentially ban new coal plants and make its continued use in existing plants 

23 
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79435.086

extremely costly. As a result, coal produced only 42 percent of our electricity in 

201136 and is expected to have produced only 38 percent in 2012.37 

One of the biggest stated concerns about coal is air pollution. Coal produces more 

emissions than natural gas when burned. However, due to actions taken by industry 

and technological advances, our air quality is improving and new coal plants are 

cleaner than ever before. Pollution control technologies such as flue gas 

desulfurization, selective catalytic reducers, fabric filters, and dry sorbent injection 

have greatly reduced coal plant emissions. According to the National Energy 

Technology Laboratory (NETL), for example, a new pulverized-coal plant (operating 

at lower, "subcritical" temperatures and pressures) reduces the emission of 

nitrogen oxides (NOx) by 86 percent, sulfur dioxide (S02) by 98 percent, and 

particulate matter by 99.8 percent, as compared with a similar plant having no 

pollution controls.38 

These advances in technology have enabled large improvements in air quality. Since 

1970, the total emissions ofthe six criteria pollutants have declined by 68 percent, 

even though energy consumption has increased by 45 percent, vehicle miles 

traveled have increased by 167 percent, and the economy has grown by 212 

percent.39 (The "criteria pollutants" are carbon monoxide, lead, sulfur dioxide, 

nitrogen oxides, ground-level ozone, and particulate matter.) The following chart 

from EPA shows the increase in economic measures compared to the decrease in 

pollution emissions.4o 

24 
105 


79435.087

As technology continues to advance, coal-fired power plants will become even 

cleaner and air quality will continue to improve. In fact, as the New York Times has 

reported, China is actually constructing some coal plants that are cleaner than those 

allowed to be built in the United States.41 An irony of our current regulatory policy 

may be that China will ultimately become the world's supplier ofthe most advanced 

clean coal plants, despite the U.S. coal resource base which dwarfs their own. 

Although coal produces relatively inexpensive energy, many activist groups 

adamantly oppose coal mining and coal-fired power plants. The Sierra Club, for 

example, has worked particularly hard to stop coal-fired power plants. They claim 

that they have prevented 150 new coal-fired power plants from being built.42 

Coal mines, especially in Appalachia, are coming under increasing fire from 

environmental interest groups and the Obama administration. The EPA revoked a 

25 
106 


79435.088

clean water permit that the Army Corps of Engineers had previously awarded, 

despite the fact that, according to the Army Corps, the permit complies with West 

Virginia state water law and the federal Clean Water Act.43 The problem, according 

to EPA, is that granting the permit would lead to changes in the conductivity (or 

salinity) of the water that might be detrimental to mayflies, stoneflies, and caddis 

flies.44 In other words, EPA denied the permit, not because of impacts on human 

health, but potential impacts on mayflies. Because EPA implemented this 

conductivity guidance without going through the proper regulatory process, a 

federal district court threw out EPA's conductivity standards. 

EPA 

power MACT 

jobs 

to to 

and 

26 
107 


79435.089

to 

when 

Reported Coal-fired generator retirements. 2012·2016 

27 
108 


79435.090

Historic and planned retiremems 01 coal-fired generators 

EIA's 

does 

not 

or 

the 

28 
109 


79435.091

to 

from 

coal 

and 

250,000, 

power. 

on Wall 

on that to nudear 

povver 

29 
110 


79435.092

Conclusion 

The United States has more combined oil, coal, and natural gas resources than any 

other country on the planet. As we used these energy resources over the past 50 

years, not only did we grow our economy and improve our quality of life, but we 

improved our air quality as well. We are energy rich, not poor. We have enough 

energy resources to provide reliable and affordable energy for decades, even 

centuries to come. The real question is whether the federal government will permit 

us to have access to our abundant energy resources, not whether sufficient 

resources exist. 

Decisions made today about access to energy resources affect energy production for 

years and decades into the future. The more areas that are accessible to energy 

production today increases the likelihood of more domestic energy production later. 

Increased energy production promotes jobs, government revenues from taxes and 

lease sales, and increased economic activity. 

30 
111 


79435.093

In turn, this supplies the revenue, wealth and technology to provide the energy 

breakthroughs of the future. Energy is defined as "the capacity to do work." Its 

reliability, affordability and abundance are critical to the future work of our nation. 

Thank you for the opportunity to supply this testimony for the Committee's use. 

'Institute for Energy Research, North American Energy Inventory, December 2011, 

http://www,energyforamerica.org!wp,content/uploads!2012!06/Energy .. lnventoryFINAL.pdf 

1 Oil and Gas journal, Globa! oil production up in 2012 as reserves estimates rise again, December 31 2012, 

iltw.:Ll"!'!!w ,gEj:~9rl1la Lticlesiprir't[V"l' 11.0lissug,-12/ejJ.e.".i.~I:!~P9rt ,,,,grl.clw.i.d ..•. , repg[tjgl"Qill,9,I,pr9<lYS,ig[1' .. 4P,in, 

.?012'~b1.111l 

3 Energy Information Administration, International Energy Statistics, 

IlJtPiLw.'lf."!.·,eiAJ!R'!/.ffEIJPs/ipdbprokUli EQIr1Qg~'Lq.fl1.!'lli!=.liltQi9.":lli"ig=.~. 

4 Energy Information Administration, International Energy Statistics, 

http://tonlo.eia.doe.govjcfappsjipdbproject/IEDI ndex3,cfm ?tid ~ l&pi d= 1& aid~2 

6 U,S, Geological Survey, 3 to 4,3 Billion Barrels ofTechnically Recoverable Oil Assessed in North Dakota and 

Montana's Bakken Formation-25 Times More Than 1995 Estimate, April 10, 2008, 

D,\Q;/fwww.uSgs.gov/newsroom/article,asp?ID~1911 , 

7 Energy Information Administration, International Energy Statistics, 

bllPjlwww.eia,gov!cfapp5/ipdbproiect/lEDlndex3.cfn]1!jd~~&pJP.",~L8@ldol 

8 Energy Information Administration, Shale Gas Proved Reserves, 

D.1W.:LL!(J~lQ&ia.do_",.gg'!/.dnav!ng/ng enr shaleg"uJ._iLDlrTl ' 

9 Energy Information Administration, Assumptions to the Annual Energy Outlook 2012, 

D1![l:ll"!.w.."",~iaJl9.'1jf.9r.""A~!el~egLilj.s,l~]lll.tiQj1-,&clfL oil gasl',(Jf 

lOEnergy Information Administration, Shale Gas Production, 

~J.tl'.iL.!9nto,eia,doe,go\fLcJr:!..av!ng/rlJl . .J'I2<l shaleQL"l a,htm 

11 Task Force on Strategic Unconventional Fuels, Development of America's Strategic Unconventional Fuels 

Resources-Initial Report to the President and the Congress of the United States (Sept 2006), p, 5, 

b.ttPdlwwwJossiLen~'!/.QJ:Qg@,r:rl;;/[..eserves!npr!publications~,ec369h report epactpdf and US Geological 

Survey, all Shale and Nahcolite Resources of the Piceance Basin, Colorado, October 2010, 

ht!pjlpu[)s,u"gs:g()y[d_d?jclcls~O,69Lddsc069:y/. The Task Force on Strategic Unconventional Fuels estimated that US 

oil shale resources were 2.1 trillion barrels. In 2010, the USGS estimated that in-place resources in the Piceance Basin 

were 50 percent larger than previously estimated (1.5 trillion barrels versus 1,0 trillion barrels), The addition of the 

0.5 trillion barrels makes U.S, in'place oil shale resources total 2.6 trillion barrels, Previous estimates put the total 

31 
112 


79435.094

economically recoverable oil shale resources at 800 billion barrels, Assuming the same rate of recovery for the 

additional 0.5 trillion barrels brings the total recoverable oil shale resources to 982 billion barrels. 

12 Bloomberg, Salazar to rewrite Bush's oil-shale plan, February 25, 2009, 

~.nE.:fL~""~"bro!,£ClrTlt'qisR!g9I,{"1JpILh-"-,,.dll,,""'~j~1.6.280852. ht"ll 

13 Wall Street Journal, Shell: More Than 100 Oil Wells Drilled in Jordan in 2 Years, October 5,2011, 

b.tt:Jl~!!0!1Jln.~"",?JS9-'1J!.aI!i<:lgl~I:.mc2.o.Ll~Q.O~-}0..f5}lo.J1.t1111 

15 Bureau of Land Management, BLM Public land Statistics 1999, Table 1.3, March 2000, 

http://www.blm.gov/public-.and_statistics!pls99jindex.htm I 

H; Bureau of Ocean Energy Management, According to the administration's 

website, the outer continental shelf is 1.76 billion acres (hl!Q,LLY'Vf'''' .. t'~rm",gc£\';G.<l,IJ>l:l£.",I§.r~e.Q!lI)oJ,= 

!.~e.~Oocument.pdf) and only 38 million acres are leased (Department of Interior, Oil and Gas lease UtilizationOnshore and Offshore, 

b!!P:LLI'{""~,.<JgjcRCl.~.\'illilI~.e.lli'.Lei'_,,,,",;[loadeL<:.fl11_?c.:;MQ.d ule"s.ecuritymlfilg§<Pilgeid" 2 3W..i). That is 2.16 

percent of the entire Outer Continental Shelf. 

17 According to the Department of Interior, 38 million acres of onshore lands are leased for oil and natural gas 

production. See Table 3 in Department of Interior, Oil and Gas lease Utilization - Onshore and Offshore, 

h.ttp:fl~V!V!.cJoi.,gQ.Y/iJ.eV!slprgser~.I.~asgsllo.i3g"r"cfl11.?c?M()q,'I.~"<;~~.~Ii.ty/&.e!fil~§<8.ag~j<l":z.,,SI f?? According to the 

Congressional Research Service, the federal government owns just over 650 million acres of land. See Appendix A. 

Congressional Research Service, Major Federal Land Management Agencies; Management of Our Nation's Lands and 

Resources, May 15, 1995, 1)!tp:!L~V!~,iJ.cs§.90Iille,()rgLDleLc.rscepgr!sJrl~lur"lI"m~n.:3."fl11. The federal government 

also controls an additional 58 million acres of federal mineral estate below privately owned surface estate. See 

Bureau of land Management, Split Estate, 

http://www.blm.iiQy/JlliCiQta/etc/I11_<cdJ.c1!itJl1:>!rnJV!91I\.1Ji.JERAlS REA..h.TY AND RESOURCE PROTECTION /bmps.Par. 

98100.File.dat/SplitEstate08finaIWeb.pdf. 

is institute for Energy Research, Obama Administration Breaks (non) leasing Records, Presents a Clear and Present 

Danger to U.S. Energy Security, November 24, 2009, I1ltp.JIV!V!~j'letitut~.9renerm.'[e5earchc<Jffi/2009LDfl.i!Li)stions­

-'I'.'CQk::i.Q]Jjler:tI1.':ll':I'{Q[d. sf 

19 Congressional Research Service, Federal Lands Offered for lease Since 1969 by Administration~ January 141 2009, 

http,ll)'(V!.".,jDgitutefore"e£gy,ec'eareh. org!pgfLC R.L"crgage _Qffere.(L!oUease_bL".(jI11.inis!r"ligns,pcjf 

20 Bureau of Land Management, Number of New leases Issued during the Yearj November 9,20111 

http:(/www,blm.gov/pgdata!etc/medialib.L2L~o/MINERAI.s REALTY AND ~!~9J!.fLi;.s...£I3.Q:!!glQ!,j...L~.n.ergyfQU 

...-.-1l~~g.?tjstjc~Lfy-2g1-1::.E.~L:J?l§]g:fH~.:.ft~!U~b_<!IL~Q!."!~1,;R.~J. In the chart, the average for each administration 

includes the fiscal years where there is overlap between two administrations. For example/ FY2008 is used in the 

average for both Bush 42 and Obama. 

"Institute for Energy Research, Who Benefits from Federal Lease Hoarding, July 16, 2008, 

bttpjj",,,,V!, ins.!i.tyt.efoEe"ergyrese"rcb ... olgl?gO?/IJ?lJ§lV!ll():~enefi15-lro.111 :fed.er." He.ase:D"a r.(jing/. 

22: Bureau of Ocean Energy Management, Regulation and Enforcement, Outer Continental Shelf Oil & Gas Assessment 

2006,h.ltp:J!~"'1N,.~oel11re,gov/reval<jivlRe.di'Jat",sse.ssl11ent,htl11 

23 New York Times, Obama to Open Offshore Areas to Oil Drilling for First Time, March 31, 2010, 

http://www.nytimes.com/2010/03!31!science!earthj31ener&y.htm I 

24 Bloomberg, U.S. in Contempt Over Gulf Drill Ban, Judge Rules, February 3, 2011, 

b1!il.:fL~""".".bIgQil'tJ~rKSQ~lLf1?",,;[2Qn:Qf-03!.u:s:a.clil'i~jSl!~.tig.n-in-ct:llJ.lerrlp.l:.o'yer:g~1.f:.IjjjJl:b.ill:l::l'i.cllLe:ru les. him I 

32 
113 


79435.095

2S Houston Chronicle, Drillers fear sinking in shallow waters: They saw federal delays in permit process threaten 

com pa nies' existe n ce, August 18, 20 10, hnQ;jlY'_Y';'_cchcQ-'h"'011<Jj'iPAtQJ:lIoI11_p)fiLu_sj!1~_>,,1?_QerJlyLZJ_:;2:r?Lj~hJ:!1}1 

26 Institute for Energy Research, The Obarna Administration is Slowing Reissuing Offshore Drilling Permits, March 23, 

2011, tmm"",,_wjrlgi!"1~fore,,-elgY~,£.~2c<:b,QmL2Q1JJQ1f2?11_h_e:9jJ_a ma-admi n Lg!2!Lon::Ls::~ccY'ly::rgi>"~rlJl:: 

offshore-drilling-permits! 

27 Forbes, Why U.S. Oil rigs left Gulf of Mexico for Brazil, March 23, 2011, 

J:1t1P~i.&101l5.fQr9§i,Eo~lken@Q~L2.01~.6?das,u~:9.±r:igiieave-for-brazil-permils-an<!:flrices-oDly-facto! 

29 Energy Information Administration, Short-Term Energy Outlook, January 8, 2013, 

.t1.ttfl.:LLw-,,",w .ei2,~vLfgrecasts(ste{JL!"tcl§.eLm~fL<1ata b. p<!f 

" Institute for Energy Research, Federal Assets Above and Below the Ground, 

httrd(www.institu~Q.Fenergyr~.sear.£h...Q.r&ml}JLQUXW£fLer.ill:~_ .... ts-abg.Le:2Q<l.:tceLQ.tt:gFQ.~fl(jf 

34 Institute for Energy Research, Economic Effects of Immediately Opening Federal lands to Oil and Gas leasing: A 

Response to the Congressional Budget Office, Joseph R. Mason, forthcoming 

36 Energy Information Administration, Monthly Energy Review/ 

http :fl,,!,,!,,!.,.e.i.a .. ,goYlt()!iJl-"D_ergYLda!alfllontlllyLR<JfL~§'L?&9f 

37 Energy Information Administration, Short-Term Energy Outlook! January 8} 2012, 

ht1P:LLY'..Y'..~eieJl()!'Lfores~steollableeljJ<lf/2<Jt2tJJ:l<Jf 

38 Email from J. Kukielka, NETl to Mary Hutzler, Institute for Energy Research, January 9,2009. See also Institute for 

Energy Research, The Facts About Air Quality and Coal-Fired Power Plants, 

t)ltp,LfY'''!w .iQetigJl"fQ!gDRmYD'_'&iJfs!l,gi&l~1.Q§LOJ1!h_e:facts-a bOllt -'!i.r.:gtl2Ii!Y~"-nQ:"'21::fl':~~<!:QQ"!er:1lLil"-tsL 

39 Environmental Protection Agency, Air Quality Trends, January 5, 2012, 

ht!'p~j~~~eQiJ .gov! oi rtle ndej",!!r""<l§,ht01J 

4. Environmental Protection Agency, Air Quality Trends, http://www_epa.gov/airtrends/aqtrends.html. The specific 

graphic is available here: .il.lli1.:fLwww.epa.gov/airtren~'l'illl?§lsomparison70.ipg 

41 New York Times, China Outpaces U.S. in Cleaner Coal-Fired Plants, May 10, 2009, 

http://www~nytimes~co.l.l1QQ!1LQ.?L1UY..CJl:LdliJ~lcoal.ht..ll.Lr=L~ 

"Sierra Club, 150 Coal Plants Unplugged, ~t!P1t_"'I'JI'J,~si"-rr"SLulJ.o.9'1l!'£()".IL~?QRI"l}I:sL Also, see U.S. Chamber of 

Commerce, Project, No Project,l:>t!p~!L,,!_,,!}'IJ>I~gDSlprgjeCt.c901L,aJegQf.Ylp!.2i~CliJI 

33 
114 


79435.096

43 Washington Post, Obama administration cracks down on mountaintop mining, January 13, 2011, 

11ttP:!Lww~w:.",a.shingt()l1Rgetc9mj",p:dYD!contentlarti"I.~/201;t/QlfA3LAR2(Jl1.o.1~?[J?O.95:htrnl 

44 Environmental Protection Agency, Final Determination af the U.S, Environmental Protection Agency Pursuant to § 

404(c) of the Clean Water Act Concerning the No.1 Mine, Logan County, West Virginia, 

46 Washington Times, Chance to block Obama's war on coal, June 19, 2012., 

1l!.tR;/h>!~'!'!:'!"..ae..hJDgt:Qntimes.cot11fuews!2012fiun!19!chance:to·block·obilm~2:~i'I:QQ;:f9311i 

49 Wall Street Journal, Can Gas Undo Nuclear Power?, January 29, 2013, 

http://professional.~~'illlfle/5B200Q1'!2:ilJ.n.~il.732}§1.4~Q4578Z}2111l!!l?)35[12.html 

34 
115 

Mr. WHITFIELD. Thank you, Ms. Hutzler. 

Mr. Vidas, you are recognized for 5 minutes. 

STATEMENT OF E. HARRY VIDAS 

Mr. VIDAS. Chairman Whitfield, Ranking Member Rush and 

members of the subcommittee, I appreciate the opportunity to discuss my work in estimating the U.S. endowment of oil and natural 

gas resources. 

Due to technology advancements, the U.S. natural gas and oil resource base is now widely seen as large and diverse. Lower-48 production of shale gas, tight oil, and associated natural gas liquids 

has been an engine of economic growth in recent years. Our analysis of the remaining resource base indicates that this unconventional resource base is large and that this production activity is in 

the early stages of the resource development cycle. Therefore, we 

expect growing production and increased jobs many years into the 

future. 

In recent years, ICF has extensively evaluated shale gas and 

tight oil resources, both in terms of technical and economic recovery. This work has been sponsored by private companies, industry 

associations and government agencies. We have evaluated the geology, historic production and costs of all the major U.S. and Canadian geologic settings, or as we say, plays. This analysis shows that 

these resources are geographically widespread, and are economic to 

develop at moderate wellhead prices. The ICF analysis of these 

emerging natural gas and oil resources is done using a geographical information system, a process that evaluates the resource 

at a highly granular level, accounting for variations in geology, resource quality and economics within the plays.This ICF analysis reflects recent upstream technology including advances in horizontal 

drilling and steering, multistage hydraulic fracturing, improvements in fracturing fluids and methods, and improvements in seismic and geophysical analysis that helps identify the best locations 

for the wells. And finally, I would point out advances that reduce 

the environmental impacts of drilling. These are such things as 

using multi-well drilling pads, conservation of water and recycling 

of water resources, reformulation of chemical additives, and reduced emission completions that capture gases in the flow-back. 

These upstream technology advances have enlarged the U.S. economic resource base by expanding areas where drilling can take 

place, increasing recovery factors and reducing capital and operating costs per unit of production. ICF estimates that the remaining technically recoverable U.S. natural gas resource base is 3,850 

trillion cubic feet, which represents 155 years of current consumption. The U.S. shale gas resource is almost 2,000 tcf, and that 

makes up 52 percent of the total. One should look at these assessments as conservative in the sense that they are developed assuming current technology and no major new plays are discovered. 

In terms of U.S. oil production, as already been mentioned, U.S. 

production started increasing in the year 2009 for the first time 

since 1984 and there is the potential for the United States to become a much larger oil producer in coming decades due, as we have 

heard, from expanded production of tight oil. Our current assessment of the U.S. oil resources in terms of technically recoverable 

116 

resources is 264 billion barrels. This represents 110 years of production at current production rates. 

The U.S. tight oil potential is excellent due to the wide range of 

potential producing plays in diverse geologic settings at numerous 

basins. The success in tight oil across a wide spectrum of geologic 

settings indicates that most historic oil-producing areas will eventually see horizontal drilling, and in many cases, this tight oil development will dominate activity and production. 

So in summary, recent advances in drilling and completion technologies have dramatically increased estimates of technically recoverable natural gas and oil resources and have led to a much more 

optimistic outlook for future oil, gas and natural gas liquids production. Our forecast for natural gas is that it is going to be growing at about 2.2 percent per year up to about 32 tcf by 2025, and 

our forecast for the oil production is even faster 2.6 percent, up to 

9 million barrels per day by 2025. 

The other point I want to make is that we expect upstream technologies to continue to improve and therefore we expect these resource base number to be going up in the future as well as the economics to improve as well. Thank you. 

[The prepared statement of Mr. Vidas follows:] 

117 


79435.097

One-page Summary of Harry Vidas Testimony 

Before the Subcommittee of Energy & Power of the 

U.S. House of Representatives Committee on Energy and Commerce 

Due to technology advancements, the U,S, natural gas and oil resource base now is seen as 

extremely robust and diverse, Lower--48 production of shale gas, tight oil, and associated natural 

gas liquids has been an engine of economic growth in recent years, Our analysis of the 

remaining resource base indicates that this "unconventional" resource base is large and that this 

production activity is in the early stages of the resource development cycle with growing 

production and increased jobs expected for many years into the future, 

In recent years, ICF has extensively evaluated shale gas and tight oil resources, both in terms 

of technical and economic recovery, This work has been sponsored by private companies, 

industry associations and government agencies, We have evaluated the geology, historic 

production and costs of all major U,S, and Canadian plays, This analysis shows that these 

resources are geographically widespread, and are economic to develop at moderate wellhead 

prices, The ICF analysis ofthese emerging natural gas and oil resources is done using a 

geographical information system (GIS) process that evaluates the resource at a highly granular 

level, accounting for variations in geologic factors, resource quality and economics within plays, 

The assessed remaining recoverable U,S, natural gas resource base of 3,850 trillion cubic feet 

(Tcf) represents about 155 years of current annual consumption. The shale gas resource of 

2,000 Tcf represents 52 percent of the total. This assessment should be viewed as 

conservative in that it assumes current technology and no major new plays. A very large portion 

of this resource base is economic at relatively low wellhead prices, and industry continues to 

make strides in reducing development costs. 

U.S. oil production is increasing for the first time since 1984 and there is the potential for the 

U.S. to become a much larger oil producer in coming decades, The currently assessed U.S. oil 

resource base of 264 billion barrels represents 110 years of current annual production. 

Crude oil and condensate production are surging as a result of tight oil plays such as the 

Bakken in North Dakota and the Eagle Ford in Texas. Tight oil production in the Permian Basin 

of West Texas is increasing and rig activity is very high. Future U.S. tight oil potential is 

excellent due to the wide range of potential producing plays and diverse geologic settings in 

numerous basins. 

Relatively low cost and abundant gas and liquids resources are creating an upsurge in domestic 

manufacturing and chemicals industries. Chemical manufacturers in the U.S. have a large 

advantage over international firms whose energy and feedstock costs are higher. In addition, 

natural gas is increasingly displacing coal for power generation, resulting in reductions in 

greenhouse gas emissions, There is also a potential for natural gas to playa larger role as a 

transportation fuel. 

The shale gas revolution has created a large demand for new and expanded mid-stream 

infrastructure, including gathering systems and processing plants. Liquids production from tight 

oil is driving the need to expand long-distance crude oil pipelines and will allow the expanded 

and more economic utilization of U.S. refineries. 

2 
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Introduction 

Chairman Whitfield, Ranking Member Rush, and members of the Subcommittee, I appreciate 

the opportunity to discuss my work in estimating the U.S. endowment of oil and natural gas 

resources. 

Due to technology advancements, the U.S. natural gas and oil resource base now is seen as 

extremely robust and diverse. Lower-48 production of shale gas, tight oil, and associated natural 

gas liquids has been an engine of economic growth in recent years. Our analysis of the 

remaining resource base indicates that this "unconventional" resource base is large and that this 

production activity is in the early stages of the resource development cycle with growing 

production and increased jobs expected for many years into the future. 

In recent years, ICF has extensively evaluated shale gas and tight oil resources, both in terms 

of technical and economic recovery. This work has been sponsored by private companies, 

industry associations and government agencies. We have evaluated the geology, historic 

production and costs of all major U.S. and Canadian plays. This analysis shows that these 

resources are geographically widespread, and are economic to develop at moderate wellhead 

prices. The ICF analysis of these emerging natural gas and oil resources is done using a 

geographical information system (GIS) process that evaluates the resource at a highly granular 

level, accounting for variations in geologic factors, resource quality and economics within plays. 

3 
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79435.099

This ICF analysis reflects recent upstream technology advances including those in the following 

areas: 

Horizontal drilling and steering 

Multi-stage hydraulic fracturing 

Fracturing fluids and techniques 

Seismic and other geophysical analyses of drilling locations 

Reductions in environmental impacts (multi-well pads, water conservation and recycling, 

reformulation of additives, reduced emission completions (RECs), etc,) 

These upstream technology advances have enlarged the U,S, economic resource base by 

expanding areas where drilling can take place, increasing recovery factors and reducing capital 

and operating costs per unit of production, 

ICF's estimate for the remaining technically recoverable U,S, natural gas resource base is 3,850 

trillion cubic feet (Tcf), representing about 155 years of current annual consumption, Our total 

assessed remaining recoverable natural gas resource base for the U,S, ~ Canada is 4,990 

trillion cubic feet (Tcf), representing about 180 years of current consumption in the two counties, 

The North American shale gas resource of 2,600 Tcf makes up 52 percent of the total, with the 

U,S, assessed shale resources being almost 2,000 Tcf and Canada's portion being 600 Tcf, 

This assessment should be viewed as conservative in that it assumes current technology and 

no major new plays, A very large portion of this resource base is economic at relatively low 

wellhead prices, and industry continues to make strides in lowering development costs, 

U ,S, oil production is increasing for the first time since 1984 and there is the potential for the 

U,S, to become a much larger oil producer in coming decades, The currently assessed U,S, oil 

technically recoverable resource base of 264 billion barrels represents 110 years of current 

annual production and is roughly equivalent to the proved reserves of Saudi Arabia, 

4 
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79435.100

Crude oil and lease condensate production are surging as a result of tight oil' plays such as the 

Bakken in North Dakota and portions of the Eagle Ford in Texas, Tight oil production in the 

Permian Basin of West Texas is increasing and rig activity is very high, Future U,S, tight oil 

potential is excellent due to the wide range of potential producing plays and diverse geologic 

settings in numerous basins, Canadian tight oil production is also increasing rapidly across a 

wide area, The success of tight oil across such a wide spectrum of geologic settings indicates 

at a general level that most, if not all, historic oil producing areas will eventually see horizontal 

drilling, In most onshore areas, tight oil will likely ultimately dominate activity and production, 

So called "wet gas" production is surging in shale gas plays such as the Eagle Ford in South 

Texas and the Marcellus in Pennsylvania, This wet gas exists in a transition zone between 

crude oil and dry gas, Wet gas contains natural gas liquids such as ethane, propane and 

butane that are key feedstocks in the petrochemical industry, 

Relatively low cost and abundant gas and natural gas liquids resources are creating an upsurge 

in domestic manufacturing and chemicals industries, Chemical manufacturers in the U,S, have 

a large advantage over international firms whose energy and feedstock costs are higheL In 

addition, natural gas is increaSingly displacing coal for power generation, resulting in a large 

reduction in greenhouse gas emissions, There is also a potential for natural gas to playa much 

larger role in the transportation sector as a vehicle fuel. 

The shale gas revolution has created a large demand for new and expanded mid-stream 

infrastructure, including gathering systems and processing plants, Liquids production from tight 

1 Tight oil is defined as light-to-medium weight crude oil contained in petroleum-bearing formations of relatively 

low porosity and permeability such as shales and low permeability carbonates and sandstones, Extraction ofthe 

oil usually takes place through hydraulically fractured horizontal wells using natural reservoir drive mechanisms, 

that is, without the application of external heat or energy to change the characteristics of the oil or to "push" the 

oil out, 

5 
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79435.101

oil is driving the need to expand long-distance crude oil pipelines and will allow the expanded 

and more economic utilization of U,S, refineries, 

There remains the potential for major new plays to emerge in both existing and frontier areas, 

For example, the Monterey tight oil play in Southern California has the potential to grow into a 

major supply in that region, with implications for infrastructure, refining, and economic activity, 

Internationally, many countries are actively attempting to replicate the North American success 

with shale gas, ICF estimates that world shale gas technically recoverable resources are in the 

range of 12,000 Tcf, However, after several years of effort, it has become apparent that this 

effort will take longer than previously thought. Reasons cited in various countries include lack 

of industry expertise, lack of infrastructure, regulatory hurdles, poor economic incentives and 

problematic geology or economic factors, Well costs are generally much higher than in the U,S, 

and resource access is sometimes an issue in densely populated areas within Europe, India 

and China, 

Framework and Assessment ""n",n~.r" 

Over several decades, ICF has evaluated and assessed North American oil and gas resources, 

The assessments combine elements of the assessments by the U,S. Geological Survey, 2 the 

Bureau of Ocean Energy Management,' industry assessments such as that of the National 

Petroleum Council: and in-house research, 

In recent years, ICF has done extensive work to evaluate shale gas, tight gas, and coalbed 

methane in the U,S, and Canada using engineering and geology-based geographic information 

2 U,S, Geological Survey National Oil and Gas Assessment website 

http:Uenergy,usgs,gov(OiIGas(AssessmenlsDala!NationaIOiIGasAssessment.aspx 

3 BOEMRE 2006 OCS resource assessment http://www.boemre.gov(revaldiv(RedNaIAssessment.htm 

4 National Petroleum Council, 2003, "Balancing Natural Gas Policy - Fueling the Demands of a Growing Economy," 

Washington, D,C, 

6 
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79435.102

system (GIS) approaches. This has resulted in one of the most comprehensive and detailed 

assessments of North American unconventional gas and oil resources available. It includes the 

analysis of all major unconventional gas plays and the most active tight oil plays. 

The following resource categories have been evaluated: 

Proven reserves - the quantities of oil and gas that are expected to be recoverable 

from the developed portions of known reservoirs under existing economic and operating 

conditions and with existing technology. (Volumes shown are as of year-end 2010, and 

include conventional, tight gas, coalbed methane (CBM), and shale gas proven 

reserves). 

Reserve appreciation - the quantities of oil and gas that that are expected to be proven 

in the future through additional drilling in existing (producing) fields. Does not include 

growth in CBM or shale gas. 

Enhanced oil recovery (EOR) - recoverable oil volumes related to tertiary oil recovery 

operations, primarily CO2 EOR. 

New fields - future new conventional field discoveries. Conventional fields are those 

with higher permeability reservoirs, typically with distinct oil, gas, and water contacts. 

Shale gas and tight oil- recoverable volumes of gas, condensate, and crude oil from 

future development of shale plays. Shale plays are defined as those in which the source 

and reservoir are the same (self-sourced). Tight oil plays are those shale plays that are 

dominated by oil and associated gas, such as the Bakken in North Dakota. 

Tight gas - recoverable volumes of gas and condensate from future development of 

very low permeability sandstones. 

Coalbed methane - recoverable volumes of gas from future development of coal 

seams. 

Exhibit 1 summarizes the current ICF gas and crude oil assessments of the U.S. and Canada. 

Resources shown are "technically recoverable resources." This is defined as the volume of oil 

or gas that could technically be recovered through vertical or horizontal wells under existing 

technology and stated well spacing assumptions without regard to price. 

The assessment of remaining technically recoverable gas resources in the Lower-48, including 

proven reserves, is 3,545 Tcf and Alaska is assessed at 303 Tcf. The estimate for Canada is 

1,142 Tcf. Shale gas in the Lower-48 is assessed at 1,964 Tcf and Canadian shale gas is 

7 
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79435.103

assessed at 601 Tcf, The combined 2,565 Tcf of shale gas represents about 52 percent of the 

assessed gas resource base, The total resource base of 4,990 Tcf represents approximately 

180 years of production and consumption at the current rate of about 28 Tcf per year for the 

U,S, plus Canada, 

The estimate for remaining crude and condensate resources in the Lower-48 is 214 billion 

barrels, of which 56 billion barrels is from gas-prone or oil-prone shale and tight oil plays, 

Alaska resources are assessed at 50 billion barrels and do not yet include estimates of tight oil. 

The combined U,S. resource of 264 billion barrels can be compared to current U,S. annual 

production of 2.4 billion barrels and proven reserves of 23 billion barrels, North American crude 

and condensate resources total 307 billion barrels, of which 45 billion barrels is tight oil. The ICF 

resource assessment method results in a single point estimate of resources, rather than a 

probability range, However, the assessment inherently includes risk factors that are applied for 

individual plays, based upon geologic factors and the maturity of the play, Thus, the results 

represent a risked mean assessment. 

8 
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79435.104

Exhibit 1: ICF North America Oil and Gas Resource Base Assessment 

(excludes Canadian and U.S. oil sands) 

Technically Reco-.erable Resources; Proved as of year end 2010 

ICF Feb 2013 

Dry Total Gas Crude and Condo 

Lower48 Tcl Bn. Bbls 

Pro-.ed reser\es 297 21 

Reser\e appreciation 204 23 

Stranded frontier 0 0 

Enhanced oil reco-.ery 0 42 

Newfields 488 68 

Shale gas and condensate 1,964 31 

Tight oil 88 25 

Tight gas 438 4 

Lower48 Total 3,545 214 

Dry Total Gas Crude and Condo 

Alaska Tcl Bn. Bbls 

P ro-.ed reser\es 8.8 3.7 

Reser\e appreciation 22.0 3.5 

Stranded frontier 14.0 0.0 

Enhanced oil reco-.ery 0 12.4 

Newfields 201 30.2 

S hale gas and condensate not assessed not assessed 

Tight oil not assessed not assessed 

Tight gas 0 0 

Coal bed methane 57 0 

Alaska Total 303 50 

Dry Total Gas Crude and Condo 

Canada Tcf Bn. Bbls 

Proved reser\es 61 4.3 

Reser\e appreciation 29 3.0 

Stranded frontier 40 0.0 

Enhanced oil reco-.ery 0 3.0 

Newfields 219 12.0 

Shale gas and condensate 601 0.3 

Tight oil 116 20.4 

Tight gas (with con-.entional) 0 0.0 

Coal bed methane 76 0.0 

Canada Total 1,142 43 

U.S. Totals 3,848 264 

North America Totals 4,990 307 

9 
125 


79435.105

ICF North America Gas Resources - Tef 

199 367 

Sources: ICF, EIA (proved reserves) 

Conventional on and Gas 

4\' Proved reserves 

Rt Reserve app. + stranded 

Newfield, 

908 2l Shale gao 

Tight oil 

Tight Ga, 

Coalb.d methane 

The remaining conventional oil and gas resource consists of proven reserves, reserve 

appreciation in existing conventional fields, and undiscovered conventional fields. Conventional 

fields are higher permeability fields, typically with oil, gas and water contacts within a structural 

or stratigraphic trap. 

Proven reserve estimates are published by the U.S. Energy Information Administration each 

year, at the state and district level. This series is based upon a large scale survey of operators. 

By definition, proven reserves are those quantities in existing fields that are recoverable under 

current economic conditions with existing technology. Production from proved reserves 

provides a base deliverability that can be projected into the future as part of future production. 

All of the volumes of proved reserves should be produced in future years, unless market and 

price conditions deteriorate, in which wells could be shut in earlier than anticipated. 

Reserve appreciation in existing conventional fields represents a major component of future 

available resources. For many decades, operators have explored producing fields to add 

10 
126 


79435.106

reserves through the discovery of new pools or through infill or extension activity. The advent of 

new technology that reduces costs or increases recovery per well can also result in the addition 

of new reserves. There are numerous methods used to estimate reserve appreciation, the most 

prevalent being "year of discovery" data series in which historical growth is evaluated, and 

factors are developed to be applied to recent discoveries. ICF also uses an analytic approach 

based upon trends in well recovery within a group of older fields. 

For over 25 years, ICF has used a computerized modeling framework to evaluate remaining 

conventional undiscovered North American gas resources. This model contains a 

characterization of reserve appreciation, new conventional fields, and unconventional gas. 

Undiscovered fields are evaluated by drilling depth interval, water depth, and field size class. 

U.S. and Canada conventional resources are based largely on USGS and MMS (and other 

agencies in Canada) assessments made over the past 15 years or so. These assessments 

were extensively reviewed by industry representatives in the U.S. and Canada as part of the 

2003 National Petroleum Council study, and recommended changes were implemented.s The 

model includes representations of oil, gas and natural gas liquids by play and depth interval. 

Costs are based upon actual drilling and completion costs and various scenarios for offshore 

fields as a function of water depth. 

The model uses a discovery process algorithm to simulate the drilling of new field wildcats in a 

play. It estimates what is "discovered" by each increment of new field wildcat drilling. Some of 

the simulated discoveries are economic and many are not. The ones that are not economic are 

"banked" for future development. There is a procedure to add these undeveloped fields to the 

curve when the average cost of an exploration step reaches their development cost. Exhibit 2 

5 U.S. National Petroleum Council, 2003, "Balancing Natural Gas Policy - Fueling the Demands of a 

Growing Economy," http://www.npc.org! 

11 
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79435.107

illustrates the discovery process model. The upper blue curve illustrates the late stages of 

exploration in which all of the large fields in the play have been found, 

Exhibit 2: ICF Discovery Process Model - Conventional Undiscovered Fields 

100% 

Example Discovery Process Results 

at Different Stages of Maturity 

9~kt_-------------------_=~~-----

80'%,4------------------:;;>'''''----------

70% +---------------'-----:7'''-, 

SO";e 4----------------;7''''-;:cc--

50% +-------------;;?'L------'CT-c 

10 11 12 13 14 15 

HSM Ffeld Size Class 

Unconventional Oil and Gas 

ICF has assessed future North America unconventional gas potential, represented by shale gas, 

tight sands, and coal bed methane, This work incorporates information on the geologic, 

engineering, and economic aspects of the resource, Evaluation with a geographic information 

system (GIS) allows a wide range of studies to beUer understand future trends in supply and 

infrastructure needs, 

In recent years ICF has prepared various studies of U,S. and Canadian natural gas and oil 

supplies. For example, ICF produced reports on U.S. oil and gas resource endowment and 

12 
128 


79435.108

future activity levels for the American Petroleum Institute (API)6, the National Petroleum Council 

natural gas studies?, the INGAA Foundation" and America's Natural Gas Alliance. We have 

also produced midstream infrastructure assessments for the NPC and the INGAA Foundation. 

ICF recently completed a study for the INGAA Foundation and other sponsors to project oil and 

gas resource development and infrastructure needs for the U.S. over the next 25 years.9 The 

study included play level analysis of past and future drilling activity, estimated ultimate recovery 

(EUR) per well, and production for both gas and oil plays. 

Shale Gas and Other Unconventional Gas Well Gas 

ICF developed a GIS-based analysis system covering 32 major North American unconventional 

gas plays. Proprietary models were developed to work with GIS data on a 36-square-mile unit 

basis to estimate unrisked and risked gas-in-place, recoverable resources, EUR per well and 

wellhead and Henry Hub resource costs at a specified rate of return. The GIS analysis focused 

on gas and NGLs and addressed the issue of lease condensate and plant liquids, both in terms 

of recoverable resources and their impact on economics. Recently, ICF has developed 

assessments of several U.S. and Canadian tight oil plays, which also contain natural gas 

resources. 

The ICF unconventional gas GIS model was originally developed in 2010 with the emergence of 

U.S. horizontal shale plays. The resource assessment component is based upon mapped 

parameters of depth, thickness, organic content, and thermal maturity, and assumptions about 

6 1CF, "Strengthening Our Economy: The Untapped US Oil and Gas Resources," prepared for API, December 2008. 

National Petroleum Council, 2003, "Balancing Natural Gas Policy - Fueling the Demands of a Growing Economy." 

NPC. Washington, D.C. http://www.npc.org/. Also available at: 

http:Uwww.fossil.energy.gov/programs!oilgas!publicatiQns!npc/03gasstudy/NG Voll 9-2S.pdf 

'INGAA Foundation, 2008, "Availability, Economics, and Production Potential of North American Unconventional 

Gas Supplies," prepared by ICF for Interstate Natural Gas Association of America, Washington, DC. 

http://www . i n ga a.o rgl cms/3l/7 306/7 628/783 3 .aspx 

9 INGAA Foundation, 2011, "North American Midstream Infrastructure Through 2035 - A Secure Energy Future, 

INGAA, Washington, DC http://www.ingaa.org!Foundation!Studies!14904/14889.aspx 

13 
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79435.109

porosity, pressure gradient, and other information. The unit of analysis for gas -in-place and 

recoverable resources is a 6 by 6 mile or 36 square mile grid unit. Gas-in-place is determined 

for free gas, adsorbed gas and gas dissolved in liquids and well recovery is modeled using a 

reservoir simulator. Well recovery is estimated as a function of well spacing. Exhibit 3 is a 

map of Lower-48 shale gas plays, most of which are included in the model. 

Economic analysis is also performed on a 36-square-mile unit and is based upon discounted 

cash flow analysis of a typical well within that area. Model outputs include risked and unrisked 

gas-in-place, recoverable resources as a function of spacing, and supply versus cost curves. 

One of the key aspects of the analysis is the calibration of the mOdel with actual well recoveries 

in each play. Exhibit 4 shows Fort Worth Basin Barnett shale play well recoveries. These data 

are derived from ICF analysis of a commercial well level production database. The actual well 

recoveries are compared with the model results in each 36 square mile model cell to calibrate 

the model. Thus, our results are not just theoretical, but are ground-truthed to actual well 

results. 

14 
130 


79435.110

Exhibit 3: North America Shale Gas Plays (EIA) 

Exhibit 4: ICF Map of Fort Worth Barnett Shale Well Recoveries 

15 
131 


79435.111

Tight Oil 

Tight oil production is black oil production from shale and other low permeability formations 

including sandstone, siltstone, and carbonates. The tight oil resource has emerged as a result of 

horizontal drilling and mUlti-stage fracturing technology. Tight oil production in both the U.S. 

and Canada is surging. Production in January of 2013 is approximately 1.4 million barrels per 

day (bId) in the U.S., up from almost zero in 2007, and 250,000 bId in Canada. 

Tight oil includes the development of previously undrilled plays, such as the Bakken shale, and 

in other cases concentrates on the fringes of old oil fields, which is occurring in Canada. 

Exhibit 5 lists the tight oil plays that have been assessed by ICF. The assessment of each play 

is based upon map areas or "cells" with averaged values of depth, thickness, maturity, and 

organiCS. The model takes this information, along with assumptions about porosity, pressure, 

oil gravity, and other factors to estimate original oil and gas-in-place, recovery per well, and 

risked recoverable resources of oil and gas. The results are compared to actual well recovery 

estimates. A discounted cash flow model is used to develop a cost of supply curve for each 

play. Well recoveries in the model are compared with actual drilling results where such data 

are available. 

As presented previously, the ICF estimate for remaining crude and condensate resources in the 

Lower-48 is 214 billion barrels. The resource can be compared to current Lower-48 annual 

production of 1.8 billion barrels and proven reserves of 21 billion barrels and U.S. oil production 

of 2.4 billion barrels. North American crude and condensate resources total 307 billion barrels, 

of which 45 billion barrels is tight oil. Currently assessed tight oil resources alone represent 

about 20 years of current annual production. 

16 
132 


79435.112

Exhibit 5: Tight Oil Plays Assessed by ICF 

Unrisked Unrisked 

Square Square 

US Bakken Shale - Williston Basin 21,852 Monterey - San Joaquin Basin, CA 1,530 

Niobrara Shale - Den\er Basin 8,900 Kreyenhagen San Joaquin Basin, CA 1,845 

Niobrara Shale - Powder R Basin 6,300 Canada' 

Canada Bakken Shale - Williston Basin 1,944 

Niobrara Shale - Green Ri\er Basin 2,088 

Montney-Doig 2,800 

Niobrara Shale - Piceance Basin 3,528 

DU\ernay - WCSB 31,896 

Avalon Shale - W, Texas 7,900 

Cardium - WCSB 11,011 

Bone Springs Clastics W, Texas 4,400 

Viking WCSB 8,715 

Wolfberry Clastics - W, Texas 5,100 

• Additional preliminary studies of Shauna""n, Ameranth, Exshaw, Sla\e Point, and Bea\er11ill Lake Ims, 

Technology Assumptions 

An important aspect of resource assessment is the underlying assumption about technology, 

The ICF resource assessment is based upon the assumption of existing technology, This is a 

conservative assumption, as has been demonstrated by the very rapid technology growth in 

shale gas and tight oil development in just five years, Technology improvements may result in 

higher well recoveries, lower costs, and less environmental impact 

'n .... ".,,.ic-cm with Other Assessments 

The ICF gas resource assessment, especially for shale gas, is higher than other published 

assessments, The difference results from the inclusion of more plays and from our more 

inclusive and extensive geological and engineering approach to resource assessment 

17 
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79435.113

Several groups in the U.S. and Canada publish oil and gas resource assessments. These 

include the followin g: 

The U.S. Energy Information Administration (Annual Energy Outlook). This 

assessment is revised each year and is primarily based upon USGS and BOEM 

assessments, with a recent EIA evaluation of shale gas. 10 The USGS assessment 

is an ongoing assessment being carried out basin by basin. 

The U.S. Potential Gas Committee. This is a group of U.S. gas supply experts from 

industry and academia that put out an assessment of the Lower-48 and Alaska every 

two years. 11 

Canadian Society for Unconventional Gas (industry group) 12 

MIT Energy Initiative. This is an academic group that published a study in 2011.'3 

Advanced Resources International. ARI is a private firm that has done oil and gas 

assessment work for DOE and others. 14 

INTEK shale assessment for EIA. This is a private firm that has developed a new 

shale assessment under contract to EIA 15 

A comparison of various recently published assessments is shown in Exhibit 6. Most of the 

difference is with the shale gas assessment. 16 

10 EIA assumptions of the 2011 Annual Energy Outlook .blli>://www.ei'Ul.ov/forecasts/a~ 

11 U.S. Potential Gas Agency, 2011, "Potential Supply of Natural Gas in the United States," Potential Gas 

Committee, Colorado School of Mines, Golden Colorado. ~""-Y{.Qgtentialgas.'2ffiL 

12 Canadian Society for Unconventional Gas (CSUG), 2011, ~:~~~~:?.!!l!!gjiE~!If!iliLlli!!l§2iEQ.~c!.: MIT Energy Initiative, 2011, "The Future of Natural Gas," I 

natural-gas. pdf 

14 Advanced Resources International, 2010, (lU.s. Natural Gas Resources and Productive Capacity/, prepared for 

Chenier Energy LNG export application, August 26, 2010. 

http://www.cheniereenergvpartners.com/lng documents/application exh ibits.pdf (pages 234-349) 

15 INTEK, 2010, "Review of Emerging Resources - U.S. Shale Gas and Shale Oil Plays," included with EIA AEO 

d ocu me ntatio n materia Is; h Up :lIwww.eia.gov/analysis!Sludios/usshalegas( 

1£ In some cases these may not be the most recent assessment. 

18 
134 


79435.114

Exhibit 6: Comparison of Lower-48 Natural Gas Assessments 

ICF, January 14, 2013 

TCF of technically recol€rable gas: excludes prol€d reser.es 

Shale Gas 

and Tight Unprol€d 

Grou~ Oil Tight Gas Coalbed Conl€ntional Total 

ICF,2013 2,052 438 66 707 3,263 

EIA AEO, 2011 827 369 117 703 2,016 

PGC, 2011 687 (with conv,) 102 858 1,647 

MIT 2011 631 173 115 951 1,870 

ARi. 2010 660 471 85 831 2,047 

Notes: 

ICF shale gas includes tight oil associated gas, 

PGC assessment does not break out tight and conl€ntionai. 

MIT assessment of conl€ntional gas shown here includes Alaska 

There are several reasons why the ICF shale gas assessment is higher than other published 

assessments: 

More plays are included by ICF, ICF includes all major shale plays that have significant 

activity or industry interest 

ICF includes the entire shale play, including the oil portion. Several plays such as the 

Eagle Ford have a large liquids area, The oil portion of the play may contain large 

volumes of associated gas, 

• ICF employs a bottom-up engineering evaluation of gas-in-place, original oil-in-place 

(OOIP), and recoverable hydrocarbons. This analysis is based upon mapped geological 

parameters and well accepted reservoir simulation and modeling methods. 

ICF estimate incorporates infill drilling and the latest current technologies that increase 

the volume of reservoir contacted and recovery factors. 

ICF includes conventional gas in the areas of the outer continental shelf (OCS) that are 

currently off-limits, such as the Atlantic OCS. Some of this resource may be made 

available, but it is not a large part of our resource base. 

19 
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79435.115

ICF evaluates all hydrocarbons at the same time (dry gas, NGLs, crude, and 

condensate). The inclusion of liquids is a critical aspect of prospect economics and has 

a large impact on the supply curve. 

The ICF resource is a "risked" resource. ICF employs an explicit risking algorithm based 

upon the proximity to nearby production and factors such as thermal maturity or 

thickness. 

The ICF assessment is based upon extensive geologic, engineering, and economic analysis. 

ICF believes that other shale assessments are low because they are not as inclusive or 

comprehensive in their approach and may not include the most recent data. The ICF well 

recovery estimates and development and production forecasts are supported by actual 

production and EUR per well results where historical data are available. 

Gas Resource Costs 

ICF has developed supply cost curves for the U.S. and Canada. These curves represent the 

aggregation of discounted cash flow analyses at a highly granular level. Resources included in 

the curve are all of the resources discussed above - proven reserves, growth, new fields, and 

unconventional gas. The unconventional GIS plays are represented in the curves by thousands 

of individual DCF analyses. 

Conventional and unconventional gas resources are determined using different approaches due 

to the nature of each resource. For example, conventional new fields require new field wildcat 

exploration while shale gas is almost all development drilling. Offshore undiscovered 

conventional resources req uire special analysis related to production facilities as a function of 

water depth. 

The basic ICF resource costs are determined "at the wellhead" prior to gathering, processing, 

and transportation. However, cost estimates have been developed to allow costing at points 

20 
136 


79435.116

farther downstream of the wellhead. In addition, costs can be adjusted to a "Henry Hub" basis 

for certain type of analysis that consider the remoteness of the resource. 

Supply Costs of Conventional Oil and Gas 

Conventional undiscovered fields are represented by a field size distribution. Such distributions 

are typically compiled at the "play" level. Typically, there are a few large fields and many small 

fields remaining in a play. In the model, these play level distributions are aggregated into 5,000 

foot drilling depth intervals onshore and by water depth interval offshore. Fields are evaluated 

in terms of barrels of oil equivalent, but the hydrocarbon breakout of crude oil, associated gas, 

non-associated gas, and gas liquids is determined. All areas of the Lower-48, Canada, and 

Alaska are evaluated. 

Costs involved in discovering and developing new conventional oil and gas fields include the 

cost of seismic exploration, new field wildcat drilling, delineation and development drilling, and 

the cost of offshore production facilities. The model includes algorithms to estimate the cost of 

exploration in terms of the number and size of discoveries that would be expected from an 

increment of new field wildcat drilling. 

Supply Costs of Unconventional Oil and Gas 

ICF has developed models to assess the technical and economic recovery from shale gas and 

other types of unconventional gas plays. These models were developed during a large-scale 

study of North America gas resources conducted for a group of gas producing companies, and 

have been subsequently refined and expanded. North American plays include all of the major 

shale gas plays that are currently active. Each play was gridded into 36 square mile units of 

analysis. For example, the Marcellus Shale play contains approximately 1,100 such units 

covering a surface area of almost 40,000 square miles. 

21 
137 


79435.117

The resource assessment is based upon volumetric methods combined with geologic factors 

such as organic richness and thermal maturity. An engineering based model is used to simulate 

the production from typical wells within an analytic cell. This model is calibrated using actual 

historical well recovery and production profiles. 

The wellhead resource cost for each 36-square-mile cell is the total required wellhead price in 

dollars per MMBtu needed for capital expenditures, cost of capital, operating costs, royalties, 

severance taxes, and income taxes. 

Wellhead economics are based upon discounted cash flow analysis for a typical well that is 

used to characterize each cell. Costs include drilling and completion, operating, geological and 

geophysical (G&G), and lease costs. Completion costs include hydraulic fracturing, and such 

costs are based upon cost per stage and number of stages. Per-foot drilling costs were based 

upon analysis of industry and published data. The API Joint Association of Drilling Costs and 

Petroleum Services Association of Canada (PSAC) are sources of drilling and completion cost 

data, and the EIA is a source for operating and equipment costS. '7,'8,19 Lateral length, number 

of fracturing stages, and cost per fracturing stage assumptions were based upon investor slides 

and other sources. 

In developing the aggregate North American supply curve, the play supply curves were adjusted 

to a Henry Hub, Louisiana basis by adding or subtracting an estimated differential to Henry Hub. 

This has the effect of adding costs to more remote plays and subtracting costs from plays closer 

to demand markets than Henry Hub. 

17 American Petroleum Institute, various years, IIJolnt Association Survey of Drilling (05t5/' API, Washington, DC. 

1B Petroleum Services Assn. of Canada, 2009, "2009 Well Cost Study." http:Uwww.psac.lli 

19 U.S. Energy Information Administration, 2011, "Oil and Gas Lease Equipment and Operating Costs," 

http://www.eia.gov/petroleum/reoorts.cfm 

22 
138 


79435.118

The cost of supply curves developed for each play include the cost of supply for each 

development well spacing. Thus, there may be one curve for an initial 80-acre-per-well 

development, one for 40-acre-per-well. This approach was used because the amount of 

assessed recoverable and economic resource is a function of well spacing. In some plays, 

down-spacing may be economic at a relatively low wellhead price, while in other plays, 

economics may dictate that the play would likely not be developed on closer spacing. The 

factors that determine the economics of infill development are complex because of varying 

geology and engineering characteristics and the cost of drilling and operating the wells. 

The analysis is based on current practices and costs and therefore does not include the 

potential for either upstream technology advances or drilling and completion cost reductions in 

the future. Throughout the history of the gas industry, technology improvements have resulted 

in increased recovery and improved economics. In oil and gas resource assessment and 

forecasting, assumptions are typically made that well recovery improvements and drilling cost 

reductions will continue in the future and will have the effect of reducing supply costs. Thus, the 

current study may be considered a conservative representation of the resource base. 

aarp,:r"f'", Cost of Curves 

North America supply cost curves on a "Henry Hub" price basis are presented in Exhibits 7 and 

8. The costs in each basin have been adjusted to account for basis differential to Henry Hub, 

Louisiana. The supply curves were developed on an "oil-derived" basis. That is to say that the 

liquids prices are fixed in the model (crude oil at $95 per barrel) and the gas prices in the curve 

represent the revenue that is needed to cover those costs that were not covered by the liquids 

in the DCF analysis. The rate of return criterion is 10 percent, in real terms. Current 

technology is assumed. 

23 
139 


79435.119

For the Lower-48, 2,300 Tef of gas resource is available at $10,00 per MMBtu or less, For 

Canada there is 650 Tef at at $10,00 per MMBtu or less, At $5,00 per MMBtu, over 1,200 Tcf is 

available in the Lower-48 and approximately 300 Tef is available in Canada, 

This analysis shows that a very large component of the technically recoverable resource is 

economic at relatively low wellhead prices, This assessment could well be conservative in that 

it assumes no improvement in drilling and completion technology and cost reduction, while in 

fact, large improvements in these areas are being made, 

Exhibit 7: ICF U.S. Natural Gas Supply Curve - Henry Hub Basis 

Lower-48 Gas Supply Curve 

$20 

- $18 til 

0 

U 

QI $16 

CJ 

... $14 ::J 

0 

til $12 QI 

a:: 

til ::J $10 I'll- (!)aJ $8 -:2: I'll:::: 

... -- $6 ::JOA-

-til 

Z $4 "0 

QI 

> .;: 

QI 

"0 

..!. Tcf dry marketable gas (includes proven reserves) 

0 

24 
140 


79435.120

Exhibit 8: Canada Natural Gas Supply Curve - Henry Hub Basis 

Canada Gas Supply Curve 

-IJ) $18 0 

() $16 <II 

u 

.... $14 ::l 

0 

IJ) $12 QI 

0:: 

1J)::l $10 1IlC!)CO _::iE $8 

1Il::iE 

.... 

::l~ -

'iii 

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QI 

> ';: 

QI 

"0 

..!. Tcf dry marketable gas (includes proven reserves) 

0 ~Shale "Tight Coalbed Other -Total 

Source: ICF 

25 
141 

Mr. WHITFIELD. Thank you, Mr. Vidas. 

At this time we will go into the question-and-answer period, and 

I will recognize myself for 5 minutes for questions. Once again, I 

want to thank all of you for your testimony. It is quite encouraging 

that we find ourselves in America today with abundant natural resources—gas, oil, coal—as well as renewables, and your testimony, 

as I had indicated in my opening statement, shows how just a short 

period of time how everyone was talking about we were depleting 

our natural resources. So it is really exciting that we find ourselves 

in America in this situation and particularly at a time when we 

really are in a global marketplace and we find ourselves competing 

with other countries for jobs and for job creation. How many of you 

attended the World Economic Forum in Davos? Dr. Yergin? OK. 

Now, I had read some comments that there was a lot of discussion in Davos about the focus on American energy independence, 

and the articles that I read indicated it was a major concern for 

the Europeans because fortunately in America, most of our production and discoveries have occurred on private lands which we have 

been able to develop even though permits on public lands are down, 

and I know that in Europe, a lot of these discoveries are on government-owned lands. But would you make a comment about your observation of the Europeans’ views on what is happening in America 

in the energy sector? 

Mr. YERGIN. Yes. I think it was summarized for me at the World 

Economic Forum, I asked a prominent journalist what he thought 

the number one theme was, and I expected him to say the euro, 

and he said shale, and it took me by surprise, but I think that, you 

know, it takes time for thinking to catch up with changes, and I 

think Europe is suffering from enormous unemployment problems. 

Spain has 26 percent unemployment. And they are looking at the 

United States and saying the United States, because of this lowcost, abundant energy is going to be a very formidable competitor 

and people kind of stopping investing Europe and wanting to transfer their investment to the United States, and I think companies 

that are European based saying that they are going to be at a disadvantage competing against the United States. 

I heard the same thing when I was in China for the publication 

of my book The Quest. I spent 2 weeks there and I heard the same 

intense discussion about shale in the sense that the United States 

was going to be changing the competitive playing field in the global 

economy because of this, so I think the rest of the world has really 

kind of become obsessed with this development in the United 

States because of how it changes the competition, as I say, in the 

global marketplace. 

Mr. WHITFIELD. Well, I agree and I think we are very fortunate 

to live here, and the policies that we adopt are going to go a long 

way in determining how far we can go down this road, and I said 

in the beginning, one of our primary focuses today is about economic growth and job creation, and we have what I will refer to 

as a magic key to really facilitate that in many ways. 

Let me just briefly talk about the export of liquefied natural gas. 

I know it is controversial and I know there are a lot of different 

sides to it. My understanding is that a permit has been issued and 

there is a facility being built in Louisiana for the purpose of doing 

142 

that. I know the chemical industry, for example, is very much opposed to it, but would some of you just make a brief comment on 

what you think about it? I mean, do you think this is something 

we should be looking at? When you think about the impact it would 

have on our trade deficit too, that is good. But Dr. Yergin, I know 

you mentioned it briefly. Just give me your views on that. 

Mr. YERGIN. Well, I think that some of us can remember a few 

years ago when we were going to have all these importing facilities 

for LNG, and you would look at a map and you would see 30 or 

40 of them and it turned out it is sort of zero right now, so I think 

there is a kind of boom discussion about all these facilities, and our 

conclusion is that the number that will be built is perhaps, you 

know, you could count them on one hand because a lot of the discussion has left out, as I said, the competitive factor that there are 

a lot of other people. Canada might have three to five just in British Columbia and they cost a lot, and a lot of new projects. There 

is new gas off of East Africa. There is new gas off Israel. All that 

is going to be coming into the marketplace, so that will kind of put 

a balance upon it, and I think as many of us feel on this panel that 

the issue is that we are demand constrained. We have a lot of gas 

and so it would not have a dramatic impact on gas cost and it 

would unfold over a decade or more. 

Mr. WHITFIELD. Did you want to make a comment, Ms. Morgan? 

Ms. MORGAN. We haven’t worked extensively on LNG exports but 

I think the key point I think across the board is, if the United 

States is successful in integrating carbon capture and storage along 

with gas from shale and other resources, you actually, I think, 

would have even greater opportunities. 

Mr. WHITFIELD. I see my time is expired so at this time I will 

recognize the gentleman from Illinois for 5 minutes, Mr. Rush. 

Mr. RUSH. I want to thank you, Mr. Chairman. 

Dr. Yergin, it is so good to see you again. I remember having 

breakfast with you at the Aspen Institute and I thought you did 

quite well and you are doing quite well now. In your testimony, you 

report that the unconventional energy revolution supports 1.7 million jobs currently and that that number will grow significantly 

over the next decade. Can you speak to these new jobs and what 

we can expect to see? How will the number grow, the types of jobs 

that will be created and where these jobs will be located nationally? 

Mr. YERGIN. We undertook this research over about the last six 

or seven months, and we were surprised by a couple of things, one, 

the scale of the jobs. We use the same methodology that the Bureau of Economic Analysis and Commerce Department uses. And 

secondly, that it really spread across all the States. That is why I 

mentioned New York and Illinois as examples because of these long 

supply chains, and I think this too, if we talk about the surprise 

around unconventional resources, the first surprise was the scale 

of it and the speed and the second has been this wider economic 

impact. So the jobs, that 1.7 million that we talk about includes direct jobs, which would actually be working in the oil and gas fields. 

It would include the technology jobs, the service jobs that support 

it, and then it is the jobs that are created—this is called the induced jobs that are created by the rising incomes that people have 

143 

to spend and it is the kind of services that would be provided. So 

it is kind of package of all of them, and you know, it is a demonstration of how tightly integrated our national economy is, that 

it goes across the entire country. So it could be everything from 

somebody working in manufacturing steel in Ohio to somebody 

working in information technology in California that feeds into this 

industry. 

Mr. RUSH. Are we equipped now? Is the American workforce prepared to take these jobs? Are we prepared to deal with these jobs? 

Mr. YERGIN. I think so up to a point, but it does require training. 

For instance, the State of Ohio is getting prepared for activity 

there, and Governor Kasich there has made a big emphasis on vocational training in the schools to train workers who would be 

working directly in the oil or gas field, in the Utica shale, as it is 

called. I think it is striking that this job creation or job support has 

really occurred during a period of high unemployment and it has 

been in a sense one of the bright spots during these 5 tough economic years that we have had. 

Mr. RUSH. Thank you. 

Ms. Morgan, in your testimony you state that the United States 

has been a world leader in clean energy research and development 

but it has had less success relative to other countries in actually 

developing a domestic clean energy manufacturing industry. In 

your opinion, what has prevented the United States from developing a robust clean energy manufacturing sector? 

Ms. MORGAN. Thank you. We recently did an assessment across 

five countries of the wind and solar value chain to look at who is 

winning the clean energy race, and what we found across the board 

is that the countries that are ahead, which include Germany and 

China, have a long-term policy signal that provides certainty for investors in manufacturing. So you need to have something that goes 

beyond 3 years. So now with our short-term benefits, you may see 

some wind turbines come up but you may be creating the perverse 

piece where you are not creating the manufacturing capacity domestically because there is no long-term policy signal around renewable energy and therefore you may see the import of those 

parts because investors don’t know what is going to happen in 2 

years or 3 years, so it is mostly that lack of national renewable energy policy that is lacking here. 

Mr. RUSH. Along the same lines, what does the United States 

need to do to become a net exporter of clean energy technology? 

Ms. MORGAN. I think there are a number of pieces across the 

value chain that would be essential. The first is that national policy that provides that long-term certainty, so that could be anything from a renewable portfolio standard to a feed-in tariff to 

whatever policy of choice provides that long-term certainty. The 

second really is putting in place the innovation centers that bring 

together public and private actors to be able to develop those new 

technologies rapidly. The third is to increase our research and development. We are doing pretty there, but our problem really is 

that although we are leading the world in R&D, we are not doing 

it fast enough vis-&-vis other players. Thank you. 

Mr. RUSH. Thank you very much, Mr. Chairman. You have been 

very kind. 

144 

Mr. WHITFIELD. Thank you. At this time I recognize the gentleman from Texas, Mr. Barton, for 5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman. 

I would like to ask Mr. Yergin if he is familiar with the emerging 

technology on hydraulic fracturing that greatly minimizes the 

amount of water that is used. Have you studied that in any detail? 

Mr. YERGIN. I am certainly aware of companies who are working 

to perhaps reduce the water requirements by as much as 75 percent, and I think, you know, one of the things when we did this 

study for the Secretary of Energy Advisory Board, we said that the 

needs here, as your question suggests, are going to really promote 

a lot of innovation and there sure is a lot of innovation going into 

the water issues right now, and we do see the water usage as a 

major part of it. 

Mr. BARTON. There is a company in my district and then there 

are a number of companies around the country that they haven’t 

commercialized it to a great degree yet but they have certainly 

shown that it works on a prototype basis, and some of them can 

take as much as 99 percent of the water that is currently used to 

frack a well. It is no longer necessary. And I think that if we can 

solve that issue satisfactorily, the sky is the limit. I think that 

seems to be the larger environmental issue. 

Mr. YERGIN. Congressman Barton, if I can say, it is striking that 

this is all—you know, this is only in the last 4 or 5 years and already to see this innovative response, which is part of our hearing, 

it kind of shows the creativity of our industries to respond to immediate needs. 

Mr. BARTON. When I was chairman of the full committee, we 

passed a bill called the Energy Policy Act of 2005, and we put in 

language that gave the Federal Energy Regulatory Commission ultimate say on siting LNG facilities for import. We thought we were 

going to be importing liquefied natural gas. That authority is now 

being used by the FERC to license facilities to export, in some 

cases the same facility. They are just turning it around. Do you see 

LNG for export radically changing the price structure for natural 

gas, which right now is a little under $3 1,000 cubic feet? 

Mr. YERGIN. No, we don’t see LNG exports as having a major impact on price. I mean, what we see is a continuing growth of supply 

and there is actually a need for additional market, whether it is 

LNG, whether it is vehicles, it is electric power, and we don’t think 

that these projects will have much impact. 

Mr. BARTON. So you don’t see any national security issues if we 

were to license LNG facilities? 

Mr. YERGIN. I think we see a gain to national security from the 

United States being an energy exporter and the influence that will 

come from that that is a net positive for our national security. 

Mr. BARTON. I happen to agree with that. 

And finally, I have got about another minute and a half, Dr. 

Yergin, how do you see the combination of hydraulic fracturing and 

horizontal drilling in terms of oil production? A lot of companies 

down in Texas 5 or 6 years ago when I talked to them about using 

this technology for oil production, they kind of laughed. They said 

it is just not the same, it doesn’t work. And a company in Houston, 

EOG, and also a privately owned company, Hunt Energy up in DalVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00150 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
145 

las, they decided to try it, and I will be darned, all you have to do 

is look at the Bakken up in North Dakota, and I think almost all 

of that production is horizontally drilled with hydraulic fracturing. 

Do you see that becoming the norm or do you still see the conventional drilling for oil dominating? 

Mr. YERGIN. I think it is really spreading. I mean, as you say, 

it was only around—this is only really is 2009, 2010 that it took 

off for oil, and I think the numbers keep—I don’t know what Administrator Sieminski would say but the numbers keeping exceeding the projections that are happening so fast and we see it being 

applied in traditional areas like the Permian Basin, which has 

been pronounced dead several times and of course is going through 

another—— 

Mr. BARTON. They had an all-time year last year. 

Mr. YERGIN. Yes, so I think it is going to be applied, and I think 

that we will see probably impact of this faster globally than we will 

see it in terms of natural gas. 

Mr. BARTON. My final question is to Mr. Sieminski. Do you see 

the United States being self-sufficient in oil production in the next 

10 years? 

Mr. SIEMINSKI. In oil production? 

Mr. BARTON. Yes. 

Mr. SIEMINSKI. In our reference case for the Annual Energy Outlook, which we just published, we have oil self-sufficiency getting 

down to the low 30s, low 30 percent, so 30 percent of our consumption would still be imported. In the side cases, which we will publish in March for the Annual Energy Outlook, we have looked at 

what it would take to get to self-sufficiency in oil. It involves closer 

well spacing, greater estimates of what the resource base is and a 

number of other factors that would drive oil production higher. We 

also looked at the demand side; that is, could fuel efficiency standards for automobiles, for example, be improved, and other steps 

that could be taken to reduce demand. In that set of circumstances, 

which requires further policy changes on both supply and demand, 

we could get to a crossover where the United States would be selfsufficient. 

Mr. BARTON. You are not saying it is probable but it is possible? 

Mr. SIEMINSKI. It is possible. 

Mr. WHITFIELD. The gentleman’s time is expired. 

Mr. BARTON. Thank you, Mr. Chairman. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. I am proud to follow my 

colleague in Texas, on the success we have had on directional drilling in both natural gas and oil. You might remember, you were 

chair of the committee, Congressman Barton, in 2005 when we did 

a bipartisan energy bill that we put in a little provision for the 

DOE to do a study on directional drilling because they had a great 

lab in Wyoming to do it, and we had a Houston or a Texas company who was drilling at that time out to 35,000 feet and they 

thought they could get to 50,000 and on, and we are seeing some 

of the success of that both for natural gas but also for the tight oil, 

as we call it. 

146 

I have always believed a balanced energy policy must support all 

domestic sources of energy including oil, natural gas and renewables, and again, the last question was, we are also using our energy smarter now because each time I buy a new car, I am getting 

5 to 10 miles more per gallon than I did on the previous one, so 

we are using our energy smarter. Limiting this production would 

only serve to jeopardize our small-business jobs and increase our 

reliance on foreign sources of energy. It may also have an impact 

on our ability to address climate change because if we fail to provide the natural gas needed to meet our short-term carbon reduction targets while providing affordable and reliable sources to 

American consumers. 

Administrator Sieminski, the EIA expects natural gas production 

to remain close to its 2012 level in both 2013 and 2014. Is that correct? 

Mr. SIEMINSKI. Yes. 

Mr. GREEN. I know currently there are a lot of wells comprised 

of just gas, or just dry gas, that are not being produced due to the 

low price of natural gas. This is one of the reasons I support the 

export of LNG so that there is additional incentive to produce these 

gas wells. Has EIA looked at what these export opportunities might 

mean for our future natural gas production levels? 

Mr. SIEMINSKI. We have done that. Coming back to the major 

driver behind why we have natural gas holding even this year and 

next year, it is mainly because we are assuming natural gas prices 

are going to recover to $4 by the end of next year. That begins to 

allow coal to compete more effectively for electric utility generation 

markets and holds natural gas back. So one of the interesting factors here that comes into play is that because of continuing strong 

supplies, natural gas prices remain low. That would actually lead 

to more demand in the electric utility sector. 

As far as LNG is concerned, and in response to the question that 

Chairman Whitfield asked at the beginning of the hearing, Mr. 

Green, the United States is already exporting natural gas. We export by pipeline to Mexico and Canada. Of course, we get more gas 

from Canada. In the reference case that we examined for the Annual Energy Outlook, EIA has LNG exports from the lower 48 

States and Alaska rising towards about 5 percent of domestic output over the period out to 2040. 

Mr. GREEN. Well, I actually have two issues, I guess, on that. 

One, I represent an area that is heavy in the chemical industry 

who is concerned about the rise in natural gas prices but I also 

know that when I drive through south Texas and I see so much 

flaring of the dry gas because we don’t have the capacity or the infrastructure or the customers for it, it is just such a waste of our 

utilization of natural gas, and so if we could sell it to someone for 

$15 an mcf, I wouldn’t mind doing that. 

But has the EIA incorporated the increased use of enhanced oil 

recovery in its oil projections? In Texas, for example, the use of 

EOR has changed our predicted production levels, and you mentioned the Permian Basin area as a good example of that. 

Mr. SIEMINSKI. We have built in some assumptions along those 

lines, and in separate cases, we look at other factors that could 

help drive oil production. One of the main questions raised at this 

147 

hearing is, what is the extent of the resource base, and if we were 

to see the same improvements that have taken place in the last 5 

years in natural gas occurring in the oil shale area, what we would 

end up saying is that rather than our roughly 6.4 million barrels 

of oil production we had last year getting up to about 8 before it 

begins to taper off, then it could get up closer to 10 million barrels 

a day and then hold pretty steady at that level, and one of those 

things includes better technology and recovery. 

Mr. GREEN. Well, and 10 million barrels a day sounds like a lot, 

but I actually have five refineries in East Houston and Harris 

County that use over a million barrels a day right now to make refined product, so we still are going to have to import or produce the 

needs for our own country. 

Mr. WHITFIELD. The gentleman’s time is expired. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. WHITFIELD. At this time I recognize the vice chair, Mr. 

Scalise, for 5 minutes. 

Mr. SCALISE. Thank you, Mr. Chairman. I appreciate you having 

this hearing on America’s energy security, and specifically to look 

at an assessment of our resources because, you know, I think the 

chairman had mentioned, the first natural gas facility, the first 

LNG export facility is in south Louisiana. I have actually toured 

that facility, Cheniere Energy, in south Louisiana, and that was 

originally built to be an import facility because we didn’t think we 

had the reserves that we needed for natural gas, and then eventually because of the technology, the advancements that brought all 

these shale plays online, now the actual opposite has happened 

where we have so much that in many cases they are not even drilling in areas where they have leases because all of a sudden we 

found these resources that we didn’t really know we could access 

just a few years ago and so they spent billions of dollars to retrofit 

and shift that from an import facility to an export facility, allowing 

us to create more American jobs and to continue to advance that 

new technology, which has really helped start a revolution, as I 

think a number of you talked about in your testimony. 

I want to ask you, Ms. Hutzler, because you specifically mentioned production on federal lands versus non-federal lands, and it 

is one of the misnomers that we hear about up here in Washington, 

you know, and the President will go around saying that production 

has never been higher, and yet you actually look at some of his 

policies that have shut production off on federal lands in the areas 

where the federal government doesn’t currently have the ability to 

go and have an impact in those States where they are seeing a real 

revolution, it is on non-federal lands. So if you can touch a little 

bit on that, about maybe some of the factors behind such an increase on non-federal lands where you actually have some problems 

and in some cases reductions on federal lands on production. 

Ms. HUTZLER. Production, for instance, production of oil on private and state lands over the past 5 years has increased, is essentially 96 percent of the total production that we have gotten, and 

the reason generally is that there is a lot of red tape when you try 

to deal with production on federal lands, and I think I mentioned 

in my opening remarks and in my testimony that it takes over 300 

days to now get a permit to drill on federal lands where in the 

148 

States it is less than 30 days. So all of this is taking much longer 

for a company to invest their money in terms of trying to deal with 

production on federal lands. 

Mr. SCALISE. Yes, and we can see, especially if you look at the 

shale natural gas plays, they are actually regulated. You know, the 

EPA might try to give the impression that there are no federal regulations and they need to step in, and I think that concerns a lot 

of people because the EPA doesn’t have a good track record of implementing good regulations where States have actually done a 

really good job at regulating natural gas shale plays, and frankly, 

the topography in Louisiana is a whole lot different than it is in 

Pennsylvania or North Dakota or Texas, and so the States have the 

ability to do that much better and have a great track record, by the 

way, of doing that, and so I think it is a good point to make because where we have seen real growth not only in energy but in 

jobs where in North Dakota, the lowest unemployment in the Nation they have up there because of all of this new economic growth 

coming from this technology, and so we surely don’t want to see the 

federal government come in and try to slow that down in the name 

of good regulations when in fact you already have good regulations 

the way it is supposed to be done and that is where the States 

themselves do it. 

I want to ask you, Mr. Vidas, because you have looked at some 

of the data. We get data from the Energy Information Agency and 

they have even shown that there has been a decrease in production 

on federal lands but some of the information you have on resources, 

on the known resources, are dramatically higher, I think 50 percent in some cases higher than the numbers that come out of EIA. 

Can you explain what data you look at that shows the outlook for 

this country is even better than what we get from the EIA’s numbers? 

Mr. VIDAS. Well, in any type of resource assessment, there is 

going to be uncertainty because what we are talking about is some 

activity that has yet to happen, so we are predicting then the productivity of potentially hundreds of thousands of wells that will be 

drilled in the future, and the way we do it is to first start with the 

geology and to develop maps of each of the plays, and we try to 

deal with and get data on the key parameters like what is called 

the structure maps, which is the drilling depth you need to go 

down to, the thickness of the shale, some of the parameters of the 

shale in terms of their carbon content, the porosity, the pressures 

and temperatures, and from that we can develop what is called a 

gas-in-place estimate, which is an estimate of how much gas there 

is in the ground in the formations that will be targeted. And then 

we have information on wells that have already been drilled and 

we can look at their production profiles and estimate over their 

lives how much gas they are going to produce. So, for example, if 

we looked at Pennsylvania and we looked at the Marcellus shale, 

we would see that the horizontal wells there that have been drilled 

have been improving in terms of their productivity and now are 

producing about 4–1/2 billion cubic feet per well. But that is in the 

better parts of the play because producers have gone to look for the 

best gas first, the most economic gas, but then we can look at the 

other areas of the play in terms of either being thinner or less presVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00154 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
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sure or lower porosity and we can correct for the productivity using 

basic engineering principles and thereby forecast that into the future, the future productivity of the wells, which we think on average will be about half of that, maybe 2 bcf per well. 

Mr. SCALISE. I am seeing I am out of time. I apologize, but I 

thank you for your testimony and your answers, and Mr. Chairman, I yield back. 

Mr. WHITFIELD. At this time I will recognize the gentlelady from 

California, Ms. Capps, for 5 minutes. 

Mrs. CAPPS. Thank you, Mr. Chairman, very much, and thank 

you, each of you, for your testimony. 

You know, assessing our current energy resources is obviously 

important, especially in light of the numerous advancements in research and technology in recent years and that is why I appreciate 

today’s hearing, but I am concerned that we are not getting the full 

picture. Today’s testimony and the questions coming from the majority have focused overwhelmingly on fossil fuels. Oil, natural gas 

and coal obviously dominate our energy supply but they are certainly not the only resources available. The EIA Energy Outlooks 

makes this clear, pointing out that renewable energy sources such 

as solar, wind and biofuels make up a sizable portion of our energy 

use. 

So my first question is to you, Administrator Sieminski. EIA 

projects that use of renewables will continue to grow, in some cases 

by double digits. Is that right? 

Mr. SIEMINSKI. Yes, that is correct. We actually have renewables 

growing the fastest in percentage terms of all of the fuel sources 

over the period out to 2040. I would also like to point out that the 

share of generation of electricity from renewables grows from 13 

percent in 2011 to about 16 percent in 2040. Electricity generation 

from solar and to a lesser extent wind energy sources grows as recent cost declines make them more economical. The 2013 projection 

is a little bit less optimistic about advanced biofuels because of the 

difficulty that companies have had in gearing up their manufacturing process but in general renewables are growing pretty strongly and help the fact that overall carbon dioxide emissions from energy in our forecast actually remain below the peak of 6 billion 

metric tons that we hit in 2005. 

Mrs. CAPPS. Thank you. And in addition to what you just said, 

Ms. Morgan, you established a direct link between burning fossil 

fuels and climate change, and that has already been well established from a variety of sources, and we have begun to see these 

impacts if we just even look at extreme weather events like Hurricane Sandy, all the droughts and the wildfires as well, and I represent a coastal State and a costal district. I am particularly mindful of climate change impacts on higher sea levels and increasing 

erosion. 

Ms. Morgan, in your testimony you discuss some of these impacts. Could you elaborate, particularly on sea-level rise and increased erosion for those of us who do represent coastal communities? 

Ms. MORGAN. Certainly, yes. Sea-level rise is one of the major 

threats to the United States and is already occurring along the 

Eastern seaboard and certainly also on the West Coast. I am familVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00155 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
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iar, we have done some work looking in Florida particularly where 

you see that Miami Beach is already having to spend more than 

$200 million to overhaul its storm damage system. You are seeing 

that Hallandale Beach has to spend $10 million a year on new 

wells because of saltwater intrusion. Florida is built on limestone, 

which means sea walls don’t help much. So that is a major piece 

of worry. Also, certainly, the energy infrastructure that is located 

along the coast is also at risk. 

Mrs. CAPPS. I just want to add an example to that. I represent 

the central coast of California, and the city of Pismo Beach is installing sea walls itself to protect two sewage lift stations that are 

threatened by erosion, and in Santa Barbara, our central creek 

that comes right down through the heart of the city has been widened to increase its flood capacity. These projects come at a high 

cost, and I know these communities have struggled to find necessary resources. 

One final one, in the last few seconds, is this something other 

communities are also struggling with and finding that the cost is 

really prohibitive? 

Ms. MORGAN. Absolutely, and I know in Florida there are four 

counties that have joined together and are facing tremendous cost. 

If you look here in Lewes, Delaware, not far away from communities that are struggling with it, go up to Maine. So it is a real 

issue that we need to face on our infrastructure investments but 

also the cost to local communities. It puts an imperative on emission reductions as well. 

Mrs. CAPPS. Thank you very much. I will yield back. 

Mr. WHITFIELD. At this time I recognize the gentleman from Nebraska, Mr. Terry, for 5 minutes. 

Mr. TERRY. Thank you, Mr. Chairman. 

This fall I hosted a natural gas forum in Omaha where we had 

representatives from just about every facet of the natural gas world 

from users, producers and potential future users. One theme came 

from that, and that is that we have a great supply of natural gas, 

we can argue 100 years or 150 years, that there is enough supply 

that we could expand the uses of natural gas into transportation, 

and this begs of question, we have been talking about exporting 

surplus but we could also have discussions of additional uses of 

natural gas. 

But one thing always came back, and that is the uncertainty of 

regulations and the regulations when you drilled further down 

were defined as uncertainty about whether the federal government 

was going to start regulating fracking, if and how, and that that 

in itself is the worry for the users. I am one of those that feels that 

expanding natural gas into vehicles will help our country not only 

because we are using a domestic product but the fact that diversity 

in auto fuels, whether we start with trucks, heavy trucks or whatever, enhances our national security status. 

So starting with Mr. Sieminski, honorable, and then going down, 

this is the question I would like to have your respective opinions, 

and that is, is it fair to say that moving more of our transportation 

to natural gas will impact our national security? 

Mr. SIEMINSKI. Thank you, Mr. Congressman, for calling me honorable. I guess I get that because the Senate confirmed me in my 

151 

appointment. I tell people that a lot of folks in my new place of employment call me sir, and that is very different than when I was 

in the private sector, but I have to fly economy when I travel. 

Mr. TERRY. I understand that. With a 9 percent approval rating 

here, we get called a lot of things, but honorable is not one of them. 

Mr. SIEMINSKI. I think that you are on to a really interesting 

question here. We actually took at look at how quickly natural gas 

could grow in transportation, and it is a very small number, a 

rounding error in terms of percentages. We do use 3 percent of our 

natural gas to move natural gas in the pipelines, but when most 

people think about transportation, they are thinking about trucks 

or cars and so on. We believe that LNG in freight trucks and then 

eventually natural gas being turned into liquids like a high-quality 

diesel fuel—there is a plant under consideration down in Louisiana 

to do just that—could actually almost double the amount of total 

natural gas in transportation so that we could get up from 3 percent now to easily 6 percent and possibly as high as 8 or 9 percent. 

A lot of that is because natural gas, from a pricing standpoint, 

looks really, really attractive compared to global oil prices. So there 

is a lot of effort underway there. 

Mr. YERGIN. I think we have pretty much the same view as EIA, 

that, you know, it does now appear that natural gas will become 

an important fuel for large trucks, for railroads and so forth. At 

this point we don’t see it becoming a major fuel for private automobiles because of the nature of the infrastructure and so forth 

that would be needed. 

Mr. TERRY. I would like to hear your opinion. 

Ms. MORGAN. I would be happy to. 

Mr. TERRY. You are the contrarian. 

Ms. MORGAN. We haven’t done extensive research on this area 

but the one piece that I can add to the discussion perhaps is that 

it is clear that gas a lower global warming potential than oil, so 

from that perspective, it is more beneficial, and I think as I was 

saying earlier, if we can also tackle the carbon capture and storage 

piece of that, you will see even greater benefit. 

Mr. TERRY. Thank you. 

Ms. HUTZLER. From our standpoint, we essentially agree with 

Dr. Yergin in the sense that there is certainly a market in the 

heavy-truck area, and it is easier to deal with the infrastructure 

problems there of supplying the natural gas but in the private sector for residential vehicles, it is more difficult. 

Mr. VIDAS. The analysis that we have done is very similar, that 

although we expect natural gas and liquefied natural gas vehicles 

to triple their use over the next 20 or 25 years, it still represents 

a relatively small part of the overall sector. The more likely way 

that natural gas could be used to displace oil would be through gasto-liquids technologies or even using natural gas to generate electricity and then using electricity in battery cars. 

Mr. WHITFIELD. The gentleman’s time is expired. 

Mr. TERRY. Thank you. 

Mr. WHITFIELD. At this time I recognize the gentlelady from 

California, Ms. Matsui, for 5 minutes. 

Ms. MATSUI. Thank you, Mr. Chairman. I would like to also 

thank the witnesses for being with us today. I am pleased to be 

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back on the Energy and Power Subcommittee this Congress, and 

I look forward to working with my colleagues to comprehensively 

address our Nation’s energy needs, and that also includes dealing 

with climate change. 

Right now there are thousands of clean technology companies 

manufacturing innovative products that will help fundamentally 

shift our country away from carbon-intensive energy sources. Many 

of these are small-business owners and entrepreneurs. My district 

of Sacramento has over 220 such companies. I have seen firsthand 

the progress they have made in solar, wind, hydrogen fuel cells and 

waste-to-energy conversion techniques. These companies are working on the technology to ensure that America remains a leader in 

green energy global market. We are rapidly losing ground in this 

sector to countries like China and Germany who are heavily investing in the renewable energy markets, and the United States must 

level the playing field to allow our clean technology companies to 

better compete. Low-carbon energy sources must have a seat at 

this table. Energy efficiency must have a seat at this table, and 

clean energy technology must have a seat at this time. Anything 

less is shortsighted and detrimental to our economy, our environment and our energy goals. 

I want to follow up to Ranking Member Rush’s questions regarding the clean energy manufacturing sector. Last month, Chairman 

Emeritus John Dingell and I introduced H.R. 400, which is a bill 

to promote American clean energy exports and increase clean energy manufacturing. This bill passed the House with bipartisan 

support during the 111th Congress and it is my hope that this committee will consider it soon. 

Ms. Morgan, can you expand on the economic benefits we would 

receive by boosting our clean energy manufacturing sector? 

Ms. MORGAN. Certainly. I think one key piece, if we are able and 

hopefully will build out our manufacturing sector would be in the 

area of jobs. Currently, according to the Energy and Environment 

Study Institute, you have more jobs created in clean energy than 

you do in oil, fossil and coal combined, and a recent study by the 

University of California actually looked at the fact that you can— 

over time if you were to really go for 30 percent renewables and 

push your energy efficiency in the economy, you could have 4 million jobs by 2030. So the job benefits are certainly significant, that 

is for sure. 

Ms. MATSUI. OK. And in your testimony, one of your recommendations is that we must build out America’s renewable energy sector. Now, what are some criteria that policymakers should 

consider for driving clean energy growth and competitiveness? 

Ms. MORGAN. I think the main criteria right now, if I look at 

where the United States stands on clean energy, is the clear, longterm, long, loud and legal signal that investors are looking for to 

see that this is a growing area, so that means that national renewable energy policy, I think it can take many different forms but optimally one that goes beyond 3 years. I think certainly having grid 

access for that renewable energy is another key criteria that I 

would look for, and I would add in training. I think the other piece 

that is very important, Colorado is doing some work on this, and 

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that is happening in Germany, is a really specific training program, big job opportunities. 

Ms. MATSUI. OK. And do you think we need to consider creative 

financing options for smaller clean energy companies to succeed? 

Ms. MORGAN. Definitely. I mean, I think that if you look at— 

there is a number of different innovative ways that you can bundle 

the demand for renewable energy and create new financing mechanisms to do that. We have had some experience with that in the 

United States and we are now seeing that happening in India as 

well. 

Ms. MATSUI. Thank you. And I also believe too as we look forward, we are not—because of my focus on clean energy, clean energy technology, it does not at all mean that we cannot look at the 

transitional aspects of things like natural gas as long as I believe 

we look at some of the areas of carbon capture and storage which 

I think needs to be looked at alongside the wonderful aspects of 

how much gas we have. So anyway, I really appreciate your testimony and I hope that we can continue the conversation and looking 

at somewhat all of the above as we move forward. 

Thank you very much. I yield back my time. 

Mr. WHITFIELD. Thank you. At this time I recognize the gentleman from Illinois, Mr. Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you, Mr. Chairman, and I thank the panel 

for coming to Mr. Sieminski and Dr. Yergin and actually Hutzler, 

and I can’t see the name and we don’t have paper anymore, so— 

Vidas. I had to go flip back on the side pad to find the testimony 

a couple times. 

Because in your presentations, a lot of you have the maps and 

the various plays, whether it be the shale, tight oil, coalbed, others 

in your testimony. What I would like to know is, how far behind 

are we from the pipeline infrastructure to move this product? I 

mean, the pipeline issue, we are dealing with Keystone and Keystone XL, part of the North Dakota play, the problem is, we don’t 

have access to a pipeline so a lot of this North Dakota oil is being 

inefficiently trucked down versus through pipelines. So can you all 

just briefly talk about pipeline infrastructure? 

Mr. SIEMINSKI. Thank you, Mr. Shimkus. So just to start, the infrastructure issues take time. I mean, you can often get some production going and you get a lot of wells being drilled. Whether or 

not companies can then afford to build the pipeline infrastructure 

to move those products, oil and gas, around depends on their own 

view about how long the production activity will last. 

Mr. SHIMKUS. Yes, and if you would just a little brief, because 

most of the pipeline infrastructure now is based upon traditional 

oil and gas and refineries and the like, so all these new plays are 

in areas where there may not be access to. 

Mr. SIEMINSKI. Exactly. 

Mr. SHIMKUS. I guess the point is, is that something we ought 

to consider in public policy debates? Dr. Yergin? 

Mr. YERGIN. Yes, I absolutely think so. I mean, it is like I said, 

our thinking needs to catch up with reality. Our logistics need to 

catch up with new production. Everything has been turned upside 

down. Instead of going south-north, it is going north-south. A big 

question, you know, we just managed to survive, save those refinVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00159 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
154 

eries on the East Coast, but they have to be hooked into North Dakota. We see, as you say, trucking, we see railroad cars. Ultimately, the most efficient way to move these supplies is by pipeline. Canada’s output of oil sands is equivalent to Libya’s before the 

revolution there. That supply—you know, we talk about U.S. energy independence. It is really a North American integration. So we 

have got to get, you know, a pipeline system that catches up with 

the fact that technology has changed. 

Mr. SHIMKUS. There is also some oil being barged down on the 

Mississippi, and there was a recent one that ran into the bridge 

down in the southern part of the Lower Miss, so, I mean, there is 

also issues with that type of transportation. 

Ms. Hutzler? 

Ms. HUTZLER. Yes, I agree with Dr. Yergin. We do have oil that 

is landlocked in North Dakota. We have built up in our storage facilities in Cushing and it is more efficient to move by pipeline. We 

are moving by rail now, I think I saw a number of 800,000 barrels 

a day, which is pretty substantial, and it is also safer to move it 

by rail—I mean by pipeline than rail. 

Mr. SHIMKUS. Mr. Vidas? 

Mr. VIDAS. I agree with the other speakers, that oil and natural 

gas infrastructure that is going to be needed to move this oil and 

gas to market is very important and it involves a substantial investment each year and thousands of miles of pipe. The other point 

that I would emphasize as well is that pipelines in general tend to 

be the least expensive and usually the safest way to transport both 

gas and oil. 

Mr. SHIMKUS. Thank you. And I will finish with Dr. Yergin. This 

whole debate on slowing down or not exporting natural gas I find 

pretty problematic as natural gas is just a basic commodity product 

just like corn or beans or pork or anything else, and that it has to 

be priced on the world market and we have to get it. You mentioned in your comment that there is a need for additional markets. 

Why did you say that and what do you mean by that? 

Mr. YERGIN. Well, because we have seen as been described my 

colleagues on this panel this growth, this technology has opened up 

a huge amount of new supply and right now, you know, there is 

a lot of supply that can’t get to market and you see activity going 

down. 

Mr. SHIMKUS. So if there is no price signal, then all these jobs 

for location discovery and recovery would be gone because there is 

no price signal to continue the—— 

Mr. YERGIN. Yes. What has happened is of course a lot of it has 

flipped into looking for either oil or for gas that is rich with liquids 

but nevertheless I think the general view is that at this low level 

that this is not a sustaining price to maintain the growth in supply 

that we need for electric power, that we need for our industry and 

might need for transportation and to meet global markets. 

Mr. SHIMKUS. Great. Thank you very much. Thank you, Mr. 

Chairman. 

Mr. WHITFIELD. At this time I will recognize the gentlelady from 

the Virgin Islands, Ms. Christensen, for 5 minutes. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and I want to 

thank you and the ranking member for this hearing as well. 

155 

Mr. Sieminski, I represent our U.S. territory, the U.S. Virgin Islands, and they are plagued with the highest rates of electricity in 

the United States. In my district of the U.S. Virgin Islands, current 

electricity rates are five times the national average. An average 

family pays, if they can, 50.8 cents per kilowatt compared to the 

9.83 U.S. average. A visit to your Web site shows a very clear 

breakdown of State electricity profiles with the U.S. average retail 

price reported but in order to find information about the territories, 

you have to really search and it is quite confusing. The majority 

of information is on a beta site that says, for public testing and 

comment only and there is a country analysis brief on the Virgin 

Islands, but this is really unacceptable. So why is it that the territories’ electricity cost information is not included there even if it is 

as an outlier and what can we do to have that information included? 

Mr. SIEMINSKI. Thank you, Congresswoman Christensen. I said 

at my confirmation hearings that EIA needed to get its data better, 

faster and cheaper, and we are working on that. We need to receive 

complete and timely data from everybody. This has been a problem 

with some of the territories but I will look into that question and 

I will see what we can do. 

Mrs. CHRISTENSEN. And we can work to try to make sure that 

you have the information. It is important for that information to 

be out there. Thank you. 

We have spent a lot of time talking today about oil and gas resources but the United States has been said by Ms. Morgan and 

others that we are blessed with ample renewable energy resources 

as well. The question is whether we and the rest of the world are 

doing enough quickly to develop those clean energy resources and 

make our economies more energy efficient. Last November, the IEA 

released their World Energy Outlook for 2012 and found that our 

current energy system is unsustainable and they projected that in 

a little more than 20 years we could see average global temperatures increase up to 6.5 degrees Fahrenheit as approximately 80 

percent of future global emissions are already locked in by existing 

infrastructure. 

Ms. Morgan, how much would we have to reduce fossil fuel use 

in order to prevent more than, I think that would be 2 degrees 

Centigrade rise in temperature and what does it mean that we 

would be locked into these emissions? 

Ms. MORGAN. Thank you. Well, on the longer term what the scientific estimates state is that we need to be reducing our emissions 

by 80 to 95 percent by 2050, which means that we have to really 

have the longer term in mind. The estimates for 2020 time period 

for developed countries tends to be around a 25 to 40 percent reduction. The United States has made a commitment to 17 percent. 

I think the thing to recognize is that there are points of no return 

where we hit tipping points where you are no longer able to restore 

coral reefs, where the arctic ice melts completely. Those are the 

types of irreversible impacts and the lock-in of our infrastructure 

that, you know, comes from the current pathway on high carbon is 

very much responsible for that. 

Mrs. CHRISTENSEN. And, you know, they also say that it is possible to prevent that 2-degree Centigrade increase if we were to act 

156 

to reduce CO2 emissions prior to 2017. So I don’t know if you wanted to comment or Mr. Sieminski wanted to comment on what is it 

that—you know, the window we have is rapidly closing. It hasn’t 

closed yet. But the IEA has said that it is ambitious but still possible. So what is it that we would have to do? What kind of technology should be included in this rapid development in climate policy if we could reduce that increase, in order to reduce that increase by 2017? 

Ms. MORGAN. I will answer quickly. I think the key points are, 

we have to have a revolution in the renewable energy space and 

energy efficiency. We have these technologies now. We need to put 

in place the policy frameworks and the R&D to get those going. We 

need to price carbon. Most other major economies around the world 

price carbon. It drives efficiency. And we need very much to drive 

R&D much more quickly. 

Mrs. CHRISTENSEN. It is only 5 years. 

Mr. SIEMINSKI. I won’t make any policy recommendations but I 

would like to point out that this is a global issue so to deal with 

the 2-degree Centigrade we need cooperation around the world. 

EIA’s forecasts show that almost all of the growth in carbon dioxide 

emissions from energy will be taking place in the non-OECD countries so outside of the developed world what we really need is to 

help countries like China and India move towards lower-carbon 

fuels. 

Mr. YERGIN. I think one of the things just to add is, our CO2

emissions from energy consumption are down 13 percent since 

2007, so this is already actually happening. And the other thing 

that we can do that has a huge impact is simply become more energy efficient. We are twice as energy efficient as a Nation than we 

were a few decades ago. We have technologies and tools to do that 

today and that is a big thing. But as Adam Sieminski says, the 

growth is in the emerging markets and those numbers tend to 

overwhelm what we are doing. 

Mrs. CHRISTENSEN. Thank you. 

Mr. WHITFIELD. Time is up. At this time I recognize the gentleman from Texas, Dr. Burgess, for 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman, and I thank you for 

convening this panel. It really has been a fascinating morning. 

I am going to start off this new session of Congress by agreeing 

with the ranking member of our committee. In his opening statement, he said we must not betray our children and our future generations. I agree with him. Now, while he was referencing carbon 

capture and storage, I would reference the economic conditions that 

have prevailed for the past 4 or 5 years. The last Congresses, I was 

also on the Joint Economic Commission. It was our duty the first 

Friday of every month to receive from the Bureau of Labor Statistics the employment numbers from the previous month, and you 

saw a pattern emerging through all of that bad news, and there 

was a lot of bad news during the years, but mining and manufacturing always led that list of new job creation. 

Now, we see this morning Forbes magazine is reporting that four 

out of the top 10 best places to live in the world are in Texas. I 

knew that. They didn’t need to tell me. But Austin leads the list 

followed by Houston second, Dallas third, San Antonio ninth. In 

157 

fact, the State of Texas has added almost a half million people over 

the past years from last summer to—the summer of 2011 to the 

summer of 2012, and the reason for that of course is the availability of energy and the cost of energy, and while energy in and 

of itself cannot be its own end, it does help drive our economy. So 

when we talk about not wanting to betray our children and future 

generations, I think we have a responsibility to the economy, and 

part of that responsibility is the energy supply that is available to 

our economy. 

Dr. Christensen talked about tipping points. I will just ask an 

open-ended question. I know you guys don’t like to speculate, but 

what kind of tipping point would we have seen with the economy 

in the last 4 or 5 years in the absence of shale? What might have 

happened to our economy without the ability to produce this energy 

and produce these jobs? And either Dr. Yergin or the Honorable 

Sieminski, I would like to hear your thoughts on that. 

Mr. YERGIN. Well, if we had remained on the track that we had 

been on prior to when we were going to build all of those LNG receiving stations, we would probably be spending $100 billion a year 

now to import LNG into the country, so that would have been a 

big burden. Secondly, had we not seen this increase, this substantial increase in oil production, as I said, this equivalent to Iran’s 

total exports before sanctions, we would be paying a lot higher 

prices for oil, and it would be a much, much tighter and more vulnerable market and we would not have had what we have seen is 

that these supply chains are so long in our economy, these are dollars that stay here. They are going to jobs here rather than going 

into a sovereign wealth fund somewhere else in the world. So in 

that other universe, it would have been a much more difficult picture and more congruent with what seemed to be the picture in 

front of people in 2008. 

Mr. SIEMINSKI. Virtually every economic study that I have seen 

suggests that higher domestic production of fuels leads to greater 

GDP, and when you get to the import issue you obviously have 

lower trade deficits. All of that helps the economy, leads to greater 

job creation, as Dr. Yergin said. I think one of the things to keep 

in mind is that the availability of relatively low-cost natural gas 

has actually, I believe, helped to sustain some of the growth in 

wind and solar on the renewable side because those are intermittent sources. They need a backup supply and it is often natural gas 

that provides the backup for these rapidly growing renewables that 

are going to become a fairly significant part of U.S. energy production and consumption. 

Mr. BURGESS. Sure. We have peaking demands in north Texas 

where in the summertime when the air conditioners are all 

cranked down low, even if you had a substantial wind component, 

you would never be able to keep up with that peak demand. 

I just have to tell you, this is such a different hearing than we 

had in this very room in 2008 and, I mean, it is good news. It is 

good news for the American people, it is good news for the American economy. Regardless of political party or political persuasion, 

this is a good-news hearing. 

The other part of the good news, and Mr. Vidas, I won’t leave 

you out down on the end, yesterday flying up here reading in the 

158 

Star Telegram and the concept of having an environmentally 

friendly fracking fluid that is being developed now by Halliburton 

in Texas. I understand other companies are doing that as well. But 

the technology is changing and it is changing in a way that is environmentally responsible, and you referenced some of that in your 

testimony but do you have additional thoughts on that? 

Mr. VIDAS. Yes. What I said was there are several ways in which 

the industry has tried to adapt their technologies to reduce the 

footprint of drilling these wells. One is the surface footprint and 

trying to reduce the amount of space that it takes by combining 

multiple wells on a single path, and that can reduce the amount 

of space used by a factor of eight. The other point that I made is 

the drilling fluids themselves, which in the old days had been formulated with diesel oil. That has almost totally been eliminated 

now, and some of the toxic substances in the frack fluids are being 

replaced by more environmentally benign fluids. 

And then the other point that has been raised is the use of water 

itself. Typically, a well will take about 3 million gallons in terms 

of the fracking process, and one of the ways the industry is reducing that is by recycling the water and being able to use it over and 

over again, and the other thing that they have been doing is trying 

to reduce the total amount of water used by various different techniques including substituting other fluids such as CO2, nitrogen 

and in some cases propane instead of water. 

Mr. WHITFIELD. The gentleman’s time is expired. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Mr. WHITFIELD. At this time I recognize the ranking member, 

Mr. Waxman from California, for 5 minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. I appreciate that we 

have made great advances and it is a reason for celebration. We 

ought to be very pleased with the advantages that have come to us 

with the production of more oil and gas resources, and we now 

have advances in technology that have allowed us to drill in many 

new areas. 

But as we congratulate ourselves for these new discoveries, we 

also, I think, need to discuss how energy choices we are making 

today will have long-term impacts for our climate. We have a rapidly diminishing window to act to reduce our carbon pollution before the catastrophic impacts of climate change are irreversible. 

Ms. Morgan, in your testimony you say the United States cannot 

and should not make energy decisions without factoring in the 

risks associated with climate change. This committee is charged 

with developing energy policy for the United States. Ms. Morgan, 

how should this committee factor in climate when making energy 

policy? 

Ms. MORGAN. Well, I think that if you look longer term, it is 

quite important. First of all, you need to take into account the intensity, the greenhouse gas intensity of the fuels you are looking 

at and you need to put a price on those fuels in order to drive innovation and energy efficiency. That is point one. The second point 

I think is that although emissions of CO2 have reduced extensively, 

which is very good news, they are plateauing out and emissions of 

methane and other gases are increasing, so that means that we 

need to put in place mandatory and voluntary approaches to reduce 

159 

methane emissions as well, and we need a very solid renewable energy approach. The countries that are moving forward, you see 

those kind of three pieces in there. Carbon pricing, renewable energy policy, energy efficiency standards are all quite important, and 

then support mechanisms around those to make them work. 

Mr. WAXMAN. I have been on this committee for a number of decades, and I remember the period of time when we decided that we 

will continue to subsidize the fossil fuels through not requiring 

them to pay their external costs and in some cases directly through 

the tax code, and we undermined the alternatives that could have 

made us less dependent on these fossil fuels, which made us, of 

course, more dependent on Saudi Arabia and Iran and other countries, the OPEC countries that held us hostage. We made a mistake 

not diversifying our energy sources at that time. We should develop 

our energy policy under this new circumstance that doesn’t make 

the same mistakes and put us all in the same situation where we 

will look back and regret that we didn’t recognize that our energy 

policy had to be more thought through. 

What are the potential economic repercussions if we fail to integrate climate risk with our energy policymaking? 

Ms. MORGAN. I think that there are three main risks. I think the 

first really is around stranded investments because I think companies today that are investing in high-carbon infrastructure without 

putting in place the mechanism to deal with CO2 are being shortsighted and that as climate change unfortunately gets worse and 

policies get put in place, those will be stranded investments, and 

if we wait to act, those likely will be more expensive as we go forward. 

The second really is missing out on new and existing markets 

around the world which are growing exponentially. You are looking 

at up to $7 trillion in new capital and renewables by 2030 and 

there is national policies in every other major economy in the world 

on renewables. They are serious about this. They are moving forward for a range of reasons. And the third are the impacts actually 

on our infrastructure itself and on the country, which as you know, 

as the EIA said, if we keep going the way we are going, you are 

looking at a 10.8-degree Fahrenheit rise in temperature, which is 

unprecedented in our time. 

Mr. WAXMAN. Dr. Yergin, aside from the investment we ought to 

be making and looking at alternative energy sources, renewables, 

efficiency, some of that research is threatened by the budget cuts 

that members want to make. Do you think we ought to develop a 

policy that looks at the environmental consequences of where we 

are going in energy development? 

Mr. YERGIN. I think so. In the 1990s, I headed a taskforce on energy R&D for the Department of Energy, and I think one of the 

things, you know, we found very distressing was this volatility in 

spending on R&D, and whether you are talking about, you know, 

MIT where more people work on solar than anything else or advances in drilling or whatever it is, I think that a sustained commitment to R&D—— 

Mr. WAXMAN. But aside from that—— 

Mr. YERGIN. —is the most important investment. 

160 

Mr. WAXMAN. I absolutely agree with you, but aside from that, 

do you think we ought to make policies in the energy area that look 

at not just the research but the consequences to the future in reducing carbon emissions? 

Mr. YERGIN. I mean, I think so. I think the environmental considerations obviously should be part of how you make energy policy. 

Mr. WAXMAN. Thank you. Thank you, Mr. Chairman. 

Mr. SCALISE [presiding]. The gentleman’s time is expired. The 

gentleman from Louisiana, Mr. Cassidy. 

Mr. CASSIDY. Mr. Yergin, there are those that say that we 

shouldn’t export liquefied natural gas because in some way by 

doing so we will promote the production of more natural gas and 

therefore contribute to global warming, but what you are saying is 

that is absurd because if we don’t do it, Australia or Canada or 

some other country will export liquefied natural gas. Is that a fair 

statement? 

Mr. YERGIN. Yes, I think people will fill the market and fill the 

need, and in fact are racing ahead to do that. 

Mr. CASSIDY. Now, as they race ahead, it is fair to say that if is 

a $5 billion or $10 billion project to create one of these export terminals, those are a heck of a lot of jobs that will be sacrificed because of an absurd premise? Again, is that a fair statement? 

Mr. YERGIN. The absurd premise is that—— 

Mr. CASSIDY. Being that if we don’t export liquefied natural gas, 

then natural gas will not be mined. 

Mr. YERGIN. Well, I think in fact if you take a country like 

China, which as Adam Sieminski pointed out, it is very heavily oriented towards coal and wants to reduce its use of coal and use 

more natural gas to produce electricity to reduce pollution, they 

will look in one direction or another, and if we are sending natural 

gas we would be contributing to their reducing their pollution. 

Mr. CASSIDY. So if we can create those jobs, we will simultaneously improve our economy, but too, improve, decrease carbon release worldwide potentially? 

Mr. YERGIN. Yes. I think what is happening now is—— 

Mr. CASSIDY. I am going to let you hold that. 

Mr. YERGIN. OK. 

Mr. CASSIDY. Mr. Sieminski, in 2007 you published a report at 

the request of Congress demonstrating subsidies for different 

sources of fuel, and at that time biofuels got $5.72-per-million-BTU 

subsidy from the government, solar got $2.82, coal got 4 cents per 

million BTU and natural gas got 3 cents per million BTU. Your updated report did not have this chart, but when we speak about subsidies for various forms of energy, there is an order of magnitude 

difference there. Is that still the ballpark of the federal subsidies? 

Mr. SIEMINSKI. I would have to look at the numbers, Congressman, but the number of assumptions and factors that you have to 

take into consideration to do those calculations are numerous and 

complex, but I think it is fair to say that in addition to fossil fuel 

subsidies that there are also obviously subsidies on renewable fuels 

and many of the other things that we do. 

Mr. CASSIDY. Yes, like 100 fold, 100 fold going to renewables. 

161 

Mr. Yergin, back to you. When you were at the World Economic 

Summit, you are right, if we don’t send energy to Japan, their 

economy will tank. That is on my mind when I go around to the 

exporters in Louisiana. I say what do you need to create more 

American jobs. They say more robust markets to export to. Right 

now Japan and Europe are in the doldrums. We need those economies to do better so we can create more American jobs. 

So is it fair to say, let me ask, at the World Economic Summit, 

what is the prognosis for the Japanese economy as an example if 

they cannot replace their nuclear capability with some reasonable—— 

Mr. YERGIN. Well, they have turned—I mean, the new government in Japan is going to reconsider, and I think in July is going 

to come out with its policy about whether it is going to keep some 

of the plants operating or not. With that said, the Japanese are 

kind of in a panic about energy supplies right now, very focused on 

LNG as their kind of major increment, and I think the point you 

say, a Japanese economy that is a weak economy as part of a global economy contributes to global weakness. So we are pretty interdependent with them. That is why I said, you know, they are a 

close ally and if they do well, we do better. 

Mr. CASSIDY. It is in our self-interest to make sure that they 

have adequate energy supply. 

Mr. YERGIN. That is right, and it is in our political interest and 

it is in our economic interest. 

Mr. CASSIDY. OK. Sounds great. 

Ms. Morgan, you spoke about methane emissions. I think it is 

important to make sure the record is straight. A lot of times folks 

who are critical of natural gas state that the—quote that Cornell 

study, Mr. Howarth’s study, and which finds very high levels of 

methane released with natural gas production. But just to set the 

record straight, that is kind of an outlier study, isn’t it? I mean, 

both the Department of Energy as well as MIT peer-reviewed study 

have found a tenth of the emissions as the Howarth study. Is that 

a fair statement? 

Ms. MORGAN. We are actually in the process of putting out a 

study on this. We think that that study is on the upper end. 

Mr. CASSIDY. The Howarth study is on the upper end? 

Ms. MORGAN. Yes, but that there are also real measures that can 

be put in place to control methane even on the lower level that are 

important. 

Mr. CASSIDY. Mr. Yergin? 

Mr. YERGIN. Just to add, I know my colleagues in the Howarth 

study used data that supposedly came from us, and my colleagues 

had written a letter to the journal which was published saying the 

data had been quite distorted, and there is now a cooperative program with the Environmental Defense Fund and a number of companies to actually measure methane and come out with some hard 

data on it. 

Mr. CASSIDY. I just say that because Ms. Morgan, your testimony 

suggested that the lifecycle carbon release of natural gas is not as 

favorable as we would presume, but that really seems to assume 

the Howarth study is valid, and frankly, there seems to be a general agreement that it is not. 

162 

Ms. MORGAN. I think even on the lower levels, it is important to 

put in place measures to deal with—— 

Mr. CASSIDY. Well, I am not arguing that. I am just saying the 

lifecycle release has been overstated. 

Ms. MORGAN. The lifecycle as a whole, that study does overstate 

it. 

Mr. CASSIDY. I yield back. Thank you. 

Mr. SCALISE. The gentleman’s time is expired. The gentlelady 

from Florida, Ms. Castor. 

Ms. CASTOR. Good morning, and thank you very much for your 

insightful testimony. 

The outlook from the Energy Information Agency is very positive 

for the economy and I think beyond the current outlook there is 

great potential for additional economic growth tied to domestic supplies if we have the appropriate environmental safeguards, and I 

think here in America we can do more for consumers and for electric reliability or reliability from all energy sources. But in order 

to build that more sustainable energy system, we need to bring 

greater balance between fossil fuels and renewable sources, and I 

don’t think it is all about generating energy from cleaner sources. 

We also need to make our economy more efficient so that we use 

less energy overall, and I think that it may be time to look at the 

business models for utilities and the incentives and modernizing 

those business models. 

According to the IEA, energy efficiency is an enormous unrealized opportunity for the world to reduce energy use and thereby 

carbon pollution. The IEA projects two-thirds of potential efficiency 

gains will remain untapped through 2035 under current policy. 

That is a real hit on the pocketbooks of American families and 

businesses. 

Ms. Morgan, in your testimony you say the United States has immense remaining potential for improving efficiency in its industrial, transportation and building sectors. Which energy efficiency 

measures have the most potential to reduce energy consumption 

from the U.S. industrial sector? 

Ms. MORGAN. I think there are a number of different measures, 

and they can come in on either the State level or on a national 

level. There is tremendous potential of combined heat and power 

on the State level for industrial facilities. In the building sector, 

certainly also you look at both the opportunity for new business 

models but also for jobs in retrofitting buildings. There is great potential there. And certainly, you know, the evidence base is quite 

strong if you look at the benefits that have come from the new car 

standards that have been put in place. 

Ms. CASTOR. Can you give me some more specific examples or the 

most innovative energy measures in use today? Are there energy 

efficiency measures being implemented at the State level or abroad 

that we should expand or employ on a national level? 

Ms. MORGAN. There is a program actually in Germany that is 

very focused on the retrofitting of buildings and you need to look 

at the ownership structure obviously but they are looking at how 

you can get at the point that the owner and the renter don’t always 

share the benefits and looking at new models of how they can put 

in place measures to retrofit those buildings extensively across the 

163 

country. They are funding that actually with revenue from their 

emissions trading system so it is not additional funding coming in. 

I think that is a very strong example. You actually have a very 

strong program in China around their enterprises as well where 

they are putting in place measures to share practices and set targets for companies to increase their efficiency. 

Ms. CASTOR. And in your written testimony, you state that the 

federal government can play an important role in improving energy 

efficiency across the economy. You said the first step is to support 

programs that ensure consumers can make informed choices. What 

were you talking about? What else can the Congress do to encourage consumers to make energy-efficient choices in the marketplace? 

Ms. MORGAN. I think there are things like smart metering, information provided in all products that is much clearer about energy 

saved, money saved, CO2 saved. There is ways when you start looking at our grid on the smart metering side of things. I think if consumers first of all have more information but then also, you know, 

can be able to buy the top products as affordably as possible. 

Ms. CASTOR. Wouldn’t it help if then the electric utilities really 

had an incentive to promote conservation and greater efficiency? 

They would help empower consumers to do that. It would be a win 

for families. They would have more money to spend at home, and 

the utilities, their business would change a little bit. For example, 

in my neck of the woods, we have this terrible debacle with a broken nuclear power plant, and it is enormously expensive, and we 

like the diversity in power supply, it is very important, but it 

seems now that we would get more bang for the buck if we helped 

save energy and the utility had some incentive. Where is that happening? Are those discussions happening? 

Ms. MORGAN. Yes, they are happening somewhat on the State 

level, I think, in certain States where you have these kind of demand-side management models that are put together where both 

utilities and consumers benefit. I think they need to be much more 

broadened out so that they occur across the country more systematically. 

Ms. CASTOR. Do any of you have information on those kind of incentives of changing the business model? 

Mr. SIEMINSKI. I could just add very quickly that the lighting 

standards that have been put in place starting this year, changes 

in appliance efficiency, the improvements in auto fuel efficiency, 

lower vehicle miles traveled, all of that is leading to lower energy 

use per capita, which is good. You are getting more value for less 

consumption. 

And quickly, the difference between the new auto fuel efficiency 

standards that got adopted last year so between 2012 and 2013 in 

our forecast by the year 2035 that is worth something like 11⁄2 million barrels a day of oil imports. 

Ms. CASTOR. Thank you very much. 

Mr. SCALISE. The gentlelady’s time is expired. The gentleman 

from Texas, Mr. Olson. 

Mr. OLSON. I thank the Chair, and welcome to the witnesses. I 

thank you for your time and expertise as we lay the groundwork 

for a broader discussion about federal energy policy and the importance of robust domestic energy industry. I want to dig a little 

164 

deeper into the geopolitical challenges we are facing in the new energy era. As we move forward as a Nation, we need to better understand how our newly realized energy resources can advance our 

foreign-policy goals. 

One historic example of how U.S. production or a lack thereof impacts the geopolitical landscape, the Persian Gulf. At the end of 

World War II, our geopolitical focus was on containing communism. 

When I joined the Navy in 1989, we had four numbered fleets: the 

2nd Fleet in the Atlantic, the 6th Fleet in the Mediterranean Sea, 

the 3rd Fleet in the eastern Pacific and the 7th Fleet in the western Pacific in Japan. Communism fell in 1991, and as a result, our 

global military forces changed dramatically. We added the 5th 

Fleet in the Persian Gulf. We disestablished the 2nd Fleet in the 

western Pacific in September of 2011, and the 7th Fleet has now 

become the largest fleet in our Navy, and it is ramping up very 

quickly with China’s aggression in the South China Sea. American 

innovation and our abundant energy resources can and should be 

leveraged to protect our allies around the world from unreliable 

and unfriendly regimes and promote our interests. 

Another example of how U.S. energy supply can strengthen our 

relationships with important countries is India. They have the 

world’s largest democracy and they are in a pretty unreliable 

neighborhood. They have Pakistan to the west, China to the north, 

Bangladesh to the east. I had lunch with the Indian counsel general in Houston a couple weeks ago. We spoke for 20 minutes about 

India getting U.S. LNG, export natural gas to India. Right now 

they have got a big problem: they have no pipelines. Because of 

their neighbors, they can’t have overland pipelines so all their energy supply has to come in the form or oil or gas, has to come either via train or via boat, mostly boat. They want to be our partner. 

And so my question for you, Dr. Yergin, in your view, how can 

our energy resource base reshape our foreign-policy objectives? 

What countries should we develop or strengthen our ties with and 

how can we pressure rogue states without relying on military intervention? 

Mr. YERGIN. Well, that is a big question. I think that first we are 

seeing, as we have been describing, a rebalancing of global oil that 

is occurring and that we will see the Western hemisphere largely 

self-sufficient in years to come and more of the oil from the Middle 

East going to the Far East, so I think that is kind of one of the 

fundamental changes. I think what you referred to with India, I 

found when I was in Asia recently in Singapore and other countries 

also that interest in seeing the United States at least a player as 

an energy exporter, if not a massive one, because for them it is diversification and they would like to actually be more reliant and 

diversified more to depend upon the United States. I think as these 

technologies develop and we see it develop elsewhere, a key country 

actually is what Mexico does in terms of opening itself up to these 

new technologies. It is something that I think is right on the foreground. 

In terms of new relationships, Brazil is on course to be a global 

energy powerhouse and I think the U.S.-Brazilian relationship is 

165 

one that grows in significance for us. So those would be some of 

the changes. 

Mr. OLSON. How about Eastern Europe, who buys their natural 

gas largely from Russia? 

Mr. YERGIN. Well, Poland is very interested in—it is interesting, 

you have different mixes in Europe on policy. Poland certainly 

wants to develop its shale gas to reduce its dependence on Russian 

gas, and Ukraine, of course, there is constant friction between Russia and Ukraine over the price of natural gas, and Ukraine, I think 

just last week or the week before, started signing some large agreements to develop shale gas in Ukraine, and for them, it is not only 

economic but it is also a geopolitical development. 

Mr. OLSON. I get emails back home every week from people along 

the Silk Road, you know, where Turkey starts and heads east toward all those countries right there, the former Soviet states up 

there on the Caspian Sea, they want our natural gas. So again, I 

think it is a great opportunity for our country to actually have an 

influence on these people, make some friends, create American 

jobs, and again—— 

Mr. YERGIN. And I think they wanted to be integrated in the 

global markets as a way to sustain their nationhood. 

Mr. OLSON. Yes, sir. It looks like I am out of time. I yield back 

the balance of my time. Thank you. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Pennsylvania, Mr. Doyle, for 5 minutes. 

Mr. DOYLE. Thank you, Mr. Chairman, and thank you to our witnesses today. 

This morning we are discussing a new landscape for North America’s energy resources and how we develop an effective energy policy in the absence of resource scarcity. In my home State of Pennsylvania, especially in western Pennsylvania where I represent, we 

are experiencing a surge in energy development that each of you 

have discussed in your testimony. In my neck of the woods, we 

have natural gas, coal, nuclear. We have got steelworkers making 

wind turbines. We have got universities producing energy startups 

that are harnessing renewables. Marcellus shale alone in my State 

has provided thousands of new jobs and we are burning a cleaner 

fuel for our transportation and electric industries. So it is important to me that policymakers fully understand energy reserves that 

we have and the best ways to develop them. But something that 

is equally important to me is how we manage the effects of carbon 

emissions that come from burning these resources. I have worked 

many years on this committee—this is my 13th year on the committee and the 19th year in Congress—to do this in a comprehensive way, and I think most of the members of this committee know 

that I want to get our fossil fuel resources out of the ground. I don’t 

think it has to be an either-or proposition. But what I am interested in is how we find that sweet spot where we can develop 

North American energy resources and effectively manage our carbon emissions simultaneously. 

So I have some questions about that, but before I ask those questions, I just want to provide some clarity to something that we 

heard at this hearing, and we hear a lot. My good friend, Mr. 

Scalise—and he is my good friend—had asked Ms. Hutzler why we 

166 

weren’t seeing more development on federal lands, and her reply 

was that the permitting process takes up to 300 days. I want to put 

a map up on the screen that I think we have that I think should 

provide a little bit of clarity. As you look at the United States, that 

dark area, the gray shaded area, that is the federal lands, and the 

light red, the pinkish area, is where our oil and gas shale plays 

are, and then the dark red that you see is where there is an overlap of federal lands and oil and gas shale plays, and Mr. Sieminski, 

I think back in August you testified to this committee that because 

basically the shale resource basins are largely outside of the federal 

lands, so too is the shale production, I think your quote was in this 

case the geology is working in favor of non-federal landowners. 

[The information follows:] 


79435.137

Lower 48 oil and gas shale plays and federal lands 

o U.S.Gas&OiIShalePlays o u.s. Federal Lands (excluding SIA) 

II Overlap area of U.S. Gas & OilShale Plays & 

U.S. Federal Lands (excluding SIA) 

Source: EIA 
168 

So we hear this a lot that there is all this development that could 

be taking place on federal lands but the permitting process is so 

bad, and I think the map pretty graphically illustrates that there 

is just not much federal lands where the oil and gas shale plays 

are in the United States. I just wanted to provide that for clarification. 

I want to ask Dr. Yergin and Ms. Hutzler too, you both briefly 

addressed climate change and greenhouse gases in your written 

testimonies, and I just wonder, as we start to reassess these vast 

new energy resources, and it is not that they are new, you know, 

technology has given us a way to make them economically feasible 

to go and recover them now, right? And everything we do is a technology question, whether it is how we dispose of nuclear waste, 

what do we do with carbon emissions, just all of this, the answer 

is in technologies, and we are discovering new ways to do things 

in a more environmentally sound way. We hear about new types 

of fracking fluids because there is this tremendous potential to get 

this out of the ground, and I guess my question is, I am interested 

to hear, do you believe that we should also factor in climate change 

in these environmental concerns? Because it seems to me that once 

industries, you know, have to address these carbon issues too, we 

are going to see technology innovations there also that are going 

to be very valuable to U.S. companies to help these economies like 

in China and India and others. They are not going to be the leaders 

in figuring out to deal with carbon emissions. That is going to 

hopefully come here and then we are going to sell that technology 

all over the world. So I guess what I want to ask you is, do you 

think we should factor this in as we are looking at a new energy 

policy and these new fuels, factoring in environmental concerns 

and climate change as we develop policy? 

Mr. YERGIN. I think we are certainly factoring them in. As I said, 

I had spent some time on that Secretary of Energy Advisory Board 

committee that I think provided a framework for looking at the environmental questions and saying how do you address them, and 

there is climate change but there is also the water questions, what 

do you do about wastewater, questions that you know very well 

from your district that need to be addressed. I think that as we 

have just discussed, understanding the methane emissions from 

natural gas drilling is a very important contribution to it. There 

are different views as to what the results will be. 

And I would say that the other thing is that you have to see this 

in an entirety. It is not that we are going to more oil because we 

are producing oil but it means our cars, as Adam says, are going 

to get a lot more efficient as we do it but the question is, is that 

oil going to be produced in the United States or are we going to 

import it. So we have to see it in the framework. 

Ms. HUTZLER. I want to address your map again, and maybe that 

is the case for the shale formations, but on the other hand, the federal government has a lot of non-shale-based areas that—— 

Mr. DOYLE. But all the growth is in the—I mean, the boom we 

are seeing right now is happening because we figured out how to 

get this oil and gas out of shale. 

Ms. HUTZLER. Well, let us take the offshore area in terms of oil 

drilling. We were drilling a lot, and as a matter of fact, the oil 

169 

numbers offshore in fiscal year 2010 were very high but then it 

dropped by 17 percent. So you can still get a lot of oil offshore if 

you allow the permitting to go on. 

Mr. DOYLE. The point is, we are seeing this huge boom in oil and 

gas shale and it basically exists on non-federal land, so I just think 

it is somewhat of a red herring. 

Mr. Chairman, I see my time is up. 

Mr. WHITFIELD. The gentleman’s time is expired. At this time I 

recognize the gentleman from Colorado, Mr. Gardner, for 5 minutes. 

Mr. GARDNER. Thank you, Mr. Chairman, and thank you to the 

witnesses today, and if I could have that last slide put up on the 

screen again, that would be fantastic. 

If you look at the State of Colorado as it appears on the map that 

is right there, you can see the state of Colorado. That red spot is 

in my district in northern Colorado. But there is tremendous opportunity for development in the gray spots, and a lot of that gray spot 

that you see in Colorado with the Rocky Mountain areas, it is BLM 

land, it is U.S. Forest Service land. They are unable to get permits 

through the BLM because of various bureaucracies. In fact, according to the Western Energy Alliance, over 100,000 jobs could be created in the western United States, primarily on those gray lands, 

if the permitting delays were simply lifted. Over 100,000 jobs could 

be created in the western United States. That is not because all the 

development is taking place in the red areas or the pink areas. 

That is because Bureau of Land Management and other agencies 

have been so slow in their permitting that we can’t get those permits through to create those kinds of jobs. So I think you would 

see a lot more red areas if we could actually get a government that 

was willing to allow us access to those resources in a responsible 

manner, and so I for one would like to see over 100,000 jobs being 

created in the western United States. 

But I would also like to ask a couple of other questions, pointing 

out that in that red area you see in northern Colorado right there, 

because that development is taking place in that play. There was 

an article in Greeley Tribune on January 17 that said—the Greeley 

Tribune is the newspaper in northern Colorado—that said Weld 

County rose 20 spots in a year to rank number 42 in the Nation 

in job and wage growth. There was an article in that same newspaper January 8, 2013, that said Weld County wage growth hits 

number five in the Nation because of in great party the energy development that is taking place in Colorado. So we can see the opportunities, and I believe it was Ms. Hutzler that talked about the 

amount of economic impact that we have seen. I think your statement—what was it again you said about the trillion dollars over 30 

years? What was the amount of money you said as a result of development? 

Ms. HUTZLER. If we opened up new areas onshore and offshore 

to development, that we would get over the next 37 years $14.4 

trillion to the economy. 

Mr. GARDNER. And I believe the President’s budget said that if 

we had—and I am going to get this number in the ballpark—if we 

had 1 percent GDP growth over the next 10 years, we would generate around $2 billion or so in new revenues for the federal govVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00175 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
170 

ernment, so you can see the kind of activity, the GDP growth we 

would see, the kind of GDP growth we would see as a result of energy development across the country. 

Ms. Hutzler, you mentioned the permitting delays on federal 

land. What do we need to do in order to alleviate those delays? 

Ms. HUTZLER. We need to make the process more streamlined. 

We need to get rid of all the red tape and the delays and look at 

the States to see how they are doing it to remove those delays or 

in fact allow the States to actually do the permitting because they 

certainly know the geologic areas and what is best for the State. 

Mr. GARDNER. Ms. Morgan, you had said something in your 

statement regarding 2050 carbon emissions. Is that reducing carbon emissions by 80 percent by 2050? Twenty percent of today’s 

carbon emissions would be, what, about a billion tons of CO2? Is 

that roughly what it would be? 

Ms. MORGAN. Roughly, yes. 

Mr. GARDNER. Can you give me an emissions inventory for 2050 

of specific sources that would add up to 1 billion tons in CO2? 

Ms. MORGAN. In 2050? 

Mr. GARDNER. Yes, a specific inventory of emissions. 

Ms. MORGAN. Well, I can certainly—I mean—— 

Mr. GARDNER. Does the technology exist today to do that? 

Ms. MORGAN. Yes, it does exist today. The National Renewable 

Energy Laboratory actually said you can get to the 80 percent renewables by 2050 with existing technologies. What the inventory 

would be then would be much less CO2. There would probably be 

a bit left over in some of the non-CO2 gases. But the point is that 

I think if we were to build out and put in place the policies, you 

can find that sweet spot of extracting or clean energy resources 

while also producing the gas in a more climate-friendly fashion. 

Mr. GARDNER. And I think that is something that I have long 

been supportive of is an effort to find a sweet spot when it comes 

to bulk renewable alternative energy sources as well as traditional 

energy sources, but unfortunately, what I see in Colorado and what 

I see out of this Administration are attempts to actually make it 

more difficult to develop that traditional resource. In fact, I was 

reading a letter from one of the EPA regions, I believe it was region 3 of the EPA, concerning an LNG export facility that they 

were asking how many new wells would have to be drilled across 

the country as a result of that one single LNG facility, and I think 

when we start asking those kinds of questions, what happens to 

this LNG to wells being drilled in Colorado, that seems to me to 

be a very adverse tone for energy production in this Nation. 

I see my time is expired and I will yield back. 

Mr. WHITFIELD. At this time I will recognize the gentleman from 

New York, Mr. Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair, and thank you to the witnesses for presenting at this hearing. 

There has been a lot of discussion about the oil and gas production and the estimates of oil and gas reserves. I believe there is 

most likely this gap between proven and technically recoverable reserves. To what degree, if any, have the environmental costs of exploiting oil and gas been considered in estimating the technically 

recoverable reserves? Anyone? 

171 

Mr. VIDAS. I can try to address that issue. In the work that we 

have done, we have defined technically recoverable to be based on 

current technology and current activity, so we apply a factor of so 

many bcf or so many barrels per well based on what is going on 

right now. So it does not take into account future changes to regulations that might change the cost. 

However, when we look at the economically recoverable resource 

base, which is a subset of the technically recoverable, we have to 

make certain assumptions about the costs. So depending on what 

kind of scenario we are looking at, we may use today’s costs, which 

are based on today’s environmental rules, or we may hypothesize 

new regulations that might be imposed in the future. And typically 

when we look at that, we would look at a series of different rules 

about water use, different types of materials that can be used and 

so on, and generally when we have looked at that, we would say 

that the future regulations might add something like 7 percent to 

the cost of a well, so that would produce then a resource cost that 

would be about 7 percent higher than today’s cost, but of course, 

that depends on what regulations are implemented in the future. 

Mr. TONKO. Anyone else? Many of you did not respond, so I am 

assuming there was no environment cost. Ms. Morgan? 

Ms. MORGAN. Yes, sir. I believe that environmental costs are actually not factored in, and we would be happy to provide data from 

a recent National Academy of Sciences report on the climate and 

non-climate impacts that has a United States focus. 

Mr. YERGIN. If the environmental costs, if you mean, for instance, regulations that require how you manage water, how you 

manage land, how you manage air quality, those are all environmental costs that are then internalized because they are part of the 

regulatory process. 

Mr. TONKO. Well, Dr. Yergin, you discussed the implications of 

the expansion in gas production for our domestic markets and for 

the global market. The demand in the United States has leveled 

out recently but global oil consumption continues to expand and 

fossil fuel use continues to expand. How do the rates of increase 

in our reserves compare to the rate of increase in oil and gas consumption globally? 

Mr. YERGIN. Globally, the world is now divided into two. There 

is the OECD, the United States, western Europe, Japan where we 

really started in about 2005, 2007 to have peak demand in terms 

of oil and our oil consumption is going to go down, not up, because 

of more efficient cars, because of demographic changes in our population, because people reach a limit to how many hours they want 

to spend sitting in a car, so I think that is happening, but the great 

boom is of course in the emerging markets and they roughly now 

consume about the same amount of oil as the advanced markets 

but that is where all the growth is going to be. China in 2000 sold 

2 million new cars, we sold 17 million new cars. By 2010, we were 

selling 12 new cars and they were selling 17 million. So that tells 

you where the growth is going to be. 

Mr. TONKO. And we are experiencing this period of relative abundance but we have been there before in our recent past history, so 

oil and gas markets are volatile and have led us to a false sense 

of energy security in the past. So how do we develop a national enVerDate Nov 24 2008 11:46 Mar 21, 2013 Jkt 037690 PO 00000 Frm 00177 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-1 CHRIS
172 

ergy policy that is less shortsighted and more strategic? Basically, 

how can we best use these reserves to maximize—— 

Mr. YERGIN. Well, what you said is quite right, that what we 

have seen overall, this is just development in the last 3 or 4 years 

and we are focusing this discussion and our resource base, but look 

at the Middle East. I mean, people used to talk about the arc of 

instability going from Syria to Iran. Now they talk about it going 

from the Sahel in Africa to central Asia. So you look at the map 

and there are many parts of the world which have abundant energy supplies, where there is a lot of very evident political risk, and 

I think your point that we shouldn’t—there is no reason here for 

complacency. 

Mr. TONKO. Ms. Morgan? 

Ms. MORGAN. I just wanted to say that I think that if you look 

at the—we really can pull out all of our resources, that we don’t 

need to be thinking of an either-or, and that renewable energy resources, energy efficiency and CCS are all part of that and you 

need to take that longer-term view or else we will be making shortsighted decisions and not building the CCS in now to our gas and 

oil decisions. 

Mr. TONKO. Thank you very much. With that, I yield back. 

Mr. WHITFIELD. Thank you very much. At this time I recognize 

the gentleman from Virginia, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. I have to say I think 

we have to use all of our energy resources to develop a plan long 

term. 

That being said, in regard to natural gas, Administrator 

Sieminski, you would expect at some point in the next few years 

for gas to return to $4? Is that correct? 

Mr. SIEMINSKI. We have natural gas prices getting back to $4 a 

million BTUs by the end of next year. 

Mr. GRIFFITH. OK. And in fact, they have been going up. They 

hit a low in April of $1.95 and in December they were $3.34. Is 

that correct? 

Mr. SIEMINSKI. I believe so, sir. 

Mr. GRIFFITH. And if I understood your testimony earlier, when it gets to $4, coal becomes very competitive again? 

Mr. SIEMINSKI. It is a sliding scale but as natural gas prices go 

higher, coal becomes more attractive. 

Mr. GRIFFITH. I appreciate that very much coming from a coal 

district, and I will turn to you, Ms. Hutzler. 

A lot of what we have been doing has been ignoring coal and its 

potential as a major resource in this country. It has always been 

that way. And I would point out that I think in your testimony you 

said that we relied on three major sources. Of course, we have got 

our renewables but our three major sources are nuclear, coal and 

natural gas. Is that correct? 

Ms. HUTZLER. Yes. 

Mr. GRIFFITH. And I think you also reported that just the mer- cury utility MACT rules would cost about $21 billion a year and 

183,000 jobs a year. Is that correct? 

Ms. HUTZLER. Yes. 

Mr. GRIFFITH. And that retirement of coal power plants by 2016, 

we are going to be retiring 27 gigawatts. Is that also accurate? 

173 

Ms. HUTZLER. I think that is through 2015 and that is an EIA 

number that has been reported to them by electric utility companies. 

Mr. GRIFFITH. All right. And that is much higher than the EPA’s 

estimates when they first came out with this new regulation. Isn’t 

that correct? 

Ms. HUTZLER. Yes. 

Mr. GRIFFITH. And in fact, not only is it going to affect jobs in 

the coal fields and at coal-fired power plants, but it also will cause 

our electric rates to go up by 10 to 20 percent in most of the country. Isn’t that correct? 

Ms. HUTZLER. Yes. 

Mr. GRIFFITH. And in fact, in some parts in the Midwest, I don’t 

represent them but in some parts it could be right up there at the 

20 percent. 

Ms. HUTZLER. Yes, in States that are highly dependent on coalfired generation. 

Mr. GRIFFITH. Now, you acknowledge in your written testimony 

that the EPA claims that they are not going to do this but you do 

raise some concern and worry that the EPA may decide that the 

modifications in regard to greenhouse gases could impact existing 

coal-fired power plants because that would force them to, if they interpreted that complying with Utility MACT created them into a 

new source that that would then put a tremendous amount of pressure on the existing coal-fired power plants and cause even more 

closures. Is that correct? 

Ms. HUTZLER. Yes, because under the Utility MACT rule, if there 

are substantial changes, they might be able to look at that particular unit as a new unit and therefore treat it as a new unit 

where they don’t want the amount of greenhouse gas emissions to 

be any more than from a natural gas plant essentially. 

Mr. GRIFFITH. And you cited a report from the United Mine 

Workers of America that would indicate that if that were to happen, that job losses could amount to more than 50,000 direct jobs 

if you could coal, utilities and the railroad industry, and as much 

as 250,000 jobs indirect. Is that a correct assessment of what the 

UMWA said? 

Ms. HUTZLER. Yes. 

Mr. GRIFFITH. So this is of great concern in my area because we 

have railroads, coal and utility companies. 

I would point out also that it is kind of interested that your written testimony indicates that the Chinese are using about four 

times as much coal as we are and that while they are building 

cleaner plants, they are not putting their older, less clean plants 

out of existence in the meantime, are they? 

Ms. HUTZLER. No, they are not. With their GDP growth, they 

need all the power they can get, and in fact, according to the National Energy Technology Laboratory, they are building 60 to 80 

gigawatts of coal-fired plants a year, and they think that will happen easily through 2016 and maybe further. 

Mr. GRIFFITH. And so they are relying on coal including maybe 

some of our coal to generate their energy and the growth in their 

economy. Isn’t that true? 

174 

Ms. HUTZLER. Yes. They have to import coal now. They can’t 

produce enough themselves to satisfy their demand and we are exporting coal to them. 

Mr. GRIFFITH. And so when I tell my constituents that not only 

are we damaging coal but we are also damaging jobs in the United 

States, we are allowing the Chinese to grow their economy while 

retarding our economy by not using our clean coal technology. Isn’t 

that correct? 

Ms. HUTZLER. Yes. 

Mr. GRIFFITH. And in fact, in my district there is a plant that 

just opened this year that is extremely clean, and because of the 

carbon rules, the greenhouse gas rules, it wouldn’t be allowed to be 

built if it hadn’t already been in construction and opened this year. 

Isn’t that correct? 

Ms. HUTZLER. Yes. 

Mr. GRIFFITH. And so for all intents and purposes, at least at 

this point in history, there is not the technology available for the 

United States to build any more clean coal plants, coal-fired electric generation plants, and we are really handicapping ourselves in 

relationship to our competitiveness with the Chinese. Isn’t that 

also true? 

Ms. HUTZLER. Yes. We don’t—currently, CCS technology is not 

available, commercially available for these plants. 

Mr. GRIFFITH. I thank you, and I yield back, Mr. Chairman. 

Mr. WHITFIELD. At this time I recognize the honorable gentleman 

from Massachusetts, Mr. Markey, for 5 minutes. 

Mr. MARKEY. I thank the gentleman very much. 

Just a point. In 2009 in this committee and on the House Floor, 

Mr. Waxman and I built in $60 billion for clean coal technology, 

carbon capture and sequestration. We voted it out of this committee with no Republican support. Over the last 5 years, unfortunately, coal has dropped from 51 percent down to 35 percent of all 

electrical generation in the country, and what has gone up? Natural gas. It is less expensive and it is cleaner. So coal is being attacked but it is by the natural gas industry, so let us just get that 

clear, and we put the $60 billion in and the coal industry opposed 

the Waxman-Markey bill. They opposed now, and now they suffer 

from not having the investment in technology to make it cleaner. 

So don’t blame us, blame the coal industry for not wanting the 

funding and blame the natural gas industry for their technological 

breakthroughs that have allowed for the production of more and 

cheaper and cleaner sources of energy. 

Mr. Sieminski, recently the Department of Energy released a 

study of the economic impacts associated with exporting large 

quantities of natural gas that was performed by NERA Consulting. 

The study used outdated 2010 EIA projection data and concluded 

that while exports would lead to higher domestic energy prices and 

adverse impacts to American manufacturing, the overall economic 

impact would be positive. Mr. Sieminski, isn’t it true that EIA’s 

2010 data predicted that domestic natural gas use in the power 

sector would decline between 2010 and 2020, though its use in the 

power sector has actually ended up growing by 27 percent just 

since 2010? 

175 

Mr. SIEMINSKI. I have been in the forecasting business a long 

time—— 

Mr. MARKEY. No, I am just asking, is that true or not? I am not 

asking for your personal history. 

Mr. SIEMINSKI. Yes. 

Mr. MARKEY. OK. That is all I needed to know. So way off. EIA 

was way off. Natural gas and the utility sectors not only did not 

go down, it has now gone up 27 percent since that report. Isn’t it 

true that EIA’s current projections of natural gas use in the transportation sector are seven times as high as the 2010 data used in 

the NERA study? 

Mr. SIEMINSKI. And our supply estimates are also higher. 

Mr. MARKEY. I am only—I am not asking you—I am asking you 

to just go back to this study that is being relied upon. Is it not 

seven times higher in the transportation sector than NERA projected in just 2010? 

Mr. SIEMINSKI. Yes, sir. 

Mr. MARKEY. OK. Thank you. So this data was released in 2010, 

and since then 100 major manufacturing projects totaling $95 billion in investment have been announced. These are manufacturing 

facilities that would produce chemicals, fertilizer, steel, aluminum, 

gas, tires, plastics and other goods, all of which rely on cheap natural gas. That is what is driving this manufacturing. These announced projects alone would push U.S. industrial demand for natural gas 30 percent beyond the estimates used in the NERA study. 

Just yesterday, the Wall Street Journal described decisions made 

by German and Canadian companies to locate new facilities in the 

United States because of low natural gas prices. The Germans, the 

Canadians are coming to the United States with their manufacturing facilities. 

Do you believe that we should be making decisions about what 

to do with domestic natural gas in 2013 and beyond using data 

that reflected what was going on in that sector 3 years ago that 

vastly underestimated what is happening today? 

Mr. SIEMINSKI. I think it is always better to have recent and accurate date in making forecasts but—— 

Mr. MARKEY. Especially since the data we are talking about is 

like a Frankie Avalon record except it only took 3 years to turn it 

into completely outdated information that was totally wrong about 

where we would be 3 years later—— 

Mr. SIEMINSKI. Congressman Markey, as I was trying to say earlier—— 

Mr. MARKEY. Let me just continue. Last year your agency found 

that exporting 12 billion cubic feet per day of natural gas could 

lead to a 54 percent increase in domestic prices but today companies are applying to export nearly three times that amount. It 

seems to me that before we permit more natural gas exports to 

occur, we should have an understanding of the potential economic 

impacts on consumers, on the manufacturing sector and on the 

transportation sector in the United States in terms of our own internal domestic growth in those sectors of our economy and have 

it based upon real data, not old data that bears no resemblance to 

what is happening in the natural gas sector today. 

176 

Now, let me just ask this question. This panel led by the Republicans voted in 2012 to repeal the ability of EPA to increase fuel 

economy standards for the vehicles which we drive. Let me just go 

down the line here and just ask each of you, do you support the 

repeal of the ability of the EPA to increase fuel economy standards 

or do you oppose repealing the authority? Can we just go down and 

we will just get your views on that way in which we deal with oil 

consumption in the United States? Mr. Sieminski? 

Mr. SIEMINSKI. It is not a question for me, Congressman. 

Mr. MARKEY. It is not? 

Mr. SIEMINSKI. No, it is not. It is a policy issue. 

Mr. MARKEY. OK. Good. 

Mr. Yergin? 

Mr. YERGIN. I think fuel efficiency standards are an important 

contribution to energy efficiency and our overall energy mix. 

Mr. MARKEY. Thank you. 

Ms. MORGAN. I agree, it is a great example of how you can meet 

energy and climate security goals at the same time. 

Mr. MARKEY. Thank you. 

Ms. HUTZLER. Well, they are important and certainly make a difference. You have to take a look at—— 

Mr. MARKEY. No, just that one issue. One issue, please. 

Ms. HUTZLER. Well, there are safety issues with vehicles and 

other issues that have to be taken into account. 

Mr. MARKEY. So you would consider repealing EPA authority? 

Ms. HUTZLER. I would think that it needs to be studied and you 

have to look at the entire situation. 

Mr. MARKEY. Yes, sir? 

Mr. VIDAS. I don’t want to state any policy opinions like that, but 

as a personal consumer of cars, I certainly like to have more efficient cars. 

Mr. WHITFIELD. The gentleman’s time is expired. 

Mr. MARKEY. Thank you. 

Mr. WHITFIELD. At this time I recognize the gentleman from Illinois, Mr. Kinzinger. 

Mr. KINZINGER. Thank you, Mr. Chairman, and thank you all for 

coming in. Just a couple of questions, and this may not take all my 

5 minutes. 

Mr. Yergin, last week’s Wall Street Journal, there was an article 

titled ‘‘Can Gas Undo Nuclear Power?’’ which discusses how low 

natural gas prices are problematic for our baseload energy production, and I would like to know your thoughts on low gas prices as 

it impacts fuel diversity into the future and existing domestic resources like nuclear. 

Mr. YERGIN. I think what has happened with natural gas prices, 

remember, when people went out to start developing shale gas, it 

was—the incentive was very great for these independents. It was 

like $12 and now we know we are talking around $3, and that is 

really changing the marketplace, the electric power marketplace for 

everything, certainly including nuclear. 

Mr. KINZINGER. So does that give you concerns for maybe the viability of nuclear in the future if this continues? And also, what do 

you think is going to happen? Do you think in 10 years if you can 

177 

magically look forward that we will have a diverse energy supply 

or do you think we will have too many eggs in one basket? 

Mr. YERGIN. Well, I think it is the—we have four reactors that 

are under construction, two projects now. I think that in this cost 

environment it is very hard to see anybody committing to a current 

generation of new power plants. The Secretary of Energy Advisory 

Board, the last session was partly devoted to small modular nuclear reactors, in other words, where there is technological innovation. And I think the other question about our nuclear fleet is, it 

is about 20 percent of our electricity. Lives have been extended. 

What happens after another 20 year and does that shrink away 

then. 

Mr. KINZINGER. And then another question. You mentioned my 

home State of Illinois as a State that already employs 39,000 people in oil and gas. 

Mr. YERGIN. Well, who are benefiting from the unconventional oil 

and gas revolution. 

Mr. KINZINGER. Right. 

Mr. YERGIN. Although Illinois hasn’t yet passed the regulations. 

Mr. KINZINGER. No, it is about time we get there. 

What would the economic impact be on Illinois if they allowed oil 

and gas production, in your mind, as far as new—— 

Mr. YERGIN. It would be—it would lead to considerable generation of income in the State, as we have seen in other States. Mr. 

Doyle mentioned it in his State. And when I was out in Illinois, 

that day the front page of USA Today was about how income is 

shifting, new income is being created in areas, rural areas, areas 

that had been depopulated and so forth because of this activity and 

kind of in the center of the State, and the—— 

Mr. KINZINGER. They are the areas that are frankly suffering 

sometimes the hardest under this recession, or this economic difficulty, we will call it, to avoid argument on it. 

Mr. YERGIN. The new Albany shale could be very important for 

the economy of your State. 

Mr. KINZINGER. And what price do you think natural gas would 

need to be in order for production to occur in Illinois? 

Mr. YERGIN. Well, I think it is really—I mean, I think people are 

ready to go ahead. It depends on happens in Springfield, I think, 

as to whether it goes ahead or not and at what—— 

Mr. KINZINGER. I will say Springfield makes Washington, D.C., 

look highly functional. 

Well, thank you, and I appreciate everybody’s testimony. I appreciate your answering my questions. The big concern here into the 

future is, I have always been a believer in saying you can’t have 

too few energy supplies, and when it comes specifically to nuclear, 

I think it is important we ensure nuclear maintains a major part 

of our energy portfolio because in the future you never know how 

things change. 

With that, I want to say thank you. Thank you, Mr. Chairman. 

I yield back. 

Mr. WHITFIELD. At this time I recognize Mr. Pompeo from Kansas for 5 minutes. 

178 

Mr. POMPEO. Thank you, Mr. Chairman, and I thank the witnesses. It has been a long morning. I think I am hitting cleanup 

today. 

A couple thoughts. It has been great to listen to. I have heard 

words like renaissance and revolution thrown around and all the 

good things that are happening. I think it is worth noting for everyone here, almost all of that happened with almost zero role of 

the federal government. Most of the things that the federal government’s resources have gone to in this intervening period between 

the hearing in 2008 and the one in 2013 continue to provide a very, 

very negligible set of outputs important to the American economy. 

So I think that suggests the direction of travel for us as well as 

we think about new policies. 

Mr. Yergin, I have got a question for you about pipelines. Mr. 

Shimkus talked about it a little bit. You know, there is an article 

in Energy Daily talking about how long it is taking for permitting. 

I would like to introduce that article into the record if I might, Mr. 

Chairman. 

Mr. WHITFIELD. Without objection. 

[The information appears at the conclusion of the hearing.] 

Mr. POMPEO. The study found that nearly 20 percent of natural 

gas pipelines have delays of over 6 months or more, enormous capital at risk when you think about building a new pipeline, and it 

is important not only for existing fields to get those pipelines—the 

Mississippi shale in my district is a good example. We have got 

production but relatively little demand in towns like Anthony and 

Coldwater, Kansas. We have got to this product to the right places. 

I think there is also a circular effect, that is, if you know that 

you can efficiently build a pipeline, folks will go look for in other 

places as well. Can you talk about the interplay between challenges 

in building pipelines and people’s willingness to take risks in finding these fields in North America? 

Mr. YERGIN. Well, Ms. Hutzler spoke about that before too. I 

think that getting—the word she used, streamlining permitting for 

pipelines. I mean, pipelines are literally a pretty straightforward 

thing and that we ought to—that you need them to keep up with 

where we are and otherwise you either are using flaring for gas or 

you are shipping oil by truck and so forth and that is not a very 

efficient way to do it. 

Mr. POMPEO. I appreciate that. I am actually—I am working on 

some legislation to give FERC a little more authority in trying to 

streamline this process. I think it will be bipartisan. I think we can 

do this in a way that provides all the protection for the environment, all the things we need to do, but getting us to a finish line 

where we actually make decisions about these. Whether the pipeline is a go or a no go, we do it in a much more timely and reliable 

fashion. 

We talked about energy exports. I was surprised Mr. Griffith 

didn’t talk about coal exports. We have been talking about LNG 

mostly but it is a broad set of energies that we ought to be exporting from America. Today with respect to LNG exports, we have a 

delineation about DOE’s authority, whether we are going to transport this to a free trade agreement country or a non-free trade 

179 

agreement country. I guess this is for anyone on the panel. Is there 

any reason for that demarcation to continue to exist? 

Mr. YERGIN. I think it is an artifact. 

Mr. POMPEO. Yes, that is my sense as well. 

Mr. YERGIN. I mean, Japan, the example I gave, is not a free 

trade country and yet it is an incredibly important country to us. 

Mr. POMPEO. It seems to me too that there is a history. I read 

a little history of how it came to be and it seems something that 

we as a policy matter could get rid of. We could direct those two 

places for shipment to be treated identically. I have a few of what 

DOE’s authority ought to be. I don’t think the—I think the national 

interest finding is by definition free trade, it creates wealth in 

America. I think it is by definition but I am sure others would have 

a slightly different view on that but at least we could get rid of 

that demarcation. 

Ms. Hutzler, I was reading an article about renewable energy, 

and in Eastern Europe they subsidized it even longer than we have 

and even more than we have, and they have had some power blackouts. There is an article in Bloomberg on October 25 that I would 

also like to submit for the record that talks about these energy 

blackouts. 

Mr. WHITFIELD. Without objection. 

[The information appears at the conclusion of the hearing.] 

Mr. POMPEO. You know, our grid could suffer the same kinds of 

things, in my view, if we have non-storable, non-reliable energy 

source. Do you have a view of the risk of us subsidizing this at 

such a rate that we get to a place where we have got less reliable 

electricity in America? 

Ms. HUTZLER. Yes. Germany is a good example because they are 

phasing out their nuclear units and turning to renewable energy in 

its place, but obviously it has to be backed up, and it has caused 

instability to their grid. Neighboring countries are not allowing 

them to export their renewable energy, their wind energy, to them 

such as Poland, and in fact, industrial users are seeing some disruptions in their service that is causing them hundreds of thousands of dollars in equipment and they have already told the German government that either you fix this problem or we are going 

to leave. 

Mr. POMPEO. I have got just 20 seconds. Mr. Sieminski, you 

talked about renewables growing at a huge rate. It is easy to grow 

at a huge rate off a small base. I remember, I ran a small company 

at one point too. It is still not a hugely important part of our energy resource base. When you made these assumptions about its 

economic growth, what did you assume for federal policy? Did you 

believe that we would continue our current—somebody on the other 

side of the aisle called it creative financing. I will call it getting in 

the pockets of taxpayers. But what assumptions did you make 

about state RPSs and these kinds of non-economic policies remaining in effect supporting—— 

Mr. SIEMINSKI. EIA’s forecasts always use existing law and regulation. We don’t try to forecast regulation or law. We do have the 

California renewable and other laws built into our forecasts. Renewables go from about 13 percent over the last few years to 16 

180 

percent of total electricity generation, so there is a lot of growth 

but it is still a small portion. 

Mr. POMPEO. Great. Thank you. Thank you, panelists, all for 

being here today. 

Mr. SIEMINSKI. Congressman, I just want to add one other quick 

thing if I might, Mr. Chairman. 

Mr. POMPEO. It is OK with me. My time is up. 

Mr. SIEMINSKI. Your background in the oil service industry, a 

number of questions have come up here this morning about the impact of hydraulic fracturing and need for water. In Pennsylvania, 

I know that most of the flow-back water is now being recycled and 

used again, and changes in technology like the multistage fracturing could lead to much less water use simply because the identification of where to frack along a horizontal well could cut the 

number of feet that you have to frack in half, and all these things, 

these changes in technology are taking place at such a rapid pace. 

It is one of the reasons why EIA’s forecasts have fallen short, as 

Mr. Markey suggested. 

Mr. POMPEO. Great. Thank you. 

Mr. WHITFIELD. OK. All time is expired, and I want to thank the 

panel of witnesses. So thank you all very much. We will keep the 

record open for 10 days, and I am asking unanimous consent to 

submit into the record a copy of a statement from National Petroleum Council and also the executive summary of the IER study on 

opening federal lands to oil and gas leasing. 

[The information appears at the conclusion of the hearing.] 

Mr. WHITFIELD. So with that, we will conclude today’s hearing, 

and once again, I appreciate the participation of everyone. 

[Whereupon, at 1:05 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

PREPARED STATEMENT OF HON. ELIOT L. ENGEL

Thank you Mr. Chairman. 

As we start a new legislative year, I am pleased to see a strong focus on North 

American energy resources. I have been a strong proponent of doing everything we 

can to make the United States energy independent. One of the reasons I formed the 

Energy and National Security Caucus was to draw attention to the fact that our 

dependence on imported oil affects our national security. 

I believe in an ‘‘all of the above approach’’ to energy independence, but we must 

include renewable energy as part of the mix, even as we tap new fossil fuels. Our 

country, the climate, and the world cannot afford for us to rest on our laurels. Climate change is a serious threat to our country and to the entire planet. We must 

tackle this threat by seriously by focusing on renewable energy resources which do 

not contribute to global climate change. 

New York, New Jersey and Connecticut were recently devastated by Superstorm 

Sandy; western states are still suffering through record droughts, and many areas 

were devastated by wild fires. Climate change is contributing to these weather patterns. We can no longer afford to ignore climate change and I am hopeful that this 

Committee will seriously deal with the issue. 

One method for helping to grow renewable energy resources is make sure it is on 

an even playing field with fossil fuels. I will soon be reintroducing my ‘‘Open Fuel 

Standard Act’’, that would require 95% of new vehicles to be able to operate on another fuel in addition to or instead of gasoline. 

181 


79435.121

INGAA report 

seeks Hill 

action on gas 

pipe delays 

Mississippi Power reaches 

deal with regulators on 

clean coal plant costs 

BY CHAD WOODWORTH 

While Congress acted in the Energy Policy 

Act Of200S to speed federal permitting of 

new interstate natural gas pipelines, an 

increasing number of those projects have 

seen approval delays since the law was 

passed, according to a new industry study 

that calls for legislation to help the Federal Energy Regulatory Commi::.'Sion enforce deadlines for completion of reviews 

by other federal agencies.. 

The study, issued I anuary I 6 by the research 

arm of the Interstate Natural Gas Association 

of America (INGAA), also says that despite the 

growing permitting problems, pipeline de\<eJopen haw rarely exercised provisions of the 

click here 

CHRIS HOLLY 

In an unusual deal aimed at ending protracted litigation over cost recovery for a 

SZ.76 billion gasified coal plant, Mississippi Power CO. Thursday inked a settlement 

agreement with ~ .. tate regulators that 

would give the utility a new opportunity 

to reCOVer millions of dollars in project 

constmction financing costs while mitigating high costs for Mississippi Power 

ratepayers, including giving them a slice 

of the revenues earned from liceruing 

the plant's proprietary gasification and 

carbon-capture technology. 

The settlemcnt wonJd givc Mississippi 

Maine PUC okays pricey terms 

for 8tatoil floating wind pilot BY ERiC llNDEMAN Paul1.0Pnge (R) that the costs of the project 

to ratepayers ·would outweigh any economic 

Reflecting deep divisions over the proj- or job benefits to tht' state. 

ect among re.~dents and politicians in However, Hywind Maine has the support 

the green-leaning state, the Maine Public of Sen. Angus King (I)~the srate's former 

utilities Commission voted 2-1 Thursday governor and newly elected U.S. senatorto allow Statoil North America to move Demonats in the Maine legiSlature and reforward with an innovative floating wind 

fann pilot project off the state's coast by 

approving the terms of a pricey power 

purchase agreement that Statoil will seek 

to secure with one or more of the state's 

regulated utilities. 

The commission backed the Hywind Maine 

initiative despite concerns expressed by one 

Maine debated the projC(T 

since Statoil North i\merka, a unit of Noror Maine's biggest utilities and Maine Gov. C'Ornpany to respDnd. 

costs it expects to incur through 2013 while 

building its 542 mega\vatt integrated gasification combined cycle (IGCC) coal plant in 

K<'mper County, Miss., which is a lead facility 

nationally for demonstrating advancE'd clean 

coal technology. 

The agreement also calls for the Mississippi Pnblic Servin.' Commission and the utility to ask the "tate Supreme Court to dismiss 

a challenge the utility fIled in July asking the 

high court to stlike down a June commission 

order barring recovery of $55 million in Kemper construction-fl"lated financing costs Mississippi POWC'f had incurred. 

In dr:>Dying the cost-recovery request, the 

commission cited separate ongoing litigation 

b~'f()re the high court in which the Mississippi 

chapter of the Sierra club is challenging an 

Statoil submitted a lease application that 

OctobN to the Interior Department's Bureau 

of Ocean Energy Manageme-ut to imtall four 

moored, floating turbines in a 2Z square-mile 

area abont 12 nautical miles offshore Boothbay. It envisions the 12 megawatt Hywind as 

a pilot projec-t for more expansive off.<;hore. 

wind energy development. 

The vote by the Maine PUC approved Stainvestor-owoed utilities··· Bangor Hydro, 

C('n1Tal Maine POWN (CMP) or Maine Public 

Service Co. 

Although PUC Chairman 

Thomas Welch had said publidy in Octoher that he would 

vote against the project unless 

Statoil revised its term sheet to 

(C) 2013 JHS • red!''''ll copyngl-]! law prohb'ts u'13l1thonzed rBproduclion 1Jj' any means anrllinpose" ;l'"1eS of L:p to 8150.000 for v'OIJtlor:s 
182 


79435.122

2· Friday, 25 January 2013 IHS THE ENERGY DAILY 

USEe sells spent fuel storage 

unit to Japanese company 

NAG expects to deliver more than 100 dry 

storage systems in 20I3, and that the accident at Japan's Fukushima Daiichi plant 

also offered major new apportunitiC's far 

NAG given Hitachi Zosen's strong position 

in serving cleanup operations at the stricken 

nuclear plant. 

USEe Inc., moving to shore up its finances and raise cash for its new uranium 

enrichment plant project, announced 

Thursday it would sell its NAC International Inc. unit to Hitz Holdings U.S.A. 

Inc., a subsidiary ofHitacbi Zosen Corp., 

for S45 mUlion in cash. 

Maryland-based USEe said the sale of 

NAC, a leading supplier of spent fuel storage 

and transport equipment and services to the 

nuclear industry, is part or its effort to focus 

resources on deployment of its advanced 

American Centrifuge enrichment technology at a plant that USEe is building in Ohio. 

Financially ailing USEe has been struggling to pay for the S38 billion American 

Centrifuge plant, and has leaned heavily on 

federal assistance to keep the project moving forward. 

USEC said the sale would also bolster its 

balance sheet and represented a hefty profit on its 2004 acquisition of NAC, which it 

bought for $10 million to diversify its business line. 

NAC has thriwd in recent years as the 

lack of disposal options for spent reactor 

fuel forced many utilities to increase their 

dependence on dry storage casks. USEe said 

Japan-based Hitachi Zosen has a longstanding husiness relationShip with NAC as 

a fabricator of NAC's dry cask storage and 

transportation systems and is <l leading supplier of such systems in Japan. 

Among other regulatory reviews, the sale 

of NAC will have to be cleared by the Com~ 

mittee on Foreign Investments in the United 

States, a federal panel that examines sale of 

U.S. businesse,~ to foreign companies to assure 

they do not compromise national security. 

Maine PUC okays pricey terms for Statoi! floating wind pi/at,. abate concerns about high generation costs 

and projected long-term economic benefits 

to the state, he ended up casting the vote that 

approved moving ahead with a PPA for the 

project. 

After Welch tabled action of the application in October, Statoil did amend its term 

sheet in Januar), to reduce the original price 

for Hywind generation from 29 cent pC'r kilowatt-hour to 27 cents. 

However, that price is still significantly 

higher than the initial 18.7 cents that National 

Grid \v:ill pay for power from the long-delayed 

Cape Wind omhore wind ptoject off the coast 

Massachusetts near Cape Cod. 

eMP submitted comments to the PUC 

earlier this week stressing that even with its 

downward price revision, StatoH is proposing 

a Hywind electricity price that is 4.5 times 

higher than current market prices. 

'·That translates to a $190 million ratepayer subsidy to Statoil," wrote CMP Senior 

Counsel Richard Hevey. 

Bangor Hydro and Maine Public Service de· 

c1ined comment on the term sheet revisions, 

saying they believed they would not have to 

buy from Hywind because they already had 

signed long-term PPA~ to buy expensive power from an ocean energy project in the state. 

The two utilities told the PUC that in December 3I contracts they accepted thp entireobligation [or Ocean Rene-wable Power CO.'s 

(ORPC) tidal pOW'Cf project in Washington 

C01111tY-···20-year PPAs for an initial 4 MW 

increasing up to 50 M\v-with "an understanding th<lt lthey] would not be responsible for any obligation under the Statoi! 

contract." 

The term sheet for the Portland, Mainebased ORPC project sets rates at 21.5 cents per 

kilowatt· hour. 

StatoH also sought to make its ptojectmofe 

politically palatable by revising its term sheet 

to promise "commerrially reasonable efforts" 

to give 40 percent or more of the work associated with Hywind to Maine companies; employ at least ISO residents during construction; and locate the proj(;'ct's operations and 

control centt'r in Maine. 

In addition, Statoi! offered a "good faith" 

commitment to use Maine contractors in any 

coTIlTIlC'rcial offshore facilities the company 

may develop along the Eastern Seaboard from 

Mail1{~ to Maryland before 2025. 

But Patrick Woodcock, director of the gOV" 

<'fnar's energy ornee, urgC'd the commission 

Wednesday to reject Statoil's revisions as not 

ensuring that the H)"'lind project would benefit Maine's economy or protect the interests 

of the state's ratepayers. 

In written comments to the PUC, he said: 

"While the supplier ~ertainly indicates the intention of supporting Maine jobs, this office 

does not believe the supplier has demonstrated clear invC'stments in the state of Maine." 

He added that the WIO Ocean Energy Act 

calls for a "demonstrated" (ommitrnent to investment in Maine manufacturing. 

Also in written comments, the Industrial 

Energy Consumer Group, which represents 

businesses that use large amounts of electricity, said the high costs ofHywind generation 

"clearly outweigh the speculative benefits 

that it may ofter, and therefore violates the 

requirements of the Ocean Enetgy Act." 

But Welch said that while voting for the 

project's PPA V'ias "a difficult decision," be 

was ultimately persuaded by Statoil's "pricr 

reductions and indications of future activities in Maine, recognizing that those are 

speCUlative," 

King was sanguine about the financial and 

dean ~'nergy benefits of Statoil's projE."ct and 

its prospects for expansion~and he warned 

that Maine would regret losing Hy" ... ind to a 

more hospitable host country or statc. 

"I haven't the slightest doubt that if we re~ 

ject this proposal, Statail and their competitors \\'iU simply go elsewhere," he said in his 

comments to the PUC, "and we will read with 

regret of great projects, thousands ofjobs and 

renewed coastal economies in Scotland, Por~ 

tugal or (worse yet!) Massachusetts," 

UndetTk'ln, (703) 236·2473; Reporters: 

Vice President IH$: Michael 

'O.9)'"",,",,do.,00m. For group dlScDunts and Site 

sabrina,ousmaa!@ihs,com; 

www.theenergydaily.com 

?) 7013 !HS • rchloral copynght law on:)hlbits unauthOI\Z80 reproduction tw any j'1ea'1.'; .'ll\d imposes tliles of up to $1~(),()[)U lor \'lolatlQ.'1S 
183 


79435.123

IHS THE ENERGY DAILY Friday, 25 January 2013.3 

Texas regulator to be NARUC gas chair ~~:~'t;:~~T) from 

Texas Railroad Commission Chairman 

Barry srnitherrnanhas been appointed 

chainnan of the National Association 

of Regulatory Utility comrnission~ 

erst natural gas committee. replacing 

outgoing chairman Timothy simon of 

california. 

Smitherman, appointed to the Texas oil 

and gas regulatory body in lOIt, previously 

chaired the Public Utility Commission of 

Among other key goals, the NARUC gas 

commiltC'e is leading effoTts by the state 

regulator group to increase coordination 

between electricity and gas sectors in light 

of growing gas use by power generators. 

Mississippi Power reaches deal with regulators on costS ... April commission order granting a certificate 

of convenience and public necessity for the 

project. 

The adverse cost recovery order issued by 

the commission in June shocked Mississippi 

Power, and led Fitch Ratings in July to downgrade the credit outlook for the Southern Co. 

subsidiary from "stable" to "negative," saying 

the uncertainty posed by the order "has already caused significant stress on Mississippi 

Power's credit metrics." 

The state high court has scheduled oral 

argument on the Mississippi Power appeal of 

the commission's June order for Monday. The 

utility and the commission late Thursday filed 

a petition asking the court to dismiss the case 

in light of the sertlement agreement. 

Sierra Club offkials said the settlement 

agreement emerged in part because the high 

court has allowed an intervener in the case to 

argue Monday that a state statute authorizing 

the recovery of construction-related financing cosls-a lawspedftC:1Uyenacted to enable 

the Kemper plant -" .. violates the Mississippi 

Constitution. 

The deal establishes a schedule under which 

Mississippi Power will file a new request for 

construction work in progress (GWIP) costs 

within three months and the commission 

must respond with an order approving or denying the request within three months after 

it receives the Mississippi Power Oling. That 

would mean a final commission order on the 

eWIP rate request no later than late June. 

The deal also responds to commission concerns about the subsrantialr3te increases-" 

estimated at 30 percent or more-n·that the 

Kemper project will impose on Mississippi 

Power's residential customers. 

In a novel wlinkle clearly designed to make 

the deal more attractive for ratepayers, Mississippi Power agrees to provide for 30 years 

a credit to its customers of IO percent of any 

royalty revenues that it or affiliate Southern 

Holdings LLG receIves from the sale ofproptietary gasification and carbon capture technologybeing demonstrated at the Kemper plant. 

The Transport Integrated GasifKation 

(TRIG) technology was developed jointly by 

Southern Co. and Houston-based engineering 

firm KBR LLC with support from the Energy 

Departm~'nt. TRJG is uesigned to allow the 

combustion of synthesis gas from low-rank 

coals with exceedingly low pollution levels, 

while cutting emission of carbon dioxide by 

roughly 50 percent. 

In a deal announced in October, Southern, 

through its subsidiary Southern Generation 

Technologies LtC! and KBR will marketlRIG 

to power companies worldwide. Southern 

Generation Technologies was formed in lOIO 

to license advanced power generation technology developed and ov,med by Southern and 

itssubsidialies. 

In another apparent move to shield ratepayers from huge Tate impacts, the settlement agreement obligates MiSSissippi Power 

to work with commission staff to propose 

within three montlL., a Tate plan to govern 

cost recovery for the Kemper project during 

its first seven years ofopemtion. According to 

(·he agreement, this plan "should be designed 

to mitigate and stabilize the up~front rate impacts to customers during the ramp"up period 

for the Kemper plant by locking in a series 

of annual revenue requirements for the first 

seven years of operation." 

ThE' plan would incorporate a $2,4 billion 

cost cap for the base rate portion of the proj· 

ect, but allows the e-ommission to exclude 

other costs from the cap. It also allows Mississippi Power to pursue alt.ernate financing for 

costs it ine-tlrs that are not otherwise recovered in any subsequent raTe procf>eding. 

The design of the Tate plan appears to reflee-t "ae-knowledgments" by the commission 

and the utility that "certain regulatory and 

accounting options" exist that wCluld provide benefits to customers by requiring that 

a portion of rates collected before the plant 

hegins operating and during the pendency 

of the Sierra Club Challenge before the state 

Supreme Court be "be recorded in accounts 

for the beneflt of lMississippi Power'sl custamers to mitigate future rate impacts, while 

mitigating the risk posed to customers should 

the Kemper Project's certifICate ultimately be 

determined by the courts to be invalid." 

The deal calls for the commission to act 

on this seven-year rate proposal within four 

mnntlls of receiving it. However, the agreement appears to suggf>st that the commission cUlTently lacks the authority to approve 

such a rate plan, A section nfthe agreement 

that enumerates a series of conditions under 

which Mississippi Power may opt out of the 

deal states that the utility can withdraw upon 

the "failure of rhe proposed legislation authorizing the seven-year rate plan dcsrnbed 

herein to become law." 

This provision is puzzling because the optout provisions are the only place in the sixpage agreement in which the word "legislation" appears. Mississippi Power and the commission did not respond to repeated requests 

for clarification on this provision. However, 

an environmentalist said Thursd:JY that legislation appearing to give the commission 

authority to approve the seven-year rate plan 

waS recently introduced in the state Senate. 

The Kemper project has been buffeted by 

intense opposition from local environmentalists, who charge it is far too expensive for Mississippl Power's customers. 

Sierra Club officials panned the settlement 

deal as a "SI72. minion flip~llop by the commission," noting onJy months ago the panel 

had refused to approve C\\''1P recovery while 

the environmentalists challenge remained 

before the state high court. 

"The Mississippi Public Service Conunission has flip-flopped again, a.nd it will cost 

hard-working families millions," Louie Miller, 

director of the Sierra Club's Mississippi chapter, said Thursday. "Today's reckless actions 

by the commission have opened the door for 

Mississippi Power to charge their customer 

base [or the boondoggle Kempel' County coal 

plant while it's under construction with no 

guarantee that the plant will ever produce a 

single megawatt of electricity." 

(':; ?(l13 illS. rO(1e:<'Ii copyngl,j law proh,blts ui1au;honzc'd 'oproductItm by CJny rr1uart.s <J."id ImpOSt$ lines 01 up !\) S1bO,fXlO lor \'lola\lolls. 
184 


79435.124

4 • Friday, 25 January 2013 IHS THE ENERGY DAILY 

Wholesale power prices hit 

record low in New York in 2012 In a record driven by low natural gas The ~ew York Indt'pendent System 

prices, New York's grid operator report- Operator said Wednesday the average aned this week that the average wholesale nual wholesale prke of electric energy in 

price for electricity in the state in 2012 New York was S45.23 per megawatt-hour 

was tbe lowest since it established the (MWh) in 2OTI, below the previous record 

state's competitive power markets 12 low price 0[$4-8.63 per MWh in ,W09. 

years ago. As a primary fuel for power plants, natutal gas sets the price [or powerin states and 

regions with competitive wholesale markets, and gas priCE'S plummeted last year 

dul:' to rising u.s. production. 

The rock-bottom prices in New York 

occurred despite a decrease in the state's 

generating capadty, with more than 

f,400 megawatts of older power plants 

being retired or mothballed last year and 

only 745 MW of new generation coming 

on line. 

INGM report seeks Hill action on gas pipe delays ... Energy Policy Act of 2005 (EPACT) allowing 

them to sue federal agencies responsible [or 

inordinate delays. 

The study noted that EPl\CT authorized 

FERC to require other federal agencies to 

make final decisions on pipeline permits no 

later than 90 days after FERG publishes its final environmental review under the National 

Environmental Policy Act (NEPA). 

Howevet, the study said the 90-day deadline c:lE.';)rly has been ineffectual in speeding 

permitting because more pipelines have experienced delays since EPACT was enacted. 

Refore F.PACT implementation, 7.7 percent 

of projectfi failed to get all agf'ncy approvals 

within 90 days of FERC's final NEPA assessment, according to the study. After the 200$ 

la,,\, was passed, 2.8 percent of pipeline projects 

experienced delays of more than go days, with 

the percentage of projects experiencing delays 

of 180 days or more after FERC NEPA approv~ 

al jumping from nearly 3.5 percent prior to 

EPACrto 19.5 percent after its enacrment. 

The report did not offer any explanations 

for the increased delays, but pipeline projects 

have faced growing opposition over potential 

environmental and safe-ty impacts in recent 

years, as evidenced by controversy OV('f the 

Keystone XL oil sands project in Nebraska, 

where critics have cited contamination 

threats to sensitive ecosystems and endangered specil.'~_ Natural gas pipelines have re~ 

ceived additional scrutiny over safety issues in 

crowded urban areas after several high-profile 

accidents have caused mUltiple fatalities, 

But the INGAr\ Foundation study said extended federal tevie\\'S have frustruted the 

congressional intent in EPACT to speed pipe~ 

line permitting, and that the problem is rhat 

EPACT "does not give FERC any means to 

enforce the go-day deadline or impose consequences on the agencies for failure to comply." 

Further, pipelines facing delays haw not ('xercise-d EPACTprovisionsallowingthem to me suit in the U.S. Court of Appeals forthe District 

of Columbia Circuit against federal agencies 

that -exceed the 90-day deadline for comple~ 

tion o[project reviews, according to the study. 

None of the companies interviewed for 

the INGAA report chose to pursue legal ;)ction even when they faced delays beyond 

go days. More generally, while FERC has approved more than roo pipeline projects since 

EPACT was passed, the legal option "has rarely been used," said the study, although it did 

not specify how many times that option hali 

been exerdsed. 

"The fact that nonE' of the survey respondents for the post-EPAGT 2005 projects pe~ 

titioned for review, even though these projects experienced increased delay, is a strong 

indicator that the judicial remedy provided 

by EPACT 2005 is not :In effective method 

to combat delay," the report said. "Despite 

the increase in number and length of delays, 

pipeline companies are very reluctant to use 

legal remedies to address agency delay in the 

permitting process." 

The study called for congressional action 

to amend rhe Natural Gas Alt to give FERC 

greater authority to ensure timely pennitting 

of pipeline projecrs, which see increased construction costs and miss in-service dates due 

to federal delays. 

"Tn order to achieve rhe llaw's) srated goal 

of streamlined permitting, there must be 

consequences fOf agencies that fail to meet 

deadlines," thl.' study said. "Additional process 

improvements, reguJamry revisions, andlor 

legislative actions likely are needed. EPACT 

has not lived up to its promise to reduce rhe 

time required to obtain necessary federal pf'fmits ;)nd further amendments to thl.' act may 

be tl11:' solution." 

Specifically, the [t'port ,ailed for amending 

the Natural Gas Actto give FERC authority to 

grant approval ofa pipeline project ifanother 

agency does not meet the petmitting timet;)ble set by FERC. 

In addition, the report suggested statutory changes that" would result in automatic 

permit approval if an agency fails to come to a 

permitting decision by the deadline. 

The report, based on surveys and interviews of pipeline company personnel representing 51 interstate natural gas pipeline 

proje-cts completed before and after the passage ofEPACT, found that state agencies v.ith 

delegated federal permitting authority were a 

common source of delays. In addition, survey 

respondents said they encountered major delays when fulfilling u.s. Fish and Wildlife Service requirements under the Migratory Bird 

Treaty Act and when complying with Army 

Corps of Engineers requirements under the 

Clean Water Act. 

To improve the pf'rmitting process, the INGM Foundation suggested that Congress or 

the couns rake action to loosen the requirements under the Migratory Bird Treaty Act 

to allow the "take" of migratory birds during 

gas pipeline development. Further, the report 

called for recognition by other agencies thar 

FERC's National Historic Preservarion Act 

and Endangered Species Act reviews are "suf· 

fident" for other penuits that require them, 

minimizing duplicative reviews. 

FERC could also take a harder line with 

state and local la\vs that overlap or c{)nflict 

with the Natural Gas Act, which preempts 

those requirements, by revising its policy 

that promotes local engagem~'nt and coopera~ 

tlon, the INGAA Foundation said. In ;)ddition, 

Congresfi could change the Jaw to authorize 

pipeline comparues to access private property 

for "non-invasive" project surveys and to authorize FERC to apply its federal agency deadlines to non-federal authorizations required 

from state and local agencies, 
185 


79435.125

Windmills Overload East Europe's Gnd Risking Blackout: Energy Bloomberg 

Bloomberg SaCK to stDfY 

Windmills Overload East Europe's Grid Risking Blackout: 

Energy 

GC'rmany is dumping electricity on its unwilling neighbors and by v.intertime the feud should ('ome to a head. 

Central and E.:'l.strm European countries are moving to disconnect their P{l"l-H'f lin",'- from Germany's during the windiest days. That's when 

they get flood{'d ".,ith energy, echoing struggles seen from China to Texas over accommodating the world's 200,000 windmills. 

ReJated links: 

Workr:; 1110-"[ P(}\H'ri"lil Lasers to 7..ap :"\uckar \Yaste in Project 

Su"tainabiJit~ m'\\"s 

Reuewable energy around the world is c..ausing problems because unlike oil it can't be stort'd, so when generated it must be eonsumed or risk 

cau,<;ing a grid eollapse. At timE's, the glut can be so great that utilities pay consumers to take the power and get rid of it. 

UGennany is aware of the problem, btlt there is not enough political ..... ill to solve the pmblem because it's very c05tly,~ Pave! Sole, Czech 

deputy minister of industlY and trade, said in an inten.-"iew. "So we're forced to make one~sided defensi ...... e steps to prevent accidents and 

destruction.~ 

The power grids in the fonner communist countries are "stretched to their limits" and face potential blackouts when output surges from 

wind turbilH's in northern Gennany or on the Haltie Sea, according to Czech grid operator CEPS. The Czechs plan to install security· switches 

near borders by year-end to disconnect from EUl'Ope's biggest economy to avoid critical overload. 

\Ylnd Farms 

The bottleneck is aile ofmallY in the last eight years as 8460 billion of wind fanns were bnilt worldwide on plains, hills and at sea before 

m'tworks were fully expanded to deliver the power to consumers. Upgrading Gelmany's system alone to addr('ss capacity and technical 

shortfalls "'ill cost at least 32 billion euros (542 billion), its four grid operators said iu May. 

Gennany installed more than 8,885 megawatts of wind t'llt'rgy since 2007, mostly in the north. Now it's studying how to build the power 

backbone to connect to the industrialized south, home to hundreds offactones such as those of chemicals manufacturer 1Vacker ChC'l1lie ,\G 

(WeH) and S!('m('n~ "\(;. (SIE) The eleetrieity detours through the Czech Republic and Puland when German eables can't handle the load as 

the countries' grids arc interconnected. 

The problem lilay iutensif~; with the approaching winter. \Yith an insufficient north-south connection, Germany's power network came clost> 

to a collapse last Februal)' when high v.rinds in the Baltic sea flooded it with power and {he Czech Republic. and Poland threatened to 

disconnet1 their grids. The coming winter can be critical, German Economy Minister Philipp Roesler said last week. 

Aging Plants 

Chancellor c\nge!a ~IerkE'!'s decision to shut down aging atomic plant,<; and exit nuclear pOWN by 2022 following last year's reactor 

meltdowns in Fukushima, ,iap;\1l, exacerbated the power imbalance. Gelmany more than ever ",ill have to rely on power generated in the 

morc "'indy north. 

",,"'e do understand that the Czech and th(' Polish grid operators are (',oucerned about market and system seeurity," Volker Kamm. a 

spokesman for grid operator 50Hertz Transmission GmbH, said in a phone intt'fview from Berlin. "'Ve are seeking a constructive solution." 

http://www.bloomberg.com/news/print!2012-10-2S/wmdmllis-overload-east-europe-s-grid-rlsking-\)lackout-energy.html[2jS/2013 3:01:12 PMl 
186 


79435.126

Windmills OVerload East Europe's Gnd Risking Blackout: Energy - Bloomberg 

Lack of grid connections, such as in China, or oversupply .as in Texas haye made wind enf'rgy'.s global rollout a lumpy process. \\'ind fam1s in 

West Texas earlier this year were paying utitities to use their electricity on particularly gusty days because they can still earn $22 a 

megawatt-hour in federal tax credits, 

Excess Flows 

Utilities like Prague-based eEl: AS (CEZ) and Warsaw-based PGE SA tpGE) are occasionaUyforced to disconnect some coaHjred plants in 

the western parts of the Czech Rf'publk and Poland because of excess power flowing from Germany. C£Z's Prunerov plant is often a casualty 

of the unplanned flows, CEPS said. 

"Measures we're using are costly and at times not sufficient," said Jerzy Dudzik, an eM'cutive from Poland's grid operator FSE. PGE had to 

adjust generation schedules at its Dolna Odra and Turow plants, he :::ald. 

Both Poland and the Czech Republic are planning to install so-called phase-shifLer transfol1ners in the trans-border area "",;th Germany to 

regulate power flows and protect their transmission networks. ''''hile the Czechs are still negotiating v{itll Gennany on other short-tenn 

solutions and pushing for a creation of smaller power-trading areas with realistic capacity allocation, they're already counting on installing 

four transformers by 2017, CEPS said. 

'Free Lunch' 

"The Gennans are m:ing our infrastnIC'ture in an excessive manner," CEPS board member Zbynek Boldis said in an inteniew in Pragne. "At 

this point they're getting a free luneh:' 

Gcnnany's eastern neighbors have also said that the eommon German~Austrian power market puts them at a disadvantage since they must 

reduce eross-border transmission capacity because of trades between the two nations and have to take costly measures to protect thcir grids. 

Southern Germany imports power from .\ustria's pumped- storage hydroeleetrk power stations in the Alps during peak periods, again using 

th(~ Czech grid while excluding the Czechs from the benefits of trading within a single-border area. 

''Traders within the Allstrian-Gem1an common zone don't need to bid for capacity in auctions eYen though they're using up the capacity of 

its neighbors, who do have to pay," CEPS's fioldis said. "That's dis{'fimination," 

The Gennal1-Austrian common market's physical transmission capacity doesn't conespand with the volume oftl'ansactions b('tween the two 

countrit's, so they end up using the Cz('ch, Polish, Slovak and Hungarian grids, Boldis said. The four countries want Germany and Austria to 

redraw the power-trading map, creating smaller areas that would better reflect electric-ity flows. 

"Electricity follows a path of least resistance in the grid, according to the laws of physics." Holdls said. "The result is that our transmission 

system is overloaded, we have security threats. ~ 

To contact the reporters on this story; Ladka Bauerova in Prague at lhancmva!ji l)lo011ltwrg.lle!; Tina Andresi'n in Dusseldorf at 

talldresCtll(~1 bloolnlwrg.net 

To contact thE' editor responsible for this story: 'ir!!1 Kennedy at wkel11wdY3ehloombl?rg.nct 

<2>21)13 BLOOMBERG L P AlL RiGHTS RESERVED 

http://wvmbloomberg.com!news!prlnt/2012-10-25/wlndmills-overload-east-europt;-s-grld-risking-blackout-energy.html[2!5/2013 3:01:12 PM] 
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Statement for the Record 

National Petroleum Council 

U.S. House Energy and Commerce 

Subcommittee on Energy and Power 

February 5, 2013 

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

the request to submit a statement for the record concerning North America's oil and natural gas 

resources and the potential for their development. This statement is based on the National 

Petroleum Council (NPC) report, Prudent Development: Realizing the Potential of North America's 

Abundant Natural Gas and Oil Resources, which was issued a little over a year ago. The study that 

produced this report reached four principal conclusions: 

First, the potential supply of North American natural gas is far bigger than previously 

thought. It is now understood that the nahlIa! gas resource base is enormous and that 

its development, if carried out in acceptable ways, is potentially transformative for the 

American economy, energy security, and the environment, including reduction of 

carbon and other emissions. These resources could meet high projections of demand. 

Second and surprising to many North America's oil resources are also much larger 

than previously thought. These oil resources offer substantial supply for decades and 

could help the United States reduce, though not eliminate, its reliance on imported oiL 

(Note: Oil from Canada is included in US. oil imports.) 

Third, natural gas and oil resources will be needed even as energy efficiency reduces 

demand and lower-carbon alternatives become more economically available on a large 

scale. Moreover, the natural gas and oil industry is vital to the US. economy, generating 

millions of jobs, widely stimulating economic activity, and providing significant 

revenues to governments. 

Fourth, realizing the benefits of natural gas and oil depends on environmentally responsible development. The nation can realize the benefits of these larger resources by 

ensuring they are developed and delivered in a safe, responsible, and environmentally 

acceptable manner in all circumstances. 

The National Petroleum Council concluded that there is an abundance of North American 

oil and natural gas resources, which if prudently developed can significantly contribute to the 

environmental protection, economic growth, and energy security wellbeing of the United States. 

A number of more recent analyses by academia, consultants, private companies, associations, 

and government organizations, including the International Energy Agency (lEA), have reached 

similar conclusions regarding the potential for North American oil and natural gas resources and 

the contribution these can make to our nation's future. 

A copy of the Summary Volume of the NPC's Prudent Development report is attached to 

this Statement for the Record. This Summary as well as the Full Report Volume, 55 supporting 

topic papers, and other study materials are publically available to be viewed and downloaded 

from the NPC 's website (www.npc.org). 
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The National Petroleum Council study was undertaken in response to a request from the 

Secretary of Energy to assess North American resources of natural gas and oil; describe their 

development potential; describe the key technologies that will be used in this development; 

set out how development can be achieved while ensuring high standards of environmental 

performance and management of community impacts; and analyze the contribution that 

greater use of natural gas can make in reducing CO, and other air emissions, while achieving 

objectives of environmental protection, economic growth, and energy security. The study was 

requested in September 2009 and the final report was delivered in September 2011. 

The NPC is a federally chartered, self-funded Advisory Committee with the sole purpose 

of providing advice to the Secretary of Energy and Executive Branch by conducting studies at 

their request. It is not an advocacy group and does not lobby. NPC study participants 

represent diverse interests and expertise relating to the topic being addressed. There were 

over 400 participants involved in the study that produced the NPC's Prudent Devdopment 

report, the majority of whom were from organizations outside of the oil and gas industry. 

A more complete description of the NPC's origins and operations, membership, and other 

reports also can be found on the NPC 's public website (ww\v.npc.o.rg). 
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Th~ Honorable Ed Whitfield 

Chai11l1lln 

Department of Energy \'''''~M,nf1mn DC 20585 

;vI arch 15, 2013 

Subcommittee on Energy and Power 

Committee on Energy and Commerce 

U. S. House of Reprcscnlatives 

\Vashington, DC 20515 

Dear Mr. Cllainmm: 

On Febntary 5, 2013, Adam Sieminski, Administrator, Ellergy Infommioll 

Administration, testified regarding "American Energy Security and Innovation: An 

Assessment of~orlh America's Energy Resources." 

Enclosed an: the answers to two questions that were suhmiued by Representative 

Eliot L. Engel to complete the hearing record. 

if we can be of fttrthcr assistance.'. please have your slaff contact our 

Congressional Hearing Coordinator, Lillian Owen, at (202) 5&6-2031. 

Sincerely, 

Deputy Secretary 

lor Congressional Affairs 

Congressional and IntcrgovCrJlmentlll Affhirs 

Enclosures 

cc: The Honorable Bobby L. Rush, Ranking Mcmber 
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QUESTIONS FROM REPRESENTATIVE ELIOT L. ENGEL 

Ql. You and several of the other witnesses today have spoken at length regarding new oil 

reserves and how this brings us closer to energy independence. Since the price of oil is 

set on the world market, can you explain the impact of these domestic sources on price of 

oil? 

AI. Additional production of domestic crude oil affects world oil markets over various time 

horizons. For example, domestic crude oil production was nearly 800,000 barrels per day 

higher in 2012 compared to 20 II, largely due to the dramatic growth in tight oil that has 

only recently been recognized as an economically attractive resource. Increased U.S. 

production was roughly equal to the total growth in non-OPEC crude oil production in 

2012, a year in which global spare production capacity was relatively tight given the 

effect of sanctions on Iran and production disruptions in countries including Sudan, South 

Sudan, and Syria. Absent the 2012 increase in U.S. production, already-low global spare 

capacity in 2012 would have been nearly cut in half, creating a significant prospect for 

world oil prices well above the levels that were actually realized. 

Even in a longer-term setting, additional production of domestic crude oil tends to reduce 

our need for crude oil imports. Increased availability of oil that the U.S. would otherwise 

import to other global buyers would tend to drive world oil prices lower, assuming 

constant demand. However, in a longer-run scenario, both global demand and supply 

forces may work to substantially reduce the sensitivity of world oil market prices to an 

increase in the level of U.S. production. On the supply side, members of the 

Organization of the Petroleum Exporting Countries (OPEC), may respond to higher U.S. 

production by reducing either their output and/or their investment in additional 
191 


79435.131

production capacity to offset the market impact of higher U.S. production. On the 

demand side, growth in global consumption is likely to be more responsive to changes in 

prices that persist for an extended period. Such a global demand response would work 

counter to the price-lowering effects ofincreased U.S. production. 

Q2. As you stated in your remarks, one ofEIA's responsibilities is measuring energy and its 

impact on the economy and the environment. Can you speak to the impact accessing 

these new fossil resources will have on the environment? 

Al. The U.S. Energy Information Administration (ElA) provides data and analysis related to 

the supply and demand for energy, including the mix of primary fuels and the use of 

different energy technologies. Our data and analyses provide insight into a variety of 

environmental indicators. For example, our data on primary energy consumption provide 

a basis for computing emissions of energy-related carbon dioxide emissions. Our energy 

projections provide insight into how energy-related carbon dioxide emissions might grow 

under a variety of assumptions about future energy markets and policies. We also track 

emissions control technologies used in the electric power sector, which together with 

information on the sulfur content of fuels, can be used to estimate emissions of sulfur 

dioxides and nitrogen oxides from power plants. 

EIA does not track carbon dioxide or methane emissions that may be associated with the 

extraction and shipment of fossil energy resources. The amount of emissions depends on 

how the fuel is extracted, processed, and how far it is moved to the point of use. The 

Environmental Protection Agency and a variety ofacademic and non-academic 
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researchers have estimated emissions associated with production of shale gas and tight 

oil. 

With regard to impacts stemming from the development of new fossil resources, such as 

natural gas produced from shale formations, joint consideration of the work done by a 

variety of Federal agencies and researchers can provide the basis for a comprehensive 

picture. For example, recent U.S. shale gas development has significantly contributed to 

an abundance of supply that has reduced the price of natural gas in U.S. markets. As a 

result, over the past several years and especially in 2012, natural gas became increasingly 

competitive with coal as a fuel for baseload electric power generation in many regions of 

the country where plants using either of these two fuels may be dispatched to meet load. 

Taking account of both the difference in carbon content per unit of energy and the greater 

efficiency of a typical natural gas combined-cycle generation plant relative to a coal-fired 

steam plant, the former produces only about 40 percent of the carbon dioxide emissions 

per kilowatt-hour as the latter. 

As a result oflower natural gas prices, 30 percent of the total electricity generated in 

2012 was fueled by natural gas, up from 21 percent in 2008. The coal share of generation 

in 2012 was 37 percent, down from 48 percent in 2008. The increase in gas-fired 

electricity generation has significantly reduced U.S. carbon dioxide emissions associated 

with electricity generation. Combining this information with data from non-EIA sources 

that estimate extraction and shipment emissions for both coal and natural gas would 

provide a basis for an initial impact assessment. 
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79435.133

ONE HUMJHED THIRl EEl\! I H CONGRESS 

H€NJ=tV A. W,\XMAN. CALjH.)P.~.FA 

RANYING MF.~H~ER 

(lJ:ongrr55 of tUt {f!lniteb ~ttltt5 

~O\l!.lt ot !\fprtSent,lWH5 

COMMiTTEE ON ENERGY AND COMMERCE 

2125 RAVBunN HOUSE BUtllj,"fi 

Ms. Jennifer Morgan 

Dirl"ctor, Climate and Energy Program 

World Resources Institute 

1 0 U Street KE" Suite 800 

Washington, D.C. 20002 

OeM Ms. ~1organ: 

WASH!NGTON, DC 2Q515-6115 Maje.wil\, t)C21nS··JiI27 

\~l'I("i;.,. :Z1JZ}??;;'·ltAl1 

February 21,1013 

Thank you for appearing before the Subcommittee on Energy and Power on Tuesday, Febt'tlary 5. 20U, 

to testifY 111 the hearing entitled '""American Energy Security and innovation: An j\sscssmcnt of North America's 

Energy Resources.~· 

Pursua.nt to the Rules ofthe Committee on Energy and Commerce. the hearing record remains open for 

ten business days to permit Members to submit additional questions to \'vitnesses, which are attached. The 

format of your responses to these questions should be as foHows: (I} the name of the ;vfember whose question 

you are addressing. (2) the complete text of the question you arc addressing in bold, and then (3) your ans,"':er to 

that question in plain text. 

To facilitate the printing of the hearing record, please respond to the-se questions by mait by the close of 

business on Thursday, March 7, 2013. Please also e-mail your responses to tIle Legislative Clerk in Word 

format at ~ick.f\brah4m@.lJlail.house:,W' 

Thank you again for your time and effort preparing and delivering testimony before the Subcommittee, 

Chairman 

Subcommittee on Enerb'Yand Power 

cc: The Honorable Bobby Rush, R.nking Member, 

Subcommittee on Energy and Power 

Attachment 
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79435.134

RESPONSES TO QUESTIONS RESULTING FROM THE TESTIMONY OF 

JENNIFER L. MORGAN 

DIRECTOR, CLIMATE AND ENERGY PROGRAM 

WORLD RESOURCES INSTITUTE 

HEARING BEFORE THE U.S. HOUSE OF REPRESENTATIVES 

ENERGY AND COMMERCE SUBCOMMITTEE ON ENERGY AND POWER: 

"AMERICAN ENERGY SECURITY AND INNOVATION: 

AN ASSESSMENT OF NORTH AMERICA'S ENERGY RESOURCES" 

The Honorable Eliot Engel 

1. In your testimony you addressed all sources of energy and the threat of 

climate change, I applaud you for that. Can you expand on your comments 

regarding electrical generation from renewable resources? How much 

generation, do you think, we can expect from these sources over the next 

decade? 

According to Renewable Electricity Futures,l a recent study by the National Renewable 

Energy Laboratory, 80 percent of continental U.S. electricity demand in 2050 could be 

met by commercially available renewable electricity generation technologies. 

However, we are not yet on track to see such widespread deployment. Today renewable 

resources represent 13 percent (53 billion kilowatt-hours per year) of U.S. electricity 

generation. According to the early release of the U.S. Energy Information 

Administration's lQL',:t/1I11J(tl~!1i!LJJJJ2lJ11(lgls, assuming current policies this is only 

expected to grow to 14 percent (65 billion kilowatt-hours per year) in 2023, and 16 

percent of generation in 2040. Under this business-as-usual scenario, EIA finds that new 

renewable generation would be driven by state renewable standards, voluntary purchases 

of "green" energy, and decreasing renewable costs. 

1 http://www.nrel.gov/analysis/re_futures! 
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79435.135

Significantly increasing renewable generation will require enacting new federal and/or 

state policies. Options include renewable portfolio or clean energy standards, longer-term 

extensions of the production and investment tax credits, feed-in-tariffs, and greenhouse 

gas (GHG) reduction policies. Renewable generation could also be stimulated by GHG 

performance standards for existing power plants, which the U.S. Environmental 

Protection Agency (EPA) has the authority to establish under Section III(d) ofthe Clean 

Air Act. The actual level of investment in renewables will depend on the stringency of 

the EPA program and on decisions made by each individual state, as the Clean Air Act 

provides considerable flexibility in how they meet EPA's guidelines. 

Our recent report, {'an/he U.S._Clet ThcCfJi:s!llLHfre:), provides some insight into the 

level of renewable generation that could be achieved through such standards. 2 In our "gogetter" scenario, which provides what we think is an upper bound of the reductions that 

could be achieved using existing federal authorities, renewable generation increases 

roughly 50 percent over current levels in 2020. 

2. In your testimony you also spoke about job creation. Can you explain more 

about tbe types of jobs we can expect from an expansion in renewable 

energy? 

Expanded renewable energy in the U.s. would create jobs across the value chain, from 

construction and manufacturing to skilled scientific, engineering, and service roles. 

Deployment of renewable generation will lead to jobs in project planning and financing 

(e.g., engineers, lawyers, bankers), equipment installation (e.g., construction workers), 

and operations and maintenance (e.g., engineers, maintenance workers). As noted in my 

testimony, WRI's r(;~c:~x~h on the clean energy economy has found that a key to 

2 http://Yrww.vvri.org/publicationlcan-us-get-there-from-herc 
196 

Æ 


79435.136

capturing manufacturing jobs is comprehensive, long-term, targeted, and inclusive 

support for renewable energy deployment. 3 

3. In your opinion what would be the single most important thing Congress can 

do to get the United States to energy Independence while reducing our 

dependence on fossil fuels? 

The most important thing is for Congress to enact the suite of policies that will drive an 

energy-efficient and low-carbon economy. First, this includes putting a price on carbon. 

Second, Congress should aim to enact bipartisan national energy policies that encourage 

more efficient energy consumption, increase the diversity of domestic energy production, 

maximize deployment of low-carbon energy technologies, and minimize environmental 

impacts throughout our energy systems. As noted above, options for renewables policies 

include renewable portfolio or clean energy standards, longer-term extensions of the 

production and investment tax credits, feed-in-tariffs. and greenhouse gas reduction 

policies. Options for energy efficiency include policies that enable informed consumer 

choice as well as energy efficiency standards for vehicles, appliances, and other energyconsuming equipment that is sold into U.S. commerce. Finally. the United States must 

invest in R&D in clean energy solutions, including high-risk, high-reward research on 

novel ideas along the lines of ARPA-E as well as sustained funding for pilot- and 

commercial-scale demonstrations of new clean-energy technologies. While existing 

efficiency programs are in place, Congress should provide continued support for these 

programs and look for opportunities to expand them. 

3 http://wv,,,\v,wri.org/publication/delivering-on-the-clean-energy-economy