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77–038PDF 2012

TAPPING AMERICA’S ENERGY POTENTIAL 

THROUGH RESEARCH AND DEVELOPMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND 

ENVIRONMENT 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

FRIDAY, NOVEMBER 30, 2012 

Serial No. 112–108 

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

( 

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

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. RALPH M. HALL, Texas, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

SANDY ADAMS, Florida 

BENJAMIN QUAYLE, Arizona 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

ANDY HARRIS, Maryland 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

JERRY F. COSTELLO, Illinois 

LYNN C. WOOLSEY, California 

ZOE LOFGREN, California 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

DONNA F. EDWARDS, Maryland 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JERRY MCNERNEY, California 

TERRI A. SEWELL, Alabama 

FREDERICA S. WILSON, Florida 

HANSEN CLARKE, Michigan 

SUZANNE BONAMICI, Oregon 

VACANCY 

VACANCY 

VACANCY 

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

HON. ANDY HARRIS, Maryland, Chair 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

PAUL C. BROUN, Georgia 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

RALPH M. HALL, Texas 

BRAD MILLER, North Carolina 

LYNN C. WOOLSEY, California 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

ZOE LOFGREN, California 

JERRY MCNERNEY, California 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

Friday, November 30, 2012 

Page 

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

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

Opening Statements 

Statement by Representative Andy Harris, Chairman, Subcommittee on Energy and Environment, Committee on Science, Space, and Technology, U.S. 

House of Representatives .................................................................................... 20 

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

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

Science, Space, and Technology, U.S. House of Representatives ..................... 21 

Written Statement ............................................................................................ 23 

Statement by Representative Brad Miller, Ranking Member, Subcommittee 

on Energy and Environment, Committee on Science, Space, and Technology, 

U.S. House of Representatives ............................................................................ 24 

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

Witnesses: 

Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of Energy 

Oral Statement ................................................................................................. 27 

Written Statement ............................................................................................ 30 

Mr. David Martineau, Chairman, Texas Independent Producers and Royalty 

Owners Association 

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

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

Dr. Daniel Hill, Interim Department Head, Professor and holder of the Noble 

Chair in Petroleum Engineering, Texas A&M University 

Oral Statement ................................................................................................. 46 

Written Statement ............................................................................................ 48 

Mr. Michael Hagood, Director of Program Development, Energy and Environment Science and Technology, Idaho National Laboratory 

Oral Statement ................................................................................................. 56 

Written Statement ............................................................................................ 58 

Appendix I: Answers to Post-Hearing Questions 

Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of Energy .............................................................................................. 80 

Mr. David Martineau, Chairman, Texas Independent Producers and Royalty 

Owners Association .............................................................................................. 81 

Dr. Daniel Hill, Interim Department Head, Professor and holder of the Noble 

Chair in Petroleum Engineering, Texas A&M University ................................ 82 

Mr. Michael Hagood, Director of Program Development, Energy and Environment Science and Technology, Idaho National Laboratory .............................. 83 
Page

IV 

Appendix II: Additional Material for the Record 

Letter submitted by Chairman Ralph M. Hall from the American Geosciences 

Institute in support of H.R. 6603 ........................................................................ 90 

‘‘The new Boom: Shale gas fueling an American industrial revival,’’ Article, 

Washington Post .................................................................................................. 92 

‘‘Oil and Natural Gas Generate EMPLOYMENT and TAX REVENUE,’’ submitted by Mr. David Martineau .......................................................................... 97 
(1) 

TAPPING AMERICA’S ENERGY POTENTIAL 

THROUGH RESEARCH AND DEVELOPMENT 

FRIDAY, NOVEMBER 30, 2012 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT, 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 9:34 a.m., in Room 

2318 of the Rayburn House Office Building, Hon. Andy Harris 

[Chairman of the Subcommittee] presiding. 
2 

RALPH M. HALL, TEXAS 

CHAIRMAN 

U.S. HOUSE OF REPRESENTATIVES 

EDDIE BERNICE JOHNSON, TEXAS 

RANKING MEMBER 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

2321 RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-6301 

1202) 225-6371 

www.science.house.gov 

Subcommittee on Energy & Environment 

Tapping America's Energy Potential Through Research and Development 

Friday, November 30, 2012 

9:30 a.m. -11 :30 a.m. 

2318 Rayburn House Office Building 

Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of Energy 

Mr. David Martineau, Chairman, Texas Independent Producers and Royalty Owners 

Association 

Dr. DanielHill, lnterim Department Head, Professor and Holder of Noble Chair in Petroleum 

Engineering, Texas A&M University 

Mr. Michael Hagood, Director of Program Development, Energy and Environment Science and 

Technology, Idaho National Laboratory 
3 

u.s. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HEARING CHARTER 

Tapping America's Energy Potential Through Research and Development 

PURPOSE 

Friday, November 30, 20]2 

9:30 a.m. -11 :30 a.m. 

2318 Rayburn House Office Building 

On Friday, November 30,2012 at 9:30 a.m. in Room 2318 of the Rayburn House Office 

Building, the Science, Space, and Technology Subcommittee on Energy and the Environment 

will hold a hearing titled, "Tapping America's Energy Potential Through Research and 

Development." The purpose of the hearing is to receive testimony on research needs and 

priorities relating to unconventional oil and natural gas resources. The Subcommittee will also 

receive testimony on H.R. 6603, the "Tapping America's Energy Potential Through Research 

and Development Act of 2012. ,,1 

WITNESS LIST 

• Dr. Anthony Cugini, Director, National Energy Technology Laboratory, Department of 

Energy 

• Mr. David Martineau, Chairman, Texas Independent Producers and Royalty Owners 

Association 

• Dr. Daniel Hill, Interim Department Head, Professor and Holder of Noble Chair in 

Petroleum Engineering, Texas A&M University 

• Mr. Michael Hagood, Director of Program Development, Energy and Environment 

Science and Technology, Idaho National Laboratory 

BACKGROUND 

The United States currently ranks second and third in global natural gas and oil production, 

respectively? The International Energy Agency (lEA) predicts the U.S. will overtake Saudi 

Arabia to become the world's largest oil producer by 2020 (Figure 1).3 Domestic natural gas 

production is also projected to increase substantially, due to an anticipated 170 percent increase 

in shale gas production (Figure 2). America's resurgence as a leading global oil and gas producer 

can be credited in part to the development of specific enabling technologies, particularly the 

combination ofhorizoutal drilling and hydraulic fracturing. 

I See Appendix A for the Section by Section Analysis of the 'Tapping America's Energy Potential Through 

Research and Development Act of 201 2 ... 

2 CIA World Factbook. Accessible at: https:llwww.cia.govllibrarvlpublications/the-worldfactbooklrankorderl2249rank.htrnl 

'International Energy Agency, World Energy Outlook 2012. Accessible at: http://www.worldenergyoutiook.org! 

1 
4 

u.s. to Leapfrog Saudis 

The U.S. Is set to overtake 

Saudi 011 output thooks to 

unconventional reservoirs ... 

Oil production, 

In millions barrels a day 

15 

forecasts 

... whlle Its oil demand Is expected 

to fall 

U.S. oil demand VS. production, 

in millions of barrels a day 

20 

I I 0 Il..... ____ --\!--\I_..l.-...l 

'11 '15 '20 f25 1m '11'15 '2(1 '25 

2 
5 

Historically, conventional deposits have provided most of the oil and natural gas produced in the 

United States.6

•

7 Conventional resources are generally considered to be resources recovered from 

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

unconventional resources can be defined as what they are not; they are those resources that 

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

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

wide area, rather than within a discrete deposit. This category encompasses heavy oil, oil shale, 

and oil sands, as well as oil and natural gas produced from shale formations and methane 

hydrates. 

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

been fully transformed into oil or gas and must be heated to transform it into an upgraded 

hydrocarbon. 

• Tight oil or oilfrom shale formations (shale oil) is produced using a combination of 

horizontal wells and fracturing to unlock hydrocarbons locked in low permeability and 

porosity siltstones, sandstones, and carbonates, or shale plays. 

• Shale gas or natural gas from shale formations refers to natural gas trapped in fine grain 

sedimentary rock formations characterized by low permeability and porosity. 

Department of Energy Unconventional Oil and Gas Programs 

The Department of Energy's (DOE) Office of Fossil Energy (FE) manages research, 

development, and demonstration (RD&D) activities for oil and gas technologies. Specifically, 

FE's Office of Oil and Natural Gas "supports research and policy options to ensure 

environmentally sustainable domestic and global supplies of oil and natural gas.,,8 The National 

Energy Technology Laboratory (NEIL) serves as the lead FE RD&D facility and manages much 

of FE's oil and gas technology research. 

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

Tenninology, Reporting, and Summary." November 30, 2010. Accessible at: Accessible at: 

http://budget.house.gov/UploadedFiles/CRS NOVEMBER2010.pdf 

7 For more infonnation on oil and gas resources, see Committee on Science, Space, and Technology Hearing 

Charter, "Tapping America's Unconventional Oil Resources for Job Creation and Affordable Domestic Energy: 

Technology and Policy Pathways," April 17, 2012, accessible at: 

hltp:llscience.house.gov/sites/republicans.sciencc. house. gov/filcs/documents/hearingsIHHRG-112-SY -20120417-

SDOO I.pdf and Subcommittee on Energy and Environment Hearing Charter, "Supporting American Jobs and the 

Economy Through Expanded Energy Production: Challenges and Opportunities of Unconventional Resources 

Technology," May 10, 2012, accessible at: 

http://science.house.gov/siteslrepublicans.science.house.govlfilesldocumentslhearingsIHHRG-112-%20SY20-

20120S10-SDOOl.pdf 

& U.s. Department of Energy, Office of Oil & Natural Gas, updated May 7,2012. Accessible at: 

htlp:llwww.fossil.energy.gov/programs/oilgas/indcx.html 

3 
6 

Table 1. Department of Energy Unconventional Oil and Gas Funding (dollars in millions). 

Program FY2012 FY H.R. 5325, the "Energy S. 2465, "Energy 

Enacted 2013 and Water Development and Water 

Request and Related Agencies Development and 

Appropriations Act, Related Agencies 

2013." Appropriations Act, 

2013." 

Unconventional FE $5.0 $0 $0' $5.0 

Technologies From 

Petroleum - Oil 

Technologies 

Natural Gas $5.0 $12.0 $10.0** $12.0*' 

Technologies 

Gas Hydrates $10.0 $5.0 $5.0 $10.0 

'House Appropnattons commIttee mark recommended $25 mllhon " to be used to support both research to Inlprove 

the economics of oil productions from shale oil, as well as to reduce the health, safety, and environmental risks 

associated with shale oil extraction'" By a vote of 208-207, the funding was removed during floor consideration. 10 

,. Funding to support DOE/EP AlUSGS Interagency Collaboration. See "Interagency Effort on Shale 

Developmenl." 

Federal Unconventional Oil Research and Development Activities and Legislative History 

Efforts to economically produce various sources of unconventional oil and gas were undertaken 

throughout much of the last century. 11 Recently, significant technology advances and high crude 

oil prices have regenerated interest in unconventional fuels production. The development of 

horizontal drilling pennitted the use of hydraulic fracturing to economically produce shale oil 

and gas. Shale oil production enabled the development of the Bakken fields in North Dakota. 

North Dakota is now the second largest oil producing state, producing over 674,066 bpd, up from 

45,000 bpd in 2007. 12 

9 House Appropriations Committee Report, "Energy and Water Development Appropriations Committee Report, FY 

2013." P. 97. Accessible at: http://appropriations.house.gov!UploadedFilesIEW-FY13-

FULLCOMMITTEEREPORT.pdf 

JO Roll no. 340 on House Amendment 1186 

" INTEK, Inc., Prepared for the US Departtnent of Energy, Office of Petro Ie lim Reserves, "Oil Shale Research in 

the United States: Profiles of Oil Shale Research and Development Activities in Universities, National Laboratories, 

and Public Agencies," Third Edition, September 20 II. Accessible at: 

http://www.unconventionalfuels.org/publications/reports/Rcsearch Project Profiles Book2011.pdf 

"North Dakota Petroleum Council, North Dakota Oil and Gas Industry Facts and Figures, September 17, 2012. 

Accessible at: http://www.ndoil.org/image/cache/Facts and Figures 2012 9.17.pdf 

4 
7 

Energy Policy Act of 1992 

Section 2012 of the Energy Policy Act of 1992 (EPACT '92) established a five year program to 

support rcsearch and development of oil shale extraction and conversion. 13 The program 

intended to support the development of economically competitive and environmentally 

acceptable technologies to produce oil shale in both the eastern and western oil shales. Section 

2013 of EPACT '92 also created a five year program to increase the recoverable natural gas 

resource base through more intensive recovery of conventional natural gas, as well as the 

extraction of natural gas from tight gas sands, Devonian shales, or other unconventional 

resources. 14 

Energy Policy Act of2005 

Section 369 of the Energy Policy Act of 2005 (EPACT '05) also contained provisions to 

facilitate the development of unconventional fuels. IS For example, EPACT '05 directed the 

Bureau of Land Management (BLM) to begin leasing Federal lands for the purpose of oil shale 

and tar sands research and development (R&D) activities. The first round of research, 

development, and demonstration leases were awarded in 2006. A second round ofleases were 

offered in 2009, resulting in two awards. 

Recent Federal Oil Shale-Related Activities 

Section 369 of EPACT '05 deelared oil shale and other unconventional resources as strategically 

important domestic energy resources that should be developed to mitigate the nation's 

dependence on foreign sources of oil and directed the Secretary of Interior to develop a 

cornmercialleasing program for these resources. Accordingly, in 2008, BLM formulated the 

Final Oil Shale and Tar Sands Programmatic Environmental Impact Statement (PEIS).16 The 

final PElS analyzed the environmental and socioeconomic impacts of amending 12 land use 

plans in Colorado, Utah, and Wyoming to designate public lands administered by BLM as 

available for commercial leasing and development. 

In response to a 2009 lawsuit challenging the PElS, BLM re-examined the land allocations, 

stating it would "reassess the appropriate mix of allowable uses with respect to oil shale and tar 

sands leasin~ and potential development in light of Congress's policy emphasis on these 

resources." I Following this review, BLM released a revised PElS, which makes approximately 

677,000 acres available for commercial oil shale leasinij, and emphasizes R&D activities before 

the leases can be utilized for commercial development. 8 This new proposal amends ten BLM 

IJ P.L. 102-486 

!4Ibid. 

IS P.L. 109-58 

!6 See Department of Energy, "Oil Shale and Tar Sands Programmatic £IS Information Center." Accessible at: 

http://ostseis.anLgov/ 

!7 2012 Final Oil Shale and Tar Sands Programmatic Environmental Impact Statement: Introduction. Accessible at: 

ht\p:llostseis.anLgov/documents/peis20 12/chp/OSTS Chapter l.pdf 

"Ibid. 

5 
8 

resource management plans, and represents a signification reduction from the 2008 plan, which 

made available more than 2 million acres for commercial oil shale leasing. 19 

Rccent Federal Shale Oil and Gas Efforts 

On April 13, 2012, President Obama issued an executive order establishing a "high-level, 

interagency working group to facilitate coordinated Administration policy efforts to support safe 

and responsible unconventional natural gas development.,,2o As outlined in the order, the 

interagency working group includes representatives from nine different agencies and four offices 

of the White House, and will work to support the safe and responsible production of domestic 

unconventional natural gas. 

The group is tasked with coordinating agency policy activities and sharing scientific, 

environmental, and related technical and economic information. The group is also to engage in 

long-term planning and coordination among the appropriate Federal entities with respect to 

research, resource assessment, and infrastructure developments, and is required to consult with 

other agencies and offices as appropriate. 

Multi-Agency Collaboration on Unconventional Oil and Gas Research 

To execute the Executive Order, the Environmental Protection Agency, Department of Interior 

and DOE signed a Memorandum of Understanding (MOU) in which they pledge to develop a 

multi-agency program directed toward a focused, collaborative interagency effort to address high 

priority challenges associated with unconventional shale gas and tight oil resources. 21 The stated 

goal of this effort is to: 

"address timely, policy relevant science directed to research topics where 

collaboration among the three Agencies can be most effectively and efficiently 

conducted to provide results and technologies that support sound policy decisions 

by state and federal agencies responsible for ensuring the prudent development of 

energy sources while protecting human health and the environment.,,22 

The interagency program is also to address and respond to the White House's 2011 "Blueprint 

for a Secure Energy Future" and recommendations made by the Secretary of Energy Advisory 

Board Subcommittee on Natural Gas.23 

The agencies will identify research priorities and collaborate to sponsor work that improves 

understanding of the impacts related to development of our unconventional resources. The 

collaboration is intended to focus each Agency on its area of core competency, foster 

collaboration on research topics as appropriate, and bring coordination and consistency to the 

19 Taylor, Phil, Oil Shale: Cheers, jeers for final Interior plan for Colo., Wyo., and Utah. E&E News PM. November 

9,2012. Accessible at: http://www.eenews.netleenewspmJ2012111/09/2 

2°President Barack Obama, "Executive Order-Supporting Safe and Responsible Development ofUneonventional 

Domestic Natural Gas Resources," April 13, 2012. Accessible at: http://www.whitehouse.gov/the-pressoffice/20 I 2/04/1 3/executive-order-supporting-safe-and-responsib Ie-development -unconvention 

21 See Appendix B for the Memorandum of Understanding. 

22 Memorandum of Understanding, DOE, DOT, EPA, April 13, 2012. Accessible at: 

ht1p:llwww.epa.govlhydraulicfracture/oil and gas research mou.pdf 

23 Ibid. 

6 
9 

annual budget process. The three agencies have established a steering committee and are 

currently in the process of formalizing a research plan, which is anticipated to be published in 

January of2013. 

The Administration requested $12 million annually for three years for DOE's portion of the 

Interagency collaboration. The Housc Committee on Appropriations provided $10 million in the 

Fiscal Year (FY) 2013 Energy and Water Appropriations bill to fund DOE's portion of the 

collaboration and the Scnate Committee on Appropriations provided $12 million in the FY 13 

Energy and Water Appropriations bill. 

7 
10 

APPENDIX A 

Section-by-Section Analysis 

H.R. 6603 "Tapping America's Potential Through Research and Development Act of 2012" 

Purpose: To authorize research, development, and demonstration activities that increase energy 

security and affordability be enabling the safe and responsible production of the United States 

vast domestic unconventional oil and gas resources. 

Section 1: Short Title 

The Tapping America's Energy Potential Through Research and Development Act of2012. 

Section 2: Activities 

This section expresses the purpose of the activities authorized in the legislation. 

Section 3: Oil Shale Research and Development Activities 

Section 3(a) authorizes research, development, and demonstration (RD&D) activities to facilitate 

commercial application of energy technologies related to the exploration, development, and 

production of oil shale resources. 

Section 3(b) states that RD&D objectives are to address scientific and technological barriers to 

enable economically feasible production of oil shale and minimize potential associated 

environmental impacts. 

Section 3( c) directs the Secretary of Energy to provide Congress an implementation plan that 

details constraints and opportunities affecting oil shale development, identifies strategies to 

enable such development, and identifies and prioritizes research, development and demonstration 

activities and requires the Secretary to transmit this report to the House Committee on Science, 

Space, and Technology, and the Senate Committee on Energy and Natural Resources 9 months 

after enactment. 

Section 3( d) allows the Assistant Secretary for Fossil Energy to conduct research and directs the 

Assistant Secretary to make awards to eligible entities for RD&D activities in areas that include 

(1) oil shale resource characterization; (2) modeling and simulation of oil shale exploration and 

production technologies including advanced diagnostics and imaging systems and advanced 

computing applied to the physics and chemistry of oil shale production; (3) minimization and reuse of water, including benchmarking of current water use rates for multiple production methods, 

potential reduction in water volume needed for operations, and recovery utilization, reduction, 

and improved management of produced water from exploration and production activities; (4) 

efficient use of energy in exploration and production activities; (5) utilization and exploration 

and production methods and materials that reduce the potential impact of such activities on the 

environment, including improved production methods for in-situ mining and ex-situ mining. 

Section 3( e) requires the Secretary of Energy to provide Congress a report on the progress of oil 

shale research and development activities to the House Committee on Science, Space, and 

Technology and Senate Committee on Energy and Natural Resources 3 years after enactment. 

8 
11 

Section 3(f) authorizes $10,000,000 is authorized for each fiscal year from 2013 through 2017 

for activities described in this Section. 

Section 4: Shale Gas Extraction Research and Development Activities 

Section 4( a) authorizes RD&D activities to facilitate commercial application of energy 

technologies related to the exploration, development, and production of oil, natural gas, and 

other liquid resources from shale formations. 

Section 4(b) states that RD&D objectives are to maximize the benefits of the United States' shale 

oil and natural gas resources by advancing safe and responsible exploration, development, and 

production of shale oil and gas resources; minimize surface impacts from activities related to 

shale oil and natural gas production; focus on areas that provide benefits to the public and to 

industry; and advance the scientific and technological foundation available to producers, federal 

and state government agencies, and other stakeholders in identified research areas. 

Section 4( c) allows the Assistant Sccretary for Fossil Energy to conduct research and directs the 

Assistant Secretary to make awards to eligible entities for RD&D activities in areas that include 

(1) water use and demand, which may include potential reduction in the volume of water utilized 

for shale oil and natural gas production, and alternative materials, substances, or ingredients for 

use in shale oil and natural gas operations that could mitigate the need for or volume of water 

used; (2) water sourcing, which may include expanding options for sources of water used in 

shale oil and natural gas operations, and alternatives to groundwater or freshwater, such as but 

not limited to water recovered from other industrial or agricultural operations, brackish water, or 

surface water unsuitable for human or agricultural use in areas with water supply concerns; (3) 

materials used in shale oil and natural gas operations which may include increasing the 

efficiency of these operations by minimizing fluid use, improving the understanding of the 

relationship between additives used in fracturing and the chemical and physical properties of 

different shale formations, and enhancing permeability through improved proppants and other 

materials; and (4) diagnostic imaging and monitoring, which may include increasing 

understanding of the propagation of fractures within target zones, and advancing fundamental 

technologies that enable improved tracking and enhanced understanding of fracture movements. 

Section 4(d) authorizes $12,000,000 for each fiscal year from 2013 through 2015 for the 

activities described in this Section. 

Section 5: Prodnced Water Utilization Research and Development Activities 

Section 5(a) authorizes RD&D activities for environmentally sustainable utilization of produced 

water for agricultural, irrigational, recreational, power generation, municipal, and industrial uses, 

or other environmental sustainable resources. 

Section 5(b) allows the Assistant Secretary for Fossil Energy to conduct research and directs the 

Assistant Secretary to make awards for RD&D activities, including improving safety and 

minimizing environmental impacts of activities, in areas that include (1 ) produced water 

recovery, including research for desalination and demineralization to reduce total dissolved 

solids in the produced water; (2) produced water utilization for agricultural, irrigational, 

municipal, and industrial uses, or other environmentally sustainable purposes; and (3) Reinjection of produced water into subsurface geological formations to increase energy production. 

9 
12 

Section 5(c) authorizes $5,000,000 for each fiscal year 2013 through 2017 for activities 

described in this Section 

Section 6: Eligible Entities 

Section 6 specifies entities eligible to receive funding for activities authorized by the bill. Those 

entities include an institution of higher education, a national laboratory, a private sector entity, a 

nonprofit organization, or a consortium thereof. 

Section 7: Program Administration 

Section 7 provides authority to the Secretary of Energy to enter into an agreement with a 

consortium to carry out research, development, and demonstration activities. 

Section 8: Coordination 

Section 8 requires the Secretary of Energy to coordinate with, and avoid duplication of, research, 

development, and demonstration activities with other DOE and Government programs. 

Section 9: Cost Sharing 

Section 9 requires all activities funded through the legislation follows cost sharing guidelines 

established by Section 988 of the Energy Policy Act of2005. 

Section 10: Limitations 

Section 1 O( a) prohibits the Department of Energy from funding research, development, and 

demonstration activities in technology areas that industry by itself is not likely to undertake 

because of technical and financial uncertainty. 

Section I O(b) prohibits any activities funded through the legislation from supporting the 

establishment of regulatory standards or requirements. 

Section 1 t: Definitions 

Section II provides definitions, including: Assistant Secretary, Institution of Higher Education, 

National Laboratory, Oil Shale, Produced Water, Secretary, and Shale Oil and Natural Gas. 

10 
13 

MEMORANDUM 

TO: 

FROM: 

SUBJECT: 

APR 13 2012 

Assistant Secretaries. National Laboratories 

Department of Energy 

Assistant Secretaries, Bureau Directors 

Department of the Interior 

Assistant Administrators, Regional Administrators 

Environmental Protection Agency 

Arun Majumdar, Acting Under Secretary of Encrgy 

Department of Energy 

David J. Hayes, Deputy Secret~ ilt .. .......-

Department of the Interior ry ~ if 

Bob Perciasepe, Deputy Administrator ;f,,n!~ Environmental Protection Agency 

Multi-Agency Collaboration on Unconventional Oil and Gas Research 

OVERVIEW: In March 2011, the White House released a "Blueprint tor a Secure Energy Future" 

(Blueprint) - a comprehensive plan to reduce America's oil dependence, save consumers money, and 

make our country the leader in clean energy industries. The Blueprint supports the responsible 

development of the Nation's oil and natural gas, with the specific goals of promoting safe practices and 

rcducing energy imports. The Department of Energy (DOE), the Department of the Interior (DOl), and 

the Environmental Protection Agency (EPA) each will have a critical role to play in this mission. 1 

To this end, the DOE, DOl, and EPA will develop a multi-agency program directed toward a focused 

collaborative Federal interagellcy eflort to address the highest priority challenges associated with 

safely and prudelltly developing uncollventional shale gas and tight oil resources. The goal of this 

program will focus on timely, policy relevant science directed to research topics where collaboration 

among the three Agencies can be most effectively and eniciently conducted to provide results and 

technologies that support sound policy decisions by state and Federal agencies responsible for ensuring 

the prudent development of energy sources while protecting human health and the environment. 

This program responds to the Blueprint and to rclevant recommendations of the Secretary of Energy 

Advisory Board Subcommittee on Natural Gas.2 

I The 31 March 2011 Whit(' Hous,' Bluqtrint for a Se"Uft" ENi?rgJl hlflln' instructed the Federal Government to "conduct research to 

examine the impacts I,'Iffracking on water rcsourct~.'" directing the EPA and DOE to S(h.\llSOr fe:«!arch , .... 

: The Secretary of Energy Advisory Board recommended that "the fedcr,\l government has a f()lc es.pecially in hasic R&D. environment 

protection. and satety" and fe~ommends that the nOE. DOl and EPA "all have mission responsibility that justify a continuing. tailored. 

Federal R&D effort." hnp:l/www."i1alegas.encrgo .govlresourceslO81811 ~90_day.~.report_fin.Lpdf 
14 

2 

Interagency Collaboration 

The DOE, DOl, and EPA will identify research priorities and collaborate to sponsor research that 

improves our understanding of the impacts of developing our Nation's unconventional oil and gas 

resources and ensure the safe and prudent development of these resources. Through enhanced 

cooperation, the Agencies will maximize the quality and relevance of this research, enhance synergies 

between the Agencies' areas of expertise, and eliminate redundancy. The Agencies remain responsible 

for implementing their own authorities and internal priority-setting processes. 

The goals of this interagency collaboration are as follows: 

I. Focus each Agencv on its area of core competency. Each Agency has a different combination of 

experiences, research strengths, personnel, resources, and mission mandates leading to 

complementary research core competencies. 

&EPA Core reSearch tpmperendes' 

" Airmonitorlng 

• Environment and human health risk 

• Water quality 

COllaboration 

.I.ENERGy 

Core reseaa;h competencies' 

• WeUboreintegrity, flow and 

control 

• Greentechnologies 

• Systems engineering, imaging 

and materials 

Collaboration 

Collaboration 

Collaboration 

Con: research competencies-

• Resource assessment 

• Hydrology and geology 

• Land use, wildlife. and ecological 

Impact 

The Venn diagram summarizes the core research competencies of each of the three Agencies. 

Further details can be found in the appendix to this memorandum. 

2. Collaborate on research topics as appropriate, While each Agency will focus on its areas of core 

research competency, there will be tasks for which the combined capabilities of more than one 

Agency will be necessary to address a particular research topic. 
15 

3 

An example of collaboration is research on water use for hydraulic fracturing, in which the EPA 

focuses on the impacts and effectiveness of current technology, DOE focuses on improvements that 

future technological innovations may yield, and USGS focuses on stream gage and groundwater 

monitoring to determine water availability, use, and groundwater flow modeling. Another example 

is the ongoing prospective case study in the Marcellus Shale that the three Agencies are currently 

collaborating on in support of the EPA's congressionally mandated study on hydraulic fracturing. 

Where practical and advisable, efforts will be made among the Agencies to apply common andlor 

consistent monitoring, sampling, and analytical protocols. These and other topic areas are 

represented by the green areas in the Venn diagram and will be further defined in the research plan 

discussed in the section below. 

3. Bring coordination and consistency to the annual budget process. Effective research requires a 

sustained, well-planned effort. The three Agencies will work to ensure that the annual budget 

process is part of a coordinated multi-year effort with targeted results. 

Forming the Partnership 

The three Agencies will take the following steps: 

Interagency management structure: The three Agencies will create a Steering Committee to coordinate 

the Agencies' activities for unconventional oil and gas research. Each Agency will contribute two 

members to the Steering Committee: one member focused on policy and one member focused on 

research and technology. The Office of Science and Technology Policy (OSTP) will also provide a 

member to serve on the Steering Committee. The lead agency of the Steering Committee will rotate 

annually among the three Agencies in alphabetical order: DOE, DOl, EPA. The Steering Committee 

will provide leadership, coordinate the activities of the three participating Agencies, and reach out to 

other relevant Federal, state and local organizations. 

Formalizing a research plan: Within 9 months off ormation, the Steering Committee will publish a 

formal multi-year Research Plan that will: 

a. analyze and synthesize the state of knowledge of unconventional oil and gas research to assist 

in identifYing and prioritizing new research directions; 

b. identifY, categorize, and prioritize research topics relevant to the safety and environmental 

sustainability of unconventional oil and natural gas exploration and production; 

c. identifY gaps in available data and appropriate activities to address these topics; 

d. identifY research milestones and deliverables; 

e. describe steps to promote transparency and maximize stakeholder participation and 

notification; 

f. establish specific mechanisms for cooperative relationships among the three member 

Agencies in planning and conducting research and reviewing the results; and 

g. determine future plans. goals and objectives. 
16 

Within 6 months of fonnation the Steering Committee will have a draft of the research plan prepared 

for public comment. 

As part of establishing the research plan, the Steering Committee will solicit comments from the 

scientific community, public and relevant stakeholders and will hold periodic workshops for this 

purpose, as appropriate. 

Ongoing collaboration: The Steering Committee, augmented by appropriate staff, will meet on a 

quarterly basis to discuss research efforts being conducted under the research plan, track key 

milestones, identity and address any implementation challenges, and ensure that work in the priority 

areas is carried out efficiently and effectively. 

Initial engagement: The Steering Committee will hold its inaugura1 meeting within one month of the 

effective date of this memorandum. In this meeting, the three member Agencies will nominate 

members to serve on the Steering Committee, and will further refine as necessary the steps outlined in 

this memorandum. 

Progress Report: The three Agencies will issue an annual public progress report in conjunction with 

the budget process providing an update on the status of research under way in the previous year, 

including significant findings, progress toward milestones set forth in the research plan, and any 

changes in research direction or focus planned for the following year. 

4 
17 

Appendix: Agency Roles and Core Competencies 

• Department of Energy 

The DOE has research experience and capabilities in wellbore integrity, flow and control; green 

technologies; and complex systems, imaging, materials, earth science and engineering. Practices 

employed by companies engaging in exploration and production of shale gas evolve rapidly. An 

understanding of these technologies and practices is critical if the Federal Government is to 

accurately quantify the risks of these activities. 

5 

Wellbore integrity. flow and control: The DOE capabilities in this area include experience and 

expertise in quantifying, evaluating, and mitigating potential risks resulting from the production 

and development of the shale gas resources, to include multi-phase flow in wells and reservoirs, 

well control, casing, cementing, drilling fluids, and abandonment operations associated with 

drilling, completion, stimulation and production operations. The DOE has experience in evaluating 

seal-integrity and wellbore-integrity characteristics in the context of protection of groundwater. 

Green technologies: The DOE has experience and expertise in the development of a wide range of 

new technologies and processes, to include innovations whieh reduce the environmental impact of 

exploration and production such as greener chemicals or additives used in shale gas development, 

flowback water treatment processes and water filtration technologies. Data from these research 

activities assists regulatory agencies in making a science-based cost-benefit analysis of requiring 

producers to adopt new technologies to mitigate environmental risks. 

Systems engineering. imaging and materials: The DOE specializes in the development of 

complex, engineered systems, high-speed computing and predictive modeling, and has experience 

in quantifying and mitigating low-frequency, high-impact risks. This includes evaluating human 

factors which potentially contribute to failures. The DOE has developed and evaluated novel 

imaging technologies for areal magnetic surveys for the detection of unmarked abandoned wells, 

and for detecting and measuring fugitive methane emissions from exploration, production, and 

transportation facilities. The DOE also has experience in understanding of fundamental 

interactions caused during the drilling process, such as the equation of state research that 

investigates the relationship between pressure, temperature, and viscosity of multi-phase fluids at 

the high temperatures and pressures associated with deep drilling and hydraulic fracturing. The 

DOE's experience in engineered underground containment systems for C02 storage brings 

capabilities that are relevant to the challenges of safe shale gas production, such as evaluating 

cement -casing integrity in corrosive environment to characterize long-term wellbore integrity for 

C02 sequestration. 
18 

• Department of the Interior: 

The United States Geological Survey (USGS) has research experience and capabilities in resource 

assessments; natural systems, geology, hydrology; and evaluation of effects on land use, wildlife 

and ecological systems. 

6 

Resource Assessment: The USGS conducts research and assessments of the undiscovered, 

technically recoverable oil and gas resources of the United States (exclusive of the Federal Outer 

Continental Shelf). The USGS assessments use a geology-based assessment methodology that 

characterizes the total petroleum system considering source rock richness, petrophysical properties, 

thermal maturation, petroleum generation, migration, and reservoir rock as important factors in 

evaluating the hydrocarbon accumulation. Assessments incorporate uncertainty, are fully risked, 

and are reported as statistical estimates of gas, oil, and natural hydrocarbon liquids content. They 

support analyses to determine those resources that are economically recoverable. These 

assessments play an important role in Federal policymaking and land management and also support 

decision making at tribal, state and local levels. 

Geology and Hydrology: Understanding the stratigraphy, physical trapping mechanisms, 

petroleum geochemistry, and stress conditions of unconventional basin gas and oil-bearing 

formations is critical to determining local and regional variations in gas and oil abundance, 

composition, and quality that identifY rock furmation targets and guide operational plans for 

drilling and hydrofracturing, and for understanding and forecasting the composition of produced 

waters. The USGS expertise in earthquake seismology, geothermal systems, and geologic carbon 

sequestration is appropriate for induced seismicity evaluation. Down hole rock composition, native 

and flowback fluid composition, borehole temperature and pressure, and in situ stress levels are 

used to generate groundwater flow models and geochemical models that provide estimates of 

solute transport and rates and the potential fate of injected waters and their constituents. The 

USGS operates more than 7,700 of the Nation's surface water streamgages and groundwater 

monitoring wells each of which provide data critical for assessing and modeling water availability 

and water quality important to understanding water use, contaminant occurrences, flood hazards, 

and ecological flows. Cooperative agreements with state and local agencies provide additional 

data. Water quantity and quality are potentially affected by energy production activities. The 

USGS maintains an extensive, nationwide water monitoring capability and conducts assessments of 

surface and groundwater availability throughout the Nation, including both fresh and brackish 

groundwater resources. 

Land Use, Wildlife, and Ecologic Impact: The USGS has diverse capabilities to evaluate potential 

impacts to biological resources and the water resources available to sustain them due to activities 

associated with shale gas and tight oil production. Landscape scale research is important to 

quantifying the response of key species and habitats to land disturbance, contaminants, and other 

potential impacts resulting from development of shale gas and tight oil resources and to develop 

best management practices to mitigate impacts. Remotely sensed airborne imagery is used to 

assess forest fragmentation and effects of shale gas activities on land use patterns, wetlands, and 

migratory bird popUlations. The USGS also assesses the effects of habitat change on key aquatic 

species including endangered species affected by hydrocarbon production. 
19 

7 

• Environmental Protection Agency: 

The EPA has research experience and capabilities across a wide range of scientific and technical 

disciplines that support the Agency's mission of protecting human health and safeguarding the 

environment. This includes core competencies in the areas of environmental and human health risk 

assessment, air quality, and water quality. The EPA has the unique ability to conduct research that 

spans the characterization of sources and emissions, to pollutant fate and transport, to ecosystem 

and human exposures, health effects and risk assessment, and to the prevention and management of 

environmental risks. 

Environmental and Human Health Risk: The EPA has extensive capabilities to characterize the 

effects of contaminants and environmental stressors on ecosystem integrity and human health for 

air and water contaminants and mixtures associated with gas extraction practices. Ecological 

research capabilities that support risk assessments focus on evaluating potential physical, chemical, 

and biological changes to ecosystems, disruptions of ecological flows in headwater rivers, and 

impacts on terrestrial wildlife, stream macrobenthos, and fish. The Agency also has the expertise 

to evaluate landscape pattern changes in terms of available habitat and changes in vulnerability for 

rare or unique ecosystems. The EPA research capabilities that support human health risk 

assessments include conducting field measurements and other types of studies to characterize 

exposures, performing laboratory and computational toxicology studies for hazard identification 

and dose response assessments, and developing and applying risk assessment methods to evaluate 

human health risks posed by environmental contaminants. 

Air Quality: The EPA possesses expertise in the measurement and modeling of air poIlutants from 

sources related to all phases of gas extraction, processing, storage, and distribution. This includes 

using mobile and fixed air monitoring systems to estimate local, regional, and national exposures to 

air pollutants. 

Water Quality: Groundwater protection research capabilities at the EPA include quantifying the 

effects of exploration and production activities on ground water quantity and quality, conducting 

subsurface hydrogeological and geochemical modeling, evaluating weIl integrity issues, and 

assessing the potential for releases to groundwater from wells or surface impoundments during 

drilling, completion. operation or post closure. 
20 

Chairman HARRIS. The Subcommittee on Energy and Environment will come to order. 

Good morning, everyone. Welcome to today’s hearing entitled 

‘‘Tapping America’s Energy Potential through Research and Development.’’ In front of you are packets containing the written testimony, biographies and Truth in Testimony disclosures for today’s 

witness panel. I now recognize myself for five minutes for an opening statement. 

Let me begin by noting that this is expected to be the last Energy and Environment Subcommittee hearing of this Congress. I 

would like to thank Ranking Member Miller and the members of 

the Subcommittee for working together to consider and address 

issues of great importance to the future of our country. 

As we have highlighted throughout this Congress, the United 

States has a wealth of untapped unconventional energy resources. 

In fact, the International Energy Agency recently predicted the 

United States will overtake Saudi Arabia to become the world’s 

largest oil producer by 2020, largely due to the potential for development of U.S. unconventional energy resources. The significant 

positive economic benefits associated with development of unconventional energy resources are widely acknowledged. Tapping 

America’s unconventional oil and gas resources will additionally 

provide sorely needed stimulation of our economy, restore our manufacturing sector and create high-paying middle-class jobs. 

Citigroup predicts the cumulative impact of new oil and gas production could create as many as 3.6 million new jobs by 2020. Unfortunately, the degree to which the United States will pursue and 

realize these much-needed benefits remains in doubt, primarily due 

to politics. 

Under Chairman Hall’s leadership, the Science, Space, and Technology Committee and this Subcommittee in particular have explored a broad range of energy production-related issues, from the 

lack of transparency and weak scientific foundations underlying 

EPA’s job-killing regulations to the waste and imbalance in Department of Energy’s research and development activities. Unfortunately, time and again, a massive disconnect between the President’s words and his Administration’s actions are evident. While 

President Obama continues to claim he supports an all-of-the-above 

energy strategy, the plain facts tell a different story. This was 

clearly illustrated in May when DOE’s Assistant Secretary for Fossil Energy testified to this Subcommittee that oil shale was a component of the Administration’s all-of-the-above energy strategy. Yet 

when pressed, he acknowledged that DOE was not spending any 

funding on oil shale R&D, and could not identify anything the Administration was doing to actively advance oil shale. In fact, despite the President’s prominent call for an all-of-the-above energy 

strategy in this year’s State of the Union speech, just recently the 

Administration finalized a plan effectively reducing lands available 

for oil shale production by two-thirds. 

Unfortunately, the Administration’s rhetoric on energy production is similarly empty when it comes to shale gas and hydraulic 

fracturing, where the EPA is leading 13 federal agencies and offices 

in pursuit of new ways to regulate this incredibly beneficial and 

safe technology. 
21 

Chairman Hall’s legislation, the ‘‘Tapping America’s Energy Potential Through Research and Development Act of 2012,’’ addresses 

the obvious imbalance in DOE research priorities. It restores a true 

all-of-the-above R&D focus at DOE through authorization of limited 

and targeted research and development activities that develop key 

technologies relating to oil shale, shale oil and gas, and produced 

water utilization. 

[The prepared statement of Mr. Harris follows:] 

PREPARED STATEMENT OF SUBCOMMITTEE CHAIRMAN ANDY HARRIS

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

Energy Potential Through Research and Development. 

Let me begin by noting that this is expected to be the last Energy and Environment Subcommittee hearing of this Congress. I would like to thank Ranking Member Miller and the Members of the Subcommittee for working together to consider 

and address issues of great importance to the future of our country. 

As we have highlighted throughout this Congress, the United States has a wealth 

of untapped unconventional energy resources. The International Energy Agency recently predicted the U.S. will overtake Saudi Arabia to become the world’s largest 

oil producer by 2020, largely due to the potential for development of U.S. unconventional energy resources. The significant positive economic benefits associated with 

development of unconventional energy resources are widely acknowledged. Tapping 

America’s unconventional oil and gas resources will additionally provide sorely needed stimulation of our economy, restore our manufacturing sector and create highpaying middle class jobs. Citigroup predicts the cumulative impact of new oil and 

gas production could create as many as 3.6 million new jobs by 2020. Unfortunately, 

the degree to which the U.S. will pursue and realize these benefits remains in 

doubt, primarily due to politics. 

Under Chairman Hall’s leadership, the Science, Space, and Technology Committee—and this subcommittee in particular—has explored a broad range of energy 

production-related issues, from the lack of transparency and weak scientific foundations underlying EPA’s job-killing regulations to the waste and imbalance in Department of Energy’s research and development activities. Unfortunately, time and 

again, a massive disconnect between the President’s words and his Administration’s 

actions are evident. 

While President Obama continues to claim he supports an ‘‘all-of-the-above’’ energy strategy, the plain facts tell a different story. This was clearly illustrated in 

May when DOE’s Assistant Secretary for Fossil Energy testified to the subcommittee that oil shale was a component of the Administration’s all-of-the-above 

energy strategy. Yet when pressed, he acknowledged DOE was not spending any 

funding on oil shale R&D, and could not identify anything the Administration was 

doing to actively advance oil shale. In fact, despite the President’s prominent call 

for an all of the above energy strategy in this year’s State of the Union speech, just 

recently the Obama Administration finalized a plan effectively reducing lands available for oil shale production by two thirds. 

Unfortunately, the Administration’s rhetoric on energy production is similarly 

empty when it comes to shale gas and hydraulic fracturing, where the EPA is leading 13 Federal agencies and offices in pursuit of new ways to regulate this incredibly beneficial and safe technology. 

Chairman Hall’s legislation, the ‘‘Tapping America’s Energy Potential Through Research and Development Act of 2012,’’ addresses the obvious imbalance in DOE research priorities. It restores a true all-of-the-above R&D focus at DOE through authorization of limited and targeted research and development activities that develop 

key technologies relating to oil shale, shale oil and gas, and produced water utilization. 

Chairman HARRIS. At this time I would like to yield to the Chairman of the Science, Space, and Technology Committee for three 

minutes for him to describe his legislation. Chairman Hall. 

Chairman HALL. Mr. Chairman, I thank you very much, and you 

have done a very good job of your opening statement. You just 

about said it all. I say to you good morning, and I thank you for 

yielding the time you have given me. 
22 

I want to thank the witnesses for being here to talk about an 

issue that is very important to me and to all of us, and in particular, I would like to recognize and thank Dr. Daniel Hill, the 

Chair of Texas A&M Petroleum Engineering Department, and I 

had a good visit with your president two Saturdays ago, I think, 

when they created Johnny Football down there and we are waiting 

to see what they do with it, and Dr. Martineau, the Chairman of 

the Texas Independent Producers and Royalty Owners Association, 

TIPRO, a great organization that I am very familiar with, and I 

think that you started out with Frank and Shelby Pitts and they 

are still with the Pitts organization. Is that correct? 

Mr. MARTINEAU. Yes. 

Chairman HALL. How many? 

Mr. MARTINEAU. Forty years. 

Chairman HALL. Well, you are probably getting old to do things 

like that. 

But energy policy is and has always been one of my very top priorities, both as a Member, and as Chairman of this Committee. I 

believe strongly that for young people today, the importance of energy and how important energy is and the fact that nations including our Nation will fight for energy if we don’t have energy and we 

shouldn’t have to because we have plenty, and I am very hopeful 

for this next two years that we can use what we have and be users 

of our own and salespeople of some will have in addition if we just 

do what we ought to do like all of the above. A lot of people talk 

all of the above and do none of the above, and that is what our 

problem is. I think after ‘‘prayer’’, ‘‘energy’’ is probably the most important word in the dictionary to youngsters that are graduating 

from high school, grade school or college. It is the foundation upon 

which our Nation has prospered, and the key to our quality of life 

and standard of living. 

That is why I introduced H.R. 6603, which would increase energy 

security through support for research and development to enable 

prudent development of U.S. domestic energy resources. The legislation builds on the record of the Science, Space, and Technology 

Committee during our tenure here this last two years. 

The United States is blessed with a wealth of unconventional energy resources and we are currently experiencing a revolution in oil 

and gas production thanks to those resources. This increased production is not only increasing our energy security, it is stimulating 

our economy and creating much-needed jobs. In 2010, unconventional natural gas development alone supported over a million jobs 

in this country, and this number is expected and could more than 

double by 2035. 

This bipartisan legislation promotes the development of oil shale 

instead of restricting it, and ensures that we maximize the benefits 

of our unconventional oil and gas resources. The bill directs the Department of Energy to undertake R&D activities to address the scientific and technological barriers to oil shale development. It also 

supports R&D to minimize water use and maximize efficiency in 

shale oil and gas operations. The legislation includes language from 

the Produced Water Utilization Act, a bill I sponsored and others 

that was sponsored in the 111th Congress and passed through the 

House with unanimous consent. 
23 

In 2005, we worked together on and I authored Section 999 of 

the Energy Policy Act, which created a very successful Department 

of Energy unconventional oil and gas research and development 

program. The bill before us today is intended to complement the 

ongoing 999 program, which is a program that we knew energy was 

there in the Gulf but we couldn’t get it up, couldn’t get it to the 

top. We needed technology to get it to the top. We traded with a 

lot of universities. They would give us the technology, and we 

would pay them with the energy they got to the top. If we didn’t 

get their technology, it didn’t go to the top. If we did get their technology, it did, and it has worked very well. They take shots at it 

every year but it is so valuable that I am hoping—it is currently 

set to expire in 2014 and I hope they are going to continue it beyond that, and I think they will, as well as provide direction for 

the DOE oil shale R&D activities and the Administration’s proposal 

for an interagency R&D collaboration on unconventional energy resources. The only thing that can stop this amazing story from continuing is politics, specifically, the Environmental Protection Agency’s thinly veiled campaign to restrict access to these resources. 

In closing, I will just say the bill I am introducing today will help 

to provide a check against EPA’s war on energy by addressing environmental challenges through technological solutions instead of 

job-killing regulations. 

I would like to ask unanimous consent to enter into the record 

a letter from the American Geosciences Institute in support of H.R. 

6603, and I look forward to hearing from our witnesses today, and 

I yield back, and Mr. Chairman, I ask unanimous consent to enter 

into the record that letter. 

[The prepared statement of Mr. Hall follows:] 

PREPARED STATEMENT OF COMMITTEE CHAIRMAN RALPH M. HALL

Good morning and thank you Chairman Harris for yielding me time. I want to 

thank the witnesses for being here to talk about an issue that is very important 

to me. In particular, I would like to recognize and thank Dr. Daniel Hill, the Chair 

of Texas A&M Petroleum Engineering Department, and Mr. David Martineau, the 

Chairman of the Texas Independent Producers and Royalty Owners Association 

(TIPRO). 

Energy policy is and has always been one of my top priorities, both as a Member, 

and as Chairman of this Committee. I believe strongly that, after prayer, energy is 

the most important word in the dictionary. It is the foundation upon which our nation has prospered, and the key to our quality of life and standard of living. 

That is why I introduced H.R. 6603, which would increase energy security 

through support for research and development to enable prudent development of 

U.S. domestic energy resources. This legislation builds on the record of the Science, 

Space, and Technology Committee during my tenure as Chairman. 

The U.S. is blessed with a wealth of unconventional energy resources and we are 

currently experiencing a revolution in oil and gas production thanks to those resources. This increased production is not only increasing our energy security, it is 

stimulating our economy and creating much needed jobs. In 2010, unconventional 

natural gas development alone supported over a million jobs in this country, and 

this number is expected to more than double by 2035. 

This bipartisan legislation promotes the development of oil shale instead of restricting it, and ensures we maximize the benefits of our unconventional oil and gas 

resources. The bill directs the Department of Energy to undertake R&D activities 

to address the scientific and technological barriers to oil shale development. It also 

supports R&D to minimize water use and maximize efficiency in shale oil and gas 

operations. The legislation includes language from the Produced Water Utilization 

Act, a bill I sponsored in the 111th Congress and passed through the House with 

unanimous consent. 
24 

In 2005, I helped author Section 999 of the Energy Policy Act, which created a 

very successful Department of Energy unconventional oil and gas research and development program. The bill before us today is intended to complement the ongoing 

999 program-which is currently set to expire in 2014 but I hope will continue beyond that-, as well as provide direction for the DOE oil shale R&D activities and 

the Administration’s proposal for an interagency R&D collaboration on unconventional energy resources. 

The only thing that can stop this amazing story from continuing is politics-specifically, the Environmental Protection Agency’s thinly veiled campaign to restrict access to these resources. The bill I’m introducing today will help to provide a check 

against EPA’s war on energy by addressing environmental challenges through technological solutions instead of job-killing regulations. 

I would like to ask unanimous consent to enter into the record a letter from the 

American Geosciences Institute in support of H.R. 6603. 

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

Chairman HARRIS. Without objection. 

[The information appears in Appendix II] 

Chairman HARRIS. Thank you, Chairman Hall, and Mr. Chairman, it is of course been a pleasure to work with you the last two 

years, and I realize that the room has been brightened up a little 

bit by a new picture hanging on the wall opposite the Chairman’s 

podium here. Yeah, that is appropriate. 

Chairman HALL. Can I tell you something about it? 

Chairman HARRIS. I will yield to the Chairman. 

Chairman HALL. I don’t know how long it took him to do it, but 

he looked at me for about an hour and a half and took a thousand 

pictures and then he brought the picture in a box down to my 

house in Rockwell and he opened it up, and I said ‘‘Oh, my God.’’ 

I looked at it, and I said ‘‘It’s terrible.’’ He said, ‘‘Well, I have my 

things here. I can touch it up. What is your problem with it?’’ I 

said, ‘‘Well, I don’t think you can improve on it.’’ He said ‘‘I can do 

whatever you ask me to do. What is the problem with it?’’ I said, 

‘‘The main problem, it looks just exactly like me.’’ Anyway, he 

eased up a little bit, but he did a good job, and thank you, Mr. 

Chairman. 

Chairman HARRIS. Thank you, Mr. Chairman Hall. 

I want to again thank the witnesses here today and now yield 

to the ranking member, Mr. Miller, for an opening statement. 

Mr. MILLER. Thank you, Mr. Chairman. 

Before I begin, I would like the opportunity to welcome our newest member, David Curson. Congressman Curson occupies the seat 

left by Thaddeus McCotter representing the 11th District of Michigan. He will not be a Member of the new Congress so he will probably not have the opportunity Thad McCotter had to impress us 

with his distinctive personality. He brings long experience as a 

member of the United Auto Workers leadership and has a technical 

background in manufacturing, which is a welcome addition to this 

Congress. So we do welcome him. 

Mr. Chairman, we obviously have some disagreement about what 

would constitute an all-of-the-above energy policy. The lesson for 

today’s hearing is from the Book of Matthew: ‘‘For to the one who 

has, more will be given, and he will have in abundance, and from 

the one who has not, even what he has will be taken away.’’ Or 

as many Americans put it colloquially, them that has, gets. That 

has certainly been the Republican policy on energy research. 
25 

Our efforts to assist emerging energy technologies like solar, geothermal, wind, and technologies to make our energy use more efficient are considered ‘‘green pork’’ to House Republicans. They have 

opposed efforts by the Department of Energy to promote research, 

demonstration projects, and commercialization of emerging technologies as picking winners and losers. The Republican’s Views and 

Estimates for Fiscal Year 2012 gave deeply principled reasons for 

opposition to government investment in emerging energy technologies, and I quote: ‘‘Fundamentally, the act of providing individual firms with government money for the purpose of commercializing profitable technology is an inappropriate intervention in 

the market that may crowd out or discourage a greater amount of 

private investment.’’ 

So for emerging technologies that have not the economic and political power of incumbent fossil fuel and nuclear technologies, even 

what they have will be taken away. But incumbent technologies, 

which are already enormously profitable, will be given more, and 

will have in abundance, with none of the navel-gazing discussion 

about picking winners and losers or inappropriate interventions in 

the market. 

The incumbent technologies have benefited from government research for generations, government subsidies for generations, including research. Hydraulic fracturing is the combination of technologies developed by federally funded research. We will obviously 

continue to depend on fossil fuel technologies for most of our energy 

well into the future. Many Democrats, including me, have supported government funding for fossil fuels research, and will likely 

support this legislation as well. The section of Chairman Hall’s legislation on produced water is almost identical to legislation passed 

by the Democratic majority in the last Congress. The industries 

and yes, the specific individual firms that will benefit most directly 

from this legislation, already have far more public and private investment in applied research and commercialization of technologies 

than do firms developing alternative energy technologies, some of 

which may dramatically alter our energy future and some of which 

may never be commercially viable. 

Even more important, continued support in abundance for incumbent technologies, often to the exclusion of alternative technologies, continues to base our energy future almost exclusively on 

hunting fossil fuels to extinction, leaving us woefully unprepared 

for our longer-term energy needs. 

Mr. Chairman, I suspect that most Democrats will support this 

legislation if it comes to a vote, but I hope that Republicans will 

consider whether the arguments in support of this legislation will 

be equally applicable to research for alternative energy sources so 

that we can have truly an all-of-the-above energy policy. 

I yield back the balance of my time. 

[The prepared statement of Mr. Miller follows:] 

PREPARED STATEMENT OF SUBCOMMITTEE RANKING MEMBER BRAD MILLER

The lesson for today’s hearing is from the Book of Matthew: ‘‘For to the one who 

has, more will be given, and he will have in abundance, and from the one who has 

not, even what he has will be taken away.’’ Or as many Americans put it more 

colloquially, them that has, gets. 

That has certainly been the Republican policy on energy research. 
26 

Our efforts to assist emerging energy technologies like solar, geothermal, wind, 

and technologies to make our energy use more efficient are considered ‘‘green pork’’ 

to House Republicans. They have opposed efforts by the Department of Energy to 

promote research, demonstration projects, and commercialization of emerging technologies as ‘‘picking winners and losers.’’ The Republican’s Views and Estimates for 

Fiscal Year 2012, gave deeply principled reasons for opposition to government investment in emerging energy technologies: ‘‘Fundamentally, the act of providing individual firms with government money for the purpose of commercializing profitable 

technology is an inappropriate intervention in the market that may crowd out or 

discourage a greater amount of private investment.’’ 

So for emerging technologies that have not the economic and political power of 

incumbent fossil-fuel and nuclear technologies, even what they have will be taken 

away. 

But incumbent technologies, which are already enormously profitable, will be 

given more, and will have in abundance, with none of the navel-gazing discussion 

about picking winners and losers or inappropriate interventions in the market. 

The incumbent technologies have benefited from government subsidies for generations, including funding for research. Hydraulic fracturing is the combination of 

technologies developed by federally-funded research. We will obviously continue to 

depend on fossil fuel technologies for most of our energy well into the future. Many 

Democrats, including me, have supported government funding for fossil fuels research, and will likely support this legislation as well. The section of Chairman 

Hall’s legislation on ‘‘produced water’’ is almost identical to legislation passed by the 

Democratic majority in the last Congress. 

The industries and yes, the specific ‘‘individual firms’’ that will benefit most directly from this legislation, already have far more public and private investment in 

applied research and commercialization of technologies than do firms developing alternative energy technologies, some of which may dramatically alter our energy future and some of which will never be commercially viable. Even more important, 

continued support in abundance for incumbent technologies, often to the exclusion 

of alternative technologies, continues to base our energy future almost exclusively 

on hunting fossil fuels to extinction, leaving us woefully unprepared for our longerterm energy needs. 

Mr. Chairman, I suspect that most Democrats will support this legislation if it 

comes to a vote, but I hope that Republicans will consider the arguments in support 

of this legislation as arguments for a truly ‘‘all of the above’’ energy policy. 

I yield back the balance of my time. 

Chairman HARRIS. Thank you very much, Mr. Miller, and I join 

you in welcoming Mr. Curson to the Science, Space, and Technology Committee, and I welcome him sitting in on the Subcommittee hearing today. 

If there are Members who wish to submit additional opening 

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

point. 

At this time I would like to introduce our witness panel. Our 

first witness today is Dr. Anthony Cugini. Dr. Cugini is the Director of the National Energy Technology Laboratory for the Department of Energy. He previously served as Director of the Office of 

Research and Development at the National Energy Technology 

Laboratory. Before that position, Dr. Cugini served as the Focus 

Area Lead for NETL’s Computational and Basic Sciences Focus 

Area. He has been at the laboratory since 1987. 

Our next witness is Dr. David Martineau. Dr. Martineau is the 

Chairman of the Texas Independent Producers and Royalty Owners 

Association. Mr. Martineau has worked in the oil and gas industry 

for more than 50 years. He is an active member of the American 

Association of Petroleum Geologists, the Interstate Oil and Gas 

Compact Commission, and the Barnett Shale Water Conservation 

and Management Committee. 

Our third witness is Dr. Daniel Hill, who is the Interim Department Head, a Professor and holder of the Noble Chair in Petroleum 
27 

Engineering at Texas A&M. Previously, he taught for 22 years at 

the University of Texas at Austin after spending five years in industry. He is the author of the Society of Petroleum Engineering 

monograph ‘‘Production Logging: Theoretical and Interpretive Elements’’, co-author of the textbook ‘‘Petroleum Production Systems’’, 

co-author of an SPE book, ‘‘Multilateral Wells’’ and author of over 

150 technical papers and holds five patents. 

Our final witness is Mr. Michael Hagood. Mr. Hagood is the Director of Program Development for Energy and Environment 

Science and Technology at the Idaho National Laboratory. He is responsible for developing programs advancing energy innovation 

and also for designing and implemented INL’s regional energy sector strategy, notably the western energy corridor concept. Mr. 

Hagood joined INL in 2003 and previously has also supported INL 

national and homeland critical energy infrastructure programs. 

Thank you all for appearing before the Subcommittee today. As 

our witnesses should know, spoken testimony is limited to five minutes each after which the members of the Committee will have five 

minutes each to ask questions. 

I now recognize our first witness, Dr. Anthony Cugini, the Director of the National Energy Technology Laboratory at the Department of Energy, for five minutes. 

STATEMENT OF DR. ANTHONY CUGINI, DIRECTOR, 

NATIONAL ENERGY TECHNOLOGY LABORATORY, 

DEPARTMENT OF ENERGY 

Dr. CUGINI. Thank you. Chairman Harris, Ranking Member Miller and members of the Subcommittee, I appreciate the opportunity 

to discuss the role that the Department of Energy’s Office of Fossil 

Energy and National Energy Technology Laboratory continue to 

play in the safe and responsible development of the Nation’s unconventional oil and natural gas resources. 

As you know, since 2008, U.S. oil and natural gas production has 

increased each year. In 2011, U.S. crude oil production reached its 

highest level in nearly a decade. Natural gas production grew in 

2011 as well, the largest year-over-year increase in history. Overall, oil imports have been falling since 2005, and our dependence 

on imported oil declined from 57 percent in 2008 to 45 percent in 

2011, the lowest level since 1995. 

There are a number of unconventional resources with the potential to support the President’s all-of-the-above strategy and to further reduce U.S. reliance on foreign oil. These include U.S. oil reservoirs amenable to CO2 EOR, heavy oil, oil shale, shale oil, and 

natural gas resources to include methane hydrates. 

Studies indicate that 24 billion barrels of residual oil may be recoverable with current CO2 EOR technologies and another 36 billion barrels with next-generation technology. For perspective, the 

United States currently produces about 2 billion barrels of crude oil 

per year and has proved reserves of about 23 billion barrels. The 

National Coal Council estimates that another 33 billion barrels of 

residual oil zone oil is recoverable at a crude oil price of $85 per 

barrel. 

In combination with oil shale, heavy oil, oil sands and shale oil, 

EIA estimates that unconventional oil resources total more than 
28 

3,000 billion barrels of liquid hydrocarbons in place. Production of 

unconventional natural gas resources has also risen sharply during 

the past decade. Shale gas in 2012 in the United States is roughly 

25 times what it was in 2000. EIA estimates that 482 trillion cubic 

feet of unproven but technically recoverable natural gas exists, 

more than 20 times 2011 annual natural gas consumption of 24 

trillion cubic feet. 

Even more abundant than shale gas is natural gas from methane 

hydrate. The Bureau of Ocean Energy Management, Regulation 

and Enforcement estimates in-place gas hydrate resources of 

21,400 trillion cubic feet in the Gulf of Mexico, and the USGS estimates 85 trillion cubic feet on the North Slope of Alaska. 

Implicit in the development of our unconventional oil and gas resources is that air and water quality and public health and safety 

are not compromised. To this end, the Department signed a memorandum of agreement with the EPA and the USGS to address the 

potential environmental, health and safety impacts of hydraulic 

fracturing and the development of other unconventional fossil resources. The DOE’s NETL is also carrying out research to quantify 

and understand the risks of shale gas and shale oil development 

as well as improve related unconventional oil and gas characterization and extraction technologies under Section 999 of the Energy 

Policy Act of 2005, the Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources program. Just this week, 

the selection of 15 new projects was announced as part of the Section 999 program. 

Regarding methane hydrates, DOE’s efforts have featured extensive interagency coordination and collaborations with leading international gas hydrate research organizations. Because of these efforts, hydrates have moved from a scientific curiosity in 2000 to a 

known resource today. 

DOE and NETL have a long history of success in unconventional 

oil and gas research. Collaboration with industry in the 1970s and 

1980s was a linchpin in the current shale gas revolution. Recent 

successes include completion of a large-scale field test of natural 

gas extraction from methane hydrates on the North Slope of Alaska. Also, Altela Incorporated will open two commercial water treatment facilities this year in Pennsylvania based on technology demonstrated under DOE’s oil and gas program. NETL also conducts 

onsite research that complements its extramural portfolio and it 

leverages competencies and capabilities including expertise in resource characterization, technology development and environmental 

monitoring to inform responsible, sustainable exploration of production of the Nation’s unconventional domestic gas resources. 

Let me conclude by saying that the United States contains significant hydrocarbon wealth that can be extracted and used to provide economic benefits for all Americans. The Department is committed to developing the science and technology that will allow the 

Nation to use its abundant fossil energy resources in a way that 

balances the energy needs for sustaining a robust economy with 

continued environmental responsibility. I recognize the developed 

legislation that aids in supporting unconventional oil and gas research, and while we have not developed a position, I am pleased 

that this legislation is focused on this important energy resource. 
29 

Mr. Chairman, this completes my prepared statement. I look forward to addressing any questions that you or the other Subcommittee members may have. 

[The prepared statement of Dr. Cugini follows:] 
30 

Statement of 

Anthony V. Cugini 

Director, National Energy Technology Laboratory 

U. S. Department of Energy 

Before the 

Subcommittee on Energy and Euvironment 

Committee on Science, Space, and Technology 

U.S. House of Representatives 

November 30, 2012 

Chairman Harris, Ranking Member Miller, and members of the Subcommittee, I appreciate the 

opportunity to discuss the role that the Department of Energy's Office of Fossil Energy's 

National Energy Technology Laboratory eontinues to play in the safe and responsible 

development of the Nation's unconventional oil and natural gas resources. 

As you know, since 2008, U.S. oil and natural gas production has increased each year. In 2011, 

U.S. crude oil production reached its highest level in nearly a decade. Natural gas production 

grcw in 2011 as well the largest year-over-year volumetric increase in history. Overall, oil 

imports have been falling since 2005, and our dependence on imported oil declined from 57 

percent in 2008 to 45 percent in 2011 - thelowest level since 1995. 

One of the factors enabling us to make such progress is that our country enjoys a bounty of oil 

and natural gas resources. Over the past century, Americans have applied their ingenuity towards 

extracting these resources, which in tum have helped to fuel our Nation's economic prosperity. 

Domestic Unconventional Oil and Natural Gas Resources 

There are a number of unconventional resources with the potential to support the president's a1lof-the-above energy strategy and to help reduce U.S. reliance on foreign oil. These include U.S. 

oil reservoirs amenable to carbon dioxide enhanced oil recovery (C02 EOR), heavy oil, oil shale, 

shale oil, and natural gas resources including methane hydrates. 

Studies have shown that 24 billion barrels of residual oil may be economically recoverable 1 with 

the application of current C02-EOR technologies and another 36 billion barrels with widespread 

application of "next generation" CO2 EOR technologl. For perspective, the U.S. currently uses 

about 5.4 billion barrels of crude oil per year and has proved reserves of about 23 billion 

barrels 3 

. In addition to the post-waterflood residual oil left behind in producing oil reservoirs, 

there are significant amounts of oil in "residual oil zones" or ROZs, the portion of an oil 

reservoir below its estimated oil-water contact. These zones can extend for hundreds of feet and 

1 Economically recoverable at a price of$85 a barrel and $40 metric ton of C02. 

2 V. Kuuskraa, T. Van Leeuwen, and M. Wallace. June 2011. Improving Domestic Energy Security and Lowering 

C02 Emissions with "Next Generation" C02 Enhanced Oil Recovery. DOEfNETL report # 201111504 

Table EX-3. 

3 E1A production for 2011, http://www.eia.gov/dnav/petlpet crd crodn adc mbbl a.hlm 

EIA reserves for end of 2010, http://www.eia.gov/dnav/pet/petcrdpresdcuNUSa.htm 

1 
31 

could hold large volumes of previously undocumented oil amenable to recovery via C02 EOR. 

The National Coal Council estimates that 33 billion barrels ofROZ oil is recoverable at a crude 

oil price of$85 per barrel4

. 

In addition to the residual oil and ROZs, oil shale, heavy oil, oil sands and shale oil 

(conventional oil in shale formations) offer a huge potential in the US. Taken together, these 

four unconventional oil resources total more than 3000 billion barrels ofliquid hydrocarbons in 

placeS. Even if one were to assume that only 10 percent of this oil could be recovered 

economically, it would mean a significant increase in the Nation's domestic energy supply. 

The United States is equally well-endowed with unconventional natural gas resources. 

Production of natural gas from unconventional rocks, tight sands, coal seams, and organic shales, 

has risen sharply during the past two decades. Production of natural gas from shale source rock 

in 2012 in the U.S. is roughly 25 times what it was in 20006

• This rapid growth in shale gas 

production is recognized to be the result of the combined application of horizontal drilling and 

large-volume hydraulic fracturing technologies. EIA's 2012 Annual Energy Outlook estimates 

that 482 trillion cubic feet (Tcf) of unproven but technically recoverable natural gas exists in 

eleven major shale gas plays, more than 1.75 times the current total for U.S. dry gas proved 

reserves and more than 20 times the 2011 annual marketed dry natural gas production (23 Tcf). 

Even more abundant than shale gas is natural gas from methane hydrate. In 2008, the U.S. 

Bureau of Ocean Energy Management, Regulation and Enforcement, released a preliminary 

assessment of the in-place gas hydrate resource in the Gulf of Mexico. The assessment, which 

does not consider whether the resource is technically or economically recoverable, estimated a 

mean value of21,400 Tcf of methane-in-place in hydrate form. The assessment also determined 

that about 6,700 Tcf of this resource occurs in relatively high concentration accumulations within 

sandy sediments; the sort of reservoirs that would be more likely to permit gas flow. To put these 

enormous methane hydrate resources in perspective, the DOE EIA reports that the US consumed 

a little more than 24 Tcf of gas in 2011. 

4 National Coal Council, 2012, Harnessing Coa/'s Carbon Content to Advance the Economy, Environment, and 

Energy Security. p. 4 

5 NETL, 2011, "Domestic Unconventional Fossil Energy Resource Opportunities and Technology Applications 

Report to Congress," September, Table 3-4, p. 15 http://www.netl.doe.gov/lechnologies/oilgas/publicationsIEPreports/20 II-005539-unc-fe-report-congress-final-oct-20 11.pdf 

5 NETL, 2011, "Domestie Unconventional Fossil Energy Resource Opportunities and Technology Applications 

Report to Congress," September, p. 13 http://www.net1.doe.gov/techno]ogies/oil-gas/publicationslEPreports/2011-

005539-unc-fe-report-eongress-final-oct-20 II.pdf 

5 USGS, 2012, "Isopach and Isoresource Maps for Oil Shale Deposits in Eocene Green River Formation for the 

Combined Uinta and Piceance Basins, Utah and Colorado," http://pubs.usgs.gov/sir/2012/50761 

5 ETA, Annual Energy Outlook 2012, Table 16, p.58 http://www.eia.gov/forecasts/aeo/pdfI0383(2012).pdf 

6 ETA, Annual Energy Outlook 2012 Online Data, Table A-14, http://www.eia.gov/analysis/projectiondata.cfm#annualproj for 2012 estimate of7 .67 Tef per year and "Shale Gas and the Outlook for U.S. Natural Gas 

Markets and Global Gas Resources," a presentation by Richard Newell from June 21, 2011 

http://www.eia.gov/pressroomlpresentations/newell 06212011.pdf for a 2000 estimate of 0.3 Tef per year 

2 
32 

Also in 2008, the United States Geological Survey estimated that there is approximately 85 Tef 

of undiscovered, technically recoverable natural gas resource within gas hydrates on the North 

Slope of Alaska. If methane hydrates can be proven to be technically and economically 

producible, this onshore resource located near existing oil and gas production infrastructure is 

likely to be the first methane hydrate deposit to be tapped. 

Current Status of Research and Technical ChaUenges 

Unconventional resources are much larger in volume than are our conventional resource stores. 

These resources, however, generally exist in more geologically complex settings or in more 

remote or environmentally sensitive areas and require more intensive production methods. The 

safe and responsible development of un eon vent iona I domestic fossil resources creates jobs and 

provides economic benefits. 

Federal coordination and collaboration is critical to successfully addressing the environmental 

and safety challenges associated with unconventional oil and gas development so that the 

benefits highlighted above can be realized. To this end, the President signed an Executive Order 

on April 13,2012, creating a new Interagency Working Group to Support Safe and Responsible 

DeVelopment of Unconventional Domestic Natural Gas Resources. On the same day DOE, the 

Environmental Protection Agency, and the Department of the Interior's U.S. Geological Survey 

signed a related Memorandum of Agreement initiating a Multi-Agency Collaboration on 

Unconventional Oil and Gas Research. The objective of this collaborative effort is to better 

understand and address the potential environmental, health, and safety impacts of shale gas 

activities, although the research is also applicable to the development of other unconventional oil 

and gas resources. Through the collaboration, a robust Federal R&D plan will be developed, 

taking into account high priority recommendations of the Secretary of Energy Advisory Board 

(SEAB) Natural Gas Subcommittee. DOE's role in this initiative will focus on priorities 

identified by the interagency collaboration in a research plan to be formed within its area of core 

research competencies. 

The Department is earrying out research directed at quantifYing and understanding the 

environmental and safety risks of shale gas and shale oil development, as well improving our 

understanding of emerging and developing shale plays, lowering the cost and increasing the 

efficiency of technologies for treating hydraulic fracturing flowback water, and optimizing the 

recovery of shale gas resource. These efforts are funded through Title IX, Subtitle J, Section 999 

of the Energy Policy Act of 2005, the Ultra-Deepwater and Unconventional Natural Gas and 

Other Petroleum Resources Program. 

DOE's current CO2 EOR research portfolio is focused on developing and demonstrating next 

generation technologies designed to accelerate the application of C02 EOR in those basins where 

it has not yet been applied, and in those reservoirs within areas with existing CO2 EOR that have 

not been viewed as economic candidates. 

While technology exists for producing heavy oil, there are challenges that still require research, 

although given the economic benefits from producing efficiently, industry has incentive to do 

most of this research themselves. A key challenge is mitigating the environmental and safety 

3 
33 

risks inherent with heavy oil and oil sands development. Recent DOE efforts have been focused 

on heavy oil deposits in the Ugnu Formation on the North Slope; understanding the formation's 

geological complexity; and developing water soluble polymers suitable for waterflooding Ugnu 

heavy oil reservoirs. 

Oil shale was a major topic of public and private research in the 1980s, but interest declined 

when other less expensive sources of oil became available. In 2007 and 2009 the Bureau of Land 

Management (BLM) leased Federal minerals in Colorado and Utah to private companies to 

permit them to conduct oil shale research projects, with the possibility that the projects could be 

followed by a commercial leasing program. At least seven companies are utilizing these leases or 

other privately held oil shale properties to test both surface retorting of mined shale and in situ 

retorting technologies. A key research challeuge associated with oil shale is the need to develop 

and evaluate technologies for reducing or controlling the potential for surface and subsurface 

water contamination and other environmental impacts. 

With regard to methane hydrates, the DOE has successfully finished a pilot production well. 

Because of this effort and past DOE efforts, hydrates have moved from a scientific curiosity in 

2000 to a known resource today. 

DOE Capabilities and Expertise 

The DOE's Office of Fossil Energy (FE) with support by the National Energy Technology 

Laboratory (NETL) remains well-positioned to address appropriate research challenges related to 

envirorunental sustainability and safe development of these unconventional oil and natural gas 

resources. FE and NETL have a long history of successfully engaging industry and academia, 

forming collaborative partnerships that leverage individual strengths to achieve useful results. FE 

and NETL engage with a wide array of experts when formulating research plans, including 

Federal Advisory Committees, industry experts, members ofNETL's academic research 

consortium, authorities at other National Laboratories, and on-site scientists and engineers. 

NETL's 1970- and 1 980-era contributions to the fundamental research that resulted in the current 

shale gas "revolution" have been reported in the press, but three examples of DOE research 

highlight recent contributions made by DOE. 

First, as mentioned above, the Ignik Siknmi well on the North Slope of Alaska represents an 

unprecedented test of technology to safely extract a steady flow of natural gas from methane 

hydrates. DOE partnered with ConocoPhillips and the Japan Oil, Gas and Metals National 

Corporation to conduct a test of natural gas extraction from methane hydrate using a unique 

production technology, developed through laboratory collaboration between the University of 

Bergen, Norway, and ConocoPhillips. Between February 15 and April 10, 2012, the team 

injected a mixture of CO2 and nitrogen into a hydrate bearing zone and demonstrated that this 

mixture could promote the production of natural gas. This test was the first-ever field trial of a 

methane hydrate production methodology whereby CO2 was exchanged in situ with the methane 

molecules within a methane hydrate structure, and the 30 day-long production test was five times 

as long as any previous test. 

4 
34 

Second, in 2010 DOE partnered with Altela Inc. to test the AltelaRain® fracturing water 

treatment process at a well site in western Pennsylvania. Over a 9-month period, 77 percent of 

the produced hydraulic wastewater was successfully treated onsite, resulting in distilled water as 

the effluent. Following the DOE-sponsored demonstration project, four AltelaRain modules were 

sold and installed at a facility in Williamsport, Pennsylvania, for treating Marcellus shale 

wastewater. Building on the success of this application, in 2012 Altela Inc. and its partners are 

opening two new wastewater treatment facilities in western Pennsylvania. Each facility is able to 

process up to 12,000 barrels of wastewater a day-about 500,000 gallons per facility. The 

purified water can then be reused for any number of purposes. 

Third, DOE is currently collaborating with Petroleum Recovery Research Center at New Mexico 

Tech to develop a nanoparticle-stabilized CO2 foam system that can improve the sweep 

efficiency of injected CO2 in EOR projects. The research team has demonstrated for the first time 

that adding a small amount (30-50 parts per million) of surfactant to a silica nanoparticle solution 

significantly improves CO2 foam generation and foam stability. Using nanosilica particle 

stabilized CO2 foam rather than a straight CO2 and water mixture, the researchers were able to 

recover up to 80 percent of the residual oil that remains after waterflooding. DOE and New 

Mexico Tech are continuing to quantify the performance of these foams in core flooding 

experiments under a variety of conditions and concentrations, but it is clear that cutting edge 

technologies utilizing next-generation materials like nanoparticles can dramatically improve oil 

recovery. 

These three examples illustrate the range of approaches-international collaboration, field tests 

on new technologies with industry partners, laboratory experiments with academic researchersthat are reflected in DOE's unconventional oil and natural extramural gas research program. 

Conclusion 

The U.S. contains significant hydrocarbon wealth that can be extracted and used to provide 

economic benefits for all Americans. Developing our unconventional oil and natural gas 

resources in an environmentally sustainable and safe manner will require new technologies. 

DOE has demonstrated its ability to engage industry and academia to perform research that can 

help catalyze the development and application of these new technologies. 

The research challenges are significant. Producing unconventional oil and natural gas requires 

that industry expend more energy, use more water, contact larger portions of the reservoir, and 

counteract more physical forces than when producing conventional oil and natural gas resources. 

It is important that we understand and minimize the unwanted consequences of unconventional 

fossil resource development. But as they have in the past, new technologies can provide ways to 

reduce or eliminate these bamers. 

The Department of Energy is committed to developing, where appropriate, the science and 

technology that will allow the Nation to use its abundant fossil energy resources in a way that 

balances the energy needs for sustaining a robust economy with continued environmental 

responsibility. As we move forward on a multi-agency, collaborative research program with 

DOl and EPA, the Office of Fossil Energy will pursue its mission with the same commitment to 

excellence and imlOvation. 

5 
35 

Mr. Chairman, this completes my prepared statement. I look forward to addressing any 

questions that you or other members of the Subcommittee may have. Thank you. 

6 
36 

Chairman HARRIS. Thank you, Dr. Cugini. 

I now recognize our second witness, Mr. David Martineau, the 

Chairman of the Texas Independent Producers and Royalty Owners 

Association. 

STATEMENT OF MR. DAVID MARTINEAU, CHAIRMAN, 

TEXAS INDEPENDENT PRODUCERS AND 

ROYALTY OWNERS ASSOCIATION 

Mr. MARTINEAU. Thank you very much. Good morning, Mr. 

Chairman and members. My name is David Martineau and I am 

representing the Texas Independent Producers and Royalty Owners 

Association, also known as TIPRO. TIPRO was founded in the East 

Texas Field in 1946. Since then, TIPRO has s grown to be a toptier oil and natural gas trade association made up of over 2,500 

members statewide. Our membership ranges from small, familyowned businesses to large publicly traded independent producers, 

and includes large and small royalty owners, mineral estates, and 

trusts. I currently have the pleasure of serving as the Chairman 

of the Board of Directors for TIPRO. I am a geologist. I worked for 

Pitts Oil Company for 40 years, as we said, and I am truly honored 

to be here. 

Lately, much has been made of this country’s looming fiscal cliff. 

The United States, however, is not only facing a fiscal cliff, but an 

energy cliff as well. Domestic independent producers are responsible for approximately 75 percent of the domestic natural gas production, and nearly 50 percent of the domestic oil production. However, threats to the framework that allows independents to maintain and grow their production levels exist in various forms. One, 

tax provisions like intangible drilling deductions, IDCs, and depletion allowance are crucial to the survival of the small independent 

producers and they are being attacked and mislabeled as big oil 

subsidies. Overreaching regulations from the EPA and U.S. Fish 

and Wildlife Service with no scientific backing pile additional unnecessary compliance costs onto the oil and natural gas producers. 

The Federal Government is attempting to go green and pick winners by focusing federal research and development monies on 

unproven, uneconomical and unreliable sources. They will not face 

the fact that 85 percent of the energy in the United States comes 

from fossil fuels. 

What needs to be done to continue to tap the American energy 

potential that has been created by the new shale revolution? You 

need to, one, understand variations in subsurface properties to 

avoid drilling marginal wells and increase recovery efficiency, scientifically characterize risks and inform stakeholders, minimize 

surface impacts of unconventional oil and gas operations. 

In the past, federal dollars have been spent on researching and 

developing improved methods of oil and gas extraction. Much of the 

resultant data and techniques combined with the forward thinking 

of some brilliant and creative private-sector minds resulted in some 

of the biggest energy successes in the country’s history. Let me outline a few specific cases of worthwhile federal research conducted 

on oil and gas. In 1976 the U.S. Department of Energy initiated an 

eastern shale project to evaluate the gas potential of and enhance 

oil production from shales within the Appalachian, Illinois and 
37 

Michigan basins in the eastern United States. This project showed 

that we had enormous amounts of natural gas locked in these domestic shale formations, which are now the massive Marcellus and 

Utica shale plays. In 1982, the Federal Government began funding 

the research efforts of the Gas Research Institute, an industryformed research and development program founded in 1978, which 

has since resulted in increased natural gas viability as a fuel 

source. In 1991, George P. Mitchell, the father of the Barnett shale, 

with financial help from the Department of Energy, drilled and 

completed his first Barnett Shale horizontal well. In 2005, the Energy Policy Act and a research program managed with the Research Partnership to Secure Energy for America called RPSEA 

has been a very successful program. 

Recognizing the importance of oil and natural gas and investing 

federal money in its development should not be a thing of the past. 

In fact, never in history has it been more crucial to continue improving and enhancing our ability to recover domestic oil and natural gas. Domestic energy independence can be achieved, and federal research money can play a part. 

In the State of Texas alone, since the shale revolution started in 

2006, from 2006 to 2011 we have increased annual production of 

oil from 347 million barrels to 431 million barrels and natural gas 

from 6.3 trillion cubic feet to 7.7. This partially is why our imports 

have dropped from 70 percent to 45 percent in that same time period as we head toward energy independence. 

Chairman Hall’s bill 6603 is a good step in the right direction, 

and I compliment him for his efforts. Many areas where additional 

research could produce significant results are outlined in the bill, 

including hydraulic fracturing, development of improved proppants, 

water minimization, management, reuse and alternatives, improved modeling of formation, energy efficiency in exploration and 

production. 

Hydraulic fracturing—the big item. The hydraulic fracturing 

process, as it has evolved over the past 50-plus years from vertical 

wells to long horizontal wells with multiple fracture treatments, 

has introduced many complexities. There is a need for research 

focus in this area to increase recovery efficiency. To do so requires 

focusing on the subsurface processes involved with fracturing, including modeling of the process, microseismic assessment, emissions, water usage and other research. Successful research will increase the efficiency of the process, significantly reducing the number of well bores required, resulting in a reduction in well sites, 

water usage, emissions, traffic, noise, dust and other factors, all 

while increasing oil and gas recovery per well. This area of research, the optics of which do not indicate direct environmental impact, can have an overwhelming environmental impact. 

Water management is another big issue. According to data collected by the Texas Water Development Board, the volume of water 

used in hydraulic fracturing represents less than one percent of all 

the water consumed in the State of Texas. However, water management goes hand in hand with hydraulic fracturing, and the industry recognizes that there is still progress that can be made in this 

arena. Research and development are needed to address mitigation 

of the volumes of freshwater required in hydraulic fracturing; sig-
38 

nificant volumes of water produced from oil and gas shale wells 

and associated concerns as to its composition when it comes back; 

the development of technology to process water, converting the industry’s largest waste stream into a new, useful product; and assuring the ability to safely dispose of water in the subsurface by 

geologic characterization of potential disposal zones across the 

country because they vary from basin to basin. 

Understanding the subsurface conditions and types of resource 

rock found within unconventional gas formations, in particular oil 

and gas shale, require ongoing research. Flow of fluids—gas, oil 

and water—through the low-permeability formations, particularly 

oil and gas shales, is not well understood. By increasing our understanding of subsurface geologic conditions, we can make progress 

toward effectively answering questions regarding economic recovery 

and environmental safety. Additionally, subsurface research can increase recovery efficiency from many unconventional oil and gas 

fields in the U.S., further unlocking minerals yet in place. These 

developed fields each have an entire infrastructure already in place 

with roads, well bores, metering facilities, marketing. 

Thousands of small independents, many of whom are TIPRO 

members, do not have the resources to conduct their own research, 

yet cumulatively produce a huge portion of domestic oil and natural 

gas. This is an area where targeted and carefully disseminated federally funded research efforts can have a significant and immediate 

impact on production and the economy, and I urge you to revive 

federal research investments into this worthwhile industry. 

Often efforts intended to impact major global oil and natural gas 

companies end up having a much larger impact on small, familyowned companies, many of whom live and work in your hometowns. These companies are a giant component in generating 

American jobs and resources for your state and this country, and 

they are worthy of your investment. 

Thank you for your time. 

[The prepared statement of Mr. Martineau follows:] 
39 

Energy & Environment Subcommittee 

"Tapping America's Energy Potential Through Research and Development." 

Testimony ofTIPRO Chairman David Martineau 

9:30 a.m. - Friday, November 30,2012 

Good morning Mr. Chairman and members. My name is David Martineau, 

and I am here representing the Texas Independent Producers and Royalty 

Owners Association, also known as TIPRO. TIPRO was founded in the East 

Texas Field in 1946. Since then, TIPRO has grown into a top tier oil and 

natural gas trade association, made up of over 2,500 members statewide. Our 

membership ranges from small, family-owned businesses to the largest 

publicly traded independent producers, and includes large and small royalty 

owners, mineral estates, and trusts. 

I currently have the pleasure of serving as the Chairman of the Board of 

Directors for TIPRO. I am a Certified Petroleum Geologist, a licensed Texas 

Professional Geoscientist, and I work as exploration manager for Pitts Oil 

Company based out of Dallas, Texas. I am truly honored to have the 

opportunity to address you all today. 

Lately, much has been made of this country's looming "fiscal cliff'. The 

United States, however, is not only facing a fiscal cliff, but an "energy cliff' 

as well. Domestic independent producers are responsible for approximately 

75% of domestic natural gas production, and nearly 50% of domestic oil 

production. However, threats to the framework that allows independents to 

maintain and grow these production levels exist in various forms: 

llPage 
40 

17 

Energy & Environment Subcommittee 

"Tapping America's Energy Potential Through Research and Development." 

Testimony ofTIPRO Chairman David Martineau 

9:30 a.m. - Friday, November 30, 2012 

1) Tax provisions like Intangible Drilling Cost deductions (IDC's) and 

depletion allowance that are crucial to the survival of small 

independent producers are being attacked and mislabeled as "big oil 

subsidies". 

2) Overreaching regulations from the EPA and U.S. Fish and Wildlife 

Service with little to no scientific backing pile additional unnecessary 

compliance costs onto the oil and natural gas producers. 

3) The federal government is attempting to go green and "pick winners" 

by focusing federal research and development monies on unproven, 

uneconomical, and unreliable energy sources. They will not face the 

fact that eighty-five percent of the energy in the U.S. comes from fossil 

fuels. 

What needs to be done to continue to tap America's Energy Potential that has 

been created by the new Shale Revolution? 

1) Understand variations in subsurface properties to avoid drilling marginal 

wells and increase recovery efficiency. 

2) Scientifically characterize risks and inform stakeholders. 

3) Minimize surface impacts of unconventional oil and gas operations. 

21Page 
41 

Tl 

Energy & Environment Subcommittee 

"Tapping America's Energy Potential Through Research and Development." 

Testimony ofTIPRO Chairman David Martineau 

9:30 a.m. - Friday, November 30, 2012 

In the past, federal dollars have been spent on researching and developing 

improved methods of oil and natural gas extraction. Much of the resultant 

data and techniques, combined with the forward thinking of some brilliant 

and creative private sector minds, resulted in some of the biggest energy 

successes in the country's history. A few specific cases of worthwhile federal 

research conducted on oil and natural gas development: 

)0> In 1976 - the U.S. Department of Energy initiated the Eastern Gas 

Shales Project to evaluate the gas potential of, and to enhance gas 

production from shales within the Appalacian, Illinois, and Michigan 

basins in the eastern U.S. This project showed that we had enormous 

amounts of natural gas locked in these domestic shale formations, 

which are now the massive Marcellus and Utica plays. 

)0> In 1982 - the federal government began funding the research efforts of 

the Gas Research Institute - an industry-formed research and 

development program, founded in 1978, which has since resulted in 

increased natural gas viability as a fuel source. 

)0> In 1991 - George P. Mitchell, with financial help from the Department 

of Energy, drilled and completed his first Barnett Shale horizontal well. 

)0> In 2005 - Energy Policy Act - is a research program with the Research 

Partnership to Secure Energy for America (RPSEA). 

Recognizing the importance of oil and natural gas, and investing federal 

money in its development, should not be a thing of the past. In fact, never in 

31Page 
42 

Tl 

Energy & Environment Subcommittee 

"Tapping America's Energy Potential Through Research and Development." 

Testimony ofTIPRO Chairman David Martineau 

9:30 a.m. - Friday, November 30, 2012 

history has it been more crucial to continue improving and enhancing our 

ability to recover domestic oil and natural gas. Domestic energy 

independence can be achieved, and federal research money can playa part. 

In the state of Texas alone, since the Shale Revolution started from 2006 to 

2011 we have increased annual production of oil from 347 million bbls to 

431 million bbls and natural gas 6.3 trillion MCF to 7.7 trillion MCF. This 

partially is why our imports have dropped from 70% to 45% in that same 

time period and we are headed toward energy independence. 

Chairman Hall's H.R. 6603 is a good step in the right direction and I 

compliment him on his efforts. Many areas where additional research could 

produce significant results are outlined in the bill, including: 

}- hydraulic fracturing 

}- development of improved proppants 

}- water minimization, management, re-use, and alternatives 

}- improved modeling of formations 

}- energy efficiency in exploration and production 

Hydraulic Fracturing 

The hydraulic fracturing process, as it has evolved over the past 50+years 

from vertical wells to long horizontal wells with mUltiple fracture treatments 

has introduced many complexities. 

41Page 
43 

Energy & Environment Subcommittee 

"Tapping America's Energy Potential Through Research and Development." 

Testimony ofTIPRO Chairman David Martineau 

9:30 a.m. - Friday, November 30, 2012 

There is a need for research focus in this area to increase recovery efficiency. 

To do so requires research focusing on the subsurface processes involved 

with fracturing, including modeling of the process, microseismic assessment, 

emissions, water usage and other research. 

Successful research will increase the efficiency of the process, significantly 

reducing the number of wellbores required, resulting in a reduction in well 

sites, water usage, emissions, traffic, noise, dust and other factors, all while 

increasing oil and gas recovery per well. 

This area of research, the optics of which do not indicate direct 

environmental impact, can have an overwhelming environmental impact. 

Water Management 

According to data collected by the Texas Water Development Board, the 

volume of water used in hydraulic fracturing represents less than 1 % of all 

water consumed in the state of Texas. 

However, water management goes hand-in-hand with the hydraulic fracturing 

process, and industry recognizes that there is still progress that can be made 

in this arena. Research and development are needed to address: 

SIPage 
44 

Tl 

Energy & Environment Subcommittee 

"Tapping America's Energy Potential Through Research and Development." 

Testimony ofTIPRO Chairman David Martineau 

9:30 a.m. - Friday, November 30, 2012 

1) mitigation of the volumes of fresh water required for hydraulic 

fracturing; 

2) significant volumes of water produced from oil and gas shale wells and 

associated concerns as to its composition; 

3) the development of technology to process water - converting the 

industry's largest waste stream into a new, useful product; and 

4) assuring the ability to safely dispose of water in the subsurface by 

geologic characterization of potential disposal zones which vary across 

the country - geologic basin to geologic basin. 

Understanding the Snhsnrface 

The subsurface geologic conditions and types of resource rock found within 

unconventional gas formations, in particular oil and gas shale, require 

ongoing research. Flow of fluids (gas, oil, water) through very low 

permeability formations (particularly oil and gas shales) is not well 

understood. By increasing our understanding of subsurface geologic 

conditions, we can make progress toward effectively answering questions 

regarding economic recovery and environmental safety. Additionally, 

subsurface research can increase recovery efficiency from many 

unconventional oil and gas fields in the U.S., further unlocking minerals yet 

in place. These developed fields each have an entire infrastructure already in 

place, i.e. roads, wellbores, metering facilities, marketing, etc. 

61Page 
45 

17 

Energy & Environment Subcommittee 

"Tapping America's Energy Potential Through Research and Development." 

Testimony of TlPRO Chairman David Martineau 

9:30 a.m. - Friday, November 30, 2012 

Thousands of small independents, many of whom are TIPRO members, do 

not have the resources to conduct their own research, yet cumulatively 

produce a huge portion of domestic oil and natural gas. This is an area where 

targeted and carefully disseminated federally-funded research efforts can 

have a significant and immediate impact on production and the economy, and 

I urge you to revive federal research investments into this worthwhile 

industry. 

Often efforts intended to impact major, global oil and natural gas companies end 

up having a much larger impact on small, family-owned companies, many of 

whom live and work in your hometowns. These companies are a giant 

component in generating American jobs and resources for your state and this 

country, and they are worthy of your investment. 

Thank you again for the opportunity to address you today. 

7lPage 
46 

Chairman HARRIS. Thank you very much. 

I now recognize our third witness, Dr. Daniel Hill, the Interim 

Department Head and Professor and holder of the Noble Chair in 

Petroleum Engineering at Texas A&M. Dr. Hill. 

STATEMENT OF DR. DANIEL HILL, 

INTERIM DEPARTMENT HEAD, PROFESSOR 

AND HOLDER OF THE NOBLE CHAIR IN PETROLEUM 

ENGINEERING, TEXAS A&M UNIVERSITY 

Dr. HILL. Good morning, Chairman and Committee members. I 

am Dan Hill. I am the head of the Petroleum Engineering Department at Texas A&M. I have been a faculty member for over 30 

years after working in industry for about five years, and throughout my career I have conducted research on methods to improve oil 

and gas production. For the past ten years, I have been supervising 

research projects funded by the Department of Energy studying 

horizontal wells and hydraulic fracturing. 

Unconventional oil and gas production has changed the U.S. energy game. In just a few years, applications of advanced technology 

have led to the most dramatic economic boost our country has seen 

in my lifetime. Production of natural gas and oil from unconventional reservoirs, primarily shale formations, is soaring, daily lessening this country’s dependence on imported oil. Slide 1 is a history 

and forecast of the U.S. natural gas supply. In less than ten years, 

gas production from shale formations has grown to over 30 percent 

of the U.S. supply and continues to grow. This is great news in 

every possible way. Natural gas is the cleanest burning fossil fuel, 

it yields the least CO2, and it is low cost, thanks to its newfound 

abundance in unconventional reservoirs. 

Even more dramatic is the rapid increase in domestic oil production from unconventional reservoirs. Slide 2 shows that oil production from the Bakken formation in North Dakota is now close to 

500,000 barrels per day. Forecasts are that Bakken production will 

reach a peak of 1 to 2 million barrels per day, equivalent to the 

peak production from the Alaskan North Slope. Production from 

the Eagle Ford formation in South Texas has grown from about 

800 barrels per day to almost 300,000 barrels per day in only three 

years, as you see in this slide. These are just two examples. There 

are many other unconventional reservoirs in other parts of the 

country that are also rapidly adding to domestic production. Without question, there is a revolutionary change in U.S. energy supply 

underway, solely due to oil and gas production from unconventional 

reservoirs. 

And how has this happened? This shale production revolution is 

a result of major advances in the technologies of horizontal drilling 

and hydraulic fracturing, and, in particular, the combination of 

these two technologies. These advances have been aided greatly by 

a modest level of research funding from the Department of Energy, 

funding that supported research primarily at universities, small 

businesses and the national laboratories. 

Let me give you one example. Beginning in the early 1980s and 

through the mid-1990s, the Department of Energy, along with the 

Gas Research Institute, supported fundamental research on measuring the sounds made as hydraulic fractures are created. This re-
47 

search, led by a team at Sandia National Laboratory, resulted in 

a commercial technique for mapping hydraulic fractures that is 

now called microseismic monitoring. This technique, which has now 

been applied to tens of thousands of fracture treatments, and which 

is now itself a multimillion-dollar industry, has allowed engineers 

to greatly improve hydraulic fracturing and well completion practices by providing a means to measure the extent of the fractured 

region. Slide 4 shows a microseismic map of the area affected by 

a multistage fracturing operation. The development of microseismic 

monitoring of hydraulic fracture treatments was clearly enabled by 

the Department of Energy-funded research that proved its viability. 

Is the current domestic energy growth sustainable? The goal of 

energy security, and possibly energy independence for the United 

States, is no longer just political rhetoric, but is technically attainable. However, it will not be easy, and it will require two things: 

further developments in technology, and the trained engineers and 

geoscientists needed for continued growth. 

On the technology side, although hydraulic fracturing methodologies have obviously been developed to the point that oil and gas are 

economically recoverable from very low permeability unconventional reservoirs, there is still a great deal of improvement that can 

be made to this technology. Major challenges include using less 

freshwater in fracturing and drilling fewer wells to contact the 

same amount of reservoir. 

The Department of Energy has been funding fundamental research in conjunction with the Research Partnership to Secure Energy for America, or RPSEA, on topics like these for the past several years, and this research is having a visible impact on industry 

practices. It is important to continue supporting RPSEA as they 

have a proven track record of producing important research results 

using a unique public-private partnership model. 

Perhaps most important is the role that Department of Energy 

funding for unconventional oil and gas research will have on the 

training of the engineers and scientists needed to sustain growth 

in unconventional oil and gas development. The research funded by 

DOE occurs primarily in universities and most of the money ends 

up in the pockets of graduate students. The research funding provided to universities through the proposed Department of Energy 

research program will help support the graduate students who will 

become the future technology leaders of our country. 

Thank you. 

[The prepared statement of Dr. Hill follows:] 
48 

Written Testimony 

Committee on Science, Space, and Technology 

U. S. House of Representatives 

November 30, 2012 

Good Morning. I am Dan Hill and I am the Head of the Petroleum Engineering 

Department at Texas A&M University. I have been a faculty member for over 30 

years after working in industry for about 5 years, and throughout my career I have 

conducted research on methods to improve oil and gas production. For the past ten 

years, I have been supervising research projects funded by the Department of 

Energy studying horizontal wells and hydraulic fracturing. 

Unconventional oil and gas production has changed the U. S. energy 

game. 

In just a few years, applications of advanced technology have led to the most 

dramatic economic boost our country has seen in my lifetime. Production of 

natural gas and oil from unconventional reservoirs, primarily shale formations, is 

soaring, daily lessening this country's dependence on imported oil. Slide 1 is a 

history and forecast of the U. S. natural gas supply -- in less than 10 years, gas 

production from shale formations has grown to over 30% of the U. S. supply, and 

continues to grow. This is great news in every possible way natural gas is the 

cleanest burning fossil fuel, it yields the least CO2, and it is low cost, thanks to its 

newfound abundance in unconventional reservoirs. 

Even more dramatic is the rapid increase in domestic oil production from 

unconventional reservoirs. Slide 2 shows that oil production from the Bakken 

formation in North Dakota is now close to 500,000 barrels per day. Forecasts are 
49 

that Bakken production will reach a peak of 1 - 2 million bpd - equivalent to peak 

production from the Alaskan North Slope. Production from the Eagle Ford 

fonnation in South Texas has grown from about 800 bpd to almost 300,000 bpd in 

only 3 years (Slide 3). These are just two examples. There are many other 

unconventional reservoirs in other parts of the country that are also rapidly adding 

to domestic production. Without question, there is a revolutionary change in U. S. 

energy supply underway, solely due to oil and gas production from unconventional 

reservoirs. 

How did this happen? 

This shale production revolution is a result of major advances in the technologies 

of horizontal drilling and hydraulic fracturing, and, in particular, the combination 

of these two technologies. These advances have been aided greatly by a modest 

level of research funding from the Department of Energy, funding that supported 

research primarily at universities, small businesses, and the national laboratories. 

Let me give you one example. Beginning in the early 80's and through the mid90's, the Department of Energy, along with the Gas Research Institute, supported 

fundamental research on measuring the sounds made as hydraulic fractures are 

created. This research, led by a team at Sandia National Laboratory, resulted in a 

commercial technique for mapping hydraulic fractures that is now called 

micro seismic monitoring. This technique, which has now been applied to tens of 

thousands of fracture treatments, and which is now itself a multi-million dollar 

industry, has allowed engineers to greatly improve hydraulic fracturing and well 

completion practices by providing a means to measure the extent ofthe fractured 

region. Slide 4 shows a microseismic map of the area affected by a multi-stage 

fracturing operation. The development of micro seismic monitoring of hydraulic 
50 

fracture treatments was clearly enabled by the Department of Energy funded 

research that proved its viability. This basic research was greatly aided by research 

funding by GRI and the U.S. Department of Energy. 

Is the current domestic energy growth sustainable? 

The goal of energy security, and possibly energy independence for the United 

States is no longer just political rhetoric, but is technically attainable. We know 

where the resources can be found, but we still need technical improvements to be 

able to produce much ofthe resource at prices that are beneficial to the public. 

However, it will not be easy, and it will require two things further developments 

in technology, and the trained engineers and geoscientists needed for continued 

growth. The proposed Department of Energy research funding will be a great help 

with both ofthese needs. 

On the technology side, although hydraulic fracturing methodologies have 

obviously been developed to the point that oil and gas are economically 

recoverable from very low permeability unconventional reservoirs, there is still a 

great deal of improvement that can be made to this technology. One of the major 

challenges is the development of various ways to lessen the environmental impacts 

of hydraulic fracturing operations, including using less fresh water in the process, 

and drilling fewer wells to contact the same amount of reservoir. Another 

challenge is the development of lower cost hydraulic fracturing techniques. 

Ironically, the success ofthe industry in rapidly developing huge new volumes of 

natural gas from shales has led to a low gas price, which has slowed gas drilling 

markedly. Ifthe rapidly increasing oil production has a similar effect, 

unconventional oil development will inevitably slow down, unless lower cost 

methods can be applied to achieve the same results. The Department of Energy has 
51 

been funding fundamental research in conjunction with the Research Partnership to 

Secure Energy for America (RPSEA) on topics like these for the past several years, 

and this research is having a visible impact on industry practices. It is important to 

continue supporting RPSEA as they have a proven track record of producing 

important research results using a unique public private partnership model. 

Perhaps most important is the role that Department of Energy funding for 

unconventional oil and gas research will have on the training of the engineers and 

scientists needed to sustain growth in unconventional oil and gas development. The 

research funded by DOE occurs primarily in universities and most of the money 

ends up in the pockets of graduate students in the form of research assistantships. 

The demand for engineers in this field is huge - the COO of a major service 

company recently told me that his company alone hired 15,000 new employees in 

the U. S. in 2011. That is a lot of jobs, and many of them need to be highly trained 

engineers and scientists. Because ofthis booming demand for petroleum engineers 

to work in unconventional oil and gas development, we are receiving 

unprecedented demand for places in our graduate program. Other universities with 

graduate programs in Petroleum Engineering are also receiving numerous 

applications for graduate school. To attract and retain high quality graduate 

students, a university has to offer financial aid, and this is usually in the form of a 

research assistantship funded by an external grant. The research funding provided 

to universities through the proposed Department of Energy research program will 

help support the graduate students who will become the future technology leaders 

of our country. 
u.s. dry gas 

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NORTH 

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http://www.rrc.state.tx.us/eagleford/EagleFordOiIProduction.pdf 

2011 January - August 2012 
55 
56 

Chairman HARRIS. Thank you very much. 

I now recognize our fourth and final witness, Mr. Michael 

Hagood, the Director of Program Development for Energy and Environment Science and Technology at the Idaho National Laboratory. Mr. Hagood. 

STATEMENT OF MR. MICHAEL HAGOOD, 

DIRECTOR OF PROGRAM DEVELOPMENT, 

ENERGY AND ENVIRONMENT SCIENCE AND TECHNOLOGY, 

IDAHO NATIONAL LABORATORY 

Mr. HAGOOD. Chairman Harris, Ranking Member Miller and 

members of the Subcommittee, thank you for the opportunity to 

testify before the House Science, Space, and Technology Subcommittee on Energy and Environment. 

I have been asked to provide a statement on aspects of U.S. oil 

shale resource development and the importance of associated research development and demonstration. The U.S. oil shale resource 

is immense in size with most of the resource located in the States 

of Wyoming, Utah and Colorado. Estimates from recent U.S. Geological Survey studies indicate that among these three states, approximately 4 trillion barrels of oil are estimated to be in place 

with a significant portion of this resource projected to be recoverable. To put that in perspective, some of those estimates are at 800 

billion barrels of oil. To further put that in perspective, given 2011 

estimates, the use of oil in the United States is approximately 6.8 

billion. It is enormous. 

A viable oil shale industry established on the foundation of these 

world-class western oil shale resources would help meet U.S. energy demands and reduce dependence on selected imports and their 

associated costs as well as reduce the risks associated with potential supply disruptions. On top of that, as already mentioned previously, this also has implications relative to the U.S. economy and 

not just directly but also in moving up the value chain associated 

with manufacturing. 

An oil shale research and demonstration program can contribute 

significantly to unlocking some of the richest portions of the western oil shale resource and help achieve this in an environmentally 

responsible manner. Government and industry research development and demonstration investment in the Canadian oil sands and 

previous U.S. and current U.S. government investment in shale gas 

and oil development attest to the value of RD&D in developing unconventional fossil energy resources. In addition, several industry 

players are currently conducting R&D demonstration projects as 

part of the oil shale research and demonstration leasing program 

managed by the Department of Interior’s Bureau of Land Management. 

While a U.S. oil shale industry will likely be initiated with current technology such as with mining and surface retorts, aggressive 

research development and demonstration is also needed to explore 

and advance new approaches in innovation. Research development 

and demonstration offers to expand technology options, improve 

operability and efficiency, mitigate potential environmental impacts, and reduce costs of producing oil shale. The objective of a potential oil shale research development and demonstration program 
57 

should be to provide solutions that help achieve specific production 

and environmental performance goals. Such a program would have 

a near-term objective of supporting responsible development of an 

oil shale industry but also be sufficiently farsighted to anticipate 

and promote multiple next-generation technology advancements. 

Given the longevity of this resource, it is something important to 

keep in mind. This resource could last 100 or more years. 

An oil shale research development and demonstration program 

should focus on challenges that exist at both a site operation scale 

and those that occur at industry-wide scale including addressing 

fuel logistics, integrated energy systems and address potential cumulative environmental effects. Relative to energy systems, these 

can include integration of renewable energy or even nuclear energy 

with fossil energy development. 

Research development and demonstration associated with site 

operations should include enhancing production efficiency and environmental performance associated with in situ processing. Addressing environmental performance both at regional and operation 

scale needs to address surface and groundwater management, air 

quality, greenhouse gas, wildlife and land disturbance challenges. 

An effective R&D program should be guided by a strong, strategic 

plan developed working with diverse stakeholders and implementing R&D roadmap to ensure that the key research needs are 

identified and prioritized. Such a strategy can be built upon work 

already completed by U.S. Department of Energy in supporting and 

implementing the Energy Policy Act of 2005, Section 369. 

Planning should also take advantage of decades of relevant research conducted in association with the Canadian oil sands as 

well as what is transpiring recently as part of the Department of 

Interior’s oil shale leasing program. This effort should also incorporate assets and expertise that have emerged around western oil 

shale operations and research including by industry, regional universities, government agencies and laboratories. 

The U.S. Department of Energy is a technical integrator that can 

bring together needed assets from both within and outside DOE to 

deliver an impactful RD&D program and can also act as an independent broker of technical information. DOE and its laboratories 

are well qualified to provide this leadership and to deliver a focused, solutions-oriented research program to address key challenges in developing long-term U.S. oil shale industry development. 

Chairman and members of the Subcommittee, thank you once 

again for the opportunity to share my testimony with you. 

[The prepared statement of Mr. Hagood follows:] 
58 

Testimony of 

Michael C. Hagood 

Director, Program Development 

Energy and Environment Science and Technology 

Idaho National Laboratory, Idaho Falls, Idaho 

Before the 

House Committee on Science, Space and Technology 

Subcommittee on Energy and Environment 

On 

TAPPING AMERICA'S ENERGY POTENTIAL THROUGH RESEARCH AND DEVELOPMENT 

ACT OF 2012. 

November 30, 2012 
59 

INTRODUCTION 

Chairman Harris, Ranking Member Miller and members of the subcommittee, thank you for the opportunity to 

testify before the House Science, Space and Technology Subcommittee on Energy and Environment. Addressing 

United States (U.S.) energy security is extremely important and establishing an U.S. oil shale research and 

development (R&D) program is strategic, in my view, to securing our energy future. 

My name is Michael Hagood. I am the Program Director for Energy and Environment Science and Technology at 

Idaho National Laboratory. I am a geologist by training and have worked in the energy and environment sectors 

for over 30 years. 

My testimony will address the following: 

Background on Western U.S. oil shale resources; 

How safe and responsible production of oil shale contributes to U.S. security goals; 

Identification of selected technical challenges and R&D needs; 

Comments on strategy to identify and prioritize R&D; 

Comments on draft legislation titled "Tapping America's Energy Potential through Research and 

Development Act of 2012." 

OIL SHALE RESOURCE BACKGROUND 

The United States is currently experiencing an increase in domestic oil and gas production, primarily associated 

with its shale gas and tight light oil (shale oil) resources. Production from U.S. oil shale resources, as we Ii, will 

likely emerge during the next several years as an important contributor to oil and gas production with the 

potential to ramp up into a substantial industry during the next few decades and lasting for most, if not ali, of 

this century. 

Oil shale is a fine-grained sedimentary source rock, containing organic matter called kerogen, an algae or marine 

based material that has not yet been converted into oil. When heated using a pyrolysis (retort) process, oil shale 

can be converted to either crude oil or gas. Crude shale oil is then processed in an oil refinery to produce 

gasoline, diesel and jet fuels. 

Oil shale resources in the United States are immense in size, with most of the resource located in the states of 

Wyoming, Utah and Colorado. The richest oil shale was deposited in the north-central part of the Piceance Basin 

in Colorado and in the northeast corner of the Uinta Basin, located in parts of northeast Utah and northwest 

Colorado (Mercier and Johnson 2012). The Colorado deposits extend from approximately 1,000 feet to as much 

as 3,000 feet beneath the surface. Within the oil shale column are geologic formations that vary considerably in 

kerogen content and oil concentration. According to U.S. Energy Information Administration (EIA), the entire 

column ultimately could produce more than one million barrels oil equivalent per acre during its productive life, 

compared to Canada's oil sands deposits which are expected to produce about 100,000 barrels per acre (EIA 

2009). 
60 

Estimates from recent u.s. Geological Survey studies indicate that between Colorado, Utah and Wyoming, 

nearly four trillion barrels of oil are estimated to be in place. Most of this resource is located on federal lands. Of 

the estimated four trillion barrels, it is not known how much oil is potentially recoverable and depends on 

technical and economic conditions. However, the Rand Corporation (Bartis et aI., 2004) estimates that 30 to 60 

percent of the oil shale may be recoverable. This is most significant, given that U.S. usage is approximately 6.8 

billion barrels in 2011 (18.83 million barrels per day) and projected to be 7.3 billion barrelsfyr. in 2035 (19.9 

million barrels per day) (EIA 2012). 

Oil shale development occurs by either in situ (in place) retorting or ex situ (at the surface) retorting. During the 

mid-1970s and early 1980s, the petroleum industry focused its efforts primarily on underground mining and 

surface retorting of oil shale. Today, mining and surface retorting is planned in areas where oil shale is located 

nearer the surface and more economical to mine. However, the higher concentrations of oil shale resources are 

located at depths where in situ processes may be more cost effective. 

It is more likely that mining with ex situ retort operations will be initiated first by the U.S. oil shale industry and 

which will be primarily conducted on state and/or private lands. In situ retort operations within the richer 

formations will likely be initiated later. EIA estimates that the earliest date for initiating construction of a 

commercial project is 2017 for ex situ process and 2023 probably is the earliest initial date for first commercial 

production of in situ processes (EIA 2009). However, the Red Leaf Resources Eco Shale process, which is a 

modified surface retort method, may come on line as early as 2015. 

Establishing an oil shale industry is heavily dependent upon economics and the price of a barrel of oil. According 

to industry representatives (represented by the National Oil Shale Association), it costs somewhere between 

$40 and $80 to produce a barrel of oil from shale, depending on the technology used. The price of oil, currently 

at -$87 a barrel, has risen ;n the past over $100 a barrel. 

HOW DOES SAFE AND RESPONSIBLE PRODUCTION OF OIL SHALE CONTRIBUTE 

TO U.S. SECURITY GOALS 

A viable oil shale industry would help meet U.S. energy demands and reduce dependence on selected imports 

and associated costs, as well as reduce the risks associated with potential supply disruptions. New jobs directly 

related to oil and gas industry and the domestic production supply chain would arise from this industry, 

including those potentially associated with value-added industries, not yet identified. Development of an oil 

shale industry will also result in increases in tax and royalty payments to federal and state government for oil 

production on their lands and contribute to the U.S. gross domestic product (Unconventional Fuels Task Force 

2004,2006; GAO 2012). 

Currently, it is not known what production rates may be achieved by an oil shale industry, however DOE 

provided a vision of a commercial oil shale projects that would range in size from 10,000 to 50,000 barrels per 

day for surface retorts to as much as 300,000 barrels per day for full-scale in situ projects. For the DOE study, a 

reasonable development scenario envisioned cumulative production of two to four million barrels per day by 

2020 to 2030. The time to market, however, depends on the level of R&D support and other factors. 
61 

SELECTED TECHNICAL CHALLENGES AND ASSOCIATED RESEARCH AND 

DEVELOPMENT NEEDS PERTINENT TO CREATING AND SUSTAINING A U.S. OIL 

SHALE INDUSTRY 

While an U.S. oil shale industry will likely be initiated on a small portion of the U.S. oil shale reserves using 

current technologies, an aggressive R&D program is required to help tap the largest and most valuable portions 

of the U.S. reserves. Specifically, R&D is required for in situ processes to explore and advance new approaches 

and innovative concepts. More research promises to expand technology options, improve operability and 

efficiency, mitigate potential environmental impacts and reduce costs of producing oil shale (DOE, 2004). 

Advancement of novel concepts and new approaches requires significant investment in long-term, high-risk R&D 

to reach proof-of-concept stages of development. Similarly, applied R&D is needed to develop and prove 

technology at bench or field scale prior to demonstration at a commercial scale (DOE, 2004). 

Research and Development has already played a strategic role in the successful development of unconventional 

fossil energy resources, such the Canadian oil sands, U.S. shale gas and shale oil (light tight oil, e.g., Bakken 

Formation). All of these R&D programs took many years to bring new products to market. Relative to oil shale, a 

summary profile of oil shale technology and R&D can be found in various reports (U.S. DOE 2007, 2011; 

Unconventional Fuels Task Force, 2007). Research emanating from Canadian oil sands development is also an 

invaluable and relevant source of information, even though focused on a different type of hydrocarbon 

resource. 

Ex situ retort of oil shale has already been deployed commercially, however most of the richer Western oil shale 

resources are located at depths requiring implementing in situ retort and recovery processes. Although the 

technical feasibility of in situ retorting has been proved, considerable technological development and testing are 

still needed. Of particular note, several industry players are conducting demonstration projects as part of the Oil 

Shale Research Development and Demonstration Leasing Program managed by the Department of the Interior's 

Bureau of land Management (Crawford et ai, 2012). Particular challenges include improving the economics of 

these operations by simultaneously attaining greater production efficiencies and mitigating environmental 

impacts. A number of associated research topics need to be addressed in a federal oil shale R&D program, 

induding increasing the energy return on investment, fracture mechanics and heat transfer for enhancing 

recovery, materials performance in high-temperature subsurface environments, real-time subsurface process 

monitoring, water use reduction and post-retort subsurface environmental impact mitigation. Modeling and 

simulation can assist in addressing many of these topics but computer simulations must be supported by 

laboratory testing and field validation. In addition, there is significant opportunity for developing novel 

technology to support "smarter," environmentally-friendly oil shale development. 

A number of challenges and opportunities also exist for an emergent oil shale industry as a whole. Collectively 

there are likely several pathways to develop Western oil shale, which goes beyond addressing individual site 

operations. Accordingly, it is worthy to consider conducting an oil shale industry fuels logistics analysis which 

would help better understand options for developing a 'power, refining and delivery infrastructure, within the 

context as well of a marketplace. Given the size and longevity of the resource, there is also opportunity to 

investigate application of hybrid energy systems approaches, including integrating renewable and/or nuclear 
62 

energy into oil shale development schemes for achieving greater carbon efficiency and reducing environmental 

impact. Understanding the development of a U.S. oil shale industry within the context of a greater bi-national 

regional energy corridor is also essential to enhancing long-term U.S. energy security and the economy. In 

addition, there will be cumulative environmental and socioeconomic effects in the region that need to be better 

understood and addressed, including within the context of competing needs (i.e., for agriculture, municipalities, 

industry, etc.). 

Associated with both site operations and development of a larger oil shale industry is a need to ensure that oil 

shale resources are developed using environmentally suitable approaches. Increasingly, research is playing a role 

in better understanding the interdependencies between energy development and the environment and the 

development of innovations that mitigate environmental impacts. This requires significant investments in 

research to enhance environmental performance associated with water, air quality, wildlife, land (including land 

reclamation) and greenhouse gases. Water management, as an example, is critical in the arid west and there are 

concerns that adequate quantities are available to support an oil shale industry and whether there will be 

impacts on water quality and use elsewhere. 

COMMENTS ON DRAFT LEGISLATION TITLED "TAPPING AMERICA'S ENERGY 

POTENTIAL THROUGH RESEARCH AND DEVELOPMENT ACT OF 2012." 

A federal oil shale R&D program is critical to establishing a viable U.S. oil shale industry, focused on long-term 

responsible and safe oil shale production. Given the evidence from R&D investments made in similar settings, 

such as the Canadian oil sands, an oil shale program would provide a high return on investment. A wellorganized federal R&D program can provide the backbone for coordinating research across academia, industry, 

and state and federal laboratories. 

The objective of such an oil shale R&D program should be to provide solutions that help achieve specific 

production and environmental performance goals. It should have a strong strategic plan and a road map to 

better focus and prioritize R&D investments. Prescribing specific investment R&D directions without sufficient 

planning can be risky and potentially lead to disconnected R&D efforts that do not effectively achieve the 

desired end state. A Significant body of work produced by DOE and the Task Force on Strategic Unconventional 

Fuels already exists upon which R&D planning can be built (see references) including a 2008 strategic plan for 

implementing portions of the Task Force's recommendations (Task Force's 2007 program plan), prepared by an 

Ad-Hoc group of approximately 35 representatives from private industry, academia, community representatives, 

and local, state and Federal agencies (DOE, 2008). 

Stakeholder engagement in an R&D program is very important. Tapping diverse views and champions are 

essential for innovations in technology. A R&D network promoting "shared research" will improve technology 

development and have greater impact on technology development than isolated R&D. 

The R&D program must consist of investments in both basic and applied research, giVen the nature of the 

industry and its longevity. In addition, a strong field demonstration aspect should be required to better facilitate 

technology deployment. Such a program would provide a greater understanding of the potential benefits and 
63 

impacts of oil shale development, while preparing the ground work for, and facilitating, commercialization of 

America's strategic oil shale resources. 

The u.s. Department of Energy and its laboratories are well qualified to provide leadership to deliver a focused, 

solutions oriented R&D program to address key challenges in realizing a competitive U.S. oil shale industry. DOE 

is a technical integrator that can bring together needed assets and expertise from both within and outside DOE, 

including universities and industry, to provide a high-quality R&D program, and as well, act as a needed honest 

broker of technical information. 

Chairmen and members of the Subcommittee, thank you once again for the opportunity to testify. 

REFERENCES 

Bartis, J.T., T. LaTourrette, L. Dixon, DJ. Peterson, G. Cecchine, 2005. "Oil Shale Development in the United 

States - Prospects and Policy Issues." Rand Corporation - Prepared for the National Energy Technology 

Laboratory, U.S. DOE. 

Crawford, P.M., C. Dean, J. Stone, J. Killen, 2012. "Assessment of Plans and Progress on US Bureau of land 

Management Oil Shale RD&D Leases in the United States." 

http://www.unconventionalfuels.orq/otherreports.html. 

General Accounting Office, 10 May 2012. "Opportunities and Challenges of Oil Shale Development: GAO-12-

740T." General Accounting Office. 

General Accounting Office, 2012. "Unconventional Oil and Gas Production: Opportunities and Challenges of Oil 

Shale Development GAO-12-7407." General Accounting Office. 

General Accounting Office, 29 Oct 2010. "Energy-Water Nexus: A Better and Coordinated Understanding of 

Water Resources Could Help Mitigate the Impacts of Potential Oil Shale Development GAO-1l-35." 

General Accounting Office. 

King, C.W., and M.E. Webber, 2008. "Water Intensity of Transportation," Environmental Science & Technology, 

Vol. 42, No. 21, pp. 7866-7872 at http://aubs.acs.orq/doi/abs/10.1021/ec800367m. 

Mercier, T.J., and Johnson, R.C., 2012. "Isopach and Isoresource Maps for Oil Shale Deposits in the Eocene Green 

River Formation for the Combined Uinta and Piceance BaSins, Utah and Colorado." U.S. Geological 

Survey Scientific Investigations Report 2012-5076, 85 p., 1 pI. 

National Oil Shale Association, May 2010. "Oil Shale Update." 

http://www.oilshaleassac.orq/documents!FinoIUpdateMay2010.pdf. 

Task Force on Strategic Unconventional Fuels, December 2009. "Annual Report." 
64 

Task Force on Strategic Unconventional Fuels, September 2006. "Development of America's Strategic 

Unconventional Fuels Resources." Initial Report to the President and the Congress of the United StatesPrepared in Response to Section 369(h) (5)(A) of the Energy Policy Act of 2005 (P.L. 109-58). 

Task Force on Strategic Unconventional Fuels, September 2006. "Development of America's Strategic 

Unconventional Fuels Resources." Initial Report to the President and the Congress of the United States. 

Task Force Strategy and Program Plan, 2007. "America's Strategic Unconventional Fuels." Volume 1-

Preparation Strategy, Plan and Recommendations, Volume 1/- Resource-Specific and Cross-cut Plans, 

Volume 111- Resource and Technology Profiles." 

U.S. Department of Energy Office of Naval Petroleum and Oil Shale Reserves, December 2004. "America's Oil 

Shale - A Roadmap for Federal Decision Making - Sustainable Development of Oil Shale Resources in the 

United States." 

U.S. Department of Energy Office of Petroleum Reserves Office of Reserve lands Management, Fourth Edition, 

September 2011. "Secure Fuels from Domestic Resources: The Continuing Evolution of America's Oil 

Shale and Tar Sands Industries Profiles of Companies Engaged in Domestic Oil Shale and Tar Sands 

Resource and Technology Development: 5th Edition." 

U.S. DOE Office of Naval Petroleum and Oil Shale Reserves, November 2008. "Strategic Plan - Unconventional 

Fuels Development within the Western Energy Corridor." U.S. Department of Energy, Ad Hoc 

Unconventional Fuels Working Group: U.S. Department of Energy. 

U.S. DOE Office of Petroleum Reserves, September 2010. "Oil Shale Research in the United States: Profiles of Oil 

Shale Research and Development Activities in Universities, National laboratories, and Public Agencies." 

U.S. Department of Energy Office of Reserve lands Management. Second Edition, 

U.S. DOE, 2008. Strategic Plan - Unconventional Fuels Development within the Western Energy Corridorproduced by the Ad Hoc Unconventional Fuels Development Working Group. 

U.s. Energy Information Administration Annual Energy Outlook Analysis. AEO, 2009. "Expectations for Oil Shale 

Production." 

U.s. Geological Survey Oil Shale Assessment Team, 2011. "Oil Shale Resources of the Eocene Green River 

Formation, Greater Green River BaSin, Wyoming, Colorado, and Utah." U.S. Geological Survey Digital 

Data Series DDS-69-DD, 6 chapters, pages variable. 

U.S. Geological Survey, June 2011. "Assessment of In-Place Oil Shale Resources of the Green River Formation, 

Greater river Basin in Wyoming, Colorado and Utah." United States Geological Survey, June 2011. 
65 

SUMMARY 

The U.S. oil shale resource is immense in size with most of the resource located in the states of Wyoming, Utah 

and Colorado. Estimates from recent U.S. Geological Survey studies indicate that among these three states, 

nearly four trillion barrels of oil are estimated to be in place, with a significant portion of this resource projected 

to be technically and economically recoverable. A viable oil shale industry would help meet U.S. energy demands 

and reduce dependence on selected imports and associated costs, as well as reduce the risks associated with 

potential supply disruptions. 

An oil shale R&D program can contribute significantly to unlocking some of the richest portions ofthe western 

oil shale resource and help achieve this in an environmentally responsible manner. Government and industry 

R&D investment in the Canadian oil sands and previous U.S. government investment in shale gas and oil 

development attest to the value of R&D in developing unconventional fossil energy resources. 

While an U.s. oil shale industry will likely be initiated with current technology, aggressive R&D is also needed to 

explore and advance new approaches and innovation. R&D offers to expand technology options, improve 

operability and efficiency, mitigate potential environmental impacts and reduce costs of producing oil shale. The 

objective of an oil shale R&D program should be to provide solutions that help achieve specific production and 

environmental performance goals. Such a program would have a near-term objective of supporting responsible 

development of an oil shale industry, but also be sufficiently far-sighted to anticipate and promote mUltiple 

"next generation" technology advancements. 

An oil shale R&D program should focus on challenges that exist at both a site operations scale and those that 

occur at industry-wide scale, including addressing fuel logistics, integrated energy systems approaches 

(including renewable and nuclear energy options), and address potential cumulative environmental effects. R&D 

associated with site operations should include enhancing production efficiency and environmental performance 

associated with in situ processing. Addressing environmental performance, both at regional and operations scale 

needs to address surface and groundwater management, air quality, greenhouse gases, wildlife and land 

disturbance challenges. 

An effective R&D program should be guided by a strong strategic plan working with diverse stakeholders and 

implementing a R&D road map to ensure that the key research needs are identified and prioritized. Such a 

strategy can be built upon work already completed by the Unconventional Fuels Task Force 

(www.unconventionalfuels.org) and DOE in support of implementing Energy Policy Act 2005, Section 369. 

Planning should also take advantage of decades of relevant research conducted in association with the Canadian 

oil sands. This effort should also incorporate assets and expertise that have emerged around western oil shale 

operations and research, including regional universities, government agencies and laboratories. 

The U.S. Department of Energy is a technical integrator that can bring together needed assets from both within 

and outside DOE to deliver an impactful R&D program and can also act as an honest broker of technical 

information. DOE is well qualified to provide leadership and to deliver a focused, solutions oriented, R&D 

program to address key challenges in developing a long-term u.s. oil shale industry. 
66 

Chairman HARRIS. Thank you very much, and I thank the panel 

for their testimony, reminding members that Committee rules limit 

questioning for five minutes. The Chair will at this point open the 

round of questions, and I recognize myself for five minutes first. 

Mr. Hagood, thank you very much for that testimony. Let me get 

those figures straight. There are estimates that of those 4 trillion 

barrels, 800 billion potentially recoverable, and if I do my math 

right, that is over 120 years at our current usage, and remember 

that our current usage of oil is actually declining over the past few 

years, so we have potentially over 120 years in that oil shale by 

those numbers? 

Mr. HAGOOD. Yes. 

Chairman HARRIS. That is what I thought. And who has the largest oil shale deposits in the world? It is us, and is it some other 

country also? 

Mr. HAGOOD. Well, the United States has—— 

Chairman HARRIS. The United States, so let me see, I think I get 

it. Okay. So it is something we probably ought to be investing in. 

Dr. Hill, do you realize that of the—oh, my gosh, let me see, $15 

billion or so DOE budget, that only $5 million is spent on unconventional, none of it on oil shale or shale oil and gas? 

Dr. HILL. I am well aware. 

Chairman HARRIS. You realize that, right? 

Dr. HILL. Yes. 

Chairman HARRIS. Okay. I know you mentioned the importance 

of getting this money to graduates, but there is no money going to 

graduate students who are looking at oil shale from DOE, I anticipate. 

Mr. Martineau, let me just run that one more time because even 

in the current discussion, we are hearing about Big Oil and all the 

rest of that. The intangible drilling cost deduction and depletion allowance doesn’t go to Exxon, does it? The vast, vast, vast majority. 

I mean, the vast majority goes to small owners and drillers? 

Mr. MARTINEAU. Yes and no. Exxon and major oil companies get 

to deduct 70 percent of their intangibles, but when they come back 

into this country and start drilling again, it is very important. 

Chairman HARRIS. That they continue to do it because they are 

drilling here, not making money overseas. 

Mr. MARTINEAU. Amortized over five years. 

Chairman HARRIS. So when we are talking about that, that is 

about domestic manufacturing. That is what I thought, and I 

thought we all support domestic manufacturing. You mentioned 

that—it is interesting because you kind of mentioned the importance of investing in these technologies, and there are two ways 

you can invest. The government can invest in order to find ways 

to condemn the technology, or they can invest to find ways to further develop new technologies, and my fear is that some of the investment being done over at EPA, and I am going to get Dr. Cugini 

next about DOE, may be the former, that’s what we want to do, 

is we want to do research to condemn current technologies, not realizing the future is to find the next technological breakthrough, 

and it would seem to me that that—and I am just asking if you 

share that opinion. It seems that that is the best way we should 

be spending our money is actually to find out how to increase pro-
67 

duction through new technology, not finding problems with current 

production in order to just condemn it. I mean, that has no use if 

you are not going to also find ways to improve it. Is that correct? 

Mr. MARTINEAU. I think you can improve the technologies that 

we currently have, and—— 

Chairman HARRIS. And that would do both things at once, right? 

It would increase production and help the environment. 

Mr. MARTINEAU. Exactly. 

Chairman HARRIS. Right, and I am still trying to figure out how 

drilling those wells at Pavilion by the EPA does the latter and not 

the former. I am still trying to figure it out. It is just to condemn 

current technology. It is incredible to me. 

Dr. Cugini, let me end up with you in my last couple minutes 

because, you know, this is about getting money into the Department of Energy to do some things. Is that really true, that there 

is no money spent right now on oil shale R&D? I mean, that was 

the testimony before the Committee this year. 

Dr. CUGINI. Well, I think there has been some historical—— 

Chairman HARRIS. Not historical—this year. 

Dr. CUGINI. But those projects are still underway, so at the University of Utah, we have some small amount of work going on 

and—— 

Chairman HARRIS. And how much is a small amount out of the 

$15 billion DOE budget? 

Dr. CUGINI. I don’t have those numbers—— 

Chairman HARRIS. Can you get that number back to me? And I 

will ask the Committee to make sure we make that request of the 

doctor. Because I suspect it is really small, which is just amazing 

to me because we have testimony, we are looking at 120 years of 

oil, and I am not even counting the things that is in shale oil and 

gas. We are just talking about this one resource, 120 years. We are 

in the midst of—the whole world would like to buy our oil and we 

are sitting on it, and you are telling me there is one little project 

at Utah, and that is it for oil shale. 

Dr. CUGINI. Well, I think there is also some work that we do with 

Bureau of Land—— 

Chairman HARRIS. Well, now, let me ask you—— 

Dr. CUGINI. —Management that you pointed out during your—— 

Chairman HARRIS. Let us pretend we start with a clean slate. 

What are some of the things we should be doing in order to move 

the development of oil shale along? What are some of the things 

the Department of Energy you think could do within the realm of 

possibility? 

Dr. CUGINI. Well, obviously several of the projects would involve 

improving the efficiency of the process, looking at things like better 

water management and those type of technologies. I think those 

are the two key components of an oil shale program. The energy 

requirements and water requirements are such that it makes it difficult to extra the oil economically so I think a program that was 

addressing those two issues would allow us to look further at oil 

shale. 

Chairman HARRIS. And do you think that Chairman Hall’s bill 

moves us in that direction, or can? 
68 

Dr. CUGINI. I think added resources would have the opportunity 

to do it. I think that is the way I would say it. 

Chairman HARRIS. Okay. Thank you very much for answering. 

I now recognize the ranking member, Mr. Miller, for five minutes. 

Mr. MILLER. Thank you, Mr. Chairman. I know what Emerson 

said about a foolish consistency but I am still struck by this discussion. 

Dr. Cugini? 

Dr. CUGINI. Yes. 

Mr. MILLER. You said in your testimony that, not oil shale, but 

shale oil technology was a result—that we have now was a result 

of research in the 1970s and the 1980s, Federal Government research but closely working with industry in that. Is that correct? 

Dr. CUGINI. That is correct. 

Mr. MILLER. Okay. And how—we have heard the phrase ‘‘picking 

winners and losers’’, and the various technologies are in competition with each other as the coal industry has learned from the decline in natural gas prices, and I think most of the assumptions 

about oil shale is that the reason it is not commercially practical, 

although it has been researched within an inch of its life, it is not 

commercially viable at current prices. But how are we not picking 

a winner? How are we not picking winners and losers in the 1970s 

and the 1980s? 

Dr. CUGINI. Well, I think in the 1970s and 1980s, the research 

was developed—was focused on developing technology, base sets of 

technology. So you heard testimony today about some of the work 

that resulted in seismic activity allowing us to draw seismic maps. 

It was somewhat fundamental in nature. We were also able to start 

asking industry to start looking at these technologies, providing information about the resource maps and other types of information 

related to resources, and working with industry, industry picked up 

a lot of the balls in looking at applying, as we found out, hydraulic 

fracturing and other types of technologies. 

Mr. MILLER. And by the way, I support energy research, and I 

support energy research into any available form of energy. In the 

1970s and 1980s, I think we were spending ten percent of all federal research funding on energy research, and I think now it is 3, 

and that seems foolish to me. I think we should be spending more 

on energy research, and it should include energy into alternative 

fossil fuels or unconventional fossil fuels. So the research in the 

1970s and 1980s was for a fairly early stage that might or might 

not work. Is that correct? Is that why the industry wasn’t just 

doing it by themselves without needing government to be part of 

that? 

Dr. CUGINI. I think there were a lot of factors in play. I mean, 

part of it was the early stage of the resources—the research. It was 

also a lack of information relative to whether that resource was actively there and actively extractable. So part of the DOE’s budget 

in research at that time was characterizing—working with USGS 

and others to characterize the available resource. So there were a 

combination of interests. I think one of them may have been the 

early stage of the technology development. 
69 

Mr. MILLER. I am struck by the arguments, the fairly dismissive 

arguments about alternative energy sources as being unreliable, 

uncertain, and the fossil fuel research that we have heard about 

today is described as a sure thing, a slam dunk. Mr. Martineau, 

that was your testimony, and you are nodding your head now, that 

yes, that is right. But if it is a slam dunk, if we know it is going 

to be profitable, why do we need to be funding it? Why is that not 

an ordinary business expense for the industry that will produce it? 

It seems like the more logical funding should be for early-stage research for technologies that might or might not prove to be commercially viable. 

Dr. Cugini, could you walk me through that? Could you explain 

that to me? 

Dr. CUGINI. Well, there still is somewhat risk factors associated 

with some of the technologies, so take for example exploiting the 

natural gas resource from shale development. Right now, there is 

incentive to exploit that resource because at about 20 percent extraction of the gas, which current technologies, give or take, give 

us, it is economically recoverable. But there is potential to access 

quite a bit more of that gas through novel techniques. There really 

isn’t any incentive, I think, in industry or capital in the industry 

to go after improved extraction technologies. So that might be an 

example that I think addresses your question. 

Mr. MILLER. Mr. Martineau, if this research is as sure as you say 

it is to produce recoverable energy, why is this not—why is our 

funding for this research not paying for just an ordinary business 

expense for the industry? Why is it not a direct, just subsidy? 

Mr. MARTINEAU. A subsidy—well, of course, I have been an independent oil and gas operator, which I have been a geologist for 52 

years now, and I just look back at what has happened in the shale 

itself. We used to drill wells all the time through shales, non-commercial, low permeability nanodarcy type thing, and you couldn’t 

do it, and until they started the Barnett shale program in 1981, 

when George Mitchell drilled the first well, attempting to develop 

the gas, and you think how many years it took before the shale 

took over. Now we have a shale revolution all over the whole 

United States, but if it hadn’t been for some of the research work, 

and I was involved somewhat when the first horizontal well that 

I mentioned here before that George Mitchell drilled, was funded 

somewhat by the Department of Energy to see if a horizontal 

well—at that time gas prices were so low, it didn’t make sense to 

do it, and as the gas prices came up, we started doing it. But some 

of the research that us independents—because we don’t have access 

to research. We strictly drill well, drill producers, dry holes and 

commercial wells, and so I think the research that has been done 

that I have been involved with through my years in the business 

has been a real asset for the small independents, because we don’t 

have the research teams to come up with the different type of technologies that were advanced in fracking itself. Fracking has been 

around for 50 years. We have been fracking wells forever, but the 

technology of hooking a horizontal well with a frack job—and they 

used to frack them all with water in one stage—or no, gel, and 

then they switched to water, increased the production tremendously. The horizontal legs now, it used to be 2,000, 3,000 feet. 
70 

Now it is 6,000 to 7,000 feet but 50 fracks in it. In other words, 

the technologies and the mapping that he did showing where the 

frack job goes is really critical because nobody knew before. The 

microseismic work that we have done and the technology, that was 

backed by funded research from the Department of Energy and different people how to do—how do you trace where these frack jobs 

go. 

The big issue, of course, is frack water contaminating the 

freshwaters, and that mapping that he showed, it only goes 150, 

200 feet away from that well before. They go up into the freshwater 

zone. It doesn’t happen. There has never been a well yet that has 

been contaminated by a frack job from the freshwater zones. They 

have been contaminated all right, but it is because of poor casing, 

cementing or the lack of integrity in the pipe, which has caused the 

water, but, you know, they have been opening water wells in homes 

forever and you could light a match to it and, you know, it is not 

the first time. Since fracking came around, everybody says, oh, 

they are caustic. That is not true. That has been happening forever 

in this United States. 

Chairman HARRIS. Thank you very much, and the gentleman 

yields back his time. 

Chairman Hall is recognized for five minutes. 

Chairman HALL. I thank you, Mr. Chairman, and I think Dr. 

Cugini and Mr. Martineau and others of you there could also point 

out that independents seek and search for and majors buy it, and 

independents are the ones that take the chance and need some 

help, and years ago I think that the names of Frank Pitts and 

Shelby Pitts are well known to this Committee. They have been before this Committee and before Energy and Commerce many times, 

and thank you. It is a product of theirs for being here. 

Mr. Martineau, I want to thank you also for impact on unconventional energy production in Texas. As you know, states currently 

have the authority to regulate hydraulic fracturing, though I am 

concerned that the EPA’s activist regulatory agency and disregard 

for scientific methods, not taking a scientific approach to it, in their 

attempts to usurp this authority. How does the responsible regulatory agency for oil and gas production in Texas—that is the Railroad Commission—perform regulation and oversight of TIPRO 

members and their companies? 

Mr. MARTINEAU. Well, the Texas Railroad Commission has been 

overseeing the development of oil and gas for many, many years, 

and they have got technical staff of engineers and geologists just 

like the oil companies do, and whenever a frack job is performed— 

of course, now with the new frack focus, you have to report exactly 

what has been pumped into the particular well and that information was somewhat started kind of by the Railroad Commission because everybody kept saying well, we don’t know what is going into 

the well. But the Railroad Commission oversees all the development when you are drilling a well, how much surface casing you 

have to set to protect the freshwaters and how much cement you 

actually have and you have to report all of this information to the 

Railroad Commission. So they have been overseeing the operations 

of oil and gas in Texas forever, and had the EPA come in—and I 

testified—well, I didn’t testify. I went over to a hearing where the 
71 

EPA was talking about trying to control fracking, and every state, 

every rock is a little bit different. You frack them all different. You 

can’t come up with one rule that covers the entire United States. 

Each state has different types of rock and therefore each State has 

its own regulatory agency and therefore you don’t need to have one 

massive rule by people who have never drilled a well in their life 

trying to tell you how to do it. 

Chairman HALL. Well, Mr. Miller asked some questions, logical 

questions about why can’t the success pay for the search, you 

know. It is probably true that the independents do take all the 

chances and the majors buy them after they are successful. That 

is the reason that they need some support as they go. 

Before I yield back my time, I want to thank Mr. Miller for his 

service to this Committee. He has been a very valuable member. 

He goes back to my state, all my people came from North Carolina, 

to give his services there, and I want to wish him well there. 

I yield back my time. 

Chairman HARRIS. Thank you very much, Mr. Chairman, and the 

gentleman from California, Mr. McNerney, is recognized for five 

minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman, and I thank the panelists for coming today and testifying. Most of my colleagues, I believe would be in favor in providing research dollars for development of energy resources but I just challenge my Republican colleagues to be as receptive toward spending dollars on clean energy 

as they are on fossil fuel energy. For example, the wind energy production tax credit is about to expire this year. That will throw 

about 40,000 people out of work, and this is an industry that has 

been developed in this country by American research dollars. These 

jobs are going to go overseas and they are going to be taken over— 

this industry is going to be taken over by our competitors. So I 

think it is important that we keep that in mind as we move forward. 

Now, I think everyone on this panel agrees that the unconventional resources are massive, that there is a massive amount of energy and fossil fuels there. But what is the energy balance of the 

unconventional resources versus the conventional resources? Pick 

any one of them, tar sands or shale oil. What is the energy out 

versus the energy in compared to what it looked like when the oil 

was first being developed back in the early 1900s? Does anyone 

want to take a shot? Dr. Hill, do you want to take a stab at that? 

Dr. HILL. All right. Well, certainly some energy is expended in 

creating these wells, and you could pretty much figure it out from 

the economics, you know, compare the value of the oil produced 

compared with the cost to create and complete the wells, and a typical good oil-producing well now from a shale formation, you know, 

that ratio might be two or three to one. In other words, two or 

three times—the value of the crude oil produced is two or three 

times the cost of the well. So that is a rough ratio. 

Mr. MCNERNEY. I mean, that sounds about right. Back in the 

spindle oil well days, they were talking about 90 or so to one, so 

we are seeing a much bigger investment of energy into these wells 

than we ever saw before, and those of us that are concerned about 

CO2 and global warming, and I am one of those people, we are 
72 

going to be putting two to three times as much carbon into the atmosphere per unit of energy delivered. So this is a very big concern 

for myself, for a lot of people across this country about what impact 

it is going to have on our global environment. And I think that is 

something we need to consider as we move forward and the research dollars that are spent in this program to understand that 

impact and to find ways to mitigate that impact if carbon sequestration is part of the solution. 

Now, another question I have is, will the so-called energy independence that we are aiming at result in any lower cost for American consumers as opposed to the cost that it will reduce for foreign 

consumers? So what I am getting at is that, yes, this is going to 

produce a lot more energy, a lot more oil but this is fungible. This 

is an international market. Those products are going to go overseas 

just like they are to this country. It is not going to help our consumers any more than it is going to help any other consumer in 

the world. So to say that this is benefiting American consumers 

more than foreign consumers I think is not necessarily true. It is 

not necessarily a true statement. Does anyone care to respond? Mr. 

Martineau? Go ahead. 

Mr. MARTINEAU. You know, one thing earlier that you said about 

the other resources, and I think of biofuels in particular, because 

it is kind of interesting, you hear a lot of conversation, you know, 

biofuels are, what, ten percent of the gasoline you have do now, 

and the cost of the biofuels, which is this third-party energy, green 

energy-type thing, comes from the corn that is grown, and they 

were talking about how much water it takes to keep that corn 

growing, which is the water that we are now talking about how do 

we use it, we are using up all the water in fracking. A lot of it is 

being used to grow the corn. The corn now goes into biofuels and 

doesn’t go to the food and so our food prices have gone up. And so, 

you know, these are the third-party-type green energy things that 

I think are very expensive, that people don’t put the real dollar to 

it what that ten percent cost is unbelievable—— 

Mr. MCNERNEY. I agree. There needs to be a fair look at all these 

sources, and I am not going to single out fossil fuels because cornbased ethanol has its problems, no question about it. 

The last question I have is regarding to the industry’s record for 

hiring veterans of this country. The wind industry has the best 

record of any industry of hiring veterans because of the transfer of 

skills. What is the record of the fossil fuel industry in this area? 

Mr. MARTINEAU. I am not real sure, although I heard, and I am 

not sure which group, they are doing a program, I think it is Houston—I will have to find out—where they are bringing in all of the 

veterans because the job increases that have increased in the 

United States recently because of the shale revolution is unbelievable, and they are putting a program together, and I can find out 

the name of it but it is to ask veterans to come in, study how to 

be a roughneck, how to be a roustabout, you know, either that or 

can they go to college and become an engineer or a geologist. So 

there are programs that are using veterans because we can’t find 

people to go to work in all these shale plays that are going on right 

now, and I think your group in the wind industry, they can go to 
73 

work in the oil industry. They are not going to have to go overseas. 

They can go right to work in the oil and gas industry. 

Mr. MCNERNEY. Mr. Chairman, I would ask that you consider 

that a part of your bill, Mr. Hall, to give provisions, special provisions for training and hiring veterans if they are going to be used 

in this research. 

Chairman HARRIS. Thank you very much, Mr. McNerney, and I 

now recognize the gentleman from California, Mr. Rohrabacher, for 

five minutes. 

Mr. ROHRABACHER. Well, let me just note that when people in 

this country are forced to use energy resources that are more expensive than the alternatives that they could use otherwise because of some harebrained environmental theory that whatever 

that harebrained theory is, that that expense, which is usually hidden from the public, goes right out of the pool of money that we 

have to provide good jobs for our veterans and everybody else. So 

if wind costs five times as much to produce the same amount of 

electricity as natural gas, that is how much money less we have to 

provide good jobs for veterans and anybody else in this country because we are eating up resources that could be used, put to better 

use and are now just evaporated because that wealth no longer exists. I find wind to be one of the, and from what I have seen and 

heard from various sources, one of the most inefficient ways of producing electricity per cost and not to mention the fact that there 

are environmental costs to it as well, the thousands of birds that 

get killed. I am not necessarily a bird man here but I can just tell 

you that there are many more birds that are killed by windmills 

than there are by fracking from what I understand. 

And by the way, wind energy is not anything new. My family 

came from a small farm in North Dakota and I used to go up there 

and work in the farm in the summertime, sometimes the wintertime. They had windmills back then. In fact, about 100 years ago, 

windmills were thought to be the potential use for electricity, especially on farms and places like that, but they decided not to go that 

direction because it was cheaper and it was a waste of resources 

not to go with the cheaper method of producing electricity, and if 

you don’t go with the cheaper method, you are evaporating wealth, 

which could be put to use in improving people’s standard of living. 

And let us also note, the idea that we have not been financing 

‘‘green energy research’’ as compared to what we are doing with oil 

and gas is just incredible. I mean, hundreds of times more money 

has been spent on green energy research than in oil and gas, and 

that is documented here. 

And one other thing. I think the oil industry and the gas industry, one of the most vilified industries that have done so much good 

for our country. Having come from a family in North Dakota, I realize what our cities must have smelled like when we were relying 

on horses for our transportation system, and I will tell you that a 

hundred years ago, one of the biggest problems was horse manure, 

and the smell and the stench and the health-related things, and 

the oil industry saved us from all of that, and kids aren’t even 

taught that now. They just think that it was hunky-dory back in 

those days. 
74 

One thing that I probably have disagreed with the industry 

about is about this whole research thing that we are talking about 

today. If we are putting money into research, which is what we are 

talking about, and we are talking about how fracking became, you 

know, a viable source, and there are certain technologies that were 

developed and certain government involvement in that. What is the 

American taxpayer getting out of that? Are we going to, as far as 

I am concerned, if we invest in the development technology for your 

industry, and that technology reaps a big reward because we are 

producing all this energy now and making billions of dollars doing 

it, shouldn’t the taxpayers be the owners of that technology if we 

are investing in it, and how much have we gotten back from our 

investment in research, for example, in fracking and other things? 

Besides the fact the public is benefiting, there is no doubt about 

that, but we are talking about in the other industry and people 

input money into research and development, develop new technologies, they have the patent rights and they have the property 

rights to that utilization and they make money on it. Now, 

shouldn’t the taxpayers make money for investing and developing 

your technology? Anybody can answer that. That is fine with me. 

Dr. HILL. I guess the government could do that if they chose to, 

in other words, Department of Energy-funded research, the Department of Energy could own the intellectual property. In general, the 

way it has always been is that this type of research is done for the 

general benefit of the public and so that knowledge that is created 

is share with everyone. 

Mr. ROHRABACHER. Mr. Chairman, just for the record and this 

hearing, that this is one Congressman that would insist that if we 

are going to invest taxpayer money and whether it is the oil industry or any other industry, that developing technology for them to 

make a profit, the taxpayers should have an ownership right of 

some kind on the technology that is being developed, and that is 

just for the record. Thank you very much. 

Mr. MARTINEAU. Let me answer one thing there. If you think 

about the economy, the natural gas prices here in the United 

States, they are benefiting because we have so much natural gas 

now that gas prices are down so low and they are benefiting indirectly. If they want to move to Europe, they sure can and pay $11 

in MCF over there as opposed to $3. 

Mr. ROHRABACHER. You know any time you do something right 

in a free market economy, it means somebody is going to make 

some more money, right? So it is not just oil and gas, it is anybody, 

if we were paying the research and development costs for any other 

industry and then they were profiting from it, that would be different if that industry was using their own money and developing 

their own technology. They would actually own the rights to that 

particular technology and they would lease it out to other people 

and make money from it. Now, if the United States government is 

going to do this for your industry or any other industry, I might 

add, I just think that the taxpayers should own that share of the 

technology they are helping to develop and should go into the coffers of the taxpayer. 

Chairman HARRIS. Again, I want to thank the gentleman from 

California, and the gentleman, the new gentleman on the Com-
75 

mittee has been very patient waiting. It is my pleasure to recognize 

Mr. Curson for five minutes for questioning. 

Mr. CURSON. Thank you, and being the newest member, I am 

probably the least knowledgeable about this issue, but I have studied the history of this Committee and these hearings, and first I 

want to agree with the previous speaker that I am glad that our 

automobiles aren’t powered by horse manure, coming from the industry. 

But in this particular issue, I know the question that the citizens 

of my district will ask is, we have got an industry that the government has participated in R&D. This is a for-profit industry. They 

provide the oil industry very generous tax rates and incentives. 

The three largest companies, oil companies in America, in 2011 

made $80 billion in profits while the rest of the economy was struggling out of the worst recession that we have had in many, many 

years. Why would the government pay for R&D to create more 

profit for a profit company when these companies aren’t making 

nickels and dimes, they are making huge dollars? I heard clearly 

that many of the smaller oil companies that don’t make these type 

of profits are the ones that are the actual benefactors. Well, there 

is other ways for those companies to take advantage of this rate. 

I believe that—I would like to have an answer on why in the big 

picture with companies making this kind of profit should the government be rolling out taxpayer dollars to do your R&D, particularly these aren’t new technologies. This unconventional resources 

have been around for years and the oil companies have decided not 

to pursue them because they weren’t profitable in the end. So if 

now new technologies are making it more clear that they can be 

profitable, you would think that would be the responsibility of the 

oil companies to pursue it, and in previous hearings on this very 

subject when you get a member of the U.S. Chamber that says ‘‘I 

don’t think you will find anybody in the industry that is saying we 

need more money from the federal government.’’ I believe that is 

the same thing the citizens of my district would say. 

So if there is a reasonable answer to that, I would like to hear 

that. 

Dr. HILL. I would like to point out that again, as I said in my 

testimony, the majority of research funding of this type that goes 

to the Department of Energy in general, it is funding university research. Is it not going to Exxon Mobil. It is not going to these very 

profitable oil companies. It is being spent in universities, and this 

is how we were able to train the engineers that this country desperately needs, and so I would encourage you to think of it that 

way. Don’t think of this as not money flowing directly to the industry, it is helping develop technology that anyone in the country is 

welcome to use but it is really being spent in support of education. 

Mr. MARTINEAU. And that education goes to people like Apple. 

You notice where Apple is on their profits compared to Exxon? You 

need to look at that. It is four times higher than what Exxon is, 

and the engineering that he was just talking about from those students is what helped. Will you give up your phone? Will you give 

up your computer? Will you give up the plastic that you use every 

day in these water bottles? It all comes from the research done 
76 

originally by the oil and gas industry and utilized by other technologies like Apple. 

Chairman HALL. Will the gentleman yield? 

Mr. CURSON. I yield the rest of my time. 

Chairman HALL. What percentage of the little independents that 

drill and hit to those who drill and miss? 

Mr. MARTINEAU. You don’t want to know the number of dry holes 

I have drilled in my lifetime. 

Chairman HALL. I think that answers my question. 

Mr. MARTINEAU. And you know, it kind of goes back, speaking 

of dry holes made me think about when we talk about intangible 

drilling deductions, and the reason that bill was put in place back 

in 1913 was because at that time if you drilled a bunch of dry holes 

or non-commercial wells, you were out of business, and if you didn’t 

continue having some sort of resources, so that tax credit for intangible drilling was passed in 1913, 100 years ago, and because of 

that being able to continue if you drill dry holes and non-commercial wells, Mr. Hall, is what has kept our industry alive, and to be 

able to say you want to take away intangible drilling costs, you will 

put so many companies out of business, it is unbelievable because 

not everybody drills a producer, let me tell you. There can be noncommercial wells, and people forget about those, but you haven’t 

got your money back. And it is not like making a washing machine 

or an automobile, you know. It comes out every day. You come and 

drill with me, you might not make a well every day. 

Chairman HARRIS. Thank you very much, and I want to thank 

all the witnesses for your valuable testimony and to the members 

for their questions. The members of the Subcommittee may have 

additional questions for the witnesses, and we ask you to respond 

to those in writing. 

Mr. ROHRABACHER. Mr. Chairman? 

Chairman HARRIS. I am sorry. I yield to the gentleman from 

California. 

Mr. ROHRABACHER. I would like unanimous consent for one 

minute. 

Chairman HARRIS. Without objection. 

Mr. ROHRABACHER. I would just like to thank Mr. Miller for the 

job that he has done with us. It has been a lot of fun kibitzing with 

you on various issues, and he is a very intelligent member and a 

very hardworking member of this Committee, and sometimes we 

have had disagreements, obviously, but the fact is, is that he is a 

very respected person here and we will miss him and wish him 

well in the years ahead. Thank you for the good job that you have 

done. 

Mr. MILLER. Thank you, Mr. Rohrabacher. I am not aware of any 

instance in which either one of us has convinced the other of anything, but thank you. 

Chairman HARRIS. I want to thank the gentleman from California and echo the gentleman’s comments. It has been a pleasure 

working with the ranking member. And, you know, in the end, we 

all realize that we want what is best for the country and what is 

best for Americans, and do our little bit here on the Energy and 

Environment Subcommittee of the Science Committee toward that 
77 

end. I want to thank him for his service to the Congress and to his 

district. 

Anyway, again, we will ask you to respond to any questions in 

writing that come from Committee members. The record will remain open for two weeks for additional comments from members. 

The witnesses are excused and the hearing is adjourned. 

[Whereupon, at 10:53 a.m., the Subcommittee was adjourned.] 

(79) 

Appendix I 

ANSWERS TO POST-HEARING QUESTIONS
80 

ANSWERS TO POST-HEARING QUESTIONS

Responses by Dr. Anthony Cugini 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

Subcommittee on Energy & Environment 

Hearing Questions for the Record 

The Honorable Andy Harris 

Tapping America's Energy Potential Through Research and Development 

Dr. Anthony Cugini 

1. What recommendations do you have to resurrect and develop a Department of Energy oil 

shale research and development program? What are key items and considerations to 

guide oil shale research activities? 

2. Please describe the types of activities you anticipate DOE supporting as part of its 

contribution to the interagency shale gas study effort. Can you ensure the committee that 

activities focused on issues such as safety and the enviromnent are designed not to find 

problems or excuses to regulate but rather are focused on developing technological 

solutions to enable increased production? Beyond enviromnental issues, what other 

govemmentally-appropriate research and development activities can be undertaken to 

advance expanded development of domestic unconventional resources? 
81 

Responses by Mr. David Martineau 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

Subcommittee on Energy & Environment 

Hearing Questions for the Record 

The Honorable Andy Harris 

Tapping America's Energy Potential Through Research and Development 

Mr. David Martineau 

1. What sort of impact have shale plays, such as the Barnett and Eagle Ford, had on the 

local economy and unemployment rate? In addition to direct benefits, what increased 

professional demands in related economic sectors is Texas experiencing? What are some 

of the multiplier effects? 

2. As you are aware, technological development in unconventional energy productions is 

providing extensive economic benefits in a time of sorely needed economic stimulation. 

Can you speak to the impact of energy development on average consumers? In addition 

to employment benefits, what other sorts of positive effects do people experience on a 

day to day basis? 

3. Mr. Martineau, a recent report by Citigroup declared that "North America is the new Middle 

East. The only thing that can stop it is politics ... " Can you describe potential hurdles politics 

could pose to the timely, safe, and economic recovery of our oil and gas resources? 

4. The Wall Street Journal's CEO Council recently ranked the most important U.S. policy 

issues and concluded that promotion of shale oil and gas to be among the top five-right 

alongside deficit reduction, taxes, and immigration. This speaks volumes about the 

magnitude and importance of the broader spillover effects of the revolution in 

unconventional oil and gas development. Can you speak to the broader importance 

increased energy production can have? For example, what effects are cheap and abundant 

natural gas supplies having on the manufacturing and chemical industries? 
82 

Responses by Dr. Daniel Hill 

U.S. HOUSE OF REPRESENTATIVES 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

Subcommittee on Energy & Environment 

Hearing Questions for the Record 

The Honorable Andy Harris 

Tapping America's Energy Potential Through Research and Development 

Dr. Daniel Hill 

1. How can technology advances in water reuse and recycling improve operation efficiency 

and potentially mitigate stress on local water resources? Can you speak to what type of 

R&D needs to be conducted in order to enable treatment and re-use of fracking water for 

other purposes, such as agricultural? 

2. Please identify some challenges associated with produced water management and the 

different nature of those challenges across different shale plays? How are recycling 

techniques and technologies different across shale plays and unconventional oil and gas 

resource types? 

3. What are some of the potential alternatives to fracking with fresh water, such as nonpotable or brackish water? Additionally, please comment on waterless options such as 

propane gel or compressed air, and discuss how University research and development 

might enable these sorts of options? 

4. Can you comment on how the Produced Water Utilization research and development 

activities contained in H.R. 6603 address major challenges related to minimizing 

potential environmental impacts of shale operations? 
83 

Responses by Mr. Michael Hagood 

RESPONSES TO HOUSE OF REPRESENTATIVES COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

Subcommittee on Energy & Environment 

Hearing Questions for the Record 

The Honorable Andy Harris 

Tapping America's Energy Potential Through Research and Development 

RESPONDENT: Michael Hagood, Idaho National Laboratory 

Question #1: What is the current state of global activity on oil shale research and production? Is there 

a risk of the U.S. falling behind to foreign countries and companies that are also pursuing 

development of oil shale? 

Response: The world's oil shale deposits are located in more than 30 countries with more than 60% 

located in the USA (Allix et ai, 2011; Knauss et ai, 2010). Given historical precedents in evaluating oil and 

gas deposits, additional oil shale deposits will likely be discovered in the future. Most of the world's 

commercial oil shale development operations are currently focused on surface or subsurface mining 

approaches accompanied by less sophisticated surface shale retort processes. 

Oil shale research and development (R&D) is primarily being applied to in situ development processes, 

i.e., for those deposits that are sufficiently deep and not economical to mine. Much ofthis R&D is 

funded by U.S. and international industry, primarily associated with Western U.S. oil shale development. 

The import of this particular R&D focus is significant given that some of the greater concentrations of oil 

shale resources are found at depth. Summary profiles of oil shale technology and R&D can be found in 

various reports (U.S. DOE 2007, 2010, 2011). 

Of particular relevance to oil shale research, the Albertan government and industry have invested 

heavily in in situ processing R&D associated with developing Canadian oil sands, primarily located in 

Alberta. Although, oil sands differ compositionally from Western u.s. oil shale, oil sands research has 

spawned significant innovation, including some benefitting U.S. oil shale research. As a result of this 

investment, Canada maintains both a n operational and R&D leadership position relative to in situ 

processing of unconventional oil resources. 

Current R&D leadership derived from a combination of Canadian oil sands work, Western U.s. oil shale 

technology demonstrations, and hydraulic fracturing technology will have a revolutionary impact on 

unconventional oil development, worldwide. However, if incentives are insufficient to advance oil shale 

research domestically, international leadership opportunities may pass by U.S. stakeholders. Informally, 

there are indications that this may be occurring already, with certain major oil companies refocusing 

their situ processing/extraction R&D from u.s. oil shales to international locations. 
84 

References 

Allix, Pierre, 2011: Coaxing Oil from Shale Oilfield Review, Winter 2010/2011. Allix, Pierre; Burnham, 

Alan K. (2010-12-01). "Coaxing Oil from Shale" (PDF). Oilfield Review (Schlumberger) 22 (4): 6. 

httD:UWWw.slb.com/~/media/Files/resources/oilfield review/ors10/win10/coaxing.ashx. 

Retrieved 2012-04-18. 

Crawford, P.M., C. Dean, J. Stone, J. Killen, 2012. "Assessment of Plans and Progress on US Bureau of 

Land Management Oil Shale RD&D Leases in the United States." 

http://www.unconventionalfuels.orq!otherreports.html. 

Knaus, E, Killen J., Bigiarbigi K, and Crawford P: "An Overview of Oil Shale Resources," in Ogunsola 01, 

Hartsetin AM and Ogunsola 0 (eds): Oil Shale: A Solution to the Liquid Fuel Dilemma. 

Washington, DC: American Chemical Society, ACS Symposium Series 1032 (2010): 3-20 

U.S. DOE Office of Petroleum Reserves, 2007. Task Force Strategy and Program Plan, 2007. "America's 

Strategic Unconventional Fuels." Volume I Preparation Strategy, Plan and Recommendations, 

Volume 11- Resource-Specific and Cross-cut Plans, Volume 111- Resource and Technology 

Profiles." 

U.S. DOE Office of Petroleum Reserves, September 2010. "Oil Shale Research in the United States: 

Profiles of Oil Shale Research and Development Activities in Universities, National laboratories, 

and Public Agencies." U.S. Department of Energy Office of Reserve Lands Management. Second 

Edition, 

U.S. Department of Energy Office of Petroleum Reserves Office of Reserve Lands Management, Fourth 

Edition, September 2011. "Secure Fuels from Domestic Resources: The Continuing Evolution of 

America's Oil Shale and Tar Sands Industries - Profiles of Companies Engaged in Domestic Oil 

Shale and Tar Sands Resource and Technology Development: 5th Edition." 
85 

Question #2: What are the potential parallels between oil sands and oil shale in terms of 

development challenges and related Research and Development (R&D) needs? You noted in your 

testimony that Canadian oil sands production, which is currently at almost two million barrels of oil 

per day, was really enabled by strategic and targeted R&D supported by the Canadian government. 

Can you describe some of the R&D that was undertaken to make oil sands production a reality, and 

how that might serve as a model for U.S. activity on oil shale? 

Relative to Canadian oil sands development, there is an estimated proven reserve of 169 billion barrels, 

which places Canada third in world oil reserves. Oil sands production reached ~1.6 million barrels per 

day in 2011 and is projected to reach five million barrels per day by 2030 (CAPP, 2012). Officially 

establishing these reserves and the current (and future) production rates have been built strongly on 

technology R&D investments. 

There are a number of parallels between oil sands and oil shale development pertinent to R&D needs. 

Both resources can be extracted by mining or in situ processes, depending on the proximity of the 

resource to the surface. Unlocking the greater portions of these deposits (80% of oil sands reserves) will 

occur at depth using in situ processes, including potentially hydraulic fracturing techniques, horizontal 

drilling, heating, solvents and/or other processes. In addition, development of both resource sets 

requires management of process C02, water, as well as addressing other environmental concerns. 

In 1974, the Alberta government formed the Alberta Oil Sands Technology and Research Authority 

(AOSTRA) for promotion of the development of new technologies for oil sands and heavy oil production 

with a main target on finding technologies for that part of the resource that cannot be recovered using 

surface mining technologies. The Alberta government invested roughly $800 Million of government 

research funding over a period from 1975-1995, while the private sector has invested over $100 Billion 

in the Alberta oil sands since the Government of Alberta's original commitment. In March 2012 the 

Alberta government confirmed commitment of $150 million annually to AOSTRA 2 over an expected 20-

year life of the new project with the intent to further development of the oil sands. 

In 1984, AOSTRA initiated the Underground Test Facility as an in situ steam assisted gravity drainage 

(SAG D) bitumen recovery facility. AOSTRA also supported research at Canadian universities and research 

institutions by providing grants to inventors, funding the operation of a technical information system, 

promoting international co-operation in oil sands development, and providing scholarships and 

fellowships for educational assistance. 

This foundational "first phase of R&D" is now leading to further developments, including the next 

generation of "in situ" extraction methods, decreasing energy intenSity and the amount of natural gas 

deployed for steam generation, reducing water usage and reducing C02 emissions, landscape, etc. 

Reference 

Canadian Association of Petroleum Producers (CAPP), 2012: Crude Oil: Forecast, Markets & Pipelines. 
86 

Question 113: What recommendations-do you have to resurrect and develop a Department of Energy 

oil shale research and development program? What are the key items and considerations to guide oil 

shale research activities? 

The U.S. Department of Energy and .its laboratories are well qualified to provide leadership to deliver a 

focused, solution oriented, R&D program to help address key challenges in realizing a competitive U.S. 

oil shale industry. DOE is a technical integrator that can bring together needed assets and expertise from 

both within and outside DOE, including universities and industry, to provide a high-quality R&D program, 

and as well, act as a needed honest broker of technical information. It is critical to recognize that any 

role that DOE plays, here, should be complementary (not duplicative) to industry pursuits. The following 

are selected recommendations and guidance for resurrecting and developing a DOE oil shale research 

and development (R&D) program; 

• Build off of existing work. The U.S. DOE Office of Fossil Energy has conducted extensive work in 

assessing and evaluating the development of a potential oil shale industry, including identifying 

technologies and R&D efforts relevant to establishing a DOE oil shale R&D program. The 2007 

Task Force Report to Congress on Strategic Unconventional Fuels has details on needed R&D for 

Oil Shale. This would be a very good place to identify key items for consideration in resurrecting 

a U.S. Oil Shale Research Program. 

• Establish a U.S. Western oil shale regional perspective and presence. A DOE oil shale R&D 

program should be focused primarily around the immense oil shale resources located within the 

Western United States, i.e., in Colorado, Wyoming, Utah. Along with this, a more regional 

presence by DOE, engaging with regional stakeholders, should be encouraged. 

• Develop a solutions oriented R&D strategy. A well planned oil shale R&D strategy should be 

developed which is driven by the goal of establishing a long-term sustainable and 

environmentally responsible Western oil shale industry. As an example, such a strategy should 

be built around, in part, production and environmental goals. 

Develop an oil shale R&D road map. Once a strategy is developed, with end goals established, it 

is recommended to conduct an R&D road mapping exercise to identify various R&D pathways. 

• Consult Alberta oil sands industry and government expertise. It is recommended to consult with 

Alberta oil sands industry, academic and government stakeholders (including provincial and 

federal governments) on strategiC planning, research collaborations and designing an R&D 

model suitable for u.s. Western oil shale, as per Energy Policy Act 2005, Section 369 H(4). 

• Address multiple scales of operations. An oil shale R&D program should focus on challenges that 

exist at both a site operations scale and an oil shale industry-wide scale, including addressing 

fuel logistics, integrated energy systems approaches, and potential cumulative environment 

effects. 
87 

• Address near-term and long-term R&D perspectives: The size ofthe Western U.S. oil shale 

resource, as well as its potential longevity, ideally requires both near-term and longer-term R&D 

approaches, the latter leading to multiple generations of innovation. This setting also broadens 

the perspective for considering R&D site demonstration, applied research and basic research 

phases. 

• Promote collaboration across DOE Offices: Given the nature of oil shale development and 

trends being witnessed in energy development, there is an opportunity to realize significant 

synergy between the various DOE offices. Examples may include the Offices of Nuclear Energy 

and Energy Efficiency and Renewable Energy working with the Office of Fossil Energy to propose 

more integrated approaches that may lead to greater production efficiencies and lessening of 

potential environmental impacts. 

• Engage diverse stakeholders in planning and implementation. Development of an R&D program 

should involve significant stakeholder involvement, including across DOE offices, other federal 

agencies (e.g., 001, EPA, 000), academia, universities, private industry and others. In particular, 

en!5agement with industry is paramount to reduce research redundancies. In addition, given the 

location of Western oil shale, there is a need to ensure regional stakeholder participation. 

Further, it is important that such a program is complementary to industry needs (not 

duplicative). 

• Target in situ development R&D. Advancement of higher risk in situ concept R&D is needed to 

reach proof-of- concept stage of development (pre-competitive), I.e., addressing energy 

intensity, fracturing, heat transfer, materials performance, process monitoring, etc. 

• Target environmental impact mitigation R&D. R&D is required to both understand existing and 

potential future impacts from oil shale development, as well as develop technology that can 

help mitigate environmental impacts. 

• Provide an independent source of technical information. DOE can playa very important role in 

providing pedigreed technical information to various stakeholders, including the public, and be 

viewed as an "honest independent information broker", including addressing some more of the 

contentious environmental and technology topics. 

(89) 

Appendix II 

ADDITIONAL MATERIAL FOR THE RECORD
90 

LETTER SUBMITTED BY CHAIRMAN RALPH M. HALL FROM THE AMERICAN

GEOSCIENCES INSTITUTE IN SUPPORT OF H.R. 6603 
91 

Page 2 

'Additional information is available online: AGI's publication "Status of the Geoscience Workforce 2011" [PDF online at 

http://www.agiweb.orglworkforce/reports.html] highlights a growing disparity between supply and demand of trained 

geoscience professionals. AGl's Pulse of Earth Science [http://www.agiweb.orgleducationlstatusreports/2007/index.html] 

surveys the limitations ofinquiry-based Earth science education for grades K-12 in the United States. AGl's Critical Needs 

publication [http://www.agiweb.orglgap/criticalneeds/index.html] sets out federal policy directions that would help the U.S. 

meet the many challenges of the twenty first century. 

The American Geosciences Institute is a nonprofit federation of geoscientific and professional associations that represents 

more than 250,000 geologists, geophysicists, and other earth scientists. Founded in 1948, AGI provides information services to 

geoscientists, serves as a voice of shared interests in OUf profession, plays a major role in strengthening geoscience education, 

and strives to increase public awareness of the vital role the geosciences play in society's use of resources, resilience to natural 

hazards, and the health of the enviromnent. 
92 

‘‘THE NEW BOOM: SHALE GAS FUELING AN AMERICAN INDUSTRIAL REVIVAL,’’ ARTICLE, 

WASHINGTON POST
93 

"For the foreseeable future, thanks to the recovery of vast U.S. underground gas deposits of 

shale, natural gas is likely to remain 50 to 70 percent cheaper in the U.S. than in Europe and 

Japan," said a recent report by the Boston Consulting Group. 

"That will translate into significantly lower costs for electricity generation, for fuel used to 

power industrial plants and for feedstock used across many industrial processes," said Justin 

Rose, a BCG principal and co-author of the report. 

Manufacturers have plans to invest as much as $80 billion in U.S. chemical, fertilizer, steel, 

aluminum, tire and plastics plants, according to Dow Chemical. And the main reason, said 

George J. Biltz, Dow Chemical's vice president for energy and climate change, "comes back to 

the massive competitive advantage the United States has with natural gas today." 

A changing conversation 

The shale boom has not just changed corporate plans. It has also altered the way we think and 

talk about oil and gas. 

For decades, most of the conversation about U.S. oil and natural gas has revolved around the 

idea of scarcity, declining output and rising prices. The seminal work by M. King Hubbert - the 

Shell geologist who accurately predicted in the 1950s that U.S. oil production would peak in 

1971 defined this framework. 

Natural gas supplies traditionally have been seen as limited and gas prices have been volatilebuming utilities that bet too heavily on gas-fired power plants in the 1990s. 

But past assumptions have been challenged by new technologies - and new uses of old 

technology. Years of pioneering work on drilling techniques by an independent oilman, George 

Mitchell, paid off. Despite concerns about water pollution risks linked to hydraulic fracturing of 

shale, drilling and production have soared. 

The United States is rife with these shale plays, some rich in natural gas and others rich in oil. 

The United States is still producing less oil than in 1971, and prices are high. But the country is 

producing more oil than in any year since 1994, and production is rising. 

Meanwhile, natural gas production has jumped to record levels. In 2000, shale gas was 2 percent 

of the U.S. natural gas supply; by 2012, it was 37 percent. 

Natural gas supplies suddenly look bountiful enough to last a century at current consumption 

rates, the National Petroleum Council said in a report last year. Some advocates of natural gas 

have called it a "bridge" to a clean-energy future because its greenhouse gas emissions are half 

those of coal and because gas plants can start up quickly and pair with wind and solar to provide 

a reliable alternative to coal. 

Others call it a detour, since it is still a fossil fuel and it is undercutting nuclear, wind and solar 

energy as well as coal. "Bridge to clean future or U-tum to dirty past?" said a headline on the 
94 

blog of the environmental group Earthjustice. The United States has drilled more oil and gas 

wells than any other country, and the new wave of supplies has brought a new wave of rigs 

dotting the countryside and new crisscrossing pipelines. 

For environmentalists, the abundance of shale gas poses a political and environmental dilemma. 

As new gas supplies fuel more and more industrial plants, new constituencies will have stakes in 

gas production, making it politically harder to impose new regulations. The Environmental 

Protection Agency is weighing whether to issue additional federal guidelines on various 

disruptive aspects of shale gas drilling, including the disposal of toxic water used to fracture 

formations and air pollution from drilling operations. The EPA might also issue rules requiring 

drilling techniques that would make contamination of water aquifers less likely. 

But one thing is clear: Tumbling natural gas prices have changed every calculation and 

assumption about the energy business. 

Petrochemical reaction 

Perhaps no one benefits more from low natural gas prices than the petrochemical industry, which 

relies on natural gas as a feedstock and as a source of power. Natural gas, in tum, produces the 

building blocks for other products, including paints, solvents, plastics, packaging, inks, dyes and 

lubricants. 

And no industry better demonstrates just how much has changed in a short period of time. 

Chemical-industry employment slid 17 percent from January 2002 through January 2011, 

according to the Bureau of Labor Statistics. 

In October 2005, after Hurricane Katrina pounded Louisiana, the price of natural gas had spiked 

to $14 per thousand cubic feet. Supplies were scarce even before the storm, and Dow Chemical 

had temporarily shut down one of its biggest petrochemical plants. 

"We say it unequivocally - the U.S. is in a natural gas crisis," Dow Chemical chief executive 

Andrew Liveris said in Senate testimony at the time. "The hurricanes have dramatically 

underscored the problem, but they did not cause it." Natural gas prices, once $2 per thousand 

cubic feet, had soared sevenfold. Gas accounted for half of Dow's costs, he said. 

"We simply cannot compete with the rest of the world at these prices," Liveris added. "We and 

others are now investing in China and the Middle East, where energy is much cheaper, to our 

incredulity. Our industry will continue to grow. It's simply a question of where we will grow." 

Among the deals it made: one with Kuwait and a $20 billion joint venture with Saudi Aramco to 

build facilities in Saudi Arabia using cheap gas found along with oil there. 

Today, Dow Chemical is drawing up plans to construct a plant in Freeport, Tex., and is restarting 

a plant in St. Charles, La. And year-end nationwide chemical-industry employment has edged up 

for the first time in a decade, the Bureau of Labor Statistics says. 
95 

Methanex chief executive Bruce Aitken said natural gas prices made moving operations to 

Louisiana attractive. 

"The proliferation of shale gas in North America has resulted in a structurally low natural gas 

price environment, which underpins the very attractive economics for this project," he told 

investors in a July 26 conference call. 

He said moving the methanol plant from Chile to Louisiana will payoff in less than four years if 

gas prices stay around $4 per thousand cubic feet. He said the company was considering moving 

a second plant from Chile to Geismar, La. 

CF Industries was also lured by the price and proximity of natural gas in Ascension Parish. Gas 

makes up about 70 percent of manufacturing costs at its ammonia and urea units. The company 

said the site is served by five pipelines at prices set at the nearby Henry Hub, which is the 

nationwide benchmark for spot gas prices. 

Foreign companies are also eyeing U.S. natural gas. 

In September, a large Egyptian construction company armounced that it would build a new 

nitrogen fertilizer production plant in southeast Iowa to supply customers in the U.S. Com Belt. 

Cairo-based Orascom Construction Industries, one of the world's largest fertilizer makers, said 

the $1.4 billion plant would be "the first world-scale, natural gas-based fertilizer plant built in the 

United States in nearly 25 years" and would reduce U.S. dependence on imported fertilizers. 

After years oflosing manufacturing jobs, most American communities are vying to lure 

industries. 

Orascom chose Wever, Iowa, over Illinois because part of its investment will be funded by a taxexempt bond. The Iowa Economic Development Authority approved an incentive package that is 

expected to provide tax relief "in the order of $1 00 million," the company said. 

Royal Dutch Shell has unveiled plans for a $2 billion petrochemical plant northwest of 

Pittsburgh, where it can use natural gas supplies from the state's enormous Marcellus shale 

formation. It chose Pennsylvania despite being wooed by Ohio and West Virginia. 

The broader effect 

The economic growth from natural gas abundance extends to companies providing supplies to 

the drilling boom. 

On Oct. 1, Honeywell armounced that it paid $525 million for a 70 percent stake in Thomas 

Russell, a privately held provider of technology and equipment for natural gas processing and 

treatment. With the acquisition, Honeywell will offer technologies and products that allow 

producers of shale and conventional natural gas to remove contaminants from natural gas and 

recover high-value natural gas liquids used for petrochemicals and fuel. 
96 

Another example: U.S. Steel. The company is churning out new pipe for natural gas drilling rigs, 

wells and pipelines. And as a big consumer of power, it is paying less for fuel. 

Surma, U.S. Steel's chief executive, said in a speech recently that the company used 100 billion 

cubic feet of natural gas in 2011, "so just a few dollars' difference in the price .0.0. allows us to 

realize important and significant cost savings." For every dollar change in the price of a thousand 

cubic feet, the company saves $100 million. 

Surma said the company is also improving its North American blast furnaces to allow for 

increased injection of natural gas to reduce its consumption of coke, a fuel derived from coal. 

The reduction could cut blast furnace fuel costs by $15 per ton of hot metal produced - and 

U.S. Steel can produce more than 20 million tons of steel a year. 

"In addition to these kinds of cost savings opportunities, natural gas should provide North 

American steelmakers with another operating advantage over our foreign competitors," Surma 

said. 

Once some of these basic industries come home, companies further down the value chain could 

return, too. 

"If you make plastics in the United States, there are a bunch of things produced in China that 

might tip back to being produced in the U.S.," said Harold L. Sirkin, a senior partner at the 

Boston Consulting Group. 

"You could think about toys," he said. "We talked to a few companies thinking, 'Does this mean 

I can re-shore some toy production to the U.S.?' The energy cost in plastic toys is reasonably 

high. And the labor content is relatively low because we're talking about automated injection 

molding facilities." 

Chinese exporting factories could be vulnerable, especially given the risks of intellectual 

property theft, transportation costs and long supply chains. 

"All of a sudden, the equations start changing about where you produce things," Sirkin said. 

"Even in industries where the cost structure includes only 1 or 2 percent electricity, that could 

make the difference." 
97 

‘‘OIL AND NATURAL GAS GENERATE EMPLOYMENT AND TAX REVENUE,’’ 

SUBMITTED BY MR. DAVID MARTINEAU

Æ