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2002
NATIONAL ENERGY POLICY—REPORT OF
THE NATIONAL ENERGY POLICY
DEVELOPMENT GROUP
HEARING
BEFORE THE
COMMITTEE ON SCIENCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
MAY 23, 2001
Serial No. 107–42
Printed for the use of the Committee on Science
Available via the World Wide Web: http://www.house.gov/science
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COMMITTEE ON SCIENCE
HON. SHERWOOD L. BOEHLERT, New York, Chairman
LAMAR S. SMITH, Texas
CONSTANCE A. MORELLA, Maryland
CHRISTOPHER SHAYS, Connecticut
CURT WELDON, Pennsylvania
DANA ROHRABACHER, California
JOE BARTON, Texas
KEN CALVERT, California
NICK SMITH, Michigan
ROSCOE G. BARTLETT, Maryland
VERNON J. EHLERS, Michigan
DAVE WELDON, Florida
GIL GUTKNECHT, Minnesota
CHRIS CANNON, Utah
GEORGE R. NETHERCUTT, JR., Washington
FRANK D. LUCAS, Oklahoma
GARY G. MILLER, California
JUDY BIGGERT, Illinois
WAYNE T. GILCHREST, Maryland
W. TODD AKIN, Missouri
TIMOTHY V. JOHNSON, Illinois
MIKE PENCE, Indiana
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FELIX J. GRUCCI, JR., New York
MELISSA A. HART, Pennsylvania
J. RANDY FORBES, Virginia
RALPH M. HALL, Texas
BART GORDON, Tennessee
JERRY F. COSTELLO, Illinois
JAMES A. BARCIA, Michigan
EDDIE BERNICE JOHNSON, Texas
LYNN C. WOOLSEY, California
LYNN N. RIVERS, Michigan
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
BOB ETHERIDGE, North Carolina
NICK LAMPSON, Texas
JOHN B. LARSON, Connecticut
MARK UDALL, Colorado
DAVID WU, Oregon
ANTHONY D. WEINER, New York
BRIAN BAIRD, Washington
JOSEPH M. HOEFFEL, Pennsylvania
JOE BACA, California
JIM MATHESON, Utah
STEVE ISRAEL, New York
DENNIS MOORE, Kansas
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MICHAEL M. HONDA, California
C O N T E N T S
May 23, 2001
Witness List
Hearing Charter
Opening Statements
Statement by Representative Sherwood L. Boehlert (NY–23), Chairman, Committee on Science, U.S. House of Representatives
Written Statement
Statement by Representative Ralph M. Hall (TX–04), Minority Ranking Member, Committee on Science, U.S. House of Representatives
Statement by Representative Lynn Woolsey (CA–6), Ranking Member, Subcommittee on Energy, Committee on Science, U.S. House of Representatives
Prepared Statement by Representative Jerry Costello (IL–12), Member, Committee on Science, U.S. House of Representatives
Statement by Representative Roscoe Bartlett (MD–6), Chairman, Subcommittee on Energy, Committee on Science, U.S. House of Representatives
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Written Statement
Statement by Representative Sheila Jackson Lee (TX–18), Member, Committee on Science, U.S. House of Representatives
Written Statement
Statement by Representative Nick Smith (MI–7), Chairman, Subcommittee on Research, Committee on Science, U.S. House of Representatives
Written Statement
Panel
The Honorable William F. Martin, Chairman, Washington Policy and Analysis, Inc. on behalf of the Alliance for Energy and Economic Growth
Oral Statement
Written Statement
Biography
Katherine H. Hamilton, Co-Director, American Bioenergy Association
Oral Statement
Written Statement
Biography
Financial Disclosure
David G. Hawkins, Director, Natural Resources Defense Council Climate Center
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Oral Statement
Written Statement
Biography
Financial Disclosure
Discussion
The Role of R&D in Energy Efficiency and Renewable Energy
Recommended Priorities in the NEPD Report
Energy and Resource Management
The Role of Renewable Energy Sources in the NEPD Report
Alternatives to Coal for Base Load Power Generation
Fusion Energy Research
Bioenergy Strategies
Effects of R&D on Gas Prices
Market Prices for Energy
The Transportation Sector and Oil Policy
New Power Plant Construction and the Role of Conservation
Effects of Increased OPEC Production
Increased Supply or Increased Efficiency?
Energy and National Security
Boutique Fuel Inefficiencies
Gasoline Price Controls
Effects of Energy Efficiency
Education Efforts on Energy Efficiency and Conservation
World Petroleum Reserves
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Appendix 1: Additional Material for the Record
Summary of Recommendations, National Energy Policy—Report of the National Energy Policy Development (NEPD) Group, May 17, 2001
Reliable, Affordable, and Environmentally Sound Energy for America's Future, Report of the National Energy Policy Development Group, May 16, 2001
Slower, Costlier, and Dirtier: A Critique of the Bush Energy Plan, National Resource Defense Council, May 2001
A Responsible Energy Policy for the 21st Century, National Resource Defense Council, March 2001
NATIONAL ENERGY POLICY—REPORT OF THE NATIONAL ENERGY POLICY DEVELOPMENT GROUP
WEDNESDAY, MAY 23, 2001
House of Representatives,
Committee on Science,
Washington, DC.
The Committee met, pursuant to call, at 1:10 p.m., in Room 2318 of the Rayburn House Office Building, Hon. Sherwood L. Boehlert presiding.
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Committee on Science
U.S. House of Representatives
Washington, DC 20515
Hearing on
National Energy Policy—Report of the National Energy Policy Development Group
Wednesday, May 23, 2001
1:00 p.m.-3:00 p.m.
2318 Rayburn House Office Building
Witness List
The Honorable William F. Martin
Chairman,
Washington Policy and Analysis, Inc.
on behalf of the
Alliance for Energy and Economic Growth
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Katherine H. Hamilton
Co-Director,
American Bioenergy Association
David G. Hawkins
Director,
Natural Resources Defense Council Climate Center
Section 210 of the Congressional Accountability Act of 1995 applies the rights and protections covered under the Americans with Disabilities Act of 1990 to the United States Congress. Accordingly, the Committee on Science strives to accommodate/meet the needs of those requiring special assistance. If you need special accommodation, please contact the Committee on Science in advance of the scheduled event (three days requested) at (202) 225–6371 or FAX (202) 225–0891.
Should you need Committee materials in alternative formats, please contact the Committee as noted above.
HEARING CHARTER
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COMMITTEE ON SCIENCE
U.S. HOUSE OF REPRESENTATIVES
National Energy Policy—Report of the
National Energy Policy Development Group
WEDNESDAY, MAY 23, 2001
1:00 P.M.–3:00 P.M.
2318 RAYBURN HOUSE OFFICE BUILDING
1. Purpose of the Hearing
On Wednesday, May 23, 2001, beginning at 1:00 p.m., the Committee on Science will hold a hearing on National Energy Policy—Report of the National Energy Policy Development Group that was released to the public on May 17. The purpose of the hearing is to receive testimony on the National Energy Policy Development Group's May 16 report to President Bush.
There will be one panel of outside witnesses representing industrial and environmental organizations.
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2. Background
In his second week in office, President George W. Bush established the National Energy Policy Development (NEPD) Group, and directed it to ''develop a national energy policy designed to help the private sector, and, as necessary and appropriate, State and local governments, promote dependable, affordable, and environmentally sound production and distribution of energy for the future.'' The NEPD Group, chaired by Vice President Dick Cheney,(see footnote 1) submitted its report entitled ''Reliable, Affordable, and Environmentally Sound Energy for America's Future''(see footnote 2) to the President on May 16.
The NEPD Group Report consists of an ''Overview'' and eight chapters: (1) Taking Stock: Energy Challenges Facing the United States; (2) Striking Home: The Impacts of High Energy Prices on Families, Communities, and Businesses; (3) Protecting America's Environment: Sustaining the Nation's Health and Environment; (4) Using Energy Wisely: Increasing Energy Conservation and Efficiency; (5) Energy for a New Century: Increasing Domestic Energy Supplies; (6) Nature's Power: Increasing America's Use of Renewable and Alternative Energy; (7) America's Energy Infrastructure: A Comprehensive Delivery System; and (8) Strengthening Global Alliances: Enhancing National Energy Security and International Relationships.
Following is text of the Overview section of the NEPD Group Report; an attachment includes the text of the Report's 106 recommendations, by chapter.
Text of Overview Reliable, Affordable, and Environmentally Sound Energy for America's Future
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In his second week in office, President George W. Bush established the NEPD Group, directing it to ''develop a national energy policy designed to help the private sector, and, as necessary and appropriate, State and local governments, promote dependable, affordable, and environmentally sound production and distribution of energy for the future.'' This Overview sets forth the National Energy Policy Development (NEPD) Group's findings and key recommendations for a National Energy Policy.
America in the year 2001 faces the most serious energy shortage since the oil embargoes of the 1970s. The effects are already being felt nationwide. Many families face energy bills two to three times higher than they were a year ago. Millions of Americans find themselves dealing with rolling blackouts or brownouts; some employers must lay off workers or curtail production to absorb the rising cost of energy. Drivers across America are paying higher and higher gasoline prices.
Californians have felt these problems most acutely. California actually began the 1990s with a surplus of electricity generating capacity. Yet despite an economic boom, a rapidly growing population, and a corresponding increase in energy needs, California did not add a single new major electric power plant during the 1990s. The result is a demand for electricity that greatly succeeds the amount available.
A fundamental imbalance between supply and demand defines our nation's energy crisis. As the chart illustrates, if energy production increases at the same rate as during the last decade our projected energy needs will far outstrip expected levels of production.
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This imbalance, if allowed to continue, will inevitably undermine our economy, our standard of living, and our national security. But it is not beyond our power to correct. America leads the world in scientific achievement, technical skill, and entrepreneurial drive. Within our country are abundant natural resources, unrivaled technology, and unlimited human creativity. With forward-looking leadership and sensible policies, we can meet our future energy demands and promote energy conservation, and do so in environmentally responsible ways that set a standard for the world.
The Challenge
America's energy challenge begins with our expanding economy, growing population, and rising standard of living. Our prosperity and way of life are sustained by energy use. America has the technological know-how and environmentally sound 21st century technologies needed to meet the principal energy challenges we face: promoting energy conservation, repairing and modernizing our energy infrastructure, and increasing our energy supplies in ways that protect and improve the environment. Meeting each of these challenges is critical to expanding our economy, meeting the needs of a growing population, and raising the American standard of living.
We are already working to meet the first challenge: using energy more wisely. Dramatic technological advances in energy efficiency have enabled us to make great strides in conservation, from the operation of farms and factories to the construction of buildings and automobiles. New technology allows us to go about our lives and work with less cost, less effort, and less burden on the natural environment. While such advances cannot alone solve America's energy problems, they can and will continue to play an important role in our energy future.
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The second challenge is to repair and expand our energy infrastructure. Our current, outdated network of electric generators, transmission lines, pipelines, and refineries that convert raw materials into usable fuel has been allowed to deteriorate. Oil pipelines and refining capacity are in need of repair and expansion. Not a single major oil refinery has been built in the United States in nearly a generation, causing the kind of bottlenecks that lead to sudden spikes in the price of gasoline. Natural gas distribution, likewise, is hindered by an aging and inadequate network of pipelines. To match supply and demand will require some 38,000 miles of new gas pipelines, along with 255,000 miles of distribution lines. Similarly, an antiquated and inadequate transmission grid prevents us from routing electricity over long distances and thereby avoiding regional blackouts, such as California's.
Increasing energy supplies while protecting the environment is the third challenge. Even with successful conservation efforts, America will need more energy.
Renewable and alternative fuels offer hope for America's energy future. But they supply only a small fraction of present energy needs. The day they fulfill the bulk of our needs is still years away. Until that day comes, we must continue meeting the nation's energy requirements by the means available to us.
Estimates indicate that over the next 20 years, U.S. oil consumption will increase by 33 percent, natural gas consumption by well over 50 percent, and demand for electricity will rise by 45 percent. If America's energy production grows at the same rate as it did in the 1990s we will face an ever-increasing gap.
Increases on this scale will require preparation and action today. Yet America has not been bringing on line the necessary supplies and infrastructure.
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Extraordinary advances in technology have transformed energy exploration and production. Yet we produce 39 percent less oil today than we did in 1970, leaving us ever more reliant on foreign suppliers. On our present course, America 20 years from now will import nearly two of every three barrels of oil—a condition of increased dependency on foreign powers that do not always have America's interests at heart. Our increasing demand for natural gas—one of the cleanest forms of energy—far exceeds the current rate of production. We should reconsider any regulatory restrictions that do not take technological advances into account.
Over the next 20 years, U.S. oil consumption will grow by over six million barrels per day. If U.S. oil production follows the same historical pattern of the last 10 years, it will decline by 1.5 million barrels per day. To meet U.S. oil demand, oil and product imports would have to grow by a combined 7.5 million barrels per day. In 2020, U.S. oil production would supply less than 30 percent of U.S. oil needs.
We have a similar opportunity to increase our supplies of electricity. To meet projected demand over the next two decades, America must have in place between 1,300 and 1,900 new electric plants. Much of this new generation will be fueled by natural gas. However, existing and new technologies offer us the opportunity to expand nuclear generation as well. Nuclear power today accounts for 20 percent of our country's electricity. This power source, which causes no greenhouse gas emissions, can play an expanding part in our energy future.
The recommendations of this report address the energy challenges facing America. Taken together, they offer the thorough and responsible energy plan our nation has long needed.
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Components of the National Energy Policy
The National Energy Policy we propose follows three basic principles:
The Policy is a long-term, comprehensive strategy. Our energy crisis has been years in the making, and will take years to put fully behind us.
The Policy will advance new, environmentally friendly technologies to increase energy supplies and encourage cleaner, more efficient energy use.
The Policy seeks to raise the living standards of the American people, recognizing that to do so our country must fully integrate its energy, environmental, and economic policies.
Applying these principles, we urge action to meet five specific national goals. America must modernize conservation, modernize our energy infrastructure, increase energy supplies, accelerate the protection and improvement of the environment, and increase our nation's energy security.
Modernize Conservation
Americans share the goal of energy conservation. The best way of meeting this goal is to increase energy efficiency by applying new technology—raising productivity, reducing waste, and trimming costs. In addition, it holds out great hope for improving the quality of the environment. American families, communities, and businesses all depend upon reliable and affordable energy services for their well being and safety. From transportation to communication, from air conditioning to lighting, energy is critical to nearly everything we do in life and work. Public policy can and should encourage energy conservation.
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Improvements in energy efficiency since the 1970s have had a major impact in meeting national energy needs relative to new supply. If the intensity of U.S. energy use had remained constant since 1972, consumption would have been about 70 quadrillion Btus (74 percent) higher in 1999 than it actually was.
Over the past three decades, America has made impressive gains in energy efficiency. Today's automobiles, for example, use about 60 percent of the gasoline they did in 1972, while new refrigerators require just one-third the electricity they did 30 years ago. As a result, since 1973, the U.S. economy has grown by 126 percent, while energy use has increased by only 30 percent. In the 1990s alone, manufacturing output expanded by 41 percent, while industrial electricity consumption grew by only 11 percent. We must build on this progress and strengthen America's commitment to energy efficiency and conservation.
The National Energy Policy builds on our nation's successful track record and will promote further improvements in the productive and efficient use of energy. This report includes recommendations to:
Direct federal agencies to take appropriate actions to responsibly conserve energy use at their facilities, especially during periods of peak demand in regions where electricity shortages are possible, and to report to the President on actions taken.
Increase funding for renewable energy and energy efficiency research and development programs that are performance-based and cost-shared.
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Create an income tax credit for the purchase of hybrid and fuel cell vehicles to promote fuel-efficient vehicles.
Extend the Department of Energy's ''Energy Star'' efficiency program to include schools, retail buildings, health care facilities, and homes and extend the ''Energy Star'' labeling program to additional products and appliances.
Fund the Federal Government's Intelligent Transportation Systems program, the fuel cell powered transit bus program, and the Clean Buses program.
Provide a tax incentive and streamline permitting to accelerate the development of clean Combined Heat and Power technology.
Direct the Secretary of Transportation to review and provide recommendations on establishing Corporate Average Fuel Economy (CAFÉ) standards with due consideration to the National Academy of Sciences study of CAFÉ standards to be released in July, 2001.
Modernize Our Energy Infrastructure
The energy we use passes through a vast nationwide network of generating facilities, transmission lines, pipelines, and refineries that converts raw resources into usable fuel and power. That system is deteriorating, and is now strained to capacity.
One reason for this is government regulation, often excessive and redundant. Regulation is needed in such a complex field, but it has become overly burdensome. Regulatory hurdles, delays in issuing permits, and economic uncertainty are limiting investment in new facilities, making our energy markets more vulnerable to transmission bottlenecks, price spikes and supply disruptions. America needs more environmentally-sound energy projects to connect supply sources to growing markets and to deliver energy to homes and business.
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To reduce the incidence of electricity blackouts, we must greatly enhance our ability to transmit electric power between geographic regions, that is, sending power to where it is needed from where it is produced. Most of America's transmission lines, substations, and transformers were built when utilities were tightly regulated and provided service only within their assigned regions. The system is simply unequipped for large-scale swapping of power in the highly competitive market of the 21st century.
The National Energy Policy will modernize and expand our energy infrastructure in order to ensure that energy supplies can be safely, reliably, and affordably transported to homes and businesses. This report includes recommendations to:
Direct agencies to improve pipeline safety and expedite pipeline permitting.
Issue an Executive Order directing federal agencies to expedite permits and coordinate federal, state, and local actions necessary for energy-related project approvals on a national basis in an environmentally sound manner, and establish an interagency task force chaired by the Council on Environmental Quality. The task force will ensure that federal agencies set up appropriate mechanisms to coordinate federal, state and local permitting activity in particular regions where increased activity is expected.
Grant authority to obtain rights-of-way for electricity transmission lines with the goal of creating a reliable national transmission grid. Similar authority already exists for natural gas pipelines and highways.
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Enact comprehensive electricity legislation that promotes competition, encourages new generation, protects consumers, enhances reliability, and promotes renewable energy.
Implement administrative and regulatory changes to improve the reliability of the interstate transmission system and enact legislation to provide for enforcement of electricity reliability standards.
Expand the Energy Department's research and development on transmission reliability and superconductivity.
Increase Energy Supplies
A primary goal of the National Energy Policy is to add supply from diverse sources. This means domestic oil, gas, and coal. It also means hydropower and nuclear power. And it means making greater use of non-hydro renewable sources now available.
One aspect of the present crisis is an increased dependence, not only on foreign oil, but on a narrow range of energy options. For example, about 90 percent of all new electricity plants currently under construction will be fueled by natural gas.
While natural gas has many advantages, an over-reliance on any one fuel source leaves consumers vulnerable to price spikes and supply disruptions. There are several other fuel sources available that can help meet our needs.
Currently, the U.S. has enough coal to last for another 250 years. Yet very few coal-powered electric plants are now under construction. Research into clean coal technologies may increase the attractiveness of coal as a source for new generation plants.
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Nuclear power plants serve millions of American homes and businesses, have a dependable record for safety and efficiency, and discharge no greenhouse gases into the atmosphere. As noted earlier, these facilities currently generate 20 percent of all electricity in America, and more than 40 percent of electricity generated in 10 states in the Northeast, South, and Midwest. Other nations, such as Japan and France, generate a much higher percentage of their electricity from nuclear power. Yet the number of nuclear plants in America is actually projected to decline in coming years, as old plants close and none are built to replace them.
Enormous advances in technology have made oil and natural gas exploration and production both more efficient and more environmentally sound. Better technology means fewer rigs, more accurate drilling, greater resource recovery and environmentally friendly exploration. Drilling pads are 80 percent smaller than a generation ago. High-tech drilling allows us to access supplies five to six miles away from a single compact drilling site, leaving sensitive wetlands and wildlife habitats undisturbed. Yet the current regulatory structure fails to take sufficient account of these extraordinary advances, excessively restricting the environmentally safe production of energy from many known sources.
Our policy will increase and diversify our nation's sources of traditional and alternative fuels in order to furnish families and businesses with reliable and affordable energy, to enhance national security, and to improve the environment. This report includes recommendations to:
Issue an Executive Order directing all federal agencies to include in any regulatory action that could significantly and adversely affect energy supplies a detailed statement on the energy impact of the proposed action.
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Open a small fraction of the Arctic National Wildlife Refuge to environmentally regulated exploration and production using leading-edge technology. Examine the potential for the regulated increase in oil and natural gas development on other federal lands.
Earmark $1.2 billion of bid bonuses from the environmentally responsible leasing of ANWR to fund research into alternative and renewable energy resources—including wind, solar, biomass, and geothermal.
Enact legislation to expand existing alternative fuels tax incentives to include landfills that capture methane gas emissions for electricity generation and to electricity produced from wind and biomass. Extend the number of eligible biomass sources to include forest-related sources, agricultural sources, and certain urban sources.
Provide $2 billion over 10 years to fund clean coal technology research and a new credit for electricity produced from biomass co-fired with coal.
Direct federal agencies to streamline the hydropower relicensing process with proper regard given to environmental factors.
Provide for the safe expansion of nuclear energy by establishing a national repository for nuclear waste, and by streamlining the licensing of nuclear power plants.
Accelerate Protection and Improvement of the Environment
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America's commitment to environmental protection runs deep. We are all aware of past excesses in our use of the natural world and its resources. No one wishes to see them repeated. In the 21st century, the ethic of good stewardship is well established in American life and law.
We do not accept the false choice between environmental protection and energy production. An integrated approach to policy can yield a cleaner environment, a stronger economy, and a sufficient supply of energy for our future. The primary reason for that has been steady advances in the technology of locating, producing, and using energy.
Since 1970, emissions of key air emissions are down 31 percent. Cars today emit 85 percent less carbon monoxide than 30 years ago. Lead emissions are down 90 percent. Lead levels in ambient air today are 98 percent lower than they were in 1970. America is using more, and polluting less.
One of the factors harming the environment today is the very lack of a comprehensive, long-term national energy policy. States confronting blackouts must take desperate measures, often at the expense of environmental standards, requesting waivers of environmental rules, and delaying the implementation of anti-pollution efforts. Shortfalls in electricity generating capacity and short-sighted policies have blocked construction of new, cleaner plants, leaving no choice but to rely on older, inefficient plants to meet demand. The increased use of emergency power sources, such as diesel generators, results in greater air pollution.
New anti-pollution technologies hold great promise for the environment. The same can be said of 21st century power generators that must soon replace older models; significant new resources for land conservation efforts; and continued research into renewable energy sources. All have a place in the National Energy Policy.
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The National Energy Policy will build upon our nation's successful track record and will promote further improvements in the productive and efficient use of energy. This report includes recommendations to:
Enact ''multi-pollutant'' legislation to establish a flexible, market-based program to significantly reduce and cap emissions of sulfur dioxide, nitrogen oxides, and mercury from electric power generators.
Increase exports of environmentally friendly, market-ready U.S. technologies that generate a clean environment and increase energy efficiency.
Establish a new ''Royalties Conservation Fund'' and earmark royalties from new, clean oil and gas exploration in ANWR to fund land conservation efforts.
Implement new guidelines to reduce truck idling emissions at truck stops.
Increase Energy Security
The National Energy Policy seeks to lessen the impact on Americans of energy price volatility and supply uncertainty. Such uncertainty increases as we reduce America's dependence on foreign sources of energy. At the same time, however, we recognize that a significant percentage of our resources will come from overseas. Energy security must be a priority of U.S. trade and foreign policy.
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We must look beyond our borders and restore America's credibility with overseas suppliers. In addition, we must build strong relationships with energy-producing nations in our own hemisphere, improving the outlook for trade, investment, and reliable supplies.
Energy security also requires preparing our nation for supply emergencies, and assisting low-income Americans who are most vulnerable in times of supply disruption, price spikes, and extreme weather.
To ensure energy security for our nation and its families, our report includes these recommendations:
Dedicate new funds to the Low Income Home Energy Assistance Program by funneling a portion of oil and gas royalty payments to LIHEAP when oil and natural gas prices exceed a certain amount.
Double funding for the Department of Energy's Weatherization Assistance Program, increasing funding by $1.4 billion over 10 years.
Direct the Federal Emergency Management Administration to prepare for potential energy-related emergencies.
Support a North American Energy Framework to expand and accelerate cross-border energy investment, oil and gas pipelines, and electricity grid connections by streamlining and expediting permitting procedures with Mexico and Canada. Direct federal agencies to expedite necessary permits for a gas pipeline route from Alaska to the lower 48 states.
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Looking Toward the Future
The President's goal of reliable, affordable, and environmentally sound energy supplies will not be reached overnight. It will call forth innovations in science, research, and engineering. It will require time and the best efforts of leaders in both political parties.
It will require also that we deal with the facts as they are, meeting serious problems in a serious way. The complacency of the past decade must now give way to swift but well-considered action.
Present trends are not encouraging, but they are not immutable. They are among today's most urgent challenges, and well within our power to overcome. Our country has met many great tests. Some have imposed extreme hardship and sacrifice. Others have demanded only resolve, ingenuity, and clarity of purpose. Such is the case with energy today.
We submit these recommendations with optimism. We believe that the tasks ahead, while great, are achievable. The energy crisis is a call to put to good use the resources around us, and the talents within us. It summons the best of America, and offers the best of rewards—in new jobs, a healthier environment, a stronger economy, and a brighter future for our people.
Chairman BOEHLERT. The meeting will come to order. I want to welcome everyone here, as we begin our review of the President's National Energy Policy Report.
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We will be having more hearings in June, both to get into the details of the report, and to hear more viewpoints. And then we would expect to report out legislation by the end of next month. Our legislative package will then be folded into the planned Comprehensive House Energy Bill slated to come to the floor in July.
But today we are just at the threshold of that process. And so we wanted to get a broad overview from groups with expertise in each of the areas the report emphasizes: fossil fuels, alternative fuels, efficiency and the environment.
And while I am sure the conversation today will range over a wide terrain, in terms of both issues and ideology, I would like to focus as much as possible on the issue within our committee's jurisdiction, namely: research, development, and demonstration programs.
Within our jurisdiction the report offers many ideas on which people from all perspectives can agree. And yet many of these recommendations have been overlooked in the initial overheated debate.
Good examples are, the reports call for increased research spending, and a strong endorsement of both alternative sources of energy and conservation. We need to focus at this hearing on how to turn those general, if positive words, into real deeds that will truly make a difference in our energy future.
That is not to say, of course, that I approve of everything in the report. It is no secret that I oppose drilling in the Arctic National Wildlife Refuge, or that I question the need for 1300 new power plants. And the environment recommendations of the report include both daringly progressive new proposals, and disappointingly shop-worn bad ideas. But overall, the report is much more balanced, and much more comprehensive than had been anticipated, or than has been acknowledged.
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I want to use today's hearing to see where we can find consensus on how our committee can help maintain that balance as the report is reduced to legislation.
The Chair now recognizes the distinguished ranking member from Texas, Mr. Hall.
[The prepared statement of Chairman Boehlert follows:]
PREPARED STATEMENT OF CHAIRMAN SHERWOOD BOEHLERT
I want to welcome everyone here as we begin our review of the President's National Energy Policy report.
We'll be having more hearings in June, both to get into the details of the report and to hear more viewpoints, and then we would expect to report out legislation by the end of next month. Our legislative package would then be folded into the planned comprehensive House energy bill slated to come to the floor in July.
But today we're just at the threshold of that process, and so we wanted to get a broad overview from groups with expertise in each of the areas the report emphasizes—fossil fuels, alternative fuels, efficiency and environment. And while I'm sure the conversation today will range over a wide terrain in terms of both issues and ideology, I'd like to focus as much as possible on the issues within our Committee's jurisdiction—namely, research, development and demonstration programs.
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Within our jurisdiction, the report offers many ideas on which people from all perspectives can agree, and yet many of these recommendations have been overlooked in the initial overheated debate. Good examples are the report's call for increased research spending and its strong endorsement of both alternative sources of energy and conservation. We need to focus at this hearing on how to turn those general, if positive words into real deeds that will truly make a difference in our energy future.
That's not to say, of course, that I approve of everything in the report. It's no secret that I oppose drilling in the Arctic National Wildlife Refuge (ANWR) and that I question the need for 1,300 new power plants. And the environmental recommendations in the report include both daringly progressive new proposals and disappointingly shopworn bad ideas.
But overall, the report is much more balanced and much more comprehensive than had been anticipated or than has been acknowledged. I want to use today's hearing to see where we can find consensus on how our Committee can help maintain that balance as the report is reduced to legislation.
Mr. HALL. Mr. Chairman, I thank you, and I am pleased that you called this hearing here today to receive testimony from these outside witnesses, two men and a lady, that I have high regard for, especially do I have high regard Bill Martin and his background as working and operating and serving at the feet of President Reagan and the Department of Energy several years ago. We had to waive his disabilities of minority to let him take a job over there, he was so young at that time. But he not only learned his lessons well there, but he learned his lessons well from his father, who was a wildcatter back in the days of Glen McCarthy.
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So we are going to have some good, practical testimony from all three of these witnesses. They are going to add a lot to the debate, and I think Vice President Cheney has sent us up a good energy policy. I am not sure just how he is going to go about it, but I hope we have him here, or have someone that he designates, again, to be here and go over it with us, and submit himself to us; and on each side of the docket here, for questions that we are all entitled to have answered. Because far too long this country has languished without such a plan, it is clear that, as they say in Texas, the chickens have come home to roost—or as they say in California. It is high time that we have an energy policy. And I am among those who is a Democrat who, I support this President, I am very proud of the President of the United States, but I am hell for leather to help California. It is a great state, represented by great people here, on both sides of the aisle.
They are in trouble. July lurks out there like a villain, waiting for them this time. And we have to give them some help. And we at least have to take some steps in that direction, where they believe help is on its way.
I think we have ignored the pleas, however, of the oil and gas industry, to rationalize Federal policy on exploration and development. This government has fenced off ANWR, and other potentially rich sources of oil and gas production in the Rockies, and off their coast, and they shut in right here in the lower 48. Now we face rapidly declining domestic oil production and natural gas shortages, or at least extraordinarily and unnecessarily high prices before additional production can be brought on line.
Mr. Chairman, we have ignored the pleas of the refining industry, and been, I think oblivious to the needs for additional refining capacity, even as hundreds of small refineries have gone out of business throughout the country, and no new ones have been built in decades. And as the refineries have been forced off shore, because of the treatment they receive from their own government. So, I think we have ignored the pleas of the electric power industry, also, to produce a rational Federal policy to facilitate the restructuring of that industry, and we are seeing the consequences of the lack of focus in California and much of the west, with the expectation that it is not simply a western problem.
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And California is out front now because they were first, obviously, but who knows who is going to be second, third, and fourth.
We have ignored the pleas of the developers of new energy production and efficiency technology as to rationalize Federal policy to permit these technologies to be easily commercialized. The consequences have been rapidly escalating, rather than getting stable prices.
So I am impressed with how well the administration has come to grips with the economy of the situation, and that they have analyzed it, and I certainly think the—especially they have only about 90 days to do the job. And the anatomy of the problem is, they've laid it out. They should be applauded for getting as far as they have in such a short time, and I am embarrassed that this Congress doesn't already have a Bill laying over there for George Bush to sign right now, that would be a step in the right direction.
So I think this Congress ought to step up there and take a lot of the blame for the situation we are in and the lateness of racing to the aid of a state that is in trouble, one of our sister states that is in trouble.
Mr. Chairman, I hope we will have the administration in to testify on their energy policy before long, so that I will have an opportunity to either brag on them to their face, or differ with them on some of their approaches; but at least, as a Member of Congress, to have some input into a situation that is drastic, desperate at this time, and can get worse.
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I yield back the balance—just a minute, Mr. Chairman, I may want to yield to Ms. Woolsey. Did you have something you wanted to add to that?
Ms. WOOLSEY. Oh thank you.
Mr. HALL. With your assurance that another 30 minutes is not——
Chairman BOEHLERT. It is always a pleasure.
Mr. HALL. To my fellow—California, you know California is just deep west Texas, anyway, so I am always anxious to——
Chairman BOEHLERT. The gentle lady is recognized for the balance of the ranking minority member's time——
Ms. WOOLSEY. Mr. Chairman, I——
Chairman BOEHLERT [continuing]. Which is about 60 seconds.
Ms. WOOLSEY. I have a parliamentary inquiry, which won't take 60 seconds.
[The prepared statement of Rep. Lynn Woolsey follows:]
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PREPARED STATEMENT OF REPRESENTATIVE LYNN WOOLSEY
Mr. Chairman, I want to share with the Committee my disappointment with the national energy policy recommendations outlined in Vice President Dick Cheney's report. Sadly, the task force proposals are nearsighted and would only tighten the stranglehold fossil fuels have on American consumers. It is also disappointing that the Administration did not believe it was important enough to send an envoy to present their plan to this Committee and answer Member's questions about it.
Most disappointing though, is that despite several pages devoted to outlining the energy crisis that is currently gripping my constituents and California, there are no recommendations to address California's crisis in the short term. The Bush Administration is well aware that directing FERC to impose temporary cost-of-service based rates for wholesale energy is the best way to rein in soaring energy costs. Unfortunately, the report recommendations blatantly ignore that California consumers are being hit by runaway wholesale energy costs. Again, I remind the Administration that they ignore the energy crisis in California at their own peril: As goes California, so goes the nation.
My optimism is not any greater concerning the parts of the report over which this Committee, as well as the Energy Subcommittee where I am Ranking Member, has jurisdiction. The Administration's report is loaded with recommendations to make massive reinvestments in old energy technologies like fossil fuels, coal and nuclear. Increasing our reliance on these 20th century technologies is not the answer. Look where dependence on fossil fuels has left California. Is that what the Administration wants for the rest of the country? Only a national energy policy that gives at least equal focus on renewable energy, energy efficiency and conservation makes sense for our future.
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Despite the fact that the President stood before this country and said in his State of the Union address that he was committed to renewable energy research, his budget and this report tell a very different story. Under the President's proposal, renewable energy programs would be cut by 36.4 percent compared to current spending levels. This includes cuts to geothermal research by approximately 50 percent cut; 54 percent of the solar energy research budget would be cut; and wind energy cut by 48.2 percent. This is unacceptable because these are the 21st century technologies and energy sources that will ensure our energy future is sustainable, clean and doesn't harm our environment.
That's why I am currently working to draft legislation that makes ''smart energy'' sources—like wind, solar and geothermal energy—a national priority. While the Administration's energy report may state that coal is the most plentiful source of affordable energy in the country, I suggest they haven't looked outside lately. It's obvious to most Americans that solar and wind energy are not just plentiful, but also renewable.
Mr. Chairman, I look forward to working with this Committee and our colleagues in Congress to shape a national energy policy that focuses on making renewables a larger part of our energy future and also makes the investments in renewable energy, energy efficiency and conservation research and technology to get us there.
Thank you.
Chairman BOEHLERT. Your inquiry will be enthusiastically received.
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Ms. WOOLSEY. All right. Mr. Chairman, since this hearing is about the Vice President's energy plan recommendations, I am wondering why there are no witnesses from the Administration here today, because I am sure that members on both sides of the aisle would like to ask some questions, and get their answers. And so we need to hear their responses on this.
Chairman BOEHLERT. Let me assure the gentle lady that the Chairman is working very closely with the Administration. The Chair has had a number of meetings with the Vice President, to discuss this very report.
It is interesting to observe that the ranking Democrat, Mr. Hall, is a little more enthusiastic about the plan than the Chair is. I would characterize him as being enthusiastic and the Chair as being optimistic.
But I would observe that, as my opening statement said, we have all had the benefit of the 163 page report, which incidentally, was developed in very short order by the Administration and the President, who inherited a problem, did not create it, but has responded in a rapid order by assigning a superstar. The Vice President, and has put together a task force, and not come up two or three years from now with some blue ribbon commissioned report, come up with something in short order, 90 to 120 days. We have that document, all of us have it. And we are all very carefully analyzing chapter and verse of it.
So we know about the document, we know about the plan. Now we want to hear from outside witnesses who are expert, who can give us some more objectivity. Then we will get the Administration witnesses in here.
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I can assure you, you are going to have more Administration witnesses talking about this subject than you will care to hear from, and probably taking up more of your time than you would care to release from your most hectic schedule.
But this is the day to get the outside witnesses in here, and as Mr. Hall stated, he has a very high regard, as do I, for all three of our witnesses. And they are going to bring, hopefully, some different perspectives to the problem.
So I thank you for the inquiry, and I want to assure you we will continue to work together to have Administration witnesses in here.
When I first came to this Committee I said that I didn't have all the answers. I didn't realize at that time that I wouldn't even know all the questions. And what we are trying to do now is to develop something that will allow us to ask the pointed questions, to get to the heart of the matter, with the object of coming up with a comprehensive responseful policy for American.
Ms. WOOLSEY. All right. Well I thank you on that. And a second question would be, when do Ken Calvert and I get to talk back to the ranking member on whether or not we consider California as southwest Texas—or deep west Texas.
Chairman BOEHLERT. Thank you very much.
Ms. WOOLSEY. Thank you.
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[The prepared statement of Rep. Jerry Costello follows:]
PREPARED STATEMENT OF REPRESENTATIVE JERRY COSTELLO
Thank you Mr. Chairman for calling this hearing. At a time when we are facing one of the most serious energy shortages in history, I am especially interested in hearing from our witnesses regarding the President's Energy Policy.
Excluding California and Hawaii, my home state of Illinois is faced with the highest gas prices in the country. While I believe the President took a step in the right direction, even more emphasis needs to be placed on coal and ethanol. Coal, which we have an abundance of in Southwestern Illinois, is an excellent alternative use of fuel. I think the President's coal initiative is a great idea that can be expanded to include incentives for new and improved clean coal technologies. We can and should use this abundant resource in an environmentally sound way. Coal usage will greatly reduce our dependence on foreign oil and avoid a Band-Aid approach, like drilling in the Arctic National Wildlife Refuge.
Secondly, I have started hearing from many farmers that want to hear more about the role ethanol will play in the President's plan. I was very disappointed to learn that Vice President Cheney does not believe alternative fuels are a viable option right now. Cheney stated: ''Years down the road alternative fuels may become a great deal more plentiful. But we are not yet in any position to stake our economy and our own way of life on that possibility.'' We can and should use alternative fuels now! In 2000 alone the ethanol industry expanded production by 155 million gallons and is on course to increase by an additional 400 million gallons in 2001. Each day more than five million gallons of ethanol are blended into about 65 million gallons of gasoline—adding critical volume to a tight gasoline market and reducing the pressure on price. Ethanol is far less expensive than MTBE—refiners could replace $1.50 of MTBE with 50 cents of ethanol.
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Again, I look forward to hearing your testimony.
Chairman BOEHLERT. Now let's go right to our first panel. It is my pleasure to—first and only panel.
It is my pleasure to introduce William F. Martin, Chairman, Washington Policy and Analysis, Inc. on behalf of The Alliance for Energy and Economic Growth. Nice job yesterday, and Diane Ream; Katherine Hamilton, Co-Director, American Bioenergy Association; and David G. Hawkins, Director, National Resources Defense Council Climate Center. All of whom have distinguished records, all of whom are appreciated for giving up their valuable time to give us some more insight to a problem that impacts on all Americans.
I will go in the order of introduction. Mr. Martin, you are first up.
Let me ask of this, of you, the usual procedure is to ask witnesses to try to summarize your statement in five minutes or so. I won't be arbitrary on that, because look, this is too darned important to devote 300 seconds to an opening statement. But, if you could summarize your opening statement, that will give us more time for interaction. And that is when I think we best serve the objective of getting out solid information.
So, with that urging, Mr. Martin, you are up.
STATEMENT OF THE HONORABLE WILLIAM F. MARTIN, CHAIRMAN, WASHINGTON POLICY AND ANALYSIS, INC. ON BEHALF OF THE ALLIANCE FOR ENERGY AND ECONOMIC GROWTH
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Mr. MARTIN. Thank you, Mr. Chairman, and I would like to submit my longer testimony for the record, if I could.
Chairman BOEHLERT. And all of the statements are going to made part of the permanent record, and I can assure you will be referred to many times.
Mr. MARTIN. Mr. Chairman, it was about 27 years ago that I organized a hearing for John Dingell. It might have even been in this room. It was on a Ford Foundation Report called, ''A Time to Choose.'' It was looking at our energy future. And one of the things, I think after 27 years of experience, I am hopeful that the administration and the Congress can learn from the past, and have a sensible policy for the future.
''A Time to Choose'' suggested that there were choices in our energy policy. It was really a supply study, versus a demand study. One of the emphasis of the alliance is that it is not either or. We really need to develop all of American's resources. We need to build infrastructure. We also have to do, and continue to do, a very good job of energy conservation and energy efficiency. We really need twenty-first century technology for a twenty-first century problem.
Let me mention something about the Alliance. We are a group of 400 organizations. We are consumers, we are producers, we are large, we are small. A really remarkable group of people. It is even remarkable that the producers themselves have come together to work in this organization together, as well as the consumers, the manufacturers. We have several senior citizen groups that are part of this.
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So we are quite varied in and of ourselves. So the statement that I am giving today really is somewhat of a microcosm of American itself. And I think, as you will see in our statement, there is quite a bit of consensus already. We believe, for example, that energy is absolutely fundamental to our economy. If we have energy, we prosper, as we have over the last decade, with cheap energy prices; but if we do not have energy, the economy suffers.
It is no surprise that Alan Greenspan is up here saying energy is one issue that has to be dealt with if we are to have prosperity in the future.
We also believe in market forces. I think history has shown us that reliance on the market is very important. However, we also see a role of leadership for government. Government needs to set the framework for the nation to follow, and I think that is really why we are so pleased with the Vice President's report. And we are also pleased with the activities of the Congress, including this Committee, which is so important, because science and techno1ogy should drive this debate. All too often it is the economists that have a lot to say about the debate. I think science and technology in this age has a much more important role.
Let me say that our objectives, I think, are what the committees are: we want reasonable energy prices, we want reliable energy supplies, we want a clean environment. And we also want to ensure our national security. I had three years I was Ronald Reagan's Executive Secretary of the National Security Council. So I am coming at this from a national security perspective, as well.
And what is our basic problem? Our basic problem is unwisely reliance on oil imports. Right now we are 60 percent dependent on imports. That could rise to 70 percent within the next 10 years. This is a national security emergency, in my view.
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The American public also says that this is the number one issue confronting the nation. There was a CBS poll last weekend that said that.
Also, a study by Wirthlin International said that 77 percent of the public want the Administration and Congress to tackle this problem, and solve it for them. So clearly the mandate is there from the American people.
I mentioned before that it is not either or. Let me just briefly talk about the great wealth of this nation, in terms of our resources, starting with coal. It is interesting we hear a lot about Saudi Arabia of Coal, that is the United States. We also hear a lot about the need for clean coal burning. It is interesting, we have almost tripled coal use over the last 25 years, overall, and we have actually lowered emissions by 20 percent. So industry is already making great progress here. We to do, continue to do well, but coal is 50 percent of our electricity, and we cannot ignore it, we need to encourage clean coal technology.
Nuclear power seems to be making a comeback in public opinion. And in fact, the industry itself is optimistic that many plants will be extended. Of course we need to make progress on yucca the mountain, and other issues. We need to ensure nuclear safety, but today it meets 20 percent of our electricity, we need it.
Natural gas meets 17 percent of our electricity. Democrats, Republicans, environmentalists, conservatives all think natural gas has to play a very important part of our future, but we need infrastructure to get the gas from the producer to the consumer.
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Interestingly enough, if we use gas closer to the consumer, like using fuel cells, for example, we save a lot of energy and losses in the transmission system. But to get gas to the consumer, we need more infrastructure.
We also know we need more infrastructure in electricity. It is estimated we need 30,000 more miles of transmission. But as of right now only 7500 are planned for.
So, our proposal is to look at issues like Federal [eminent] domain for transmission lines. One of our proposals for infrastructure in gas is to encourage more rapid depreciation of gas facilities. These are items the government can do to expedite the supply and demand of energy.
Let me also say that we believe oil and gas is important. We also believe that the Cheney task for recommendation that some Federal lands be granted for more access is important.
We also support expanding solar energy. I look forward to hearing our other panelists today, they are experts in this area more than I am, in hydro and wind. I would like to see the Administration come forward, for example, with a specific budget for this area. At the moment it has been zeroed out in the budget talks. I would like to hear, you know, what can be done to encourage R&D for renewable energy resources.
Let me also give a compliment to Mr. Hawkins, down the table. I am very impressed with his web page. He has some excellent ideas how consumers can actually make money and save energy. For example, if you look at his web page, if you have an older car and you spend a hundred and fifty bucks for new tires, you can get 20 percent savings on your miles per gallon. Well that is a very, very quick pay out. It is also the type of philosophy we like in the Alliance. We don't mind mandating standards, in fact standards have indeed played some role in encouraging greater efficiency of our appliances. But we still think this is primarily a choice of the consumer. Let us get the information out to the consumer, let us let him invest in—for example, our homes today are 25 percent more efficient than they were 20 years ago. And if you get a good refrigerator now, an efficient one, it will cost you $40 to run that refrigerator, compared to $120 per year, even two decades ago.
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Let me also mention, we need a sound foreign policy. That is not the jurisdiction, of course, of this Committee; but let me say that we want to encourage worldwide oil and gas development. Oil development in the Caspian Sea or in Africa reduces reliance on the Persian Gulf. Let me also say that we—it is very important for our allies to do like us.
For example, if the nature of the problem is growing reliance on the volatile Persian Gulf, then conservation in Sweden, or coal plants in Germany, or nuclear power plants in Japan, they all reduce reliance on that volatile source. So we are in this together, with our allies.
Let me say, in conclusion, that the cost of doing nothing could be catastrophic to our economy. This is not an Alliance Energy model, but I am in the business of energy models, usually they are wrong, but I, I will preface it by saying that, but our analysis suggests that this government does not take action to reduce our oil imports, that our GNP could be one percent per, less per year, over the next decade. That is based on an assumption that if we do nothing, OPEC countries will have to increase production from 30 to 40 million barrels a day, the price of oil could go to $40 or higher.
So, even though doing something in the Congress is expensive, these energy programs proposed by NRDC and by ourselves and others are not cheap, but the reality of doing nothing is that the costs could indeed much higher.
But Ralph Hall said that I worked for Ronald Reagan, and I did, even as three years in a personal capacity, and I would like to think of the spirit of Reagan here. He was an optimist. And I think we can be optimistic about the energy future.
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If you think about the resources we have in this country, if you think about the technology we have in the country, if you think of the human resources we have in this country, if we cannot solve this energy problem, and put science and technology at the forefront, Mr. Chairman, then we are doing ourselves immeasurable harm.
No other nation, no other nation has the ability to solve the energy problem the way that we do, with sensible policies. So I am going to end with a quote of Ronald Reagan, ''It can be done.''
Thank you Mr. Chairman.
[The prepared statement of The Honorable William F. Martin follows:]
PREPARED STATEMENT OF WILLIAM F. MARTIN
On behalf of the Alliance for Energy and Economic Growth
Good morning. My name is William Martin and I'm delighted to be here today to testify on behalf of the Alliance for Energy and Economic Growth regarding the Bush Administration's energy plan unveiled last week.
I am an energy economist by training. I am the Chairman of the Council on Foreign Relations Energy Security Group and the Chairman of Washington Policy and Analysis, Inc. I am currently a Board member of the World Resources Institute. I served as Deputy Secretary of Energy under President Reagan. Earlier, I worked as a program officer of the Workshop on Alternative Energy Strategies in the MIT Energy Laboratory.
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The Alliance is composed of a wide range of consumer groups and energy providers who have come together in support of a comprehensive national energy strategy. Currently, we represent more than 400 organizations nationwide.
The Alliance has commended the report of the National Energy Policy Development Group for proposing a mix of conservation and production, and for promoting new technologies that promise greater efficiency and environmental protection. Indeed, our members are keenly interested in all of the energy-related issues that are being studied by both the White House and members of Congress, and we are eagerly following proposals emerging from both ends of Pennsylvania Avenue. We urge Congress to implement a bipartisan national energy plan that promotes the energy supplies that Americans need while ensuring the quality of our environment.
We commend you, Mr. Chairman, and the Members of this Committee for the prompt and careful attention you are giving to this matter of such urgent importance to American consumers individually and the economy overall. The Alliance has several objectives which all members share:
Increase energy efficiency and conservation;
Assure adequate energy supplies and generation;
Renew and expand the energy infrastructure;
Encourage investment in new energy technologies;
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Provide energy assistance to low-income households; and
Assure appropriate consideration of the impacts of regulatory policies on energy.
Our goal is to help encourage the creation of a national energy policy that meets long-term consumer demand for reliable energy at reasonable prices, while protecting the environment. Any successful national energy policy must include efficiency measures and conservation, address supply problems, infrastructure renewal and promote technological development.
Projections for the future show an increasing disconnect between Americans' energy needs and the availability of reliable, affordable energy. If present trends continue, a widening gap between growing demand and stagnant supply will threaten America's economic well-being.
America's economic prosperity, the quality of life of its citizens, and its national security all depend on the availability of reliable, affordable energy. Increasing domestic energy supplies and enhancing our energy infrastructure are critical to a comprehensive, market-based and balanced national energy strategy. In addition, it is vital to produce, generate and distribute energy in the most efficient manner possible.
Americans are concerned about having enough energy to maintain a strong economy. A national poll the Alliance conducted in the middle of May clearly demonstrates that Americans make a connection between a robust supply of energy and their quality of life. The poll, conducted by Wirthlin Worldwide, shows 77 percent of Americans believe their quality of life would suffer 20 years from now if the U.S. fails to develop a comprehensive energy policy.
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And 80 percent of those polled agree that for the Nation's economy to keep pace with our growing population, energy policy must reflect 21st century economics and technology.
But we can't take energy for granted. The unprecedented growth of America's economy has rapidly outstripped our ability, under current policies, to develop and deliver the diverse energy supplies needed to sustain that growth. In the past 25 years, we have increased our use of energy in America by 34 percent, but domestic energy production has increased by only 18 percent. Today, America is far more vulnerable to energy shortages and more dependent on foreign energy than it was during the energy crises of the 1970s.
The Alliance believes that we must make a national commitment to renew and expand the energy infrastructure—that means the Nation's natural gas pipelines, its electric transmission grid, its power plants, and its oil refineries.
Natural gas professionals also estimate that we need to spend more than $150 billion dollars on the infrastructure of that industry. About $99 billion dollars of that is needed to upgrade local distribution lines, and $51 billion would go toward new pipelines.
Clearly, electric transmission capacity needs to be expanded as well. Between August 1999 and 2000, congestion on the electric transmission grid grew by more than 200 percent, according to the North American Electric Reliability Council (NERC). In the first quarter of 2001, transmission congestion was already three times the level experienced during the same period in 2000. The U.S. Energy Information Administration also has said that the U.S. that we need to build as many as 1300 new power plants in the United States over the next 20 years.
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When it comes to oil and gasoline—no new major refineries have been built in the United States in more than 20 years. The petroleum industry estimates that refineries are working at 96 percent of their capacity. We need to move forward to expand the capacity of refineries now. Part of the answer to getting the infrastructure built lies in streamlining the permitting process.
At the core of the Alliance's principles lays a simple proposition—that the U.S. must pursue a balanced energy policy that promotes fuel diversity. In other words, to achieve our goal of assuring adequate energy supplies and generation, policymakers should ensure that the U.S. is able to harness the full range of available fuels we currently use to meet our energy needs.
Take electricity, for example. No single fuel source can meet the Nation's electric power needs. Currently, more than 50 percent of the Nation's electricity comes from coal. 20 percent comes from nuclear power, and about 16 percent from natural gas. Moving forward, a larger share will be generated from natural gas.
Hydroelectric power from dams generates about 10 percent of the electricity we use. Renewables such as wind and solar generate about two percent. Some regions are getting more electricity from wind power than ever before, and solar technology is improving by leaps and bounds. Utilities need to be able to harness each and every one of these resources in order to deliver affordable and reliable power to customers.
We simply can't afford to put all our eggs into one energy basket.
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Of course, tapping into our Nation's technological prowess must be a major goal for our new energy policy. This means, above all, encouraging investment in new energy technologies that promote the greatest level of conservation—at home, in business and in factories. Conservation measures, more energy-efficient products, and alternative fuel sources are important to the success of a long-term energy policy. Both the energy suppliers and the energy customers are placing a premium on such efforts. In the electric power sector, for example, utilities are working closely with customers to find efficiencies to help them save money, while also allowing the utilities to better manage their load during peak demand periods. The practice of real-time metering—which allows customers to adjust their electric power usage according to actual, real-time prices—is already here, and is likely to grow in the years to come.
Energy efficiency improvements have significantly helped to meet national energy needs since the 1970s. The amount of energy used in homes today has decreased by more than 25 percent because of more efficient appliances and construction methods and materials. Today's best air conditioners use 30 percent to 50 percent less energy to produce the same amount of cooling as air conditioners made in the mid-1970s. In 1980, it cost $106 per year to run the average refrigerator. Today, it costs $55 per year. Compact fluorescent light bulbs are becoming popular with consumers: they put out as much light as regular incandescent bulbs, but last anywhere from 8 to 10 times longer. They use anywhere from 50 percent to 75 percent less electricity. And the new horizontal access clothes washers, popular in Europe, are now being produced in the United States. They use about half the energy of the older style washers in use here now.
The Alliance wants to assure that lawmakers and regulators consider the impact of regulatory policies on energy. The ''energy impact statement'' required by President Bush's recent executive order is a good beginning. The impact of a policy or a regulation on the energy business is directly linked to the economy. That is because the prosperity of the Nation is closely tied to the availability of affordable and ample supplies of energy. Economic growth and energy growth follow similar trends.
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Our energy suppliers and distributors would benefit from more flexible regulation. For example, much of the multiple-use land managed by the federal government that is off-limits to energy exploration and production can be tapped for energy resources using an environmentally sensitive approach. Industry does not ask to develop in parklands or in wilderness areas set aside by acts of Congress.
We believe that energy recovery, done appropriately, is an important public good. And now, new technology can create a three-dimensional map of resources far below the surface, which makes identifying energy resources more accurate. New, high-tech drill bits are built with microscopic cameras in their heads. New methods of horizontal drilling are less intrusive because the surface of the earth remains largely undisturbed.
While the U.S. has strong strategic and economic interests in maintaining a vibrant domestic oil and gas industry, we also need a wide diversity of international supplies. With the best efforts to produce domestic reserves in an environmentally sound way, this country will still require significant amounts of foreign supply to meet its needs. U.S. energy security is best served by the U.S. oil and gas industry being a competitive participant in the international energy arena.
Other emerging technologies will help us more efficiently and cleanly tap one of America's most abundant natural resources—coal. Current estimates suggest we have at least a 250-year known reserve of coal in the U.S.—and new R&D efforts, such as the clean coal initiative that has been underway for several years at the Department of Energy, can help us use that rich vein of energy with lower emissions. We have more coal in this country than Saudi Arabia has oil. The Alliance firmly believes our energy future must include coal.
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Finally, the Alliance strongly believes that we must make energy assistance available to low-income households. Congress should increase the amount of funding available for the Low Income Home Energy Assistance Program (LIHEAP), which helps low-income individuals pay part or all of their heating or cooling bills.
Over the past four years, the performance of the U.S. economy has truly been remarkable. Economic growth has averaged well over four percent per year, far surpassing projections. This growth has pushed the demand for energy upward. The most recent forecasts by the Energy Information Administration show that the demand for energy of all forms is likely to increase significantly over the next 20 years. By 2020, EIA forecasts total energy consumption to increase by 32 percent, petroleum by 33 percent, natural gas by 62 percent, coal by 22 percent, electricity by 45 percent, and renewable energy by 26 percent. The EIA forecasts assume a healthy increase in the efficient use of all these energy resources.
During a recent visit to Capitol Hill, Federal Reserve Chairman Alan Greenspan testified in the Senate Finance Committee that energy shortages in the United States are likely in the future, and that they will have a significant impact on the economy ''for quite a good number of quarters in front of us, and perhaps, a number of years.'' The Alliance for Energy and Economic Growth is concerned that we develop a balanced and comprehensive national energy policy to meet the needs of our Nation's businesses and families, while ensuring the quality of the environment. The fact of the matter is, our economy runs on energy—and maintaining a strong economy will require both increased conservation and increased supply.
Thank you for inviting me to speak to you here today. I look forward to answering any questions you might have.
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BIOGRAPHY FOR WILLIAM F. MARTIN
William F. Martin is Chairman of the Council on Foreign Relations Energy Security Group and Chairman of Washington Policy and Analysis, Inc. He formerly served as Deputy Secretary of Energy, Executive Secretary of the National Security Council and Special Assistant to President Reagan, responsible for the President's head of state meetings.
An energy economist by training, Mr. Martin served early in his career as program officer of the Workshop on Alternative Energy Strategies in the MIT Energy Laboratory and as special assistant to the Executive Director of the International Energy Agency in Paris during the second oil crisis. He began his Washington professional experience by assisting Congressman John Dingell prepare ten days of hearings on ''Growth and Its Implications for the Future.''
Mr. Martin is currently a Board member of the World Resources Institute and Chairman of its development committee. He is also a Board member of the Prague Institute of National Security. He was the lead author of the 1997 Trilateral Commission report, ''Maintaining Energy Security in a Global Context.'' Mr. Martin has degrees from the Wharton School of the University of Pennsylvania (BS) and from MIT (SM). His MIT graduate school thesis became the basis of an article he published in the Harvard Business Review (Autumn, 1975) entitled, ''Our Society in 1985, Business May Not Like It'' (co-authored with George Cabot Lodge).
Chairman BOEHLERT. Thank you very much. There is a pony in there someplace.
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Mr. MARTIN. Yes.
Chairman BOEHLERT. Thank you very much.
Miss Hamilton?
STATEMENT OF KATHERINE H. HAMILTON, CO-DIRECTOR, AMERICAN BIOENERGY ASSOCIATION
Ms. HAMILTON. Good afternoon, and thank you Mr. Chairman and members of the Committee for giving me the——
Chairman BOEHLERT. Would you mind pulling your mike just a little bit closer, because we are anxious to hear what you have to say.
Ms. HAMILTON. Is that better?
I am Katherine Hamilton, I am Director—Co-Director—of the American Bioenergy Association. We are a group that represents companies developing new technologies in biomass power, biofuels, and biochemicals; but today I agreed to speak on behalf of all of my renewable energy colleagues. And, after contacting them extensively over the last couple of days, I will attempt to represent their views fairly.
We are all a part of a group called the Sustainable Energy Coalition, and I included a list of the groups that are members of that organization in my remarks for the record.
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I will now present for you today some of the materials that this coalition did, in response to the Bush energy plan.
Briefly, with stories swirling on the Washington Post about the secrecy of the task force, I wanted to give you an idea of how the renewable energy community interacted with that task force. We were invited up, on a number of occasions, to speak to the staff. And, we also had an occasion to speak with the Vice President, and to present our list of things that we thought as a community would best represent good policies for renewable energy development.
To be honest, I think most of us felt that when we presented these that a lot of what was going to be in the plan had already been determined. So, a lot of it was, you know, a way to get us up to talk, but we did feel that a lot of the policies were already set in place.
When the report came out the Coalition released a score card, and that is also in the package of my statement, and we went point by point through several energy efficiency, renewable energy, and other types of energy recommendations. I am only going to address the renewable energy portion of that today, but since we don't have an energy efficiency witness, I would recommend that you all also read those reports, as well.
Chairman BOEHLERT. We shall, I can guarantee you.
Ms. HAMILTON. Okay.
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When the report was announced the President appeared at a combined heat and power facility, a biomass power facility, and a hydroelectric facility. The clean energy message in the venues and within in beautiful pictures in the report, was given a lot of visual importance. But the substance of the report belies the fact that the Administration does not give renewable energy the same credence it does traditional energy sources. The recommendations are not particularly bold or innovative, nor do they allow for the significant growth that we believe can happen in the renewable energy industry.
First, the renewable energy community believes that renewable energy tax credits are critical to bring these technologies to an even playing field in the market. The Administration did, in its plan, recommend extending the wind, and closed loop biomass tax credits, as well as expanding biomass to include residues and co-firing with coal. The solar residential tax credit was also recommended.
Those of us in those industries were very pleased with those recommendations. But those legislative suggestions are not new. In the last Congress, and in this Congress, Republican and Democratic members in both the House and Senate have introduced those same policies. Those policies were in the campaign platform, and they were also in the 2002 budget release.
Because small wind system incentives for those who want to generate at their farm or ranch or in their home, and a lot of folks from California are doing that right now, and tax incentives for geothermal and incremental hydropower, since both were not included, we gave the tax credit section an incomplete.
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Likewise, the renewable energy research and development budget category received an incomplete grade. The two major recommendations were to accept 39 million dollars addition to the renewable energy budget that Secretary Abraham actually announced the date the budget was released. Unfortunately, the 39 million dollars was taken out of the energy efficiency programs, and placed in renewable programs, and did not begin to effect some of the most severely cut renewable energy programs, which included solar, wind, and geothermal research and development.
The report also suggested that DOE review the program, to determine if increases should be given to these programs. And quite honestly, with due respect to DOE, we do not think that a study and report could be done within this budget cycle.
So, we are hopeful that this Committee, in conjunction with the appropriators, can come up with some ideas to try to make these programs whole. Research and development is absolutely critical to those companies. We would not have technologies ready for the marketplace had it not been for research done in the Department of Energy Laboratories. And if we do not support increased R&D for these technologies, other countries will. They will gain the global technological and economic advantage over our clean energy industry that we should rightly have.
A recommendation that the coalition made to the administration is for a Renewables Portfolio Standard. This is a renewables generation requirement similar to that which President Bush signed into law while serving as Governor of Texas. On this policy the administration has received a fail grade. There was merely a cursory mention of renewables in the restructuring section of the plan, but no direction to ensure that renewables had a place in utilities deregulation.
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In Texas the RPS has provided an incentive for 1,000 megawatts of new wind energy to come on line by the end of this year. The Republican Nevada legislative is voting today, I believe, and will likely pass an RPS. This is not radical unreasonable policy, and we hope we can get this in the new legislation.
Similarly, net metering and interconnection standards received a fail grade in our report. 30 states have enacted into law some form of net metering. These policies have received bipartisan support in both the House and Senate in the previous Congress in, and this Congress. Interconnection standards of net metering would allow producers of renewables and distributive power technologies to connect to the electric grid with the consistent national standard, and could be able to sell their excess power back to the grid.
As to renewable fuels, the administration received an incomplete. The plan does recommend extending the ethanol tax credit that expires in 2007. We did support that. But something, a bolder move, would have been to have a renewable fuel standard that requires transportation fuels to contain a minimum amount of renewable fuels.
Senators Lugar and Daschle have introduced a Bill recently on the Senate side. This policy would foster the tripling of ethanol in this country by 2010, at least a third of which would be derived from biomass waste. And since roughly h of the oil that we use goes to transportation fuels, this is one sector of renewable energy technologies that really begins to address the nation's dependence on oil. And we hope that also passes this year.
So, after all of this parochial analysis of the administration's energy plan, what does the renewable energy community really want? We need to have tax credits for solar, wind, biomass, geothermal, and incremental hydropower signed into law this year. We need sustained funding for renewable energy research and development this year. We need renewable energy market incentives in RPS and renewable fuel standards signed into law this year.
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The Federal Government should serve as an example and begin purchase renewables and alternative fuels for its own buildings and fuels, and we need bureaucratic barriers removed, with such policies as net metering, interconnections, and expedited permitting.
Most importantly, we do not want to be marginalized as an industry. The report has beautiful pictures of wind farms, but it does not suggest in its policy recommendations that renewable energy has a place at the same table as coal, nuclear, oil, and natural gas.
Speaking for myself, I would not be in this business unless I thought there was a more environmentally and economically sustainable way to produce energy. If we want a diverse portfolio of energy options, we need to put our polices where our mouth is, and begin conditioning the market for clean renewable energy, and we trust that by working with this Committee we can start to do that.
Thank you.
[The prepared statement of Katherine H. Hamilton follows:]
PREPARED STATEMENT OF KATHERINE H. HAMILTON
Thank you, Mr. Chairman and Members of the Committee, for giving me the opportunity to testify today about the Administration's National Energy Policy Development Group energy report. I am Co-Director of the American Bioenergy Association, a group representing the interests of companies exploring new technologies in biomass power, biofuels, and biochemicals. I agreed today to speak on behalf of the interests of all renewable energy technologies and have contacted as many of my colleagues as I could to ensure that their views would be represented fairly here. We are all part of an organization called the Sustainable Energy Coalition (list of member groups is attached for the record) and I will present for you today some of the materials released about the plan by that Coalition.
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With all the stories of secrecy swirling around the Energy Policy Development Group, I wanted to give you a perspective of how most of the renewable energy community was involved in the process. A few of us were invited in on April 20 to give our perspective list of policy ideas to the task force staff. Other industry groups, such as solar and hydropower had additional meetings with the staff on separate occasions. We submitted to them our agreed upon list of those policies that would best help the renewable energy industry. While the staff members were quite receptive and cordial, we left feeling that most of what would be in the plan had already been determined. The Vice President met with a group of renewable energy organizations and CEOs shortly before the plan's release. This meeting was to inform us of some of the items in the plan that addressed renewable energy. Two days before the report was released, the Sustainable Energy Coalition released a list of items on which the report would be graded. On May 17, the day the report was released, those blanks were filled in with ''Pass,'' ''Fail,'' or ''Incomplete'' based on our judgment of the plan's recommendations. That report card has been included for the record. I will refer to those grades as I discuss the substance of the plan.
When the report was announced, the President appeared at a combined heat and power plant, a biomass power facility, and a hydroelectric facility. The clean energy message—at the locations and within the report—was given much visual importance. The substance of the report, however, belies the fact that the Administration does not give renewable energy the credence it does traditional energy sources. The recommendations are neither bold nor innovative nor do they allow for a significant growth in the renewable energy industry.
The renewable energy community believes that renewable energy tax credits—both production tax credits for biomass, geothermal, and incremental hydropower, as well as incentives for installation of solar residential and small wind energy systems—are critical to bring these technologies to an even playing field in the market. The Administration recommended extending the wind and closed loop biomass production tax credit as well as expanding the biomass credit to include residues and co-firing with coal. A solar residential tax credit was also recommended in the report. Those of us in the wind, biomass, and solar industries were pleased with these recommendations. These legislative suggestions are not new to the renewable energy community. In the last Congress and in this one, all of these tax policies have been introduced by GOP members of both House and Senate. These credits were also part of the Bush campaign platform as well as the fiscal year 2002 budget release. Not included in the credits were small wind system incentives or tax incentives for geothermal or incremental hydropower technologies (however, positive statements and other policies were recommended for hydropower which the industry strongly supports)—thus, the Coalition gave the tax credit portion an ''Incomplete'' grade.
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Likewise, the renewable energy research and development budget category received an ''Incomplete'' grade. The report supports the budget amendment announced when the budget was released to move $39 million from energy efficiency to renewable energy programs. Not only did this move take funding from a strong program in energy efficiency—the Partnership for a New Generation of Vehicle—but it also did not restore funding to some of the most severely cut renewable energy R&D programs such as solar, wind, and geothermal. The report did suggest that the Department of Energy review the programs to determine if any increases be given to those programs that were cut. With due respect to the Department of Energy, asking that they study and report on a subject is not an activity that we believe can occur within this budget cycle.
We are hopeful, however, that this Committee, working with the appropriators, will be able to make some determinations before a formal report comes out of DOE. Those of us who work with our industry members who develop renewable energy technologies understand the importance of research partnerships with the Federal Government. Many of our companies would not have technologies ready for the market had it not been for research coming out of the DOE lab system. We strongly support the continuation of robust R&D programs to help bring down the cost of the technologies for those of us helping industry to market them. If we do not support increased R&D for our technologies, other countries will—gaining global technological and economic advantage over our clean energy industry.
On a positive note, the report recommends that EPA develop a renewable energy consumer choice program as well as a program to expedite permitting of renewable energy projects in brownfields. We are quite supportive of these ideas and believe we can work with the Chairman to facilitate the development of those programs. These programs, however, would likely not be funded until the fiscal year 2003 cycle.
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Another recommendation that our Coalition made to the Administration is for a renewables portfolio standard, a renewables generation requirement similar to that which President Bush signed into law while serving as Governor of Texas. On this policy, the plan received a ''Fail'' grade. There was merely a cursory mention of renewable energy in the restructuring section of the plan, but no direction to ensure that in the course of utility deregulation renewable energy has a place. In Texas, the renewables portfolio standard has provided the incentive for 1000 megawatts of wind power generation to come on line by the end of this year. The Republican Nevada legislature recently passed a renewable portfolio standard. This is not a radical or unreasonable policy.
Similarly, the plan ''Failed'' on net metering and interconnection standards. Thirty states have enacted into law or regulation some form of net metering; these policies have received bipartisan support in both the House and Senate. Interconnection standards and net metering would enable producers of renewable energy and distributed power technologies to connect to the electric grid with a consistent national standard and be able to sell excess power back to the grid.
As for the use of renewable fuels, the Administration received an ''Incomplete.'' The plan did recommend extending the ethanol tax credit that we support, but that provision does not expire until 2007. A bolder move would have been to recommend a renewable fuels standard that would require transportation fuel to contain a minimum amount of renewable fuels. Senators Lugar and Daschle have introduced a bill, S. 670, that requires such a measure. This policy could foster the tripling of ethanol in this country by 2010, at least one-third of which would be derived from biomass. Since roughly two-thirds of the oil we use goes to transportation fuels, this is the one sector of renewable energy technologies that truly begins to address our nation's dependence on oil.
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Another task force recommendation was to expedite the permitting process for geothermal energy plants on Federal lands. While we agree with expediting the process, we do not agree with the statement in the report that the geothermal industry relies on drilling technology from the oil and gas industry. In fact, the opposite is true.
Geothermal drilling is much more complex and difficult than oil and gas drilling—having to produce a 12j inch diameter hole, while oil and gas use a four inch hole and taking place in volcanic rock whereas oil and gas drilling occurs in considerably softer material. The oil and gas industry, for the past 15 years, has routinely advanced their drilling knowledge based on the experience of the geothermal community and the geothermal drilling funding of the Department of Energy.
So, after all of this parochial analysis of the Administration's energy plan, what does the renewable energy community want and need? We need to have tax credits for solar, wind, biomass, geothermal, and incremental hydropower signed into law this year. We need sustained funding for renewable energy research and development this year. We need renewable energy market incentives—a renewables portfolio standard and renewable fuels standard—signed into law this year. The Federal Government should serve as an example and begin purchasing renewable electricity and alternative fuels for its own buildings and fleets. We need bureaucratic barriers removed with such policies as net metering, interconnection standards, and expedited permitting.
Most importantly, we do not want to be marginalized as an industry. The report has beautiful pictures of wind farms, yet does not suggest in its policy recommendations that renewable energy has a place at the same table as coal, nuclear, oil, and natural gas. Speaking for myself, I would not be in the renewable energy business unless I thought there was a more environmentally and economically sustainable way to produce energy. If we want a diverse portfolio of energy options we need to put our policies where our mouth is and begin conditioning the market for clean, renewable energy. We trust that, by working with this Committee, we can begin to do just that.
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BIOGRAPHY FOR KATHERINE H. HAMILTON
Katherine Hamilton is currently Co-Director of the American Bioenergy Association, specializing in biomass power policy. Starting in 1985, Ms. Hamilton worked as a distribution engineer and commercial energy specialist at an investor-owned utility, Virginia Power. She was recruited by the Department of Energy in 1993 to begin an EPACT-mandated energy audit program for the Federal Government. She was hired at the National Renewable Energy Laboratory to perform that work and, in her six years at the lab, started the SAVEnergy audit program, a water conservation program, and a project reporting database. Ms. Hamilton also served as Manager of Government Relations in Washington, DC, during her tenure at NREL. In late 2000, Ms. Hamilton started her own consulting business, The Hamilton Group, and, in that capacity, has advocated on behalf of the clean energy industry, including biomass, geothermal, energy efficiency, and others. She helped get a law passed in the State of Maryland last year which is the first state tax incentive bill for development of energy efficiency and renewable energy technologies. Ms. Hamilton is a Certified Energy Manager and holds degrees from Cornell University and the University of Paris at the Sorbonne.
STATEMENT OF DISCLOSURE
Neither the American Bioenergy Association nor Katherine Hamilton are funded in any way by the Federal Government at the time of testimony.
Chairman BOEHLERT. Thank you very much Ms. Hamilton.
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Mr. Hawkins?
STATEMENT OF DAVID G. HAWKINS, DIRECTOR, NATIONAL RESOURCES DEFENSE COUNCIL CLIMATE CENTER
Mr. HAWKINS. Thank you, Mr. Chairman. Well, we are in the middle of a fight we don't need to have. The script seems to have been written that it is the Bush Administration versus the environmental and energy advocacy community. But, let us step back and look at the broad positions.
Environmental groups are not in favor of energy shortages, we are not in favor of price gouging. We are in favor of getting the maximum potential out of the smart use of energy, energy efficiency. We are also in favor of having a more diverse energy supply, one that uses greater reliance on renewable energy sources. And, of course, we are in favor of protecting the environment, securing the gains we have made over the last 30 years, and moving ahead on problems that we haven't yet adequately addressed.
NRDC has published in the last several months two reports that I want to call the Committee's attention to, and they were included, and I hope they will be included in the record.
One is a responsible energy policy for the twenty-first century, that we published in February, and then last week, in a response to the Bush Energy Plan, a critique of that plan entitled modestly, slower, costlier, and dirtier.
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The Administration asserts that its energy policy is balanced, but in our view it is not. Let me just start by summarizing a few of its damaging features. First, the plan includes a two billion dollar subsidy for the world's dirtiest fuel, coal. In our view coal producers and coal burning utilities do not need additional help from the taxpayer. They are earning record profits, and they do not need two billion dollars of our money to run their business.
Do they need to improve their environmental performance? Of course they do. But the best way to get them to improve that performance is to enforce the current pollution control laws and enact strong new laws.
In contrast, the Bush Plan calls for interfering with the law enforcement efforts of the current clean air act, and offers only a vague and incomplete promise for a new pollution law.
Second, the plan calls for drilling for oil in the Arctic National Wildlife Refuge. In our view this proposal has nothing to do with energy security, and everything to do with keeping dollars flowing through the coffers of the owners of the current pipeline. If you have a hammer, everything looks like a nail. The existing oil pipeline is the oil company's hammer, and they want to use it to nail the Arctic Wildlife Refuge. We think it is a bad idea.
Third, rollback of clean air rules. The plan pressures the Attorney General to actually stop enforcing air pollution clean up cases, and it pressures the Environmental Protection Agency to change the rules that would allow more pollution from refineries and coal-fired power plants. These proposals would mean more disease and death by air pollution from these already dirty sources. Another bad idea.
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The plan emphasizes increased reliance on fossil fuels, with no attempt to limit global warming pollution. As a result it ignores our existing commitments to reduce global warming pollution. The President's father, in 1992, signed the Rio Climate Treaty. The treaty calls on the United States to return its emissions to 1990 levels. We are currently about 14 percent above those levels. Under this plan, however, carbon dioxide emissions would actually increase. It appears they would increase by 35 percent above today's levels, which is 50 percent above the 1990 Rio Treaty undertaking, over the next 20 years.
Then let us look quickly at what is not in the plan. There is no support for bipartisan bills that would immediately help cut electricity and natural gas consumption for the building sector. Proposals such as H.R. 778, which the Chairman is a co-sponsor of, as well as other members of this Committee.
There is no support for bipartisan bills to create a Renewable Portfolio Standard and a public benefits fund in the electric industry. No commitment to raise fuel economy standards from vehicles, which would deliver more oil faster than all of the oil that you could get out of the Arctic Wildlife Refuge, and no commitment under the disastrous budget cuts in the energy department's successful efficiency and renewable programs. And finally, no commitment to undo the indefensible weakening of the air conditioner efficiency standards.
This single weakening action that was undertaken about a month ago will cost consumers 18 billion dollars, that is billion, with a b, on their energy bills over the next 25 years. The President could have undone that with the stroke of a pen, but he didn't. He needs to.
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Finally, let me address, well let me not address it, since my time is up I will stop and I would be glad to answer any questions.
[The prepared statement of David G. Hawkins follows:]
PREPARED STATEMENT OF DAVID G. HAWKINS
Summary
The United States can adopt effective policies to reduce vulnerability to tight energy supplies and the resulting high prices of fuels and electricity. Our best, cleanest, and most secure source of energy supply lies not in increasingly remote fossil reservoirs but in expanded efforts to reduce the amount of energy we use to produce a dollar of economic growth. Our best weapon against OPEC and high prices is the ingenuity of American firms that will find ways to reduce our energy intensity if given the right support and incentives.
The President's energy policy, by relying primarily on expanding traditional fossil energy supplies, will cause more air pollution, damage more special places in America, and leave consumers with higher energy bills.
Waiving environmental standards and programs in pursuit of new energy supplies will harm health and the environment Americans cherish but it would not solve our energy problems.
Congress has before it a number of measures that if enacted would help speed the arrival of an economy that is less vulnerable to energy shortages and price spikes. These proposals include, incentives for more energy efficient buildings, programs to support renewable energy supplies and efficiency programs as an integral part of restructuring the electric generating industry, repeal of the grandfathering of old polluting power plants, to both clean the air and promote construction of new, highly efficient generators, and incentives for more fuel efficient vehicles
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Administrative actions also play an important role. Most important is the opportunity reduce our dependence on imported petroleum by increasing the fuel efficiency of vehicles, particularly SUVs and other ''light trucks.'' The President's delay in directing the Department of Transportation to propose stronger fuel economy standards misses an opportunity to send an immediate signal to combat the wasteful consumption that produces higher gasoline and oil prices. In addition, more rapid development and updating of appliance efficiency standards will help to lighten the load on our electric system. The President should have corrected his error in weakening a strong air conditioner efficiency standard but he did not do so in his plan.
Introduction
My name is David Hawkins, and I represent the Natural Resources Defense Council. I appreciate the opportunity to appear before you today to discuss the Report of the National Energy Policy Development Group, accepted by President Bush as his energy plan. A sound energy plan would promote policies that both protect the environment and reduce the amount Americans spend on energy. Unfortunately, the emphasis in the President's plan is on policies that will harm the environment and consumers.
The Natural Resources Defense Council is a national, non-profit organization of scientists, lawyers, and environmental specialists, dedicated to protecting public health and the environment. Founded in 1970, NRDC serves more than 400,000 members from offices in New York, Washington, Los Angeles, and San Francisco.
First, a statement of the obvious: no consumer values a kilowatt of electricity, or a gallon of gasoline or heating oil for itself. We pay money for these commodities to get the services they provide us: mobility, comfort, lighting, communications, and other qualities that make modern life enjoyable. If we can find ways to constantly improve our ability to provide these services with fewer units of energy, we win. We win economically and we win environmentally.
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The Bush Administration's National Energy Policy Report seems to miss sight of this basic fact. Reading the report, one might conclude that the health of our energy policy depends on how many power plants we build and how many tons of coal, barrels of oil, and cubic feet of gas we extract and burn. While there are a few specific proposals to promote more efficient use of energy and renewable energy sources, these limited measures do not appear to alter the fundamental assumption of the report: that only an unprecedented increase in energy supplies will address our needs.
NRDC believes a more balanced program is in order. Yes, significant new supplies will be an essential part of a sound energy policy. But the scale of our need for new supplies can be dramatically lower if we embrace an integrated program that places at least equal emphasis on bringing on very large additional ''supplies'' of energy efficiency and increasing our use of renewable energy sources.
In February of this year, NRDC published a report calling for a balanced approach, entitled A Responsible Energy Policy for the 21st Century,(see footnote 3) and last week we released a response to the President's energy proposals, called Slower, Costlier and Dirtier: A Critique of the Bush Energy Plan.(see footnote 4) Both of these reports are available at www.nrdc.org and I have included hard copies for the convenience of the committee. Together these reports identify the flaws in the Administration's program and provide suggestions on a balanced policy that will meet our energy needs and protect the environment.
The Bush Administration asserts that its energy policy is balanced but it is not. Let me summarize just a few of its damaging features:
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A $2 billion subsidy program for the world's dirtiest fuel—coal. Coal producers and coal-burning utilities are earning record profits. They don't need $2 billion from taxpayers to run their businesses. The best way to improve this industry's environmental performance is to enforce current pollution laws and enact strong new laws. The Bush plan interferes with law enforcement and offers only a vague, incomplete promise for a new pollution law.
Drilling for oil in the Arctic National Wildlife Refuge. This proposal has nothing to do with energy security and everything to do with keeping the cash flowing for the owners of the existing pipeline in Alaska. If you have a hammer everything looks like a nail. The existing oil pipeline is the oil companies' hammer and they want to use it to nail the Arctic Wildlife Refuge.
Rollback of key clean air rules. The plan pressures the Attorney General to stop enforcing air pollution cleanup cases and pressures the Environmental Protection Agency (EPA) to change the rules to allow more pollution from refineries and coal-fired power plants. These proposals would mean more disease and death by air pollution from these already dirty sources.
Increased reliance on fossil fuels with no attempt to limit global warming pollution. Ignoring our commitments to reduce global warming pollution from today's levels, the plan would actually increase this pollution by 35 percent over the next 20 years.
And look at what is not in the plan:
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No support for bipartisan bills that would immediately help cut electricity and natural gas consumption from the buildings sector with tax incentives and performance standards.
No support for bipartisan bills to create a renewable portfolio standard and public benefits fund for the electricity industry.
No commitment to raise fuel economy standards from vehicles, even from the most gas-guzzling ''sport/utility vehicles'' (SUVs) on the road. Acting now to adopt better standards would save more oil than the Arctic Refuge ever could provide.
No commitment to undo the disastrous budget cuts in the Energy Department's successful efficiency and renewable energy programs.
No commitment to undo the indefensible weakening of air conditioner efficiency standards. This single weakening action will cost consumers $18 billion on their energy bills over the next 25 years.
By relying so heavily on new fossil fuel supplies, the President's plan would make worse the largest threat to health and environmental quality that faces the human race in the 21st century: the mounting danger of global warming. The President's father, as 41st President of the United States, signed the 1992 Rio Climate Change treaty, which was ratified by the Senate that year. While the Rio treaty calls on industrialized countries, including the United States, to return our greenhouse gas pollution to 1990 levels, this Administration's energy plan would increase that pollution dramatically. Given the forecasts for increased fossil electricity and gasoline consumption repeated in the President's plan, U.S. CO pollution would increase by 35 percent over today's levels, an amount nearly 50 percent higher than our Rio treaty commitment. It is remarkable that the President's plan contains not a whisper of an acknowledgement of this failure to honor our agreements.
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Opportunities for a Balanced Approach to Energy Policy
Unbalanced efforts to provide a burst of new supplies will not solve our problems. Without sustained programs to search out and deploy untapped opportunities to use energy more efficiently and to increase the use of cleaner sources, we will stay on a fossil fuel treadmill that moves faster and faster and is more and more vulnerable to disruption.
That is not to say that new supplies don't have role to play. New supplies are in fact being produced. In California, for example, since April 1999, more than 9,300 megawatts of new plants (equivalent to almost 20 percent of California's peak needs today) have received state siting approval, and more than 6,000 megawatts more are poised to follow. NRDC and other groups have supported bills, such as Assembly Bill 970 in California, to streamline the siting of new cleaner generation sources. But new supplies are not by any means the whole answer.
Some Opportunities in the Electric, Natural Gas, and Heating Oil Sectors
The President's energy plan repeats the claim that between 1300–1900 new electric power plants need to be built in the next 20 years. However, an alternative policy, emphasizing energy efficiency and renewable power, could dramatically reduce the number of power plants needed, lower Americans' electric bills by $30 billion per year, and significantly cut all forms of power plant pollution, including carbon dioxide. According to a November 2000 Department of Energy Report, ''Scenarios for a Clean Energy Future,'' which the Bush Administration has ignored, energy efficiency and renewable power can meet 60 percent of the Nation's need for new electric power plants over the next 20 years. Moreover, an energy policy that takes advantage of efficiency and renewable energy sources could lower Americans' electric bills by $30 billion per year, cut CO pollution by one-third, and slash emissions of other pollutants in half.
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There are a wide range of actions that can increase the reliability and performance of our electric supply system. Let me mention a few.
Restoring effective utility and government programs to carry out cost-effective energy efficiency actions for commercial, industrial, and residential customers;
Expanding programs to provide discounts for customers that shift their consumption to off-peak periods;
Promoting clean, distributed generation technologies by adopting simple interconnection rules and streamlined permitting;
Enacting a Renewable Portfolio Standard to extend the fuel supplies available to electric generators;
Accelerating the adoption of additional and improved efficiency standards for new appliances, lighting, and heating & cooling systems.
Tax incentives for energy efficient buildings and equipment can also reduce the amount of natural gas, heating oil, and electricity we need to run our homes, businesses, and schools. For example, H.R. 778, cosponsored by Chairman Boehlert and other members of this committee, would provide such incentives and produce huge savings in energy, energy bills and pollution. Under H.R. 778, peak summer demand is projected to drop by 20,000 megawatts (the output of 60 large power plants) and direct economic savings to consumers would exceed $40 billion. The President could have endorsed this sensible bipartisan bill in his plan but he did not.
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Sadly, the President's plan lacks any specific policies to help us reduce energy bills by being smarter about how we use electricity, natural gas and heating oil. His plan includes a vague directive to the Secretary of Energy to consider increasing energy efficiency standards for appliances and other equipment, but the President already has weakened the new air conditioner standard set by his predecessor, a step that will force construction of at least 40 more power plants by 2020, cost consumers as much as $900 million in higher electric bills in that year, and generate 180 million more tons of carbon dioxide emissions over the next three decades.
The President's budget would cut by more than half the Energy Department's funding for setting new energy efficiency standards. And while proposing more spending to weatherize low-income homes, the Bush budget would slash programs to develop the next generation of energy efficiency technologies by $180 million, a crippling 30 percent cut.
The Vice President dismissed conservation as just ''a personal virtue,'' but it is worth remembering what energy efficiency already has achieved. Thanks to private sector investments and government policies, our economy has become far more energy efficient since the genuine energy crises of the 1970s. Without these improvements—due mainly to higher mileage cars, energy-saving refrigerators, light bulbs and other equipment, and energy savings in industry—U.S. energy use in 2000 would have been 40 percent higher, Americans would have spent $260 billion more on energy bills last year, and pollution levels would have been even higher. But to continue this progress real policies are required; last minute additions of general support for efficiency are no substitute for the specific efficiency measures I have mentioned above.
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Opportunities in the Petroleum Sector
First, the United States can not produce its way out of vulnerability to oil price spikes.
Oil is a global commodity. The price of oil is therefore determined primarily by international markets. This will continue to be the case regardless of the level of domestic oil production unless the United States wants to return to an era of price controls and de facto rationing, which is not an experience that anyone is anxious to repeat. In other words, as long as U.S. oil markets remain open, the price of gasoline in Chicago, Detroit and Washington will fluctuate with global oil prices, even if the United States did not import any oil. Changes in domestic oil production will, therefore, only affect oil prices to the extent that they influence the global supply/demand balance. The United States, however, only produces about 12 percent of global petroleum supplies, so even large changes in domestic production will have only a marginal effect on global markets. Over the long term, the U.S. share of global production will inevitably decline further. The United States has only two percent of world oil reserves, while Gulf State OPEC members control about two-thirds of proven reserves. Opening the coastal plain of the Arctic National Wildlife Refuge to oil exploration would not appreciably change this situation. USGS's mean estimate is that 3.2 billion barrels could be economically produced, which would add just 0.3 percent to global reserves.
In contrast, the United States is responsible for about 25 percent of world petroleum demand. This fact alone indicates that we can have a much larger impact on global markets on the demand side than on the supply side. This conclusion is strengthened by the fact that there are large untapped energy efficiency resources, whereas our most abundant and accessible oil resources have already been exploited. I will return to this point.
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Second, rolling back environmental standards governing the oil industry would damage irreplaceable natural resources.
The data presented above makes it clear that rolling back environmental standards would be totally ineffective as a policy response to recent or anticipated oil price spikes. This would, however, put irreplaceable natural resources at risk. The oil industry has made significant progress in reducing the environmental impacts of its operations, but oil production remains an inherently damaging and risky activity that is simply incompatible with protecting fragile natural resources, such as remaining coastal wetlands and wildlife refuges. For example, offshore oil and gas development continues to result in oil spills, the release of drilling waste, dumping of contaminated ''produced water'' and on shore impacts from terminals, pipelines and other facilities:
Oil spills. This is the most obvious impact of offshore development. While platform blowouts resulting in large spills are rare, pipeline spills are not. According to DOI statistics, from 1986 through 1997, some two million gallons of oil was spilled from OCS oil and gas operations. In January of this year, an oil pipeline in the Gulf of Mexico ruptured after becoming fouled with an anchor from a drilling rig and spilled some 94,000 gallons of crude oil into the Gulf about 120 miles south of New Orleans.
Drilling waste. Drilling operations generate more than a thousand tons of drilling waste per well. Toxic pollutants in drilling waste include lead, naphthalene, arsenic, copper and selenium. Suspended solids in drilling waste can smother bottom dwelling organisms and alter critical benthic habitats. Disposal of OCS drilling wastes typically involves dumping it over the side untreated.
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Produced water. ''Produced water'' (brine in the formation that is brought up along with oil from a well), is generated in massive quantities by production operations. Produced water contains a variety of toxic pollutants, including benzene, toluene, and the radioactive pollutants Ra 226 and Ra 228 (produced water generated off Louisiana has been found to contain levels of radioactivity higher than that permitted to be discharged by nuclear power plants and higher than the level that distinguishes hazardous from nonhazardous waste under RCRA).
Onshore impacts. Offshore oil and gas extraction typically requires extensive onshore industrial development to process and transship oil or gas. Pipelines, storage facilities, processing facilities and other industrial infrastructure built to support offshore oil and gas has resulted in substantial environmental damage to coastal resources. For example, a study done for NOAA in the 1980's conservatively estimated that offshore pipelines crossing coastal wetlands in the Gulf of Mexico had destroyed more coastal salt marsh than exists in New Jersey through Maine. Particularly in areas where little infrastructure presently exists, onshore impacts can be expected to be substantial.
Renewed calls for opening the Arctic National Wildlife Refuge to oil exploration axe generally accompanied by claims that the environmental impact would be minimal, yet a review of the impact of existing oil development in Alaska tells a different story. Once part of the largest intact wilderness area in the United States, Alaska's North Slope now hosts one of the world's largest industrial complexes. More than 1,500 miles of roads and pipelines and thousands of acres of industrial facilities sprawl over hundreds of square miles of once pristine arctic tundra. Impacts include air pollution, spills and waste:
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Air pollution. Oil operations on Alaska's North Slope emit tens of thousands of tons of oxides of nitrogen annually, which contribute to smog and acid rain. In addition, North Slope oil facilities release tens of thousands of tons of methane, a potent greenhouse gas that contributes to global warming.
Spills. Each year, hundreds of spills involving tens of thousands of gallons of crude oil and other petroleum products and hazardous materials occur on the North Slope. In 1995, approximately 500 spills occurred involving more than 80,000 gallons of oil, diesel fuel, acid, biocide, ethylene glycol, drilling fluid, produced water, and other materials.
Waste. Oilfield activities generate tens of thousands of cubic yards of sewage sludge, scrap metal, garbage, and waste every year.
Third, the United States has major opportunities to reduce its dependence on petroleum.
Almost thirty years after the first OPEC oil embargo the United States is still dependent on petroleum for 97 percent of its transportation energy needs. As a result, two-thirds of our petroleum consumption goes to fuel transportation. With average efficiencies declining for new vehicles, and a 21 percent increase in miles driven between 1990 and 1998, the petroleum dependence of transportation is continuing to rise.
CAFÉ standards helped double vehicle efficiencies from 1975 to the late 1980s, reducing the impact of high oil prices on consumers. This is the most effective policy that Congress enacted in response to the oil crises of the 1970s, and it can be used again to protect citizens from fluctuations in oil prices such as those we are now experiencing. Unfortunately since 1995 provisions in the transportation appropriations Acts have prohibited the Department of Transportation (DOT) from even examining the need to raise the Corporate Average Fuel Economy (CAFÉ) standards. As a result of this rider and the growing market share of SUVs, the average fuel economy of all new passenger vehicles is at its lowest point since 1980. It is time for this wasteful policy to end.
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SUVs should be held to the same efficiency standards as other passenger vehicles, by ending their classification as light trucks. The weaker CAFÉ standard for light trucks was intended to allow for legitimate differences between commercial vehicles and passenger vehicles, but allows SUVs to consume one-third more oil per mile than cars. With SUVs and other light trucks now accounting for half of new vehicle sales, this unintended loophole must be closed. The technology currently exists for SUVs to meet the tighter standard for cars, at an estimated additional cost of $575, which is recouped in less than two years from savings in gasoline bills.
Recent analysis shows that CAFÉ standards could be raised to over 40 miles per gallon for new cars and light trucks by 2010. This would result in oil savings of about three million barrels per day below business-as-usual projections, with a net economic gain for consumers of $69 billion over the life of the vehicles. It would give Americans fifteen times more oil than drilling the Arctic Refuge.
To complement higher fuel economy standards, Congress should enact tax incentives to encourage consumers to purchase energy efficient products, and to spur the production of energy from clean, renewable resources. By providing a direct financial reward, incentives can help to overcome market barriers to the full commercialization of new technologies. The tax code already provides incentives for some efficiency and clean energy measures, but major areas are currently left out of what could be a comprehensive tax policy.
In particular, ''hybrid'' vehicles integrate a conventional gasoline internal combustion engine and on-board battery-electric power into a single drivetrain. These vehicles have the great advantage of requiring no additional fueling infrastructure, and are likely to provide a transition path to electric and fuel cell cars. Hybrid cars available commercially for the first time this year in the U.S. are capable of fuel efficiencies of 60 to 70 miles per gallon, two to three times that of the average new passenger vehicle. Consumer tax incentives for clean, highly-efficient hybrid vehicles would facilitate the rapid commercialization of this promising technology. While the President's plan calls for a vehicle tax credit, details are missing on two critical elements. First, the incentive should be keyed to the fuel economy performance of the vehicles, not just to the equipment on-board. Second, the tax credit is no substitute for an improvement in the overall efficiency of the vehicle fleet. If increased hybrid sales were to be credited against the existing CAFÉ standards, there would be no savings in gasoline consumption.
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The Fraud of Attacks on the Clean Air Act
It is quite clear that three of the most polluting industries in the United States (coal, oil, and electric generators) are bent on parlaying Americans' concerns about energy policy into an assault on vital Clean Air Act protections. These industries and their lobbyists have papered the press, the Congress, and the Vice President's energy task force with claims that clean air rules are an impediment to expanding production at power plants and refineries. While a cursory review of the industry claims demonstrates their lack of merit, for some reason the White House task force was unwilling to just say ''no'' to this assault on the Clean Air Act. The plan recommends the President direct the EPA Administrator to review it rules and, even more startling, that he direct the Attorney General of the United States to review enforcement actions that are already pending before Federal judges. Each of these reviews is completely unnecessary and each runs the risk of interfering with prompt settlement of existing enforcement actions and prolonging industry's refusal to honor its pollution control obligations.
Because the industry's misrepresentations have been so blatant and because the Administration failed to reject out-of-hand the industry efforts to evade the law, I think it important to provide some background on this controversy.
Since 1970, the Clean Air Act has required new air pollution sources to meet federal emission standards intended to reflect modern pollution control performance. To prevent evasion of this ''new source performance standard'' through piecemeal replacement of existing plants, Congress also provided in 1970 that when an existing plant is modified in a way that increases emissions, it too becomes subject to new source requirements. Congress defined ''modification'' in the 1970 Act very broadly, including in the term ''any physical change or change in method of operation'' that increases emissions. When EPA adopted implementing rules for this broad definition in the 1970s, the agency created an exemption for ''routine maintenance, repair, and replacement.''
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After lengthy investigations, EPA, along with a number of states and citizen organizations (including NRDC), commenced enforcement actions against a number of electric generating companies, alleging the companies had made extensive modifications to their power plants without seeking required permits or installing required pollution controls. (EPA has also commenced enforcement actions against a number of refining companies, alleging similar violations.)
Industry's immediate response in 1999 was to seek enactment of riders that would have barred these enforcement cases. That effort failed and the litigation has continued, leading to a number of settlements by electric generating companies and refiners. These settlements will result in over one million tons of air pollution reduction as they are implemented.
Now, waving the banner of ''energy crisis,'' the recalcitrant defendants are back leading the charge to have these cases fixed, rather than cleaning up their excessive pollution. The industry lobbyists make three claims:
that their construction projects were merely ''routine maintenance;''
that EPA's interpretation of its rules was newly minted in 1998;
that EPA's interpretation will prevent expansion of electricity or gasoline production at existing plants.
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Each of these claims is false.
Contrary to industry claims of ''routine maintenance,'' the challenged projects involve millions of dollars of capital investments that utility witnesses in public utility commission rate cases have described as going beyond routine maintenance and substituting for building new plants. Indeed, in a recent filing with the Department of Energy, one of the defendants, American Electric Power Co. explicitly labeled some of the challenged projects as activities that were not ''routine maintenance.'' As an example of the scale of the challenged construction, the Justice Department brief filed one month after Attorney General Ashcroft took office points out, ''[t]his case concerns multi-million dollar capital improvements at multiple TVA plants—involving total replacement of stories-high and miles-long pieces of equipment, including a plant rehabilitation so extensive that it required construction of an on-site railroad.'' Brief for the United States in TVA v. Whitman, at 55, (filed February 21, 2001).
The industry claim of a ''new'' interpretation is even more remarkable. The current cases are based on an interpretation unchanged since the Reagan Administration. In 1988, the Reagan EPA administrator issued a formal determination to a Wisconsin utility, finding that an equipment replacement project was not routine. The Reagan Administration interpretation was affirmed by the EPA in the first Bush Administration and the industry took EPA to court (represented by the same lawyers who are claiming surprise today). In 1990 the court agreed with EPA's interpretation of the routine maintenance exemption. The industry sought legislation from Congress in 1991 to overturn this ruling (claiming they were victims of a ''new'' interpretation then too) but Congress rebuffed this effort. Despite this absolutely clear record, ten years later the industry is back, claiming that an interpretation that has been consistent over the terms of three Presidents is once again, new.
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In fact, as documented in industry conference proceedings from 1984, industry members discussed the fact that their construction projects might well subject them to review and they settled on an approach:
identify projects as ''upgraded maintenance programs;''
''downplay the life extension aspects of these projects (and extended retirement dates) by referring to them as plant restoration (reliability/availability improvement) projects;''
deal with the air regulatory issues ''at the state and local level and not elevate [them] to the status of a national environmental issue.'' (i.e., don't ask EPA because you won't like the answer).
EPRI, Proceedings:: Fossil Plant Life Extension Conference and Workshop (1984) at 27–4.
Industry's final argument is that if the government's position is not overturned, they will be unable to expand production at existing plants to meet energy needs. This claim is as false as the rest. The Act's New Source Review (NSR) program only applies to projects that increase emissions above baseline levels. EPA's NSR rules provide generous ''baseline'' emission formulas (the maximum polluting hour in the past five years and the average of the two maximum polluting years of the previous five years). A company that commits to not exceed these generous limits can carry out any maintenance or other project it wishes, routine or otherwise, without triggering NSR. Just last May EPA informed Detroit Edison that a non-routine expansion would not trigger review because the company was representing that its project would not increase emissions above baseline levels.
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In sum, the Clean Air Act does not prevent increases in energy production from existing power plants and refineries; it merely requires that pollution levels not increase. Sources that keep their emissions level are exempt from federal review. Since most of these plants are ''grandfathered'' from modern pollution controls, they have high baseline emissions and many cost-effective opportunities to make any modest improvements in emission performance that might be needed to keep their overall pollution from increasing. Thus, we don't need to solve our short-term energy supply problems on the backs of communities neighboring refineries or on the backs of millions of citizens who live in the long shadow of pollution from today's grandfathered power plants.
President Bush campaigned on a promise to end grandfathering of power plants under the Clean Air Act. But the refiners and utilities are lobbying to expand their grandfather status. If the Administration supports these industry efforts, existing pollution sources would be able to operate in perpetuity with dirty, outmoded facilities. They would become ''grandfathers on steroids.'' Not only would this make air pollution worse, it would make it that much more difficult for cleaner, more efficient sources of energy to enter the marketplace. I urge you to use your influence with the President and his Administration to prevent this outcome.
Thank you for your attention. I look forward to answering any questions you may have.
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Chairman BOEHLERT. Thank you very much. I appreciate all of the witnesses sharing with us their valuable time, and serving as resources for the Committee.
Now there is going to be a temptation, since this is the first hearing anyplace, on either side of the hill, to take a look at the President's Energy Proposal, there is going to be a hearing, to wander all over the lot, and get far afield from the Committee's jurisdiction.
It is interesting, as we start this whole exercise, that you have the ranking Democrat very enthusiastic about the administration's plan, and you have the Chair of the Committee expressing optimism in terms of the direction in which we are proceeding. It is a work in progress, that is the good news.
And what we have now, finally, after many years of no action, we have a plan. Now there are some parts of the plan that we can all embrace and jump up and clap for, there are other parts of the plan that are somewhat disappointing. I will just tell you from my own perspective, I think we have come a long way.
Initially, when this plan was being developed, the talk was all of expanding supply. Lost in the equation was, what are we going to do about demand, what are we going to do about the rest of the story, as Paul Harvey would urge us to consider.
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So, no one can deny the fact that we have to have increased supply. We have millions of more Americans coming into being every single year, and the demands on energy sources are increasing. But we also need to have conservation, as Ms. Hamilton, and Mr. Hawkins, and Mr. Martin have all mentioned, and I would feel a lot better about the conservation plans if there was more to the story, like for example increasing CAFÉ standards for light trucks and SUVs. To the credit of the administration, they are talking about addressing that very subject in a timely manner, not 2, 3, 4 years hence, but like right away, as soon as the National Academy of Science Report comes out, in July.
I would feel better about energy efficiency if it were given greater attention, and if we did such things as require a higher SEER average, or rating, for air conditioning units, for example. No one suggesting, as they did back in the 70's, that you turned off the air conditioner, or you turned down the thermostat in the dead of winter. What we are saying is, why not produce more energy efficient units, appliances. The consumers would love it, because they pay less for the energy output. And then when we talk about, as Ms. Hamilton did, focusing on renewables, I would feel a lot better about the talk of focusing on rernewables if the budget was going up, and not down. And so, put your money where your mouth is.
But I am very optimistic, because I sense in this administration, and Ms. Woolsey, I want you to pay particular attention to this, because we work so well—thank you so much, because we do have a partnership. But there is an extensive outreach program underway. This is something that is going to require the best minds of everyone around this town, and far beyond our borders.
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And I am comforted by the fact that there was an adjustment in the final report, calling for 39 million dollars extra for investment in renewables, but then you say where is the 39 coming from, I am not happy with that.
But the point is, I think the administration is recognizing it is more than supply, when the President stood up in St. Paul, to announce his plan, in big letters behind him, this high, it said conservation. They are paying attention. They are getting the message, and I think we have cause to be optimistic. Because I feel that we are going to end up with energy policy, the same way we are in the process of ending up with education policy. We are going to reason together, and we are going to get a good bill for America, and it is going to be a bill that deals with the problem for the long range, not just for a quick fix, which you know, deserves a simple solution to a complex problem, and it is usually wrong. Complex problems require complex solutions.
So, I really do think that we are headed in the right way, but as Mr. Hawkins knows, from—and I have worked with him many, many times, it is not going to be easy, and we have a lot of work cut out for us.
So, with that long preamble, let me go and say to you that this is the Science Committee, we have some special responsibility, and I would like to focus on the responsibility. We are going to be part of the solution to the problem. We cannot wave a magic wand and solve it all by our lonesome self. There are jurisdictional questions, and everything else.
So, let me ask my one question of the three of you, and I will keep you here all afternoon, if you are willing to, after the others have a chance to ask questions.
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What can this Committee do, within our jurisdiction over energy research, development and demonstration programs, at the Department of Energy, to promote energy efficiency and renewable energies in ways that will make a real difference? Is that question clear?
And I will go in reverse order. Mr. Hawkins, do you want to try first with that? You are a good lead off hitter.
The Role of R&D in Energy Efficiency and Renewable Energy
Mr. HAWKINS. Well, thank you. I would certainly urge moving H.R. 778 through the process. As I mentioned, that is a bill that you are co-sponsor of for building efficiency. It also has tax incentives, but it is a very important program.
Then I think going through and doing a very thorough review of the impact of the budget cuts in the efficiency and renewables program at the Department of Energy documenting for the public, perhaps for some of the personnel in the new administration themselves, the fact that these investments in research have paid back Americans many times over the original investments.
The efficiency programs in one component alone, for example, have delivered 30 billion dollars in savings to American consumers, at a cost of 700 million dollars. So, we are talking about a huge pay back on investment. You can't make that kind of money on Wall Street. This is one of the best investments, and it is one that is really short-sighted in our view for the President to have cut that money.
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It also, in our view, was very bad in terms of sending a sense of balance to, in effect, have the money for the coal subsidy program come out of the cleanest energy resources, coming out of efficiency and renewable funding, and putting it into the dirtiest coal energy resource. A very bad message to send about how the administration plans to approach it.
So I would say, whatever the Committee can do to document the benefits of those programs, and to try to get administration witnesses to make an earnest effort to do a thorough review, and a reversal of those cuts would be a great service.
Chairman BOEHLERT. Ms. Hamilton?
Ms. HAMILTON. Yes. I wanted to say that David Garman, who has been slated to be the Assistant Secretary for Energy Efficiency and Renewable Energy is great, and we are all really excited about him getting in there. I think he will be a very positive force.
I think working with him, and with the industry partners that work with the Department of Energy and their laboratories, it would be great if you all could do a very strong authorization Bill to these programs. I think it helps appropriators to have good authorization Bills and to know that it has come out of the thoughtful process that goes on in the Science Committee.
Chairman BOEHLERT. Thank you. Mr. Martin?
Mr. MARTIN. My suggestion is to be enthusiastic, but don't get yourself into the situation where the Committee, or the government, is choosing winners or losers with regard to energy technologies.
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The reality is, a lot of significant progresses have been made in conservation. Many of our members of the Alliance, for example, are big industry. Whether they be the cement industry, or the steel industry, or the electrical industry. They have had to make significant gains in energy efficiency to stay competitive, nationally and internationally. So, quite a bit has been achieved.
Secondly, I would mention that the average household is already 25 percent more efficient today, although we are still much lower than the average household in Europe or in Japan.
I, at DOE, since I was Deputy Secretary, I was always concerned about giving money to people when industry was not also giving money. It seemed to me that the most innovative research and technology comes from companies themselves who have an entrepreneurial spirit to make money. And I never quite understood why the government was giving money if industry wasn't. Therefore, I was always attracted to industry/government partnerships, maybe each side puts up 50 percent. That way, I think we are a little bit more tied to the market.
Bottom line, I think there is big business in energy efficiency. I think it is going to be one of those industries which grows and prospers, and it would be very helpful if the Committee helped raise the conscienceness of the American people about the types of technologies that they can invest in for their good, for their own economy, and get some immediate pay back in the marketplace.
Chairman BOEHLERT. Thank you very much, and I hope all of you will acknowledge that this is a work in progress. This is not the finished product. To the credit of the administration, a proposal has been laid on the table, and now we are all going to try to sort things out, to work things out.
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And Ms. Hamilton, I am glad you talked about the appointment, because there are some very good people being appointed to positions in this administration, and that seems to be ignored in some quarters, and the focus is on people with whom some don't agree.
But the fact of the matter is, I think we are moving in the right direction, and that work is in progress, and I am pleased to now recognize Mr. Hall.
Mr. HALL. Well thank you Mr. Chairman, both of you.
Mr. EHLERS. It takes two to handle you.
Recommended Priorities in the NEPD Report
Mr. HALL. Mr. Martin, thank you. I think it is a little silly for me to hold this up, but you know what it is, and you know, the recommendations in the back with the stars by them are the hundreds of recommendations that were made. If you would, and we can't possibly inquire of you about each of them, we would be here for six weeks, but tell me what part of it that you really subscribe to, or what are the three most important recommendations in here that they made. If you could.
Mr. MARTIN. Well, Mr. Hall, I think they made over a hundred recommendations, and recently I was seeing Senators Murkowski and Bingaman had made another 125 recommendations, so we have got 225 recommendations on the table here.
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I am one to always believe that probably 10, maybe 10 of them give you 90 percent of what you need.
Now let me first describe, what do I want? A, I want to keep our oil imports down. I really want to do that, because I think going to 70 percent dependency on oil imports is not a good idea for this country; for price, for security, for a number of reasons.
Secondly, however, I also want a clean environment, and I want to use technology to get there. So that is why my conclusion is we get into this issue of access to Federal lands. This is a lightening rod. I know that, I am a board member of the World Resources Institute. In fact, I am chairman of the development committee of the World Resources Institute, and I told them the best thing we could do for fund raising is elect George Bush.
So—to make my job easier. So, I am very sensitive to the environmental ledger here. I know the recommendation is of the task, for—to open ANWR. I am not opposed to that. I am not opposed to more drilling in the Rocky Mountain states, for example, for gas.
But I'm from a state, in Oklahoma, and Texas, and I know now there is proposals to drill in Lake Michigan. I, for one, would like to see production of oil come from the biggest fields, in the most remote areas, away from population.
I do not like to see drilling in the oceans, I do not like to see it in Lake Michigan. I, you know, Oklahoma and Texas, we have got that——pock-marked.
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Mr. HALL. But don't you agree that drilling in the ocean with a rig, off shore rig, looks better than a transport ship going somewhere with a load of our kids to fight for energy?
Mr. MARTIN. Exactly, and we are going to continue to have to send 500 thousand troops over to the Persian Gulf every time there is a disruption. And the problem is, those countries are having more sophisticated weapons of mass destruction now, and we are going to put our soldiers in harms way.
So, I am for development, generally, of oil and gas, but not just in the United States, everywhere outside the Persian Gulf, Africa, North Sea, Caspian Sea, and so forth, so we reduce reliance on the Middle East. ANWR is part of that. NRDC points out that it is a very small bump, all right, in our total energy needs. And NRDC is absolutely right.
The reality is, to get to where we have got to get, we need a lot of small things, which add up to close the gap of three or four million barrels a day of where we are headed in oil imports to where we need to be. So I think access is important.
Secondly, I think infrastructure is extremely important. I think it was the EIA said we need 1600 new power plants. I don't think we need that many power plants, I think we are going to do a lot more in energy efficiency. But we have to do something to improve power plants, to be able to build them, to expedite them, or we are all going to be in the California situation, and that includes transmission lines as well.
Natural gas. Everybody likes natural gas, but you have still got to get gas from the producer to the consumer. We need infrastructure, we need pipelines. We have to expedite that. Maybe we can give the industry greater tax write-offs, or whatever, to be able to emphasize energy infrastructure.
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So access is important, infrastructure is important. The final point I would say is energy efficiency and renewables. I think these new resources, as have been pointed out by Ms. Hamilton, are going to be absolutely critical in the future, to be able to meet environmental standards, whether it is the Kyoto Accord, or SO, or NOX, or whatever. We need new and exciting technologies. The reality is they are very small at the moment. I think the government has a responsibility to fund them appropriately so they become real opportunities in the future. So those would be my three, sir.
Mr. HALL. Mr. Hawkins, I respect you as a Director of the National Resources Defense Council Climate Center, and I kind of know where you are.
Just briefly comment on Mr. Martin's discussion, if you would. I respect what you do, and what your goals are, I share them with you. I think, though, events change situations, and I know that environmentalists are parents and grandparents first, and you too would like to lessen the purchases we have to make overseas for energy. I subscribe to that with you.
Go ahead and make whatever comments you want to make. I think it is only fair for you to.
Mr. HAWKINS. Well thank you, Mr. Hall.
I very definitely, we want to improve energy security. We think the first place you go to improve energy security is not a wildlife refuge, though. The first place you go is the appliances and the vehicles that are increasing energy bills for us every day of the year. We have the technical know-how to reduce those energy bills, and it is a win/win situation, to use a tired phrase, because we will reduce costs for consumers, we will improve our national security, and we will reduce the conflict between protecting the few special places that we have left in America and the desire of Americans to have a reliable energy supply that is available at fair prices.
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So, in our view it doesn't make sense to emphasize or even include environmentally sensitive places as the lead items for where we are going to get new supplies.
So we need new supplies? Yes we do. But why have as your banner under which you sail, drilling in the Arctic Wildlife Refuge? For the life of me I don't understand that. It is as though the tobacco industry, in an effort to rehabilitate itself, says let us sell tobacco to kids. It is just a backward thing to do. It is the most provocative type of policy that one could advocate in the energy policy area, to go into a wildlife refuge as the source of new supply.
There are many, many lands in the Rocky Mountain area 95 percent of the lands that are managed by the BLM are open for leasing. Why not explore those lands, those less environmentally sensitive lands, and look for production there. There is an opportunity to get consensus, if you do that, and if you combine it with efficiency and renewable support that goes beyond general conceptual agreement. And that is, we are glad that the President got the general conceptual support for efficiency and renewables, and we hope that there will be a dialogue, so he can move further.
Mr. HALL. I don't disagree with everything you have said, because I think I heard you say that I think it all ought to be put into the computer, and what we ought to do in the interests of both saving the environment and solving our energy problems.
I thank you for your time.
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Energy and Resource Management
Mr. EHLERS. The gentleman's time has expired, the next person on the list is myself. And since I have the Chair, it probably would have been that way anyway.
I have several comments. First of all, Mr. Martin, I believe you made some comment to the effect that we should listen more to the scientists than the economists, and in this——
Mr. HAWKINS. In this Committee.
Mr. EHLERS. Pardon?
Mr. HAWKINS. This Committee.
Mr. EHLERS. This Committee, okay. It indicates what an incredible sage you are. Since I happen to be a scientist, I can't pass up this invitation to make some comments.
First of all, just some basic scientific laws that we ought to recognize, they have some serious economic implications.
First of all, energy is our most important natural resource. Energy is our most important natural resource for several reasons. One, it represents the ability to do work, and that is what distinguishes us from the agricultural society. Secondly, without energy you cannot use any of our other natural resources. You can't dig steel out of the ground, you can't process it, you can't properly fabricate it, and so forth. That is the first basic fact we have to deal with.
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Secondly, energy is our only non-recyclable resource, our only one. Once we use it, it is gone, period. And that is not true of any other resource we have. The material resource that we can recycle over and over if we wish. We may not do as much as we should, but we do, but we could.
Those two characteristics of energy have incredible implications for our energy policy. One conclusion is that we certainly should use our energy as efficiently as possible. First of all, to save the resources, because we can only use them once. We have some responsibilities to our children and grandchildren.
But secondly, for—the economic aspect comes in. The more efficiently we use it, the more money we save. So it has been a huge puzzle to me why American citizens, and to a certain extent American businesses, have resisted energy efficiency. And I have decided it is because businessmen decided long ago, in the '70's that this was a fuzzy-headed liberal idea, because the children of the 60's were advocating it, therefore it must not be any good.
But once, and you saw the figures from the panel here, once you look at the figures, there is incredible pay back on some of the things you can do to improve energy efficiency.
We have to get the word out on that.
And the other comment I eluded to a bit earlier, the responsibility to future generations. If we have resources that can only be used once, and we have finite resources of oil, natural gas, not quite so finite of coal, even less finite of nuclear, but we have to use those resources wisely, because as a Republican I feel that very strongly, just as I felt very strongly we should balance the budget. We shouldn't burden our children and grandchildren with our debts, similarly we shouldn't use all their resources before they have a chance to use them.
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So I think we have a huge responsibility to develop other sources of energy, and more efficient ways of using energy, even if we don't need it immediately, we still have that responsibility to our kids and our grand kids.
Now, I have a minute and a half left, and I would like to ask each of you to respond to those comments. First of all, do you agree or disagree with them. And secondly, and more importantly, given those facts, if you accept them as facts, what is the government's role in relationship to that? What should the government do in attacking these issues, based on that information?
Let us go in reverse order this time, for a change. Mr. Hawkins, Ms. Hamilton, and Mr. Martin you will have clean up here.
And try to keep it brief, I don't want to go over too much.
Mr. HAWKINS. I will try to keep it brief. I would actually disagree with your first point, and agree with your second point.
I would not put energy at the top of the list of, as our most important natural resource. I would put at the top of the list the living systems that actually cleanse the air that we need to breathe, and that cleanse the water that we need to survive, and that provide us with a soil that allows us to provide the nutrients that we need to survive. Those, to me, are our most important natural resources.
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I agree completely that energy is our only non-recyclable resource, and in my version of your two points, that is another reason to be as efficient as possible in using energy, because we can only use it once, and when we do use it, we tend to eat into the ability of natural systems to cleanse the air, to cleanse the water, and to provide a nurturing soil. Thank you.
Mr. EHLERS. Ms. Hamilton?
Ms. HAMILTON. Thank you.
I agree that we need to develop more energy efficiency and renewable energy technologies, and I also am not under the delusion that renewable energy will be able to provide all of our energies, so I think we need to look at all of our options.
I think the government's most important role is stewardship of our planet. That is, we have to be leaders and stewards of the world that we live in, for our children and grand children. And so, whatever policies that we can craft to be leaders, in conjunction with industry, certainly, because we want industry, we want consumers to all be buying into this whole policy.
I think it is important for us to remember that we are stewards.
Mr. EHLERS. Thank you. Mr. Martin.
Mr. MARTIN. Mr. Chairman, I think your comments about science, or my comments and your reaffirmation being under represented is a real problem. It is a problem in every administration. I spent 8 years in the Reagan years. The role of the science advisor is delegated off to the side, it really is, and it is a tragedy.
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Plus, every department, I think, could do better science advice at the very top. I mean science looks after generations. And one of the basic problems is the economist is always looking at the short term. That is where government is run, what are the benefits in the next three to four years, four or five years, and so forth. There is absolutely no long-term perspective in government deliberations. I think science brings in that generational aspect, and I think again I like Ms. Hamilton's comment about the stewardship of the government. Absolutely. If the government isn't looking to the longer term, you really can't count on the individual to, or the economy to take the short-term perspective. So I would adhere to what she had to say. Thank you.
Mr. EHLERS. Thank you very much for your comments, and Mr. Hawkins, thank you, I will clarify that one point, because I left biological, or life systems out of it, I was talking about material resources. So, I will be more precise in the future.
The other comment, a question, rather than take a lot of time on this here, I would really appreciate it if you would be willing to address, in writing, to me and to the Committee, some comments about that second question. What specifically, what specific action should the government take. You talked about stewardship, but what does that mean? What does that imply? And if you could just send me, and the Committee, some brief responses, how you see that should be handled, I would appreciate that.
My time has expired. I now recognize the gentlewoman from California, Ms. Woolsey.
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Ms. WOOLSEY. Thank you Mr. Chairman. Mr. Chairman, first of all, I have a letter from the Geothermal Association that I would like to have, ask unanimous consent to insert into the record.
Mr. EHLERS. Without objection, so ordered.
[The material follows:]
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The Role of Renewable Energy Sources in the NEPD Report
Ms. WOOLSEY. The Geothermal Association was concerned because they weren't included, could have been, and would have liked to have been included on this Panel. And I am sorry we move so fast, but we will get them on another panel.
I have a comment, just that every time Mr. Martin, that you say 25 percent more efficient with our homes, the thing that keeps running through my head is, yeah but our houses are 100 or 150 percent bigger than they used to be. So it is kind of, thank heavens we are more efficient, but we are still using way too much.
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When my constituents ask me about this report, and two hours after it was out assumed that I had read the whole thing, inside and out, I assured them that it felt and looked like an Exxon annual report, but that we would get to read it, and we would start questioning it.
So my main question is for you, Ms. Hamilton, because I think this plan is going to affect your young family greater than all of the rest of us put together. So, one of my great disappointments, most disappointing parts of this report is the lack of consideration for renewable energy sources. And the conflict between words in the report and funding in the budget that is not there.
So, you know, I mean I can go over the lists of where one thing says one thing and does another, where, you know, there might be placards on conservation, but there is no dollars to support their programs.
Where do you think that money could come from, and what is your opinion on this? I mean, how are we going to level the playing field?
Ms. HAMILTON. It is now up to Congress to figure out how to deal with that.
Ms. WOOLSEY. I know. Thank you, agreed.
Ms. HAMILTON. And——
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Ms. WOOLSEY. We want your help.
Ms. HAMILTON. And my sense is that you all can be the leaders in figuring out what you ought to be giving these programs. And I think that the report does say that, give an opening for perhaps they need more funding. They were sort of waiting for DOE to respond, but my sense is that there is an opening for you all to say, we need significantly more funding to develop these resources. And it will be up to you all, working with the appropriators, to figure out, you know, what are your priorities. What do you want to get done this year, what do you think are the most important things to get past, legislatively, that will help everybody, and what are the things that maybe we can wait on a little bit.
Ms. WOOLSEY. Okay. All right.
Ms. HAMILTON. I can't give you any offsets right now.
Ms. WOOLSEY. Well, no, I mean it is very frightening.
Mr. Hawkins, if we had invested, over the last 20, 30 years to the same degree that we invested in fossil fuels and clean coal, the billions of dollars invested in clean coal technology and energy, I mean not taking it away from them, but invest equalizing it, where do you think we would be with renewables now?
Mr. HAWKINS. Well, if we extrapolate from what the efficiency and renewable programs have done at the Department of Energy over the last 10 or 15 years, the top 20 programs in the efficiency area, for example, cost 700 million dollars. A lot less than what we spent on so-called clean coal technology. They delivered benefits to consumers of 30 billion dollars.
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If we had spent twice the amount of money on efficeincy, would we have gotten twice the benefits? Probably not. There tends to be a law of diminishing returns, but we would have gotten another sizable chunk.
The bill that I mentioned, H.R. 778, which is the, you had mentioned about the fact that our buildings are bigger, H.R. 778 is a bill that addresses the fact that our buildings are larger, and it promotes efficiency, performance standards, and tax incentives for residential, commercial, and industrial buildings. And it would save the treasury a billion and a half dollars a year, as well as reducing energy costs for the consumers by 8 billion dollars a year, with a present value of 40 billion dollars. This is a great investment. Congress ought to enact this without delay.
Ms. WOOLSEY. Mr. Martin, why don't we invest in those good programs?
Mr. MARTIN. When I was Deputy Secretary funding was much higher in this area. As I point that out. That was even under President Reagan, it was quite remarkable.
We have to remember that we, we have a massive economy. We have 270 million people. I have heard we are headed to 400 million people in this country, in the next 20 years, 30 years.
We need centralized power sources, at least as a very, very important element here. Otherwise—it is economic, it keeps prices low. So I say, the Alliance represents both producers and consumers. Consumers on the Alliance want inexpensive energy, because they look to the 1990's and they recognize that inexpensive energy made them more competitive in their towns and their country and their world. That is really important.
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If you look at Japan, their electricity prices are twice as high as in the United States. So Ford Motor, let us say, for example, gets quite a bit of help, competitively, against Toyota, because their energy prices are low.
So, centralized power, we ought to think about as, and indeed the NRDC sometimes characterizes it as a dirty fuel. So let us remember, these are the fuels that have fueled American economic growth, and made us strong, and helped keep prices down in the country.
So, yes, let us improve centralized power, and indeed progress can be made, and let us look at the renewables. When I was an MIT researcher I shared an office with Amory Lovins, and Mr. Hawkins probably remembers Amory. Amory was always working on his calculator. He is the leader of the soft energy path. And one of the calculations we did in 1973 at MIT was how many windmills of 150-foot blades would it take to equal one million barrels a day. All right? That is not a lot, we consume, we import 11 million barrels a day of oil, and the answer was 50,000 windmills, 50,000. Now imagine if you put those on coastal sites, and so forth, the challenges you would have in siting. That is not say that when——
Mr. WOOLSEY. Let me claim my time a minute, I would like to respond to that. That windmills are smaller now, and ten times more efficient. So, I mean we don't have to have those great big windmills.
Ms. HAMILTON. Right, technology helps.
Chairman BOEHLERT. The time has expired.
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Mr. WOOLSEY. Thank you.
Chairman BOEHLERT. Let me do a little exercise here. How many here favor more investment in renewables?
Is there any nays? Raise your hand, more investment in renewable energy sources. I mean, everybody agrees with that. We have got agreement. We have got the administration saying it, in its report. Now we have got to have more than just words, we have got to have deeds, and we have got to work with them to convince them that it is all well and good to call for renewables, but you have got to request the funding, and shame on us in Congress if we ignore the need.
Mr. Calvert?
Mr. CALVERT. I thank the Chairman, I appreciate it, and being from California, and I know that a lot of people have been talking about California in not very positive terms, of late. But I want to say some good things about California. No state conserves more energy per capita than the state of California, and I think we ought to congratulate ourselves on that fact.
No state uses more wind power than the state of California, and I think we ought to congratulate ourselves on that fact. No state uses more solar power than any other state in the union, and I think California certainly should congratulate themselves on that. And no state uses geothermal power more than the state of California, and my area down in southern California, and my own county, of Riverside, California, you can go down the Banning Pass and see thousands of windmills churning away, producing peaking power for electricity. And you go down a little bit further, down in Imperial County, and you can see those massive geothermal plants operating, providing power.
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But here we are in California, with blackouts, which are going to take place all summer long.
I have got to congratulate the city of Los Angeles, because they thought ahead. They have made a deal in Utah to have a tremendous amount of their base load power supplied by coal. A matter of fact, I understand Dick Riordan was just in Utah a few weeks ago, negotiating to put up another 3500 megawatt plant in the state of Utah, using their clean coal technology as base load energy.
And I guess that is, as the Chairman pointed out, I am in favor of plussing up those renewable accounts. I used to be chairman of the energy environment subcommittee. I think it is a good investment, I support it.
And you know what, at the end of the day, that is exactly what is going to happen. All that criticism will go away. I suspect when we get the final determination of an energy bill, we are going to have plus ups on renewables and that will go away.
But, base load power, and we would, you have mentioned a soft path, problems we have got in California. I think some of us think we got soft in the head. We made some basic mistakes. We thought that some of that power could sustain population growth, industrial development in the state of California, and obviously it has not.
Alternatives to Coal for Base Load Power Generation
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So what do we do for base load power? I know coal is the, I would make an argument that there are those in the environmental movement who I have talked to, who are not in favor of coal in any capacity because of CO. So, if you took that off the table, what do you do to have base load energy on top of renewables, because even if you triple the renewable energy use in this country in the next 10 years, that will bring it from two percent to six percent, what do we do with base load energy.
Mr. Martin, you can answer that question first.
Mr. MARTIN. I don't think you get there without coal. I, let us take natural gas, which has met most of our incremental demand over the last 15 years. I would like, again, being interested in energy efficiency, I would like to use gas closer to the consumer in fuel cells, because then you avoid these hideous transmission and production losses. In other use, use those BTUs closer to the consumer. I would like to use natural gas, and that way clearly natural gas will double in the next 10 years to help electricity. I guess you have to look at nuclear power, too. But I don't think you get there without coal.
Mr. CALVERT. Ms. Hamilton, do you think we can—the wind and the sun will take care of everything, or do you feel——
Ms. HAMILTON. Well, the one technology, Mr. Calvert, that you forgot, that California is also number one on is biomass.
Mr. CALVERT. Ethanol?
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Ms. HAMILTON. No, biomass power plants. You have the most biomass, and ethanol you have quite a bit of ethanol, as well, but——
Mr. CALVERT. How much a megawatt—what is the power, what is the rate on biomass right now, relative to nuclear or coal?
Ms. HAMILTON. Right now biomass is 7 to 10, between 7 and 10,000 megawatts. It is about three percent of our primary energy.
Mr. CALVERT. No, price.
Ms. HAMILTON. Oh. It just varies, really——
Mr. CALVERT. Is it three times as much as coal, four times as much?
Ms. HAMILTON. No.
Mr. CALVERT. What is the relative price right now?
Ms. HAMILTON. No, it is not, because most of it is waste that would normally go to a landfill, and so that you would offset the cost of——
Mr. CALVERT. You are basing that on an economic study that someplace out there that biomass is at the same price as coal.
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Ms. HAMILTON. No, it is not. Right now it is more expensive because you have to transfer——
Mr. CALVERT. Is it about three or four times as much as, based upon existing power plants that are in operation.
Ms. HAMILTON. No, it is not. I can get you some figures for——
Mr. CALVERT. Well, why don't you get the figures and make that for the record. As I understand it, that that is the case.
But Mr. Hawkins, would you like to respond to any of this?
Mr. HAWKINS. The first thing I would say about base load power, Mr. Calvert, is combined heat and power. We waste h of the energy that we put into an electric power plant. The amount of energy that was waste in generating electricity in this country is more than the total energy in all the coal we burn in this country. If we could do something to improve that efficiency of generating electricity, and we can, we can stretch all of our supplies very much further.
I think we should be moving to combine heat and power as quickly as we can, so that the heat that is currently wasted from electric generation is used instead, which will then offset other fuels that would have to be used separately to produce that heat.
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We have tremendous opportunities there. We can use more natural gas than we are currently using. Coal is more than 50 percent of our electric generating resource. The reason it is more than 50 percent, in our view, is that it is not bearing its full share of the costs.
Mr. CALVERT. Now does natural gas create CO2?
Mr. HAWKINS. It does indeed.
Mr. CALVERT. It does.
Mr. HAWKINS. It creates CO at about half the rate of coal.
Mr. CALVERT. You didn't mention the word nuclear. Is your organization still absolutely opposed to the use of nuclear energy?
Mr. HAWKINS. Our organization has never been absolutely opposed to nuclear power. Our organization has been opposed to very specific applications, such as reprocessing the breeder reactor. It has been in favor of finding a solution to nuclear waste disposal.
Our organization thinks that nuclear power is an economic loser, and that is the reasons we wouldn't want to put it into a portfolio.
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Fusion Energy Research
Mr. HONDA. Thank you Mr. Chairman, and I just want to thank you for putting this hearing together. I think it is very proactive.
To Mr. Hawkins, you just mentioned in your discussion about nuclear power, absent that, what are the thoughts and experiences of folks in your area, this would be to Ms. Hamilton and Mr. Martin, also in the area of research that has been done in the past, and currently being done, I guess in the area of fusion. We have Lawrence Labs and other universities doing primary research, and I think Mr. Martin indicated that we should look at industry rather than other places for research. But I beg to differ that, you know, we need to also look at primary research in our universities and our other labs that are looking at things like fusion energy, and I would like some response as to your knowledge and some of your opinions on that.
Mr. HAWKINS. Well, I am far from an expert on fusion. I, most of what I know about it is what I have read in the newspapers. It obviously has, it is in a way a holy grail of an energy source, and that alone would seem to make it quite attractive as certainly for basic research. You know, sometimes you get surprised when you do research, and that is one of the great values of basic research.
The, I think the biggest issue with fusion research is competition for dollars. It is pretty expensive, as I understand it, and at, when we start cutting programs, then people are going to ask hard questions, whether we ought to emphasize programs that have a more clear potential for near term delivery.
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Ms. HAMILTON. I would also recommend looking at other technologies that haven't yet produced energy results, like the hydrogen program, and things like that, that are good science programs, we need to continue those as long-term solutions.
Mr. MARTIN. Fusion is a good example of where we need international collaboration, because it is getting very expensive. In '85 we agreed to an international program with Russia. I was the negotiator with Academician Velakov of the USSR at that time, to start collaborating on magnetic fusion. That has been expanded I think including Europe and Japan. I would like to see international collaboration in fusion, because that will save us a bit of money.
A very important energy technology is the, just to mention it, is the methane hydrate area, where we get natural gas from frozen, in ice. This has huge potential, and as we look at dwindling supplies of gas down the road, this would be I think an important area to emphasize.
Mr. HONDA. Mr. Chair, if I might just by closing, perhaps we could have a session on the areas that we just talked about, that would be in addition to the renewable energy resources that has been spoken to today.
Chairman BOEHLERT. Mr. Honda, I can assure you we will, and we will be having many more hearings on this broad overall subject, because its import is far beyond our ability to comprehend at this juncture.
Unfortunately we are going to be rudely interrupted by the necessity of voting on something called the education package for the future of America.
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So we will be in recess for approximately ten to 12 minutes. We will get back as soon as we can, because we don't want to hold you up unnecessarily.
[Recess]
Chairman BARTLETT. Let me call our Committee hearing back to order. That was obviously more than 10 or 12 minutes. There were two bells that came on, which tells us if it is only a single vote, but that was followed by another 15 minute vote, and then five or so, five minute votes after that, so it was quite a while. Thank you very much for your patience.
Let me turn now to Ms. Rivers.
Bioenergy Strategies
Ms. RIVERS. Thank you Mr. Chair, and thank you, too, our guests. I appreciate that you waited, because I have some questions I would like to ask.
Winston Churchill said you can always count on the American people to do what is best, once they have exhausted all the other alternatives, and I think we are reaching the point where we may have exhausted a lot of our alternatives.
And one of the questions I have for Ms. Hamilton is, right now people are feeling the shock at the gas pump. In California they are feeling it in every way possible, but in my part of the world, in the mid-west, it is the gas pump that is hurting the most.
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Do we have, do we have other strategies available to us right now? Can bioenergy provide us with ethanol or other kinds of resources quickly and inexpensively, that can help lessen the pain that people are feeling right now?
Ms. HAMILTON. Ethanol currently provides about 1b percent of the gasoline market. And projections are if you do a renewable fuel standard it will triple the use of ethanol, which it is 3b–4 percent of the whole market that would include diesel. So it is not going to be a huge amount that that will be able to provide. The issue is to get policies in place right now that we can start using it, especially biomass ethanol.
Ms. RIVERS. And how quickly could those kinds of changes be made within the industry?
What would be the cost of that alternative, in terms of, as opposed to a gallon of gasoline?
Ms. HAMILTON. Well, they are bringing the cost down, of ethanol, and I could get you the cost right now on the market, if you would like it, I would like to respond in writing with that.
Ms. RIVERS. Okay.
Ms. HAMILTON. I think that to get biomass ethanol, which is taking instead of using the corn starch, using the rest of the corn, the stover, and using agricultural waste to produce ethanol, between three to five years we will be able to start producing significant gallons.
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Right now there is not a plant, right now, producing that. If we invest in them, within two years those plants will be producing, and in five years it will make a difference.
Effects of R&D on Gas Prices
Ms. RIVERS. In the seven years that I have been here in Congress, and on this Committee, year after year this Committee has done what it is supposed to, and has authorized alternative energy dollars, but many times we have had our pocket picked by the appropriators, and money tends to turn up in the fossil fuel column, instead of in the alternative fuel.
Could we have averted some of this problem at the gas pump, had we done things differently in Congress over the last seven years?
Ms. HAMILTON. I think it is more complex than funding, R&D. I think it is more complex because of the commodity of, refiners and the storage, the storage issue that we had last summer. I think that there is more to it than just the renewables.
Ms. RIVERS. One of the things that the petroleum industry said about reformulated fuel is that they didn't like dealing with it. It was a nuisance to them. They put off producing it, which then pushed the price of it up, etc., etc.
Are we going to have the same sort of problem with ethanol? Is it going to be a less favored thing to work with? Are we going to encounter resistance within the industry? Do we have to find pathways around the status quo?
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Ms. HAMILTON. Yes, I think so, I think we need to be creative with our legislation, and we need to bring the industry along.
I mean there are some states, like the state of Minnesota offsets 10 percent of its gasoline with ethanol. You can do it if you have a commitment to do it.
I think it is simply a matter of trying to make sure we have sort of an innovative policy.
Ms. RIVERS. Are there other kinds of alternate fuels besides ethanol?
Ms. HAMILTON. Absolutely.
Ms. RIVERS. Bioenergy fuels?
Ms. HAMILTON. Oh, right, right: biodiesel, soy, you can use almost any kind of agricultural product to produce a fuel. Certainly this country is——
Ms. RIVERS. You just lost your microphone.
Ms. HAMILTON. I am sorry, this country has plentiful agricultural resources.
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Market Prices for Energy
Ms. RIVERS. I see. Thank you very much.
Mr. Martin, I have a question for you, and it is something I have been thinking about for a long time, because I understand the arguments that are made about letting market forces do their work.
But one of the things, as I look at the energy industry, is that when you are dealing with market forces, the one tool that the consumer has at the ready is that they can make other choices. They could decide not to purchase the item.
So, a few years ago when coffee was prohibitively expensive, people drank tea instead. Well, we don't have the option of burning water in our car. In the Great Lakes area we have lots of water. Maybe in Vermont they would use maple syrup, I don't know, but we have to all buy gas. We all have to put lights in our house, and buy electricity.
And even in some states, like mine, the same companies now own the electricity and the gas supplies. So I am a little confused how you let market forces work when only part of the market equation actually is involved. The consumer doesn't really have an ability to impact the industry in the way that someone who is selling ice cream is going to feel if the consumer doesn't show up.
Mr. MARTIN. I think that was one of the reasons why the Congress and Administrations past looked at electric deregulation as the way to try to at least get more competitiveness in electricity. And some states have done quite well, like Pennsylvania. Others, in California, have not. And in a way it has been a great experiment among 50 states.
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So, that, the electricity I think there has been an effort by the Congress, and I think deregulation hasn't necessarily been the problem. I still think that is a pretty good thing to go for.
As far as alternatives to transportation, I mean you are right, there is very little choice. I guess one could argue there is competition among retailers, but the reality is the world oil price is set, you know, internationally.
Ms. RIVERS. In my state many of the retailers are using the same refineries, the same pipelines. They are competitors only in a limited way. I mean the infrastructure is shared, is my understanding.
Mr. MARTIN. What is your state?
Ms. RIVERS. Michigan.
Mr. MARTIN. Michigan? So there you have the auto industry, too, so that is a great state to look at. Did you like my comment about drilling in Lake Michigan?
Ms. RIVERS. No, I did—I liked it that you didn't like it, yes, that I——
Mr. MARTIN. Well at least I won a couple of points there. My in-laws are here from Michigan, and they have left, but they told me that was a problem for them.
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They are not a member of the Alliance, I might add.
The Transportation Sector and Oil Policy
Ms. RIVERS. Even the 28,000 auto workers that live in my district don't like the idea of drilling for oil in the Great Lakes.
Mr. MARTIN. You know transportation is, I don't know maybe Mr. Hawkins knows more than I do, and I don't know if we have transportation represented in our Alliance, but this is a key to the energy security problem, because the reality is we use most of our oil in transportation in autos. And if we are really to concentrate on a particular sector, that would be a great industry for technological breakthroughs.
Ms. RIVERS. But we also use a lot of power in generating power, isn't that correct? A lot of energy goes into making other kinds of energy?
Mr. MARTIN. Yeah, but for example our oil use in electricity is very low, but we use oil, which again I think is one of the major concerns in autos, and I think, I am interested in what others on the panel might say about what are the alternatives in transportation, other than using gasoline.
Ms. RIVERS. But certainly in this Committee we looked at the PNGV, the Partnership for New Generation Vehicle, which had, as a goal, a very fuel efficient vehicle. Unfortunately that was cut from the budget. So it is the same problem that we have had with bioenergy, is that things have not been funded. We have not put the kind of emphasis on them, and now we are having to deal with the consequences.
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I see my time is up. Thank you Mr. Chair.
Mr. BARTLETT. Thank you very much. I feel like a mosquito in a nudist colony. There are so many opportunities for comments and questions here, I am not quite sure where to begin.
First of all, Mr. Martin, you mentioned Amory Lovins I think.
Mr. MARTIN. Yes, I did. He is one of the most creative, innovative people I have met.
Mr. BARTLETT. We would do well to listen to him, and I hope that he is a witness before our Committee in the near future. I want to apologize at being late to the hearing, but I was at a press conference on energy, and I had there the Prius hybrid electric car. I was the first Prius owner in Maryland, I was the first Prius owner in Congress.
I think shortly more, a bigger percentage of Congress persons are going to own the Prius cars, and a very much larger percentage than the population at large.
There are now five of us who own them, and I think that is going up to eight rather quickly. So we are at least in that area presenting a good example to the American people.
When the budget resolution came before the House I had some serious problems with it, because of the energy part of the budget, and I told them that I couldn't vote for it until I had spoken with the Vice President, and I did that.
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I told him that this President was my President, and I am very fond of him, and I didn't want him to look dumb, and help me understand why cutting the energy budget, when we have an energy crisis isn't dumb. And he wasn't quite sure about all of the details, and so he asked OMB to come and brief me, and they did that. And it wasn't as bad as it appeared just by the numbers. Because what they had done was take a lot of money out of R&D and move it over to tax credits to create a market.
The philosophy that if there is a market that the companies, if they are big company, and now Solarex, which is in my district, is owned by BP, they certainly have deep pockets, and we don't need to provide them R&D, we just need to assure them there is going to be a market out there, and the tax credits would do that.
I am very much concerned about basic research, not just here, but just across every sector. For a major industrial power, we spend a smaller percentage of our GDP on basic research than anybody. That is one of the most short-sighted things you can do. That is like eating your seed corn. We are not going to have the R&D in the future without the basic research today.
I am opposed to drilling in ANWR, not because of environmental reasons, I have been there, I think we can control those. We have only two percent of the known reserves in the world. We use 25 percent of the world's oil. As I asked the Vice President, Mr. Vice President, if you could go out tomorrow and find and pump that two percent, what will you do the day after tomorrow? And there will be a day after tomorrow. This may be a rainy day, and if you are in California, it is indeed. But I think we will have a rainier day, and I would like to husband, the small reserves that we have of oil for a more difficult time. So I am opposed to drilling off shore, I am opposed to drilling in Lake Michigan, I am opposed to drilling in ANWR. I am, you know it is like putting a band aid on a cancer. It is papering over the problem. We need to address the problem that we are using 25 percent of the world's oil, we have only two percent. We have got to do something about that. It is a major national security problem.
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There is a big, big future for renewables, much bigger than is anticipated in the report of the energy study. Solar is growing at about 30 percent a year, that doubles in less than three years, and they are saying it would be remarkable if it tripled in 10 years. That is increasing at least 15 times in 10 years. Most of those sales are overseas. We need to have a tax credit which incents us to move in that direction in this country.
Distributive production is more competitive than what we think, although now it costs about 20 cents or so a kilowatt hour to produce electricity. We are using it locally, you are getting all of it. If you are producing at the power plant, you don't get all of it, and you pay an environmental penalty for all of that electricity that is lost in the wire. Unlike oil or gas, not all of the electricity comes out the end of the wire. If you run long enough nothing comes out at the end of the wire. Which is why Saudi Arabia, I think, is the biggest—it was a few years ago—the biggest purchaser of solar cells in the world. They have lots of sunshine in widely distributed small communities, and so a big power plant and power lines was not the solution to their problem.
[The prepared statement of Congressman Roscoe Bartlett follows:]
PREPARED STATEMENT OF CHAIRMAN ROSCOE BARTLETT
I apologize for coming late to the hearing, but I have just returned from a press conference highlighting the importance of conservation and efficiency in the energy policy mix. I believe the Administration deserves credit for recognizing the importance of conservation and efficiency. In a personal note, I was the first person in Congress and in Maryland to take delivery of a Prius. I drove it over from the news conference and it's parked out on the Rayburn horseshoe drive.
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For those of you still unfamiliar with this car, it is a highly efficient Toyota hybrid-gas-electric vehicle that gets me at least 45 miles-per-gallon on my commute to DC. It's rated at 52 miles per gallon in the city, and 45 highway. It also meets EPA's standard for low emissions. It does all of these things for me when my wife lets me drive it.
Toyota can not make enough Prius to meet the demand for these cars. Americans are waiting four and five months to take delivery. That demonstrates that this technology will be embraced. The gas-electric hybrid technology is transferable to any other vehicle class, such as trucks, SUVs or minivans. We would make a serious dent in our consumption of gasoline if more Americans were driving hybrids.
I would like to thank the Chairman of the Science Committee, Mr. Boehlert for calling this important hearing today. I believe that today's hearing will shed some light on several issues of critical importance to this nation's future economic prosperity. Our witnesses today demonstrate the difficulty of putting together a plan that makes everyone happy.
I applaud the President for making development of a national energy policy one of his top priorities. Without strong presidential leadership and focus, it is highly unlikely that we in the Congress will be able to take the steps necessary to overcome our nation's long term strategic vulnerability to our national security and economic prosperity posed by our reliance upon imported oil. That is not because there is a lack of interest or commitment among members. Rather, it is a reflection of the institutional difficulties posed by the split jurisdiction over energy policy among many committees and subcommittees on the House as well as in the other body.
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The U.S. has only two percent of known world oil reserves. We consume 25 percent of the oil produced worldwide. We are now importing close to 60 percent of the oil we use. There is a unanimous consensus by energy experts that the U.S. can never produce enough oil domestically to meet either our current or future demand. Many of us on the Hill understand the importance of conservation and increased energy efficiency as the first, easiest, and quickest means of reducing our energy consumption generally, and of fossil fuels. We support efforts to shift to the increased use of renewables as part of a balanced portfolio. We, on Capitol Hill, should continue to champion common sense and cost-effective renewable technologies for the future. As such, I will continue to support robust R&D efforts in this area and I encourage the adoption of appropriate renewable energy technologies.
However, I understand that there is another critical question involved in determining a proper energy strategy. That is how we get our products to market, our employees to work and keep our homes heated and cooled over the next decade or two. That calls for a balanced approach. We need to examine our energy needs, examine how we can reduce these needs through efficiency or conservation, make pragmatic use of renewables and then examine what energy technologies best address the balance. I believe that we will need to increase the use of nuclear energy. I support nuclear energy as a safe, domestic source of energy that also contributes to environmental protection because it does not produce greenhouse gases.
That said, we must not dismiss the importance of coal, natural gas and petroleum in the short and intermediate term. We must continue to harness the nation's technological genius to make sure that when we use energy, we do so more efficiently and in a way that minimizes the environmental effects. We need to be able to make better use through clean coal technology of our vast coal reserves. Technological advances are also imperative in order to develop and begin a transition to alternatives to fossil fuels. That transition will not be possible without technological breakthroughs.
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Clearly, we face some serious challenges, but if we apply our intelligence and our uniquely American capability of promoting and harnessing entrepreneurial innovation, we shall prevail.
Mr. BARTLETT. I want to recognize another member who has joined us, and then we will have another round of questioning, and I have some graphs I want to put up, to ask you to comment on those. But let me turn, now, to Sheila Jackson Lee for her comments.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman. I would offer to put my entire opening statement in the record. I would ask unanimous consent.
Ms. JACKSON LEE. Thank you very much. To the witnesses, let me thank you for being here. We are in between two sets of hearings, particularly a markup, dealing with internet privacy, so I apologize for not hearing your testimony. But this is such an important hearing, that I wanted to comment and add, and solicit your comments as well, on where we go from here.
It is interesting that we sort of, energy policies sort of run in cycles, and we get past them and it is like a person who attempts to stay sober, we forget. We forget what we have learned, and we forget to try and build on what we have learned.
I am reminded, as all of us are, of the lines in the 70's. I happen to have participated in those lines, but I have also participated on the gas end of the business, and what you call curtailment, and then take or pay. And so when we had to curtail, because we had so much gas, and then we signed a lot of contracts, and then we had to take or pay, and we were over, overloaded.
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My question to you, as I look at the President's Energy Policy, which has a lot of conservation in it, it happens to be the same kind of proposal that the Clinton Administration utilized, and worked on.
There is some sense of opposition that that couldn't be realistic, we can't conserve ourselves into being, if you will, energy secure.
I would like your comment on that position. In addition, I think it is valuable to talk about short term, and I think we do have to be concerned about what is happening in American today. I would ask you to comment, and I am not sure whether you are able to do so, but in any event, about the idea of soliciting OPEC, if you will, to release a number of more barrels. I think the 2.5 million they released extra when they were requested by the Clinton Administration, and as they did that, that makes a sizable impact, since we use about 76 million barrels a day.
I would appreciate a comment on that. And then, I would like to hear from you about the plans to build power plants. I think as I came in I heard the Chairman say a comment on power plants. But, as I understand it, they take a long time to build. Are we able to reasonably look at the building of power plants as a reasonable solution, not to say that they are mutually exclusive.
But can we look at that as a reasonable solution, inasmuch as it takes a long and extended time to have those in place. Would not conservation alternatives and renewables be better? And I finish on this note, how in the world are we going to be serious, if we cut our research R&D budget so drastically? Isn't R&D about creativity, about visioning, and about success?
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And I thank the members of the panel for their responses.
[The prepared statement of Congresswoman Sheila Jackson Lee follows:]
PREPARED STATEMENT OF REPRESENTATIVE SHEILA JACKSON LEE
Chairman Boehlert and Ranking Member Hall, thank you for this opportunity to discuss the Bush Administration's proposal to address our nation's energy crisis.
The Administration had indicated that a number of spokespersons would be made available to Congress to testify before the Committees. However, the Administration has chosen not to be represented at this hearing. Furthermore, it is not clear at this time if the Administration intends to testify before this Committee at a later date.
The Administrations proposal was prepared not under the open purview or view of Congressional Committees that share jurisdiction in this important area. Those who contributed to the final document that the Administration presented to the Nation and the Congress have not been revealed.
The President directs the Secretary of Energy to promote greater energy efficiency.
Expand the Energy Star program beyond office buildings to include schools, retail buildings, health care facilities, and homes.
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Extend the Energy Star-labeling program to additional products, appliances, and services.
Strengthen Department of Energy public education programs relating to energy efficiency.
The President directs the Secretary of Energy to improve the energy efficiency of appliances.
Support the appliance standards program for covered products, setting higher standards where technologically feasible and economically justified.
Expand the scope of the appliance standards program, setting standards for additional appliances where technologically feasible and economically justified.
We must explore the potential that renewable energy technologies have to contribute to fulfilling an increasing part of the nation's energy demand and how that can occur, while increasing the economies, that can be reach through more efficient and environmentally sound extraction, transportation, and processing technologies.
The first hearing held by the Full Science Committee in the 107th Congress was on the issue of our Nation's energy future. It is appropriate that this subcommittee review closely this portion of the Administration's budget, because the United States does need to develop a long-term national energy policy. Our Nation's energy priorities should remain constant regardless of the changing dynamics of energy supply.
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However, the Administration's budget recommendations drastically reduce the Department of Energy funding in the conservation and renewables programs, as shown in the tables below:
In the Administration's budget renewable energy programs would be cut by 36.4 percent over current spending under the request. Geothermal and hydrogen research would be cut by 48.3 percent. Hydropower would be cut by 49.9 percent. Solar energy research would be cut by 53.7 percent. Wind energy programs would be cut by 48.2 percent.
In a last minute change, the renewable resource request will be increased by an additional $39.2 million, which will come from an offsetting conservation program cut. The increase has been reported to go to hydrogen programs, although the budget does not specify. Thus, actual request would be $276.7 million, a decrease of $96.5 million or a cut of 25.9 percent.
The President's budget would reduce energy conservation programs, other than weatherization grants, by 21.2 percent in FY 2002. The Federal Energy Management Program, designed to reduce the energy use and costs of the Federal Government would be slashed by $12.4 million or 48.2 percent, despite efforts to reduce Federal energy consumption on the West Coast, which has been hit by electricity blackouts. Building conservation R&D would be cut by $48.4 million or 46.3 percent. Industry sector programs would be cut from $148.6 million to $87.7 million. The one significant increase in conservation spending is a program of grants to stages to help weatherize homes, an increase from $152.7 million to $273 million.
In a last minute change, this cut will actually be greater because a footnote to the budget table states that an additional $39.2 million will be cut from energy conservation. This means the actual conservation budget (other than weatherization) is $482.8 million, or a 27.2 percent reduction. The most likely source of the cuts will be the Partnership for a New Generation of Vehicles, which is a program to develop fuel efficient and environmentally clean vehicles. The budget for that program, currently at $255.4 million could drop to $200.2 million.
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Other than the budget amendment, the effect of which is shown on the second line of each table above, it is not clear how the Administration proposes to increase the conservation and renewables programs to carry out the policy recommendations.
The recommendation states that after his review, the Secretary is ''then directed to propose appropriate funding of those research and development programs that are performance-based and are modeled as public-private partnerships.''
The language raises a number of questions:
Is the new funding to come from other DOE programs or will it be new money that will be made available to the Department?
Will it come to the Congress in the form of a reprogramming request, which would mean a reallocation of funding within the Department, or as a budget amendment?
The report makes the following recommendations for fossil and nuclear energy programs:
The President direct the Secretaries of Energy and the Interior to promote enhanced oil and gas recovery from existing wells through new technology.
The President directs the Secretary of Energy to improve oil and gas exploration technology through continued partnership with public and private entities.
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The NEPD Group recognizes the importance of looking to technology to help us meet the goals of increasing electricity generation while protecting our environment. To that end, the NEPD Group recommends that the President direct the Department of Energy to continue to develop advanced clean coal technology by:
Investing $2 billion over 10 years to fund research in clean coal technologies.
Supporting a permanent extension of the existing research and development tax credit.
Directing federal agencies to explore regulatory approaches that will encourage advancements in environmental technology.
In the context of developing advanced nuclear fuel cycles and next generation technologies for nuclear energy, the United States should reexamine its policies to allow for research, development and deployment of fuel conditioning methods (such as pyroprocessing) that reduce waste streams and enhance proliferation resistance. In doing so, the United States will continue to discourage the accumulation of separated plutonium, worldwide.
The United States should also consider technologies (in collaboration with international partners with highly developed fuel cycles and a record of close cooperation) to develop reprocessing and fuel treatment technologies that are cleaner, more efficient, less waste-intensive, and more proliferation-resistant.
The President's request is a 17.1 percent reduction in research and development of fossil fuels, including coal, oil, and gas. The program cuts are actually much larger, since the budget for fossil fuels includes a new Clean Coal Power Initiative of $150 million. Thus, other fossil fuel programs are reduced by $242 million, or 44.7 percent. Among the programs being cut are the central systems program from $199.1 million to $61.0 million, a 69.4 percent cut, although much work will be transferred to the new initiative. The natural gas program will be reduced from $45.0 million to $21.0 million, a 53.4 percent cut. The petroleum program will be reduced from $66.9 million to $30.5 million, a 54.4 percent cut.
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The Administration's new ten year, $1 billion Clean Coal Initiative appears to be soundly based, although the industry believes more is needed to accomplish all the steps required to make coal-fired power plants clean and efficient. Oil and gas proponents, principally some in the independent producer community are upset that budget recommendations do not match the Cheney recommendations.
The President's report directs the Secretary of Energy to improve oil and gas exploration technology through continued partnership with public and private entities.
Key programs in the Oil Technology that currently carry out this recommendation are cut drastically:
60
73326a.eps
Furthermore, oil technology programs at eight of the National Laboratories are eliminated and the programs at two others are all but eliminated.
Programs in Natural Gas Technology are similarly affected:
67
73326b.eps
In the context of developing advanced nuclear fuel cycles and next generation technologies for nuclear energy, the United States should reexamine its policies to allow for research, development and deployment of fuel conditioning methods (such as pyroprocessing) that reduce waste streams and enhance proliferation resistance. In doing so, the United States will continue to discourage the accumulation of separated plutonium, worldwide.
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Our Nation should also consider technologies (in collaboration with international partners with highly developed fuel cycles and a record of close cooperation) to develop reprocessing and fuel treatment technologies that are cleaner, more efficient, less waste-intensive, and more proliferation-resistant
While no estimates are available on the cost of implementing these recommendation, it is clear that substantial increase would be needed in the Nuclear Science and Technology budget to achieve these objectives.
I represent residents and businesses that call the 18th Congressional District of Texas their home. Energy and energy related companies such as Reliant, Enron, Vaalco, Equilon, Motiva, Equiva Trading, Equiva Services, Edge Petroleum Company, Houston Exploration Company, Altra Corporation, and dozens of other exploration companies are the backbone of the Houston economy. For this reason, the 18th Congressional District can claim well-established energy.
I believe that the effects of rising energy prices have had and will continue to have a chilling effect on our nation's economy. Everything we as consumers eat, touch or use in our day to day lives have energy costs added into the price we pay for the good or service.
Fossil fuels and the quality of life most citizens enjoy in the United States are inseparable. The multiple uses of petroleum have made it a key component of plastics, paint, heating oil, and of course gasoline. All fossil fuels are used to produce electricity; however, our national addition to petroleum was painfully exposed in 1973 when the Organization of Petroleum Exporting Companies (OPEC) implemented an oil embargo against the United States. This event resulted in the rapid conversion of oil-fired electricity production electric plants into coal- and natural gas-fired plants.
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This hearing will allow us to delve into what the Administration is proposing, but not hearing directly from the Administration on its proposal. I hope that soon the Administration will join the Committee in a hearing to offer further clarification on this energy proposal.
I would only caution my colleagues, Administration officials, academics, industry leaders, environmental groups and consumers not to assume that we have learned all that is knowable about energy generation, but that we are still learning. We must bring to this debate a vigor and vitality that will enliven our efforts to not have a future of energy have and have nots, due to out of control energy demand with few creative minds working on the solution to this pressing problem.
I look forward to hearing the testimony of the learned members of the panel offering testimony before our subcommittee today. I thank you for your expertise and your willingness to offer comment on the issue of our Nation's energy future.
Thank you.
Ms. JACKSON LEE. Mr. Martin, you were taking notes, I don't know, you——
Mr. MARTIN. Yes ma'am.
Ms. JACKSON LEE. I appreciate it.
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Mr. MARTIN. But I would like Mr. Hawkins, maybe to address the conservation. I would like to take a crack at the OPEC.
Ms. JACKSON LEE. All right.
Mr. MARTIN. If we can divide up a little bit here.
Ms. JACKSON LEE. I would be delighted.
Mr. MARTIN. And this is renewables here.
Ms. JACKSON LEE. All right. Thank you.
New Power Plant Construction and the Role of Conservation
Mr. HAWKINS. Thank you. The conservation and the power plant issue I think really are two sides of the same coin, and it is a question of balance. When you state, when one states it, as the Vice President has, you know, that we can't conserve our way to energy security, it is just as accurate to say we can't produce our way to energy security.
Neither approach, by itself, is going to, is going to work. It is a question of proportion. And the reason I link it to power plants is that the Vice President has, a number of times, talked about the projections that we have to build 1300 power plant equivalents over next 20 years.
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Ms. JACKSON LEE. Yes.
Mr. HAWKINS. However, the Department of Energy shows how the efficiency investments can affect that projection. According to the clean energy future study that was done by the Department of Energy last November, 600 of those power plants could be avoided. So we could cut in half the number of power plants that are required by an effective efficiency set of programs. And it is all laid out in great detail, and we could save billions of dollars for the consumer, as well.
In addition, of the remaining power plants, they don't all have to be fossil fueled. An effective renewables program the Energy Department calculates could replace 200 of those fossil power plants with renewable fueled power plants.
So, does that mean that efficiency and renewables takes care of 100 percent of the problem? No it doesn't, but it takes care of a very big chunk of the problem, and lessens the load that the traditional approaches then have to pick up.
Ms. JACKSON LEE. It certainly means they are not mutually exclusive.
Mr. HAWKINS. They are entirely complementary, Congresswoman.
Ms. JACKSON LEE. Thank you very much. Mr. Martin?
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Effects of Increased OPEC Production
Mr. MARTIN. Just to add to that, I liked your comment that it is kind of not an either or between supplier and energy efficiency. We really do need both, and I liked your comment too, it is the amount of the proportion. I think that is really going to be one of the key debates of the Congress. What is the proportion that we allocate? And of course one good way to do that is in the R&D budget.
Our group, the Alliance, is a, certainly favors renewable energy, and support for the budget, especially as experts come down and tell us what are technologies, and how can they be made more effective to enter the market.
It is also important to note that we are, at the moment, hooked on central sources, coal for 50 percent, nuclear for 20, gas for 16 percent, and hydro for 10, as far a central station. And with regard to that, we need better infrastructure over the next 10 years. The Congress can help in that respect by granting some rights on Federal domain, on transmission, they can help by the tax code accelerating, in much the same way that you can accelerate renewables with tax credits, you can also accelerate more use of gas pipeline infrastructure.
Congress really has an important point here. They can accelerate what I think is a really growing problem, and that really brings me to the OPEC question. I am alarmed that you mentioned the world of 74 million barrels a day of oil. That is going to climb globally to maybe, my mind will show to perhaps as much as 90.
Ms. JACKSON LEE. Um-hum.
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Mr. MARTIN. In the next 12 years. If you look at OPEC production, they are likely to go from maybe increase production like 10 million barrels a day. In other words, the marginal well internationally will be produced by OPEC, that is just the reality of geology, it will be in the Persian Gulf. And I have real problems with that, from a national security perspective. Why are we becoming so reliant on this perilous place, where Iran and Iraq and other nations are building weapons of mass destruction. And, you know, having been in the National Security Council, I can tell you, no President is going to make an easy decision to send 500,000 troops over there again, in harms way, in real harms way.
So I think we have a real obligation here to, your question is so informative, because you are saying, well, can't OPEC do something to help us? And I would like to be able to say, gee, I really don't like depending on OPEC to help us. I would like to get us out of that box. Yes.
Ms. JACKSON LEE. If the Chairman would yield me just an additional 30 seconds. Let me, Mr. Chairman, I am sorry. I see the red light on, so I just want to—thank you very much.
Let me, because of the time frame, we sort of, if you will truncate our questions, and certainly I believe in my opening remarks, I want us to have a domestic energy policy, and I want us to deal with marginal wells. There may be something in the Bush plan that I am supportive of. The whole idea of domestic drilling, and our independence along with, I think you can see my interest in R&D and renewables and others.
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But what I would say is that the criticism that I have of the plan, as it now stands, is a lack of response short-term. And short-term it is my belief that there can be an inquiry made to OPEC, in the short term, about releasing more barrels. But I am certainly in agreement with you that we need to long-range handle ourselves where we are independent.
My opening point about we never learn our lessons? That is the lesson that I was speaking about, and I hope we can learn it with a policy.
And I thank you very much. Thank you for your insight. Thank you Mr. Chairman.
Mr. BARTLETT. Ms. Hamilton, you had a comment?
Ms. JACKSON LEE. I am sorry.
Increased Supply or Increased Efficiency?
Ms. HAMILTON. I did. I just wanted to say, I think there are also some things in between central plants and energy efficiency. And a couple of those things are, distributed generation, which you can use natural gas with microturbines and fuel cells, or renewable energy, to do smaller, on-site generation, so you don't put as much pressure on the large plants.
And also, another technology that you all could fund is superconductivity, and that is superconducting power lines. Right now there are lines that have been tried in France, and Asia, that are much higher efficiency, and have lower line losses, and are certainly a good way to get power from point a to point b. Because North Dakota is a Saudia Arabia of wind energy, but there is no way to get the energy out of the state.
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So we need really high, efficient power lines, as well.
Ms. JACKSON LEE. I don't know if Congressman Bartlett was here, but out of pride of location, I was one of the strongest supporters, not in Congress, I wasn't there for the superconductivity lab in Texas. I don't know what happened here in the United States Congress, but we had Dr. Paul Chew who is a premier expert in superconductivity right in Houston, Texas. I am sorry we are not on that, but I support you on that issue.
Thank you Mr. Chairman. Thank you very much.
Mr. BARTLETT . Thank you very much. Mr. Smith?
Mr. SMITH. Mr. Chairman, thank you, and for your leadership in this whole field as Chairman of our Energy Committee.
Energy and National Security
Mr. Martin, did—talking about OPEC. Did the Commission talk about the security implications to this country of continued, the high dependency that we now have on the OPEC countries, and the fact that they have not always been that friendly in terms of their actions to this country, and expand to look at some of the Caspian countries, or at least what is involved in us being more involved in the changes in laws that might be involved in our investment in some of those countries, to be less dependent on OPEC and look at other countries, including Mexico?
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Was that part of somebody's discussion?
Mr. MARTIN. I think Vice President Cheney's task force had chapter ten. I think the international, I would put the international setting as chapter one. I think one of the things that the commission could have done better is more clearly define what is the problem here, and I think it is an international problem.
I couldn't agree more with your comment and the direction of your comment about the need to explore internationally.
My comment about OPEC. Dependence on OPEC is not necessarily bad, it is just the concentration in the Persian Gulf, globally, that gives me problem. I think we should be stimulating our companies, and international companies, to look for oil and gas in the Caspian. Africa offers quite a bit of hope, Angola, Nigeria, North Sea, Norway for example. Norway is the second largest exporter in the world, you know, they can develop more.
The President has emphasized western hemisphere energy security is a very important item. So, yes, we need to do that, and we need to encourage international activities.
Mr. SMITH. Yes, I agree.
Boutique Fuel Inefficiencies
Let me ask the question, maybe to the other two witnesses, on the legislation that I introduced, directing the Department of Energy to review all regulations in terms of how current they were in terms of their application to the environmental concerns. In particular, I have been concerned from the company's and distributors, and stores of petroleum fuels, on the whole boutique fuel requirement. Fourteen or 15 boutique fuels, and if you multiply that by regular and mid-grade, and premium, you end up with a lot of inefficiency that is built in.
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Is it possible to review those considerations, including the winter and summer changeover that has really complicated Michigan. We are sort of a peninsula, and we have to ship it up, and then come back down. Is that something we can look at and still be reasonably sure, have assurance that it is going to be environmentally friendly if we do revisit those boutique requirements?
Mr. HAWKINS. I will start, Congressman. It is certainly possible to have fewer grades of fuel, fewer blends of fuel, and have even better environmental protection. The way to do that is to have fewer blends be better blends. The proliferation of the number of boutique fuels is due in part to I think the equivalent of a tragedy to commons. There were some refiners that felt that they didn't need to meet the highest performance standards. That was their view, and that it was easier for them, at the time when these provisions were being adopted, to suggest to a locality, well, you don't have to meet the best federal——
Mr. SMITH. Twenty-five years ago we had California, and then everybody else.
Mr. HAWKINS. Right.
Mr. SMITH. And we have sort of evolved into a system that, by definition, creates a lot of inefficiency, as you have to clean off the pipelines every time you make a change.
Mr. HAWKINS. Yeah, I think in part what happened is that each one of these boutique fuels looked attractive in terms of cost-effectiveness, when it was looked at narrowly, in the context of that specific region. And nobody looked at the issue of whether it made sense as part of a national system, where you wanted to preserve the flexibility, to be able to move large volumes of fuel around, from one pad to the other, from one distribution station.
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Mr. SMITH. And I am sure the question has been asked earlier about, I am a farmer, so interested in the biofuels, the biodiesel, tremendous potential. Another bill that I introduced, because, as a farmer, it would save me a lot of money as nitrogen prices triple, since between 80 and 90 percent I understand of producing nitrogen is the cost of natural gas going into the production of nitrogen, and so direct, we will do it, as Chairman of the Research Committee, and this Committee, we will also put language in the NSF authorizing bill, to look at research into the fixation, a better, more efficient way to fix nitrogen, either by existing legume, traditional legume type crops, or with the new biotechnology, looking at putting those nodules on traditional crops, to fix nitrogen. But it seems to me that the best news, in terms of reviewing the President's policy, is the fact that we are moving ahead. We are looking at ideas as sort of forcing us to decide what kind of implications we can have.
So the best news is the fact that we are moving ahead on a real energy policy that includes conservation, as well as a review of everything else.
Mr. Martin, you were going to make a comment.
Mr. MARTIN. I am just, I was——
Mr. SMITH. Just say, that is a good idea, Congressman Smith.
Mr. MARTIN. It is. I like the idea of moving ahead. I like that.
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Gasoline Price Controls
Mr. SMITH. It is a question of where we go on research. I happen to be, Mr. Chairman, like the previous speaker, if I could have 30 seconds, and then take a little more.
I was on the Presidential oil policy advisory commission during the first Arab oil embargo, and they, Earl Butts said, look, also what you are going to do, besides go over and meet with Bill Simon every morning at 6:30, is we were very, in the Cold War situation, very nervous then about somebody attacking us, while we are short of energy. So a top priority was given to get fuel to farmers.
And so the decision that I voted for, it seemed like the thing to do, was we set prices on gasoline, but to set prices on gasoline so that people wouldn't complain about the high price of gasoline, we then went to the distributors to say that they couldn't have excess profits.
And I was directed to make sure that all farmers in the United States had fuel available. So we set up a computer system in every county in the United States, and farmers came in to complain if they didn't have fuel, and we looked down our chart and directed a fuel supplier to go, and it became very obvious that even the best computers then, or today, can't substitute for the marketplace, in distributing a less than available resource.
And so, just huge problems, because we would take it away from one person, and then they would end up with less fuel, but a huge complications.
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Do you talk about price controls in the commission? Or do any, do any of the, do either of the other witnesses, have you ever involved yourself in recommendation on what a lot of Members of Congress and the White House are now being strongly suggested that we put price limits on the price that somebody can charge to reduce the price to the customers?
Did you talk about that in the commission?
Mr. HAWKINS. Congressman, none of us was a member of the Vice Presidents Task Force.
Mr. SMITH. Oh, I thought Mr. Martin was.
Mr. HAWKINS. Not as far as I know.
Mr. MARTIN. I look the part, but I wasn't actually part of the task force, but I did serve as a spokesman for the governor, in the campaign. And let me say that price controls, we learn from experience. They probably sounded good in the '70's, when we faced problems, and but we learned our lessons. And one of the challenges is to take that experience, like you have had and others on the committee have had, over 30 years, apply the knowledge we have learned, the good news and the bad news, and come up with really a sensible energy policy.
Mr. SMITH. See we were scared as heck that, we were gung ho, we decided we have got to have conservation, we have got to have more research into alternate fuels. At that time we were importing 35 percent of our petroleum needs, petroleum energy needs, and now we are up to whatever it is, 58 percent or so. And so how do we, how do we discipline ourselves to do a better job than we did after the first and second oil embargo in the 1970's?
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Any advice? Somehow we have got to take it more seriously, and I thought we were really taking it seriously then, ordering states to reduce their speed limits, and doing every other little thing we could think of to increase efficiency.
Mr. HAWKINS. Congressman, if I could say, it seems to me that the lesson of the last 30 years, that we should learn, is that price by itself is not a durable policy instrument to produce the kind of efficiency responses. Because the price oscillates, and people don't have, and the manufacturing sector, and others, don't have a secure feeling or expectation that there is a discernible trend on prices land it is, you know it is going to inexorably go in one direction, and that is up. If, in fact, that was the belief, then I think you would see the system respond to the price signal with much more efficiency, and the market would work. But because, there isn't that expectation, because if you look back at previous price patterns, there is an oscillation, and I guess everybody is an optimist, and they think, well, it is going to go down again, and we can't be sure we are going to get a return on our investment, so we won't make that investment.
Mr. SMITH. We are starting wildcatting in Michigan again, so there is some feeling of security that they can go start leasing land again.
Mr. Chairman, thanks for all the time.
[The prepared statement of Nick Smith follows:]
PREPARED STATEMENT OF REPRESENTATIVE NICK SMITH
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America has a serious energy shortage. After many years of being accustomed to abundant and, compared to the rest of the world, very affordable energy, we have been caught short.
It is good this Administration is awake to the crisis.
Skyrocketing prices for gasoline, natural gas, and electricity, rolling blackouts in California, and predictions of shortages and outages in other parts of the country have focused the minds of consumers, manufacturers, farmers, and small businesses on something we once took for granted—affordable and reliable energy.
As a member of the Presidential Oil Policy Commission during the Arab oil crisis of the early 1970s, I have seen how supply disruptions and high prices can take a economic toll on the country. I played a role in the decision to implement price controls and some other policy decisions that clearly did not work. I am determined that the mistakes of the past are not repeated again.
Modern economies depend on energy to sustain growth. For example, much of the economic growth in the past decade has been driven by information and networking technologies. But this equipment requires tremendous amounts of electric power. Without adequate generating capacity, we will be unable to capitalize fully on these new technologies that improve our lives in countless ways.
Indeed, energy is so central to our economic growth and way of life that this current crisis requires immediate attention. We have multi-story office buildings that are climate controlled and require elevators. We have critically ill people in hospitals whose care is dependent on reliable electricity. We can no longer afford brownouts, much less blackouts.
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Demand is beginning to outstrip supply. Unless we take action to restore our energy markets, the gap between supply and demand will widen further, jeopardizing both our economic growth and our national security. The President and Congress will make this issue a top priority.
I do not have to tell you that gasoline prices are the highest they have been in years—consumers are reminded each time they stop at the gasoline station to fill their tanks. As of May 1, the average price for a gallon of regular gasoline in the Michigan was $1.81. This is about 30 cents a gallon more than the same time last year and 65 cents a gallon more than in May 1999.
If we look at the breakdown of that $1.81, we will see that most of the components that make up the price have been rising individually and for different reasons. First, gas prices generally fluctuate with crude oil prices, which account for about 58 cents in each gallon. After surpassing $30 per barrel last summer, crude has remained in the upper twenty dollar per barrel range. This is almost triple crude prices in 1998 and 1999.
Strong economic growth in the U.S., recovering Asian economies, and production decisions by OPEC have all had a role in increasing oil prices. Moreover, our reliance on foreign nations for oil has also taken a disturbing trend. We now import 52 percent of the oil we consume, up significantly from 35 percent during the Arab oil embargo of the 1970s.
If we are to ensure our energy security and reduce our exposure to price instability, we need to address our over-reliance on foreign sources of oil, especially from OPEC countries that have often been unfriendly. That means we must look for more of our energy right here at home.
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Next we have taxes. Federal excise taxes, which go toward highway funding, are 18 cents a gallon. State and local taxes in Michigan account for an additional 27 cents a gallon—19 cents for the state excise tax, about one cent for the underground storage tank tax, and six percent of the price for sales tax.
Lastly, refining and distribution costs and profits account for the remaining 78 cents a gallon. Refining costs have risen significantly in the past two years due to a variety of factors.
One large factor has been the patch-work of environmental laws governing fuels requirements. These mandatory gasoline specifications have increased refining and distribution costs, and thus the price we pay at the pump. There are now 15 different ''boutique'' fuel formulations sold in different markets throughout the country, and as each is sold in three different grades, there is little margin for error in the distribution and storage system.
This not only increases costs, but limits the markets ability to move supplies around to respond to shortages. The shutdown of the Wolverine Pipeline in Jackson last year is an example of how disruptions in the distribution system can lead to supply shortfalls.
Several other factors also contribute to increased refining and distribution costs. Since 1981, refining capacity in the U.S. has dropped about three million barrels a day. In Michigan over the last 20 years, the number of refineries has decreased from 5 to 1, and capacity has fallen over a third to 74,000 barrels a day. Michigan, therefore, must rely on fuel shipments from other states to meet its demand.
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Today, refineries are operating near peak capacity. This means that additional crude oil cannot be processed when demand rises. Further, under such conditions, refinery shutdowns—even for routine maintenance—can lead to supply interruptions.
We also have regulations on switching from winter to summer fuels that require handlers to drain tanks and lines before bringing in the new fuel, resulting in increased costs.
All of these factors have contributed to high gasoline prices, and all of them should be addressed as part of the larger solution to this problem. In the long run, we must develop policies that will increase our supply, encourage conservation, and promote alternative fuels. However, there are things we can and should do in the short term to help us through this period.
I have introduced two bills that will bring some relief to consumers. The first would temporarily repeal the most recent federal gasoline tax increase of 4.3 cents per gallon. If enacted, this legislation would save consumers billions of dollars over the six-month period covered in the bill.
However, I also recognize that gasoline tax dollars are earmarked for federal highway funds. That is why my bill replaces the lost gasoline tax revenue out of the general fund, so it would have no impact on the highway trust fund. This bill will provide much needed and immediate relief until the end of 2001.
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My second piece of legislation directs the Department of Energy to review and report on ways to minimizing the impacts of the 15 different fuel requirements throughout the country. Specifically, I have asked DOE to look at what we can do to lower costs and increase reliability by bringing some order to the hodgepodge of requirements governing boutique fuel requirements, fuel vapor pressure, and the transition from winter to summer fuel mixes.
These recommendations will, I believe, provide some immediate relief to consumers and improve the reliability of supply by making the distribution of gasoline less complex, and therefore less subject to disruption.
Agricultural bottom lines also have been affected by high energy costs. In addition to the direct: consumption on energy on the farm, substantial amounts of energy are also used to manufacture fertilizers and pesticides.
In fact, natural gas, which has doubled in price since 1999, accounts for 75 to 80 percent of the cost of making nitrogen fertilizer. For corn, which has a high nitrogen requirement, energy input costs alone have risen above $60 per acre, now accounting for over 40 percent of corn production costs. Due to the dramatically increased costs of producing fertilizer domestically, ammonia nitrogen imports have surged over 74 percent this year.
The Department of Agriculture has estimated that, even though planted acreage is expected to fall in 2001, fertilizer expenses will increase between three and four percent from last year. Pesticide costs will also increase because a significant amount of petroleum is used in pesticide manufacturing.
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Overall, total commodity production expenses are projected to increase by $1 billion this year. Because individual farmers cannot pass on higher costs, net farm income may be significantly reduced by this situation.
Given the significant cost of nitrogen fertilizer to farmers, I have introduced legislation that will direct the U.S. Department of Agriculture to establish a research program to develop new varieties of legumes and other commercial plants with enhanced nitrogen-fixing ability. This $5 million program will help farmer reduce the need for nitrogen fertilizers, saving energy resources and saving farmers money.
Research and development into alternate energy sources and new technologies will also have to be a significant part of any energy plan. Currently, alternate and renewable sources of energy account for about 7 percent of energy use in the United States, and about four to five percent in Michigan. Michigan also is home to over 18,000 alternative-fueled vehicles.
I believe we can make alternates a greater part of the mix. As Chairman of the Science Committee's Research Subcommittee, I will be looking at ways to unleash the best scientific minds to realize the full potential of alternate technologies. Some of the promising avenues of research include biofuels and biodiesel, photovoltaics, wind energy, and fuel cells, each of which has tremendous future potential.
In addition, research is also being conducted to improve the efficiency and reduce the environmental impact of existing technologies. Research into superconducting materials, for example, will result in more efficient motors and electrical distribution systems.
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Clean coal technologies will help to meet growing electricity demand and significantly reduce greenhouse gas, nitrous oxide, and sulfur dioxide emissions. The U.S. has abundant coal resources, and coal now accounts for 52 percent of the fuel used to generate electricity. In Michigan, coal is used to generate about half of the electricity supply, so making coal a ''clean'' fuel should be one of our goals.
There is no reason why we cannot increase our supplies of energy through new technologies that conserve energy and protect the environment. Through a coordinated program of R&D, we can achieve these goals without sacrificing economic growth.
Lastly, I would like to talk about the energy plan that President Bush released last Thursday.
For too long, the country has been without an energy policy. The President's plan comes at a crucial time. And while I believe we can provide consumers with some immediate relief, everyone should recognize that there are no quick fixes to America's energy shortage.
The fact is, future energy demand is going to significantly outstrip supply unless we take action now to produce more energy domestically. This will be critically important for Michigan, which ranks ninth in the country in energy consumption.
Critics of the President's plan say that Americans already use too much energy and believe conservation can solve the problem. Conservation will be an integral part of the solution, but it cannot do it alone.
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Since the 1970s the U.S. economy has increased its energy efficiency dramatically. It now takes 30 percent less energy to produce a dollar of GDP than it did in 1970, and future gains are anticipated.
There is also no reason why we cannot increase our energy use in a environmentally responsible way. From 1970 to 1999, while energy consumption increased 42 percent, emissions of air pollutants declined by 31 percent. We also have new technologies that allow us to develop energy resources with minimal disruption to the environment.
President Bush's comprehensive energy plan incorporates conservation, R&D into new technologies, regulatory reform, and other measures to ensure that Americans have access to reliable, affordable, and clean energy.
The President's plan will: increase conservation programs; permit modernization and expansion of energy infrastructure; diversify energy supplies so we are not overly reliant on a single source; reduce emissions through R&D into clean coal and other technologies; strengthen America's energy security; and provide heating and cooling assistance to low-income families.
I hope to work with the White House to craft the R&D portions of the package that will be so important to achieving these goals. New technology can make our energy supplies cleaner, cheaper, and more efficient.
I want to congratulate the Administration for its leadership at this critical time. Some parts of the President's plan are going to be controversial. But instead of ducking the issues, President Bush has taken them head on and produced a plan that makes the hard choices.
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The sooner we in Congress act to debate and implement the President's plan, the sooner we can provide real, permanent relief to American consumers.
Mr. BARTLETT. Thank you very much, you have created and expanded your 30 seconds into six minutes. That is very good.
Mr. SMITH. They were a good six minutes.
Mr. BARTLETT. I have a couple of graphs, and one of those can be up on the screen.
Effects of Energy Efficiency
Someone mentioned talking to OPEC. Imagine yourself a member of OPEC. Now you are producing just a bit less oil than you did 18 months ago, and you are getting twice as much for it.
Why would you want to change that? I just don't think there is anything to be gained by going and talking to OPEC. This is an interesting graph that is up on the screen.
If you look at the very top line, that is the amount of energy that we would be using if it were not for the yellow area and the green area.
The yellow area is, represents the energy that we are not using because we exported manufacturing overseas. Now, if you are concerned about the environment, we will pay a big price for that, because they don't have the environmental constraints over there that we have here. So that yellow line getting bigger is not good news for us in the long run.
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The green area up there represents conservation. And you note that that is about, if you discount the yellow, and just look from the green on down, that is nearly g of what we are now using. We would be using nearly g more if it were not for conservation.
So those who say that conservation isn't important just haven't looked at the data. And, you know, it is very important. We have been very effective in doing that. We can do that tomorrow. You can't build a power plant tomorrow. Efficiency, you can do it a little quicker than building a power plant, but you can't do it tomorrow, but you can conserve tomorrow. And I would just like to see more emphasis on conservation.
The next graph, please. This is a very interesting one, and it shows essentially the same thing, in a different way. It shows it in bar graphs, and it shows the contribution of hydro and other, and nuclear, and coal, and natural gas to our energy. And it shows there, the second one from the left, is the energy we would have to be producing from somewhere, if it were not for conservation and efficiency. And it is enormous. It is next to the biggest graph, the bar up there, isn't it? It is not all that much less than all of the energy that we have gotten from petroleum.
So, just another indication of how effective energy and energy efficiency and conservation have been. So I don't like to see them discounted as not being able to play a big role in the future, they played a heck of a big role in the past, and there is no reason with little concentration they couldn't do even better in the future.
One of you mentioned, I think it was Mr. Hawkins mentioned the fact that we do almost no district heating in this country with the waste energy from power plants. Even a combined cycle gas plant, and the steam turbine runs at about two pounds pressure, so it is not really steam, it is just hot water. But that hot water would heat a lot of homes, and I would like to see that encouraged. That heat is gone, just gone. It is a resource that does absolutely no good. And a lot of energy was used in producing the heat, and when you have a cooling tower, wet or dry cooling tower to dissipate that heat, and then we put it back into the water at somewhat higher temperatures, in spite of that. You know we really ought to be using district heating. It is done lots of other places in the world. There is no reason we shouldn't be doing it here.
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One other thing I would like to mention, and ask you a question. We have green buildings. I was in another life a home builder, and I built, and I think it is still true that I built more solar homes in the county I live in than all other builders combined, and I haven't built a home there for about 16 years, so that is not a big growth industry in our area. But my challenge was to build a house that was no more expensive than the usual home. You used just the materials differently when you do it, and I was very successful in doing that.
And we are introducing a bill to certify green builders, everybody knows what a green building is. We think that there are building concepts that will be very green and that you can use those, or not use them, and the building will not be more or less useful as a result of that.
As a matter of fact, the user may not even notice the differences in the building, but you will be very much greener because you have done that.
The question I wanted to ask you, and you can see by the empty chairs up here, and the empty chairs behind you that we have a big education challenge ahead of us. How do we get the conservation message out, and the renewables? I am a big, big fan of renewables. Agriculture is really hurting. There are lots of opportunities for renewable energy for agriculture. We ought to be exploiting those. How do we get this out to the American people? Get this message out, that these are things we need to be doing?
Education Efforts on Energy Efficiency and Conservation
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Mr. MARTIN. One thing, this is one place where I think the government could do a very effective job with good, smart, public education programs. So that the average home owner understands that the light bulbs in their kitchen are costing them a certain amount of money, and that there are products on the market that would last 10 times as long and use & the energy. NRDCs offices downtown, just a mile or so from here, use n the energy of an average office. And they are very comfortable, very convenient, very pleasant offices to work in. We can see daylight from virtually anyplace in the office, because it was designed that way. That reduces the amount of lighting we need. We have personally controllable heating and cooling systems, so that those are more efficient. We have just a wide variety of things that make the office a more pleasant place to work.
So getting the, but the point that I want to make is that it took us having one person work for one half a year, a half a person year, to collect all the information necessary to equip the office with state-of-the-art energy efficiency options. They weren't that much more expensive, they were about 15 percent more expensive, first cost. We got it paid back in less than a year, but it took a person a half a year to collect all of this information, because the average contractor didn't use that, and they didn't have packages ready and available. But this is where the government could help. It could provide materials to contractors, it could provide materials to building operators and owners, and it could provide materials to individual consumers, so that they can go to a convenient spot, whether it is a web page, you know, have a calculator there. Say, when did you buy your refrigerator? Well, it is probably costing you $200 a year, if you bought it 15 years ago. And did you know that you could sell it, you could retire that refrigerator, buy another one, and you would get your money back in a couple of years, and have a brand new refrigerator, too?
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Ms. HAMILTON. The EPA has this Energy Star Program that I am sure you are well aware of that has been very effective. Consumers can go into a store, when my washing machine broke down, I went into Sears and I said, you know, show me your Energy Star section, and it is a labeling program so you can tell which appliances are the most efficient. In the state of Maryland last year I worked to pass a bill that has tax incentives for Energy Star appliance, so when you go in Maryland to buy your washing machine, you don't have to pay any sales tax.
So Energy Star is a great place to start. There is a great recommendation in the task force plan that suggests that they also do a consumer choice program at EPA for renewable energy, which I think would be terrific, because it would be great for, to have some labeling or recognition program that everyone knows about that they have public service announcements on, that people can readily see that they are going to save energy, save water, help the environment, and not spend any more money.
Mr. BARTLETT. Thank you. Mr. Martin?
Mr. MARTIN. I will just say, as part of our Alliance, we actually have a very similar graph, showing that at least half of your savings come from conservation.
Also, as a group of over 400 organizations, and also we include the Chamber of Commerce, we include the national manufacturer associations, NAM, Chair Jasanowski we are quoting here.
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We feel that the private sector has a very important responsibility to join in government in getting good information out. One of the reasons that we have achieved so many savings, it is not just households, it is not just CAFÉ, it is industry that has saved energy, because they are smart enough to realize to be internationally competitive this is what they have to do, and they want to continue this as well.
For example, my colleague just said the lighting in this room is not efficient. So, we can start with the Congress. But I do think it is important, and this hearing has talked a lot about renewables, it has talked a lot about efficiency, and we, as an Alliance, are behind that. And anybody who wants to join, we have got membership rosters back here, you are welcome to.
But I don't want to forget a key question that the Congressman from Michigan asked was, you know, and several people have said, what exactly does government do? Well, we can do better on the R&D budget for renewables, and we have got to fix that. But we also have to recognize that we are hooked on centralized energy, and to solve problems like California, Congress is going to have to take some action to help cut the lead times in building new infrastructure. Now maybe the silly number of 1300 power plants is not real. I don't think it is real, because we are going to conserve a lot, but we are still going to have to build a lot of power plants. We are still going to have to transmit that electricity, we are going to have to build pipelines, if we are to achieve energy efficiency with better use of natural gas, and keep international environment standards up.
So clearly the Congress needs to help us accelerate the development on the supply side as well, in an environmentally sensitive way. I don't want to lose sight of that. Again, we are producers, and we are consumers.
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One of the things the consumers want, and let me emphasize this, they want cheap energy prices. You know, they really do. And the public wants cheap gas prices. The public wants reasonable electricity prices, and they want reliability. So our group, we talk about finding that balance between supply and demand, demand just among our members, and believe you me it is an exciting debate.
So, thank you for raising that. We will join you in the propaganda battle.
Mr. BARLETT. Mr. Chairman?
Chairman BOEHLERT . Yeah, I agree with all of the above, everything you said is very important.
One of the things we can do, and we are responsible, because we have sort of a miniature bully pulpit, is shoot down the false choices that are being, that the public is being exposed to.
For example, some people would lead you to believe that if you, you are either going to have to have the existing air conditioning ratings, or you are going to have a house with a 100 degree temperature and you can't have the air conditioning on. That is nonsense. You can have a higher SEER rating, you can have a cool house, and you can save energy in the process. And you can get, there is a good pay back period, too, a short period of time, so that you are on the plus side of the ledger.
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Some people think that those of us who are advocates increase CAFÉ standards, which to me, that is a no-brainer. You are going to have to do away with SUVs, and America loves SUVs. You can have a SUV that gets 27b miles a gallon. And as a matter of fact, they are moving in that direction now, and it is not anybody in the United States doing anything about it, it is the European and the Japanese market driving that.
But there are a lot of things that we can do, and I know you, as a distinguished scientist, and I have heard you wax eloquently on ANWR, for example. We both oppose ANWR, but for different reasons. And you make a very cogent argument on the national security interest. And, well, but we have all got a role to play, and people have got to pay attention, and we have got to make certain the American people understand that as we deal with this energy crisis, as people are labeling it, we are not telling people to turn the thermostat down to 50 degrees, or to turn off their air conditioner at 100 degrees, or to abandon the SUV that an expanding family might require to meet the family needs, and replace it with a compact car, none of the above. We don't face that. What we have to do is be smarter, more creative, and more cooperative, and then we will develop a comprehensive energy plan for America that works, and so let me thank you, Mr. Chairman for.
World Petroleum Reserves
Mr. BARTLETT. Thank you, before I turn the chair back to you, so that you can terminate our meeting, let me just make a comment about oil, and oil reserves.
Something that is almost never mentioned in the discussion of oil is the fact that the amount of oil available to be pumped in the world is limited.
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There is very good evidence that at about 1970 we had pumped half of all the oil that was to be pumped in the United States, and it has been downhill, except for a little bump with Prudhoe Bay, it has been downhill since 1970.
I also understand that there is nothing that we can do now, scurry about and drill every place you want, there is nothing that we could do that is going to increase oil production in this country. It will go down maybe less rapidly if we scurry about and drill those last few gallons of oil out, but it is still going to go down.
We had a hearing on that in our subcommittee. There is about a thousand gigabarrels of known reserves in the world. If you do some very simple math, that is about 30 years supply at current use rates. Of course there is some we haven't found, and if you are wildly optimistic and say that there is only, that you will accept that there is as much there, with only a five percent level of probability you will find it, it is less yet to be found than we have found. That goes from about 150 gigatons to about 295 gigatons.
That is absent from most discussions. Oil is not forever, and the oil yet to be found will probably just about make up for the increase in use of oil. So there is roughly 30 years of oil left in the world. That needs to be factored in. It is not forever.
Most of the discussion seems to presume that the Lord in his wisdom knew how profligate we would be in the use of energy, so he hid away an enormous amount of oil, and it is kind of a hide and go seek thing, he hid it. Our only challenge is to go find it.
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But the best evidence is that that is not true, it is a very limited supply. I would like to see that as a component in this discussion, because what it tells us is that we not only have to run our current economy world-wide on fossil fuels—by the way, there is a little more gas than that, and coal won't last 500 years. No where near that, when you start using it in increased amounts, because the other fossil fuels are running out.
And we know that to keep our economy running, we have to make the investment in alternatives that is going to cost energy to invest in at some point. We have passed the point of no return, so to speak. Have we done that, or when do we do it?
Yes, sir.
Chairman BOEHLERT . Mr. Martin?
Mr. MARTIN. I don't disagree with a finite reserve argument, you made it, the Hubbard argument, and the fact that there is 2,000 billion barrels, we have used half.
The interesting part is what has been achieved on the enhanced recovery. If you think, if the 2000 barrel of proven reserves is based on an oil in place of 6,000 billion barrels, I think those are the rough numbers, and we can increase the efficiency of recovery of oil, which is happening in places like the North Sea and elsewhere, then indeed that is a very important technology we need to look at.
I think enhancing the technology here could be as important as developing ANWR and so forth, if we can get more oil out of the ground. And many of the folks that Ralph Hall worries about, the independents in Oklahoma, they have got secondary production, tertiary recovery, and so forth, and they are working those old wells in Oklahoma and Texas. I am the beneficiary of one or two of them. That's all we have go left from an oil business, that's why I went into government. We didn't have an oil business, we got crashed.
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But let us not forget technology developments in the oil and gas area which have been quite significant and will continue to help keep that production up. It is not going to solve our problem, but it is going to help sustain us a bit.
Mr. BARTLETT. It is still not forever, even if we are able to do that. But my children and grandchildren will be.
Mr. HAWKINS. My comment, Congressman, would be that yes the fossil reserves are a finite resource. There is an even more scarce resource, and that is the atmosphere into which we are dumping the waste products of the fossil reserves. And we will run out of that faster than we will run out of the fossil reserves.
If we burned all the coal that exists, we would run out, or we would alter the climate so that we would have a planet that would be too inhospitable for us to finish burning that coal. And that is the problem that we have to confront. It is going to confront us before we run out of the coal.
Mr. BARTLETT. And to clean it up we pay a big price penalty, and if we don't clean it up we pay a big environmental penalty, is the point that you are making.
Mr. Chairman, shall I thank our witnesses?
Chairman BOEHLERT . Well, I just want you to know that this hearing has been most helpful and I am hopeful that you agree that it has been very thoughtful, and it has already had one benefit, the staff has been instructed to immediately, immediately do an energy audit of all the facilities under the jurisdiction of this Committee, and we are going to follow though on that. Because we get a little bit too casual about our consumption, and that is why we have got, what, three percent of the world's population consuming about 25 percent of the world's energy output. We are going to contribute too, right here.
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Thank you all very much.
[Whereupon, at 4:30 p.m., the Committee was adjourned.]
Appendix 1:
Additional Material for the Record
Next Hearing Segment(2)
(Footnote 1 return)
In addition the Vice President Cheney, NEPD Group membership included: (1) Colin L. Powell, Secretary of State; (2) Paul O'Neill, Secretary of the Treasury; (3) Gale Norton, Secretary of the Interior; (4) Ann M. Veneman, Secretary of Agriculture; (5) Donald L. Evans, Secretary of Commerce; (6) Norman Y. Mineta, Secretary of Transportation; (7) Spencer Abraham, Secretary of Energy; (8) Joe M. Allbaugh, Director of the Federal Energy Management Administration; (9) Christine Todd Whitman, Administrator of the Environmental Protection Agency; (10) Joshua B. Bolten, Assistant to the President and Deputy Chief of Staff for Policy; (11) Mitchell E. Daniels, Director of the Office of Management and Budget; (12) Lawrence B. Lindsay, Assistant to the President for Economic Policy; and (13) Ruben Barrales, Deputy Assistant to the President and Director of Intergovernmental Affairs.
(Footnote 2 return)
See http://www.whitehouse.gov/energy/.
(Footnote 3 return)
On NRDC's web site at http://www.nrdc.org/air/energy/rep/repinx.asp
(Footnote 4 return)
On NRDC's web site at http://www.nrdc.org/air/energy/scd/scdinx.asp