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September 21, 2000, Thursday

SECTION: CAPITOL HILL HEARING

LENGTH: 35302 words

HEADLINE: HEARING OF THE HOUSE GOVERNMENT REFORM COMMITTEE

SUBJECT: ENERGY PRICES

CHAIRED BY: REPRESENTATIVE DAN BURTON (R-IN)

WITNESSES: ENERGY SECRETARY BILL RICHARDSON EPA ADMINISTRATOR CAROL BROWNER FERC CHAIRMAN JAMES HOECKER

LOCATION: HOUSE RAYBURN OFFICE BUILDING, ROOM 2118 WASHINGTON, D.C.

BODY:
REP. BURTON: (Gavels.) The committee will come to order. We're expecting other members here shortly, but because of the time constraint that Secretary Richardson and Ms. Browner have today as well as Mr. Hoecker -- is that how you pronounce it? Mr. Hoecker?

MR. HOECKER: Yes, sir.

REP. BURTON: Thank you for being here -- we'll go ahead and get started. And I'll start off by letting my distinguished senior colleague from the International Relations Committee, Mr. Gilman, make an opening statement.

REP. BENJAMIN A. GILMAN (R-NY): Well, I want to thank you, Chairman Burton, for this series of hearings on this oil crisis. It's affecting all of our region, but particularly the Northeast region. And I want to thank our witnesses: Chairman Richardson, our secretary, Department of Energy; our administrator, Carol Browner, of the Environmental Protection Agency; and James Hoecker, chairman of the Federal Energy Regulatory Commission. It's so good you're willing to come and share with us some of your thoughts on how we can best resolve this crisis. I just mentioned to Secretary Richardson that I just a meeting with the vice minister of Energy in Venezuela, who has offered to be of help. And I know that our secretary of Energy has been meeting with some of the other OPEC nations. We, too, in our International Relations Committee are having bilateral meetings with our OPEC nations, trying to convince them that this is not the way to keep goodwill between our nation and their oil-producing activities. Their manipulation of the market certainly has not helped our economy, nor our consumers, nor our industry. And we hope we can finally convince them to open the spigot so that we're not going to be confronted with all of these problems.

Energy Secretary Bill Richardson testified before our committee and told us about his diplomatic efforts, and we hope that they will produce results. And we look forward to hearing him.

And last winter we were told that the increase in the cost of fuel was a result of the heavy winter. And over the past few months the administration told us that the prices of fuel went up due to increased travel this summer and a host of other reasons. I think what we need most for the American people right now is a strategic, forward-looking energy policy that will take into account that our seasons are not natural disasters, but something that occurs every year and it's something that we should be planning for.

In the short-term energy outlook for September, the Energy Information Agency reported that unless the winter in the Northeast is unusually mild and/or world crude oil prices collapse, substantial price strength gains for heating oil and diesel fuel oil are highly likely.

Once again, it appears that Mother Nature has been dictating the energy policy for the administration rather than our administration being proactive in creating and implementing both a short- and long- term energy policy that takes winter weather into consideration, and plans for it rather than hoping for a mild winter.

So, we welcome having our secretaries here and our administrator here.

And, Mr. Chairman, I again want to thank you, and Ranking Minority Member Waxman for conducting this series of hearings.

REP. BURTON: Thank you, Chairman Gilman.

Let me start with the official business, besides your opening statement, and say, a quorum being present, the Committee on Government Reform will come to order, and I ask unanimous consent that all members' and witnesses' written opening statements be included in the record, and without objection so ordered.

I ask unanimous consent that all articles, exhibits and extraneous or tabular material referred to be included in the record, and without objection so ordered.

And I ask unanimous consent that questioning in this matter proceed under Clause 2(j)(2), House Rule 11 and Committee Rule 14, in which the chairman and ranking minority member allocate time to members of the committee -- of the committee, as they deem appropriate, for extended questioning, not to exceed 60 minutes equally divided between the majority and minority. And without objection, so ordered.

Today we return for our third day of hearings on problems in our energy markets. Before I get into my statement too much, Ms. Browner told me that her father, Michael Browner, is here today and I wanted to acknowledge him. He's from Limerick, Ireland and now lives in Florida. Where are you, sir? (Pause.) Just wanted to recognize you and let you know we love Ireland -- (scattered applause) -- and we welcome you to the good old U.S.A. I guess you've been here for a while, though.

Anyhow, we're happy to have before us the Secretary of Energy, Mr. Richardson, and Ms. Browner, the head of the EPA. We welcome you both back. You've been here before. We also have the chairman of the Federal Energy Regulatory Commission, Mr. Hoecker. I got that right that time. And this is the first time you've been before us, and we welcome you.

Energy prices are soaring all around us: gasoline, home heating oil, natural gas, electricity. We're seeing disruptions in supply, and it seems like fires are erupting faster than we can put them out. If this situation continues, every American family across the country is going to feel the impact this winter and next summer. No one is going to be immune. Yesterday I spent some time talking about some of the early warning signs we're seeing, but it's worth taking another look.

This summer, the price of reformulated gasoline shot up to over two dollars a barrel (sic) in the Midwest. Last winter, the price of home heating oil more than doubled in New England and in the Northeast. This fall, inventories are at a five-year low. Prices are so high that distributors are going into the winter with empty storage tanks. The price of crude oil is now closing in on $40 a barrel; at the beginning of last year it was $10 a barrel -- almost a 400 percent increase. The price of natural gas has tripled since last spring.

In Montana, electricity rates have gone up 500 percent for industrial users. We heard yesterday from a businessman who had to shut down his business and lay off 300 people, simply because they could not pay their electric bills. In San Diego, California, electricity rates have tripled. Week after week, the state of California has to turn off the power to many of its large customers to keep the whole grid from crashing.

These problems are mounting one on top of another and we've seen no energy policy long-term from this administration. What's the administration going to do to help bring natural gas prices down? What's this administration going to do to stop gasoline and home heating oil price spikes? What's the administration going to do to help restore stability to our electricity grid?

We need to deal with these problems, and we have to have an energy policy and we have to have it right now. The administration simply doesn't have one.

Senior citizens living on fixed incomes cannot afford to see their electric bills double or triple now or this winter. Low-income families can't afford to pay twice as much to heat their homes. They simply can't do it.

We have some fundamental problems with our energy markets. There are supply and demand problems; demand keeps growing, but supply is simply not keeping up. Oil refineries and electricity generators, our transmission systems are practically bursting at the seams. All it takes is one small disruption to put the entire system into a tailspin and send prices soaring. We saw that this past summer in Chicago.

Yesterday we heard from professionals in the energy business. We asked them about the obstacles that they face, why they're having trouble keeping up with demand. In almost every instance, the story was the same -- government overregulation. In some cases it's state and local laws that create the problem; in many cases it's the federal government and federal regulations.

We talked to a home heating oil distributor from New England. He told us, first of all, that prices are so high that distributors can't fill their storage tanks to get ready for the winter; they're going into the winter with empty tanks. But he also told us one of the strangest stories of red tape run amuck that I've ever heard -- and I've heard quite a few. He brought with him four little bottles. And I want to show you these bottles here -- they're different colors, as you can see -- four little bottles of diesel fuel. They're all different colors. And I asked him to leave the bottles with me so I could put them on display and ask you about them.

The federal government makes the dealer dye these fuels different colors and store them in different tanks, thus necessitating more expenditures for tanks. The two red ones are complements of the Treasury Department; they're apparently for off-road use. The Treasury Department makes the dealers dye them different shades of red to make sure that no one cheats on their excise taxes. The two clear ones are complements of the EPA. The EPA makes the dealers store them in different tanks because they have slight differences in their sulfur levels. Dealers have a dwindling number of storage tanks because it isn't economical to build them anymore. At the same time, they have to sub-divide the tanks that they do have to hold these four different colored fuels. They have to have different trucks to haul the different colors. And the kicker is this -- they're all practically the same fuel. The differences are very small.

I probably didn't explain all that very well. I've had it explained to me three or four times yesterday, but I'm still not sure that I get it. I do know this much; it's one of the more bizarre stories of government run amuck that I've heard. At a time that they're facing a market that's been turned on its head, these dealers should not have to deal with this kind of nonsense.

Now, that's a fairly small problem. The problems that the gasoline industry is facing are much more serious. Under the Clean Air Act, and other federal regulations, it's impossible to build a new refinery in America. It hasn't been done in 25 years. In 1982, there were 231 refineries in the United States. Today that's been reduced from 231 to 155. Yet at the same time, refiners have to make as many as 15 different blends of gasoline to comply with the reformulated gas rules during the summertime. So on the one hand, they can't expand their capacity to keep up with demand, and on the other hand, the federal government is placing all of these additional demands for speciality fuels on them.

We have a chart here -- (to staff) -- and can you put that chart up? We have a chart here of all the different fuels Citgo has to make in one region. (To staff) Can we put that up on the monitors? Do we have that for the monitors?

(Returning) That's the only one we have on the big poster, so I'll draw your attention to the poster over there that they're having trouble putting up on the easel.

You can see the different colors. Their refineries are being stretched to the limit. Under those circumstances, all it takes is one little disruption to bring the whole system down. And that's what happened in Chicago and Milwaukee this summer, and it's going to happen again, unless we make some changes.

But that's not all. We're told yesterday that the EPA has a raft of new regulations for gasoline and diesel fuel in the works.

They're going to take effect in the next few years. Industry is telling them that if they're hit with these new restrictions in such a short time period, it's going to overload the system. It's going to disrupt fuel supplies. Consumers are going to be hurt. But apparently, not many people are paying any attention.

When I say that we don't have a serious energy policy in this country, that's exactly what we're talking about. Industry has offered solutions that would bring about dramatic reductions in sulfur and other pollutants, but that wouldn't disrupt supply. The EPA apparently isn't interested. That's something I and members want to talk to both Ms. Browner and Mr. Richardson about today.

Yesterday we heard from am executive who builds electric power plants. His company is building a state-of-the-art facility in California. It sailed through the permit process, but under EPA rules, all it takes is one person to file an appeal and the whole process is brought to a screeching halt. One person who lived over 100 miles away from this particular site filed an appeal and the project was shut down for more than four months. By the time -- and I want to tell you, the Sierra Club and everybody else was for the project. And evidently you were. But the regulation that was in place allowed this one person to shut it down for four months, and it's put an extremely large strain on California. And the people in California are now asking them to work double shifts to get that generating capacity on line. And they're trying to do it, obviously, to keep from avoiding some more blackouts now and in the future. Ironically, the EPA has been working on new rules to streamline the appeals process and weed out frivolous appeals since 1992. The new rules still haven't taken effect.

Now, these are just a few examples of areas where the government can exercise a little common sense to help solve some of these problems, but it isn't happening. Nobody is saying we should we appeal the Clean Air Act. Nobody is saying we should roll back the clock. But how about just a little more flexibility for some of these industries as we move forward?

These problems aren't going to go away by themselves. The Energy Information Administration projects that natural gas prices will go up another 23 percent this winter over current prices. They estimate that home heating oil will go up another 31 percent this winter. When families are seeing their electricity bills tripling and when businesses are laying people off because they can't pay their energy bills, something has to be done.

If we don't develop a tough energy policy and stick to it, we're just going to keep lurching from open crisis to another. The bottom line is this: We can't bury our heads in the sand anymore. We have to have a strong energy policy. Under this administration we have not, unfortunately, had a strong energy policy, and we've suffered for the past eight years. We need a policy that will help us become more self-sufficient.

We have enormous deposits of oil and gas that are off-limits, and I'm going to ask questions about that in a few minutes. We have sites in the United States that we have been told by experts, yesterday and before, that have tremendous deposits of natural gas and oil that could be drilled in an environmentally safe way, and they're off- limits. We can't get to them. And with all those reserves, some of them 50, 60, 70 years of reserves, it seems to me that we ought to take another look at that. We need to review some of these new EPA rules coming down the pike to see if there's some flexibility that could be put in order.

And I want to say once again to Secretary Richardson and Ms. Browner and Mr. Hoecker -- Hoecker (correcting pronunciation) -- excuse me, I'll get that right -- that we really appreciate you being here. We have a lot of questions and I look forward to hearing your answers.

And I understand that Secretary Richardson is under time constraints. We'll try to meet his time constraints so that he can get to other business that he has to do, but I do want to afford my colleagues as much time as possible for questions. So we'll ask you for your opening remarks, and we'll start with you, Secretary Richardson.

REP. GILMAN: Mr. Chairman, may I ask permission to insert my full opening statement in the record, please.

REP. BURTON: Yes, that's fine.

REP. GILMAN: Thank you.

REP. BURTON: Do other members have opening statements, real quickly? Oh, I'm sorry, Mr. Waxman. Of course you have one. And then I'll ask other members, if they don't have an urgent need for opening statements, to put those in the record, but if they do have opening statements they want to make, we'll accede to their wishes.

Mr. Waxman.

REP. HENRY WAXMAN (D-CA): Thank you very much, Mr. Chairman.

We had a hearing yesterday, and at that hearing I said that we are looking at a topic that's been neglected by the Congress for too long, and that's the topic of an energy policy.

I learned yesterday that there's a bipartisan agreement that our nation faces serious energy problems. Members on both sides are worried about the impact of high energy prices on our cse problems and how we should address them. Chairman Burton and other Republican leaders blame the policies of the Clinton administration. Some even claim that the Clean Air Act, one of our nation's most successful environmental laws, is the cause of soaring energy prices. We had one executive from an oil company tell us yesterday that we ought to just let them drill off the coast of our nation and set up oil wells, and that would solve our problem. These theories may make for good politics, but they're basically nonsense.

The fundamental problem that our nation faces is that we are too dependent on fossil fuels in general, and oil in particular. This leaves us vulnerable to manipulation by OPEC and threatens our economic and national security. And as we enter the 21st century, we are also burdened with an antiquated electric utility infrastructure.

Now, these are not new problems. Gas lines in the 1970s showed us the dangers of excessive reliance on oil. But a combination of factors -- lower energy prices, anti-regulatory sentiment in the administration in the 1980s and in the Congress in the 1990s, and a growing economy have conspired to halt our progress towards alternative fuels, renewable energy, and energy independence. In fact, we consume more oil, more gasoline and more diesel fuel today than we did 20 years ago.

The Clinton administration has proposed modest steps to reduce our dependence on oil and other fossil fuels. The administration has proposed tax credits to spur energy efficiency and research and development partnerships with the auto industry to develop a new generation of clean vehicles, and the administration has sent Congress electricity restructuring legislation. But even these needed measures have met resistance in the Congress. As a result, we haven't formulated or implemented the kind of comprehensive energy policy our nation needs.

The last time Congress enacted a comprehensive piece of energy legislation was 1992. In recent years, the Republican leadership in Congress has even gone so far as to call for the abolition of the Department of Energy and the sale of the Strategic Petroleum Reserve. The states, too, have made mistakes. With hindsight, the deregulation efforts in California may have serious flaws, allowing energy suppliers to manipulate the market and raise prices through the roof.

But while we face serious problems today, the future could be much brighter. Our energy policy may have stagnated, but technology hasn't. New energy technologies are on the horizon that can strengthen our economy, protect our environment, and lessen our dependence on oil and other fossil fuels. Fuel cells, for instance, have made enormous strides in recent years. This technology combines hydrogen with oxygen via an electrochemical process to generate electricity without emitting any air pollution or greenhouse gases. The costs of this technology are dropping, and prototypes have been developed that can run automobiles or light buildings. And since fuel cells do not have to run off of gasoline, they can reduce our dependence on foreign oil. I'd also like to point out that distributed generation with fuel cells avoids the need to construct high-voltage transmission lines that are often difficult to site and costly to build.

It won't be easy to shift course. We learned yesterday that big oil and gas companies are making billions off of today's high prices.

And they hire countless lobbyists and give millions in campaign contributions to preserve the status quo. But if we have the political will, we can craft a sound energy policy for our children, one that relies on new technologies, energy efficiency, and renewable energy to create new industries and jobs, provide greater energy independence, and protect the global environment.

The energy crisis of the 1970s showed us the importance of developing forward-looking energy policies. But unfortunately, we squandered that opportunity to reduce our dependence on oil and implement needed changes in U.S. energy policy. I hope we won't repeat that mistake again.

I yield back the balance of my time.

REP. BURTON: Do other members have opening statements that they feel they want to make? Mr. --

REP. : Mr. Chairman?

REP. BURTON: I beg your pardon?

REP. : I mean, I'd be happy to enter mine into the record if it's agreeable to the other side to all such statements so we can get to the witnesses.

REP. BURTON: Well, I always like to allow members to make opening statements if they choose to do so. The only problem is that Mr. Richardson and Ms. Browner, I think, are under some time constraints, and I'd like to get to questioning as soon as possible. But if you have an opening statement you want to make and you feel --

REP. : I'd be happy to submit mine to the record for the -- in the interests of time.

REP. BURTON: Okay. Without objection, so ordered.

Anyone else have an opening statement? Mr. Kucinich?

REP. DENNIS J. KUCINICH (D-OH): I have an opening statement, and I'll submit it for the record. I'd just like to say that -- (pauses) -- I represent Cleveland. And one of the things that's happening in our area is that the price of natural gas has gone up three times in a year. And when we look at the supply of natural gas, it seems to have -- there seems to be some real questions because I think all of us remember that the Federal Energy Regulatory Commission presided over the deregulation of natural gas wholesale rates. And we're now experiencing a steep rise in natural gas prices even before families are turning on the heat. We're also seeing the use of certain market mechanisms by natural gas companies where they're now offering long- term contracts at reduced rates and variable rates to their customers. While they're asserting questions of whether they have an adequate supply, the demand remains constant, the price goes up. In some cases demand has even exceeded that.

The question I hope to see answered in this hearing is, you know, what are people supposed to do when it looks like government is not adequately responding, the prices keep going up and up. I'm hopeful that we're going to see addressed in this hearing the question as to whether or not this free market approach that's been taken has its limits. Because, you know, whether we're talking -- there's programs in place for low-income people. But what about middle-income people who are going to see their whole way of living under attack with -- and working people are going to see their whole way of living under attack with these sharp price increases. And can government just afford to stand on the sidelines and let the natural gas companies and the oil companies charge whatever they want? I hope not.

REP. BURTON: Thank you, Mr. Kucinich.

REP. : No, I'll pass. I'd like to give the witnesses a chance.

REP. BURTON: Thank you.

What we'll do is we'll try to --

REP. JANICE D. SCHAKOWSKY (D-IL): (Off mike.)

REP. BURTON: Ms. Schakowsky.

REP. SCHAKOWSKY: Thank you, Mr. Chairman. I'll be very brief.

I want to take this opportunity to publicly thank Administrator Browner during the time that the Midwest was suffering from differentially high gasoline prices this summer: your responsiveness to us and your effectiveness in helping initiate an FTC investigation. And some may argue otherwise, but I do believe that the initiation of that investigation itself helped to bring prices in line, at least, with the rest of the nation, as high as they may be.

And to Secretary Richardson for your responsiveness, too. We had a meeting of our energy task force with you, and your willingness to say that everything is on the table -- and to the vice president for the initiation yesterday of the proposals, the concrete proposals that he made in Illinois, too. We are seeing gas prices at -- natural gas prices at unprecedented levels.

In July they told us that last year's bill of $410 would be $610 this year. They've revised that upward to $750 this year for the same amount of gas last year costing $410.

But finally, just a couple of sentences. You know, if we want to point fingers -- I wasn't here when we deregulated natural gas, but I was organizing around this issue with lots of consumers who were very concerned about it. It seems to me now that we are reaping the rewards of some of that, and that if we want to point fingers, we should look at big oil and big gas and say, how come at a time when anyone could predict shortages, that we were seeing a decrease in production and, remarkably, a dramatic increase in profits? I mean, I think that we need to take steps as the government, but it hasn't been for lack of trying, and I think now that we move more aggressively forward, that's important. But I think we need to question big oil and big gas about their role.

Thank you.

REP. BURTON: Mr. Sanders?

REP. BERNARD SANDERS (I-VT): I would concur with what Ms. Schakowsky --

REP. BURTON: Excuse me just one second, Mr. Sanders.

It is the intent of the chairman to go ahead with the hearing and have Mr. Shays take over the chair when he comes back. So if people want to go vote and come back to expedite the hearing, it will be all right.

REP. SANDERS: Okay, I'll be very brief.

Number one, I want to thank our guests for being here, and thank both of them for the excellent work they're doing. Thank Mr. Richardson for meeting with the New England delegation yesterday; and Ms. Browner for the outstanding work she's done for so many years. I just want to inform both of them that -- they may or may not know that well over 100 members of Congress from both parties sent a letter to the president and congressional leaders outlining six basic points that we would like to see action on, and action on immediately.

Number one, Mr. Richardson, thank you for your efforts in moving the Northeast home heating oil reserve forward. That's a request that we made to you last year, and the administration has moved actively on that. I know that you need now authorization from the Senate so that it can be a trigger mechanism so that the president in fact can release that oil, and we've got to give that to the president.

Number two, we must release oil from the Strategic Petroleum Reserve. We've discussed that at great length. We have close to 600 million barrels sitting out there. There is an emergency. Middle- class working families, elderly people cannot afford to see prices go higher and oil. Let us release some of that oil; that is why it's there.

Thirdly, I believe the administration has got to be more vigorous in negotiating with OPEC. Americans lost lives bringing the Kuwaiti ruling family back into power, defending Saudi Arabia. They cannot turn their back on us at a time of need, and cut back production.

Fourthly, with soaring prices, there must be a significant increase in LIHEAP funding, and the president must release, as soon as possible, a substantial amount of emergency LIHEAP money so that people have the opportunity of buying oil before prices really hit the roof.

Fifth, we all agree that we need to be much more vigorous, long term energy conservation. We're more dependent on the Mideast now than we were 25 years ago. Ms. Browner, you and I discussed this a couple of months ago. Vermont is beginning to try to do something. We can significantly lower the amount of energy that we are utilizing in this country. It's an outrage that we're not.

Let's go forward in those areas. We should give you the tools. You should be vigorous in expounding that.

Mr. Chairman, thank you very much.

REP. BURTON: Thank you, Mr. Sanders.

Mr. Richardson, do you have an opening statement? First of all, let me -- we have a custom here of swearing-in our witnesses. Please rise. Raise your right hand. (Witnesses are sworn.)

Mr. Richardson? Secretary Richardson -- excuse me.

SEC. RICHARDSON: Chairman Burton, I want to thank you for the responsiveness and graciousness that you have undertaken with my schedule today, and I appreciate it.

Mr. Chairman, our energy policy is based on market forces, not market-making; on diversity of supply, and robust diplomatic relations with energy-producing countries. It's based on improving production and use of traditional fuels through new technology. It's based on diversity of energy sources, with broad investment in alternative fuels and energy sources. It's based on increasing energy efficiency and, lastly, in preserving and fortifying our insurance policy against supply interruption, and that is our Strategic Petroleum Reserve.

Mr. Chairman, we've published two statements of our national energy policy in the past few years. These documents serve as blueprints for our energy policies that we have put forward by the administration. What we need now is a bipartisan energy policy to deal with the problems that many of you so ably outlined.

The main problem we have is volatility. Mr. Chairman, we need such over-arching policies, especially today. In the past year what we have seen is substantial volatility in our energy markets. We've endured supply and price problems in heating oil, in gasoline and in electricity. The year has not seen a season go by without an energy challenge. Every region of the country has shared in the increase in crude oil prices, and many regions have experienced specific problems on energy supplies. It is essential that we recognize the importance of integrated diverse energy supply and demand policies.

Let me also state, Mr. Chairman, in this robust economy in the last seven years, energy demand in this country, partially because of the robust economy, has increased 14 percent. This has been an important factor. With oil and gas markets, as you know, as part of the administration's efforts to address market imbalances, I've talked extensively with oil-producing nations. OPEC and other producers have heard our concerns and have boosted their output three times, with the most recent increases to come on line in October.

Our latest data shows that there are about 3.5 million barrels per day more oil on the market than at this time last year. That is a significant addition to the world market. And according to the Energy Department's Energy Information Administration, the latest addition of 800,000 barrels per day, along with boosted production from non-OPEC producers, should enable the oil industry to finally begin rebuilding global stock, which has also been a problem. I say "finally" because, while more oil has come into the markets over the past year, demand has grown much faster than anticipated -- as I said, increasing by 14 percent in recent years. And as demand has absorbed additional supply from the market, the oil industry has been unable to refurbish stocks, even with, for example, U.S. refiners working at 96 percent of capacity.

These factors have combined to result in a number of price increases across the range of petroleum products. We see this in the crude market, which closed yesterday at $37.20, one of the highest prices in a decade. We are seeing this at the gas pump, where drivers are paying an average of $1.56 per gallon, up over 30 cents from last year, but down 12 cents from this past June when you held your hearing. And with distillate reserves already at levels far lower than usual for this time of year, about 20 percent below last year, we're facing the potential for another heating oil shortfall.

The administration is taking steps to meet these energy challenges. Most notably, the administration took the step of creating a 2 million barrel Northeast heating oil reserve to be used to augment supplies if they are needed. Sites have already been chosen, and contracts for the oil were let last month, and oil is coming into the reserve. Mr. Chairman, let me be clear that we need the Congress to approve a reasonable trigger for releasing the heating oil in the reserve as well as the funding to continue the reserve beyond this winter. That hasn't happened yet.

We also continue to examine the option of swapping oil from the Strategic Petroleum Reserve if the oil supply and supply conditions warrant it. We have renegotiated oil delivery schedules for the SPRO's Royalty Fill Program so that millions of barrels of oil go into the market instead.

Mr. Chairman, again let me remind you that Congress has delayed action to extend the Energy Policy and Conservation Act, which authorizes the Strategic Petroleum Reserve and America's participation in the International Energy Agency. We need to get that work done.

The administration has taken other aggressive measures. You will recall that to help American families heat their homes last winter, the president released all the emergency low-income energy assistance funds available for the year. He also asked Congress for $600 million more to replenish the reserve, funds which were just approved in July.

Still, the House and Senate have underfunded our FY 2001 request for weatherization assistance. Mr. Chairman, we have found this to be an effective way for families to lessen their demand for heating oil and electricity and, in turn, lessen their winter energy bills. We need to have this critical relief increased in conference.

We also reestablish an Office of Energy Emergencies at our department, to coordinate with the states and other federal agencies regarding energy-related crises. This helped us during the summer, when electricity was demand was high.

We address the issue of supply through increased support for tankers, small business loans for distributors and other small businesses impacted by high prices, and encourage refiners to increase production.

We have some budget needs. Mr. Chairman, we have these needs, and they are a priority.

As I mentioned to you before, we've worked hard to escalate domestic production of oil, to cultivate alternative sources of energy, and amplify energy efficiency, especially in transportation. In fact, thanks to our vigorous research and development efforts, we've taken recent strides on this latter point, strides that will help reduce our dependence on foreign oil, continue to lessen pollution, and keep our economic engine humming at home and in the world marketplace.

For example, a major milestone is a partnership for new generation of vehicles, where recently we have automakers unveiling three concept cars which may reach 80 miles per gallon, in three or four years.

At the department, we just announced the third and final part of our heavy vehicle/truck research program, high-efficiency clean diesel engines for eighteen-wheelers, whose drivers have been hit hard by high oil prices. And a research project was recently launched with the heavy-duty vehicle industry to develop more energy-efficient trucks over the next five years, from pickups and SUVs to eighteen- wheelers.

As you know, Mr. Chairman, we're accelerating work in natural gas, which has emerged as a competitive and critical fossil energy resource. Our energy Information Administration forecasts that demand for natural gas will grow by more than 4 percent in just one year.

So this is what we're doing: working with the Interior Department and other agencies on simplifying access to public lands. We have an interagency working group meeting at the White House to pursue proposals on access to natural gas. The administration is working to streamline environmental review processes, develop regional assessments of oil and gas resources, and advance technologies to produce on federal lands.

Mr. President (sic), in March the president proposed tax incentives for oil and gas production, delayed expense of what is called G&G expensing, which is more drilling for natural gas.

We need your support so that we can do even more to get this relief to consumers.

Earlier this year the president sent a letter to the majority leader of the Senate, urging the Congress to work with the administration to enact the president's pending energy proposals soon as possible. One chief component of the president's energy initiative is a $4 billion tax package of tax incentives to encourage domestic oil and gas production, and for consumers to purchase more efficient cars, homes, and consumer products. While this package contains a number of viable solutions to our current challenges, solutions to be found right here in the United States, Mr. Chairman, the proposal has been idle in the Congress for more than two years.

The president has also repeatedly asked for increased investments to meet our energy needs. In FY 2001, the president advanced a $1.4 billion investment in Energy Department programs in energy efficiency, renewable energy, natural gas, distributed power systems, but still the Congress has not backed these investments, approving just 12 percent of increase over the last seven years. Mr. Chairman, this simply is not acceptable.

And right now the president is requesting an additional $19 million from Congress for low-income home weatherization -- funds which were not included in the supplemental appropriations act.

On electricity restructuring, I'd like to finish by expressing to you how disappointed I am that it appears Congress will adjourn without acting on electricity legislation, which Mr. Waxman mentioned. The president submitted comprehensive electricity restructuring legislation to Congress two years ago. Unfortunately, the 106th Congress has failed to act on this or any other piece of electricity legislation.

And you yourself mentioned the problems we are having with our electricity grid.

Mr. Chairman, the Congress' inability to adopt restructuring legislation has helped produce some of the difficulties seen in electricity markets in some parts of the country. Over the last several summers several utilities struggled to meet demand. They were forced to cut off interruptible customers and plead to consumers and businesses to conserve energy. In some instances they were forced to implement rolling blackouts to avoid complete collapse.

Mr. Chairman, as in our oil market, unparalleled economic growth has spawned burgeoning demand that outstrips supply. And I know Chairman Hoecker is an expert on this issue, and I'm sure he can tell you more. We've seen the price spikes in California, the Pacific Northwest, and parts of New York.

Enactment of federal electricity restructuring legislation as proposed by the administration along with several bipartisan proposals would go a long way towards resolving this problem. It would help do so by establishing a federal rules of the road, where generating companies have the certainty they need on whether to invest in new power plants and transmission facilities. Moreover, our bill would help produce a more efficient interstate transmission system to enable the free flow of power to where it is needed the most. The legislation would also provide a funding source to make up for utility cutbacks and energy efficiency programs. In light of the problems we face, I would urge the Congress to reconsider its inaction on electricity restructuring.

Mr. Chairman, again, thank you for listening and thank you for accommodating our schedule.

REP. BURTON: Let me just say before we go to Ms. Browner that we asked all of our witnesses to submit their statements to us ahead of time. And unfortunately I guess she couldn't do that.

You wanted to leave, Mr. Secretary, by 2:00 because you have an appointment. Because the statements weren't given to us and because they take so long, it may necessitate us having another hearing next week because we do have a lot of questions. And we really need to get those answers for the American people. And because of the time constraint that you're under today we may not be able to get that done. And so I wanted to apologize to you in advance because we're going to get the questions answered. And I'm sorry that it's taking this long.

REP. : Mr. Chairman?

REP. BURTON: Yeah.

REP. : I just want to say, maybe Mr. Richardson can stay longer because this is an important hearing. Or, if we need to, we'll have another one. But we did have a very, very long opening statement by the chair, and I followed him and made an equally long one -- not quite as long. (Laughter.) But it is not fair for the witnesses to -- where they had to sit through all our openings -- but they know -- Mr. Richardson was in the House. He knows the way it works. So maybe he can stay a little longer, because we ought to get those questions asked and answered at this hearing. If we can't, maybe we can get him back.

REP. BURTON: Absolutely. That's absolutely correct.

So, Ms. Browner, you're recognized.

MS. BROWNER: Thank you, Mr. Chairman, members of the committee. It is, indeed, a pleasure to be back before this committee. And I welcome this opportunity to discuss the administration's belief that protecting the health of the American people is an essential part of good energy policy.

This administration's policy is to protect public health and to promote a healthy economy. We believe that this is clearly achievable. We believe that we have demonstrated it over the last seven and a half years. We have achieved some of the greatest environmental progress in the history of this country in the last seven and a half years, and at the same time we have grown our economy in unprecedented ways.

I think a powerful example of this hand-in-hand relationship between a healthy economy and a healthy environment is provided by the results of the work that this nation has done under the Clean Air Act amendments of 1990. We are aggressively and sensibly implementing this landmark public health protection statute which was enacted by Congress with bipartisan support and signed into law by then President Bush. The result of this unprecedented legislation is that we are achieving real public health benefits in ways that are consistent with a healthy economy and take into account the need for reliable energy supplies. Over the past decade we have made great strides in cleaning the air we breathe while our economy is growing.

Mr. Chairman and members of the committee, if I might refer you to this chart, this tells an incredible story. Between 1990-1999 the nation's gross domestic product increased 32 percent. Fossil fuels consumption increased 13 percent. Vehicles miles traveled, the distance, the miles we are driving our cars, increased 30 percent. And at the same time, the aggregate emissions of the six predominant air pollutants decreased by 9 percent. Now, that is a real success story. We are growing our economy, we are using more fuel, we are driving further, and yet our air is getting cleaner.

In addition, an unprecedented number of cities have met public health safe national ambient air quality standards since 1991. Thirty-nine of the original 42 carbon monoxide areas are now in compliance; 59 of the original 98 ozone areas, 68 of the 85 original fine-particle areas, all designated "nonattainment," meeting standards today, important public health standards.

The human health benefits of these emissions reductions required by Congress in the 1990 amendments are dramatic. The annual benefits in the year 2010, when the law is fully implemented, will include 23,000 fewer incidences of premature death, 20,000 fewer cases of chronic bronchitis, 47,000 fewer cases of acute bronchitis, 22,000 fewer respiratory-related hospital admissions, 42,000 fewer cardiovascular hospital admissions, 4,800 fewer emergency room visits for asthma. The list goes on and on. The public health benefits of cleaning our air are dramatic. They are real.

Now, the Clean Air Act recognizes that we cannot meet the public health goals set by that important piece of legislation without reducing air pollution from sources such as coal-fired power plants, gasoline and diesel fuels, and I think it is important to note that there are many in industry that have done their part, that have risen to these challenges. The utility industry dramatically cut acid rain- causing emissions from power plants, while net electricity generation increased 28 percent. Oil refiners were successful in producing cleaner gasoline required by the Clean Air Act, while the amount of gasoline supplied during the 1990s continued a steady increase.

Companies such as BP/Amoco have even gone beyond the legal requirements, committing to produce the new EPA-required low-sulfur, clean-burning gasoline three and four years earlier, at current prices. Likewise, a number of our automobile manufacturers agreeing to lower their tailpipe emissions earlier. Why are they doing this? Not just because it's good for the public's health. It is good for the bottom line. It is good for their business.

In pursuing the nation's public health goals, EPA takes the issue of adequate energy supplies very seriously. Mr. Chairman, my written testimony contains a umber of specific examples in which EPA has provided regulatory flexibility in energy supply emergencies and has pursued specific actions to reduce peak energy use. In addition, we work with industry and other stakeholders to craft flexible rules that allow for common sense, for cost-effective compliance strategies.

Let me just share with you one or two examples. Last year, the president announced our new Tier 2 tailpipe emissions standards and low-sulfur gasoline requirements. These are reasonable, they are flexible, they are cost-effective. The rule gives refiners substantial lead time, on the order of four to five years. For most refiners, the phase-in begins in 2004 and continues through 2006. Small refiners get until 2008 and can apply for some additional time if they can demonstrate a need.

Flexibility is also provided through annual averaging and trading of credit among refiners, and credits for early reduction. There is a phase-in program for gasoline sold in certain western states, again demonstrating that you can both set and meet tough public health standards and provide flexibility to industry in order to meet those standards in a cost-effective manner. We're also promoting a flexible approach for achieving required NOx reductions in the eastern part of the country. These are the NOx problems that -- the NOx that travels, that contributes to the regional ozone pollution problems.

To further assure reliability, EPA is allowing states to use a credit trading program. We are encouraging -- and we would ask Congress to give us some more authority so we can do that more expeditiously -- but in the meantime we are working with states to use what we have learned from the very successful, the very cost-effective acid raid emissions credit trading program and bring that to bear on NOx and other air pollution.

Mr. Chairman, members of this committee, no one is saying that public health protections, pollution reductions are without cost, but reducing pollution is an invaluable investment in the health of our citizens and our environment. Time and time again, our air regulations, we have been able to show, the cost -- the benefits far outweigh the costs.

For example, the new tailpipe emission cleaner-fuel requirements, it is if we are taking 164 million cars off the road, but they're going to be there, each and every one of them, they're just going to be cleaner, they're going to be polluting less. When we look at the cost of meeting those standards, we estimate that for every $5 invested, we will get $25 back in environmental and health benefits for our families.

We estimate that the acid rain program in the year 2010 will have $48 billion in health benefits from reduced particle matters -- we're talking about the particles that become embedded in the lungs, particularly of our senior citizens. They can't spit them out, they can't cough them up; can result in premature death.

In 1999, EPA completed an extensive congressionally mandated analysis of the cost and benefits of the Clean Air Act of 1990. Although, obviously, any such analysis involves all of the normal economic uncertainties, the central finding is that the benefits of that act, as we have worked to implement that important piece of legislation, have exceeded the cost of meeting environmental standards by a ratio of four to one.

Mr. Chairman, if I might just in my time remaining highlight some of the opportunities that I believe are available to this Congress to help address energy supply issues -- energy efficiency. Since 1992, EPA and DOE's Energy Star programs have been helping businesses and families select energy-efficient products that save money on energy bills, while also helping to conserve energy supplies and reduce air pollution at peak periods. Our Energy Star program has eliminated the need for almost 10,000 megawatts of peak summer generating capacity -- 10,000 megawatts through energy efficiency. We have also, through this program, saved businesses and consumers more than $4 billion on their energy bills, and we have reduced air pollution.

Now, Congress has the opportunity to fund this program. Unfortunately, neither the House or the Senate, in the EPA appropriations bill, has thus far provided the dollars to EPA which the president has requested -- $124 million increase for technology, for programs like Energy Star. And both the House and the Senate thus far have failed to fund this incredibly cost-effective, sensible, reasonable program. If Congress had fully funded past requests for EPA's Energy Star programs, electricity demand this summer could have been up to 3,000 megawatts lower than it is currently; equivalent to the power output of more than 10 average-size power plants.

Congress also has the opportunity to promote energy efficiency by supporting the president's request for $85 million for a new Clean Air Partnership Fund. This has not been included in our appropriations bill thus far. This is an initiative that would provide much needed dollars to state, local governments, to work with their businesses to develop innovative, energy-efficiency strategies, such as investments in clean distributive power sources that do not harm the air their citizens breathe, but do increase power supplies.

In addition, Mr. Chairman, I would like to renew the administration's call for Congress to expeditiously send to the president comprehensive legislation to phase-out the fuel additive MTBE from our cleaner-burning gasoline. In June of 1999, Mr. Chairman, EPA's Blue Ribbon Panel concluded that MTBE poses risks to our drinking water. EPA believes that Americans deserve both clean air and clean water, and never one at the expense of the other.

We are encouraged -- the administration, EPA, is encouraged that the Senate Environment and Public Works Committee has taken action on a bill that is consistent with the legislative principles that we put forward earlier this year.

The current oxygenate requirements in the Clean Air Act should be replaced by a flexible renewable fuel standard. This would allow all of us to work together to promote the use of ethanol, to do what we can to drive the market for biofuels, for biomass. We have tremendous opportunity -- rice straw, wood waste, other biomass. That can become an important part of our energy supply in this country. This legislation would not only protect water quality; it is good environmental policy, it is good energy policy, it is good farm policy.

In closing, Mr. Chairman, we recognize that fuels, electric power, clean air are important to economic well-being and the health of the American people. We look forward to working with all members to move forward, as we have done in the past, to continue to set the strong public health/environmental standards that the citizens of this country demand, to do it in common-sense, flexible manners.

Mr. Chairman, if I might -- several points have been raised by you. Several points were raised yesterday. I look forward to sharing with this committee the rest of the story. I'm sure it is important to all of us that we have a full record of exactly what has happened, so that as we move forward, we do so with a base of knowledge.

Thank you again for the opportunity to be here.

REP. BURTON: Mr. Hoecker?

MR. HOECKER: Thank you. Mr. Chairman, Congressman Waxman, and members of the committee, I want to express my thanks for inviting an Energy Regulatory perspective to this hearing today, and I commend you for holding it. It is timely, and there is a clear need to publicly examine the current price to consumers of the various forms of energy and how we ought to respond to those prices through markets, technology, and public policy.

I have spent much of the past several weeks testifying at or conducting hearings on the challenges we as a nation face in this area. We have heard stories of genuine hardship coming from high electricity prices in California, and the expectation that the price of natural gas will stretch the budgets of many households and businesses this winter.

Yesterday I was in Ohio with Governor Taft and Alaska Governor Knowles, discussing the causes and probable results of the gas deliverability squeeze. In that case, many of the experts present, me included, stated their belief that natural gas reserves were adequate and that gas markets were capable of responding to stabilize natural gas prices at lower levels over the next year.

I should note for the committee that gas markets have produced almost $200 billion in savings for the American consumer since 1985, and I expect this to continue.

Electricity markets pose a different set of issues for regulators and other public policymakers. That industry is undergoing a fundamental transition at the moment. There are -- it was clear in our hearings in California that the electricity market there was dramatically out of sync with the needs of the digital economy, the expectations of public policymakers, and, most importantly, the economic well-being of average electricity customers in that state and in San Diego in particular.

The causes and proposed solutions are complex, and they include the dramatic surge in demand growth in California.

But it has become clear that the California electricity markets are not competitive during peak periods -- or periods of peak demand, and that the efforts of state and federal governments and even private corporations to anticipate and avoid this crisis have simply proven inadequate.

There is plenty of responsibility for this market and its prices to go around. The FERC, which oversees the wholesale portion of all domestic markets, including California's, has been aggressively investigating the problem and looking for appropriate solutions. If that means devising new ways to thwart market power, we will try to do that. If that means changing market rules and wholesale market structures, then we will do that. If it means imposing stricter controls on the ability of utilities or generators to collect market rates, then we will do that. And if it means making rates subject to refund until we can be reasonably confident markets like California's will get -- that Californians, rather, will get price signals instead of price shocks, then the commission is likely to move in that direction.

In the meantime, we have, in effect, capped wholesale markets in that state. The state of California has fortunately also lifted its restrictions on the ability of utilities to hedge in the market when they buy power, and has adopted legislation to get retail rates back to normal levels and to expedite the siting of new-generation facilities.

I want to assure the committee that the FERC is indeed pursuing a consistent energy policy. It is, in fact, spelled out in our strategic plan. Within the limits of our jurisdiction and within the limits of our role as an independent regulatory agency, the commission has, for many years, promoted competitive energy markets. Some call this deregulation. I don't happen to be one of them. I agree with Congressman Kucinich that there are indeed limits to what free-market approaches can obtain. But, having said that, lighter-handed regulation of energy markets is part of our approach. Monitoring markets to ensure they are competitive, efficient and fair is another element. A third component is to ensure adequate energy infrastructures, such as natural gas pipelines, consistent with sound environmental practices and environmental law.

We believe that this is a recipe for stable prices and energy security in the long run. And today, Mr. Chairman, I believe that the FERC is doing all it can.

However, we need Congress's help. I have long-advocated restructuring legislation that would untie our hands in promoting sound electricity markets. My recommendations would provide: First, that FERC have jurisdiction over all electric transmission in the country. We don't currently. Secondly, that FERC have oversight of electric reliability. We right now have no such authority. Third, that we have express authority to promote regional transmission organizations to govern the operation of the bulk power market. And fourth, we want broader FERC authority to remedy market power abuses in energy markets. Currently that authority is limited.

To that list, I might now add additional FERC authority to retroactively correct extraordinary wealth transfers that can happen when prices unexpectedly skyrocket and consumers cannot get out of the way. We, right now, do not have that authority either.

Mr. Chairman, I want to thank you again for inviting me here today. I'll be happy to try and field your questions.

REP. BURTON: Thank you, Mr. Hoeker.

We'll now go to our questioning. Let me start off by saying that --

REP. WAXMAN: Mr. Chairman, may I make a request? We were going to have a half-hour each side of the full panel. Why don't we do 15 minutes each side of just Mr. Richardson and see if we can accommodate his schedule, and then go back to the other witnesses.

REP. BURTON: Well, even if we did 15 minutes on each side, we wouldn't be able to get through all of our questions that we have today. I think because of the time constraints Mr. Richardson's under, we have no option but to have another hearing and to bring him back.

REP. WAXMAN: Perhaps so, but he is trying to deal with an energy crisis. I think the country would be better off if he were dealing with that than sitting in a hearing answering questions that might be asked now and answered now so he can get on with his job.

REP. BURTON: Mr. Waxman, there's an election coming up. If you become chairman next year, you can run this committee, but right now you're not chairman.

REP. WAXMAN: Well, I gather what's happening is politics to be sure you're chairman.

REP. BURTON: Mr. Chairman, Mr. Chairman -- Mr. Waxman -- (laughter) -- we would like to get on -- we would like to get on with the business at hand. Do you have any more comments to slow us down?

REP. WAXMAN: Mr. Chairman, may I inquire how we're proceeding?

REP. BURTON: We're proceeding under the regular order.

REP. WAXMAN: Is that a half-hour each side?

REP. BURTON: That's absolutely correct.

REP. WAXMAN: So before Democrats can ask a question, you'll go for a half-hour, but then we'll have a half-hour.

REP. BURTON: Mr. Richardson will then depart after their questions, and we will not have an opportunity --

REP. WAXMAN: Well, is it your hope that he'll depart after your questions so we can't do questioning?

REP. BURTON: (Bangs gavel.) Regular order.

Mr. Richardson --

REP. WAXMAN: It appears so.

REP. BURTON: Mr. Richardson -- (chuckles) -- we had 231 oil refineries, and it's declined down to 155 oil refineries. And you said in your opening statement that we are letting market forces dictate the price of oil. When the oil industry people were here yesterday, they said one of the problems that they have is they're operating at, I think, 96 percent of capacity right now, and one of the big problems that they have is because they have not been able to build a new oil refinery in the past 25 years, and as a result, they're limited in the supply they can produce.

So I'd like to ask you and Ms. Browner, why is it -- and they tell me that they can build oil refineries and gas production facilities that will comply with environmental standards and keep the ecology clean if the restrictions by EPA and the Energy Department are not so restrictive. And so I'd like to ask you, what can we do to get more refineries in place to make sure that the demand is met?

SEC. RICHARDSON: Mr. Chairman, let me say that we are very --

REP. BURTON: Turn your mike on.

SEC. RICHARDSON: Our policy is to have a viable refining industry in this country. That's number one. A number of small refineries have closed in the past decade. Poor economics and other investment problems. Now, we have asked the National Petroleum Council, which is a group of energy executives, to advise the Department of Energy, me, on what we need to do to have a viable refining industry in the country. They're expected to complete a report for us this summer.

Now, it is our view, Mr. Chairman, that our refining capacity right now is at 96 percent. It's gone up. And we were concerned because it was in the low 90s. It's now 96, some say a little bit more. Total U.S. refining capacity has been expanding and becoming more economically competitive. So what has happened also is new refining capacity is likely to be at existing refineries along mainly the Gulf coast. So what we're seeing is refining capacity has been added to existing refineries right now. That is how they've kept pace with demand without building new refineries. Nonetheless, we still have -- we're watching this very closely and we're looking forward to the industry's recommendations.

REP. BURTON: Well, the industry was here yesterday. And the indications from the industry was they would like to build new refineries. They would like to increase capacity, and they can't do it because of environmental regulation. And they're very concerned about that.

The other thing is -- and we should put up that natural -- do you have a comment, incidentally, Ms. Browner, about that?

MS. BROWNER: I do, I'd like to respond. If the allegation is for some reason public-health air pollution standards stand in the way of new refineries, I would like to respond.

REP. BURTON: No, that's not what they said. They said they could reach -- they could build refineries that were environmentally safe --

MS. BROWNER: But that our rules were a problem.

REP. BURTON: Yes.

MS. BROWNER: And I'd like to respond to that allegation. May I?

REP. BURTON: All right.

MS. BROWNER: Thank you.

I'd like to make three points. One is the same point that Mr. Richardson made, but we'd like to actually use the chart. In the last five years, while the number of individual refineries, facilities, has gone done, the refining capacity of the remaining 155, 160 facilities has actually gone up. Part of the reason it is going up is because we work with them to expand those existing facilities, and we do it in an expedited manner; we do it in conjunction with the states. I'll give you an example.

There are currently pending 12 permit applications to expand existing refineries -- that's over the last two-year period. Most of those permits -- and they are issued by the states, with our concurrence -- most of those permits have been issued in 12 months. Of the 12 that have been received in the last two years, only five are currently pending; the others have been granted.

I'll give you an example. We received one down in Texas on March 2000 of this year; it will be done in the next two to six weeks. We received another one in July. We have asked for more technical information; we will then be moving forward. So we are moving through the permitting process the expansion that the companies are deciding are best for them.

The final point I'd like to make, Mr. Chairman, is we're always open to receive any permit application. We don't decide what the application should be in the first instance; that is up to the companies. They do it for a variety of reasons.

REP. BURTON: Well --

MS. BROWNER: In the last 25 years -- not because of the new Clean Air Act, not because of the old Clean Air Act, but because of their business realities -- they have chosen not to apply for any new facility, ground-up, but are, rather, expanding existing facilities. And we are permitting those with all of the public health protections.

REP. BURTON: I know. But the argument they made, Ms. Browner, was that the environmental regulations, that they believe are extraordinary, are such that they can't do it in a profitable way, and as a result, they haven't been able to build those new refineries.

But nevertheless, let me get on to another subject.

(To staff) Would you put up that chart on the gas reserves?

The gas companies -- the natural gas producers said that their existing wells are producing at lower and lower levels, and they can't meet the demand because those wells are producing at lower levels. Now, we have -- as you can see on that map -- several very large gas reserves in the continental United States. And this is in the lower 48; this does not show what we have up in Alaska. But they told us that if they could -- and they can in an environmentally clean way, drill these wells and get the oil, they said there's no question about that.

So my question is, why is it we're not drilling wells in those areas, which are off-limits now because of the EPA?

MS. BROWNER: Well, I think three of the --

REP. BURTON: Because of the Interior Department.

MS. BROWNER: I don't want to answer for Interior. But I do think it would be important to note -- and natural gas exploration, not home use of natural gas, residential use of gas, that does not require any EPA permit. We are not involved in that process whatsoever. But exploration of natural gas in some instances may require a water pollution or air pollution permit from EPA.

Mr. Chairman, with all respect, I think three of the areas that you are noting up there -- I'm having a hard time seeing this -- but I think three are actually off-shore areas, and those, obviously, bring with them particular issues of particular concern, particularly to the citizens of those areas, to the protection of their beaches.

REP. BURTON: Well, let me get to Mr. Richardson -- because I'm running out of time -- since he's in charge of energy policy.

The large reserve in the middle of the United States -- if you excluded the ones that are off-shore -- according to the people who were here yesterday, would provide a substantial amount of gas over a long period of time -- 10, 15 years -- if we were to drill that.

And it could be done in a very safe, environmentally safe way. Why are we not exploring in that area?

SEC. RICHARDSON: Mr. Chairman, a lot of that is public land, that central area.

Let me also mention to you, Mr. Chairman, that statistics for natural gas, we have had increased domestic natural gas drilling. We have, I think, a total now of rigs, domestic drilling rigs are almost 800, the highest level in the last 15 years. And we've seen a nearly 60 percent increase in the production of natural gas on federal onshore land since 1992. We did open -- I don't know if the map reflects that. I can't see the -- I can see it, though, but we did open the Natural Petroleum Reserve in Alaska to gas development, where we have 10 trillion cubic feet. Oil production -- no, it's not on the map. Oil production on federal Indian lands accounted for 25 percent of domestic production in '99. But on natural gas, Mr. Chairman, what happens is supply and demand dictate production levels.

REP. BURTON: Well, let me just interrupt, because the gas producers yesterday said that -- and Mr. Hoecker may want to answer this, too. They said that they have their pipelines full at the present time, I think 96 percent. They're concerned about additional pipelines, number one, and number two, also getting more productive gas wells. And they say that the source is there. I mean, there's definitely a source of gas. They could do it more efficiently. They said that more wells could be drilled -- 800 rigs out there right now simply isn't going to meet the demand. There's more wells that can be drilled. And they want to know why -- and I do, too -- if this could be done environmentally safely. We're not doing it. So if you and Mr. Hoecker could answer that, I think I'm just about out of time.

SEC. RICHARDSON: Mr. Chairman, let just add on natural gas, what we have also proposed that is in the president's package is a tax credit for natural gas drilling. It's called Geologic Expensing, which allows for a better ability for the natural gas people to drill. We think this is very important.

REP. BURTON: Mr. Hoecker?

MR. HOECKER: Mr. Chairman, there is -- that's a very accurate portrayal of the amount of reserves we have, and in Alaska there's another at least 35 trillion cubic feet of gas, but no way to get it to the lower 48 except through some limited L&G (?) facilities.

Currently we have a deliverability problem, however. When prices collapsed a couple of years ago, a lot of people left the oil and gas production business, a lot of wells were shut in, and production declined. It was a response to a variety of things that you can trace back to the collapse of the Asian economy. But what that's meant is that we have been using up that supply of cheap gas and have had very little to replace it. Now with gas prices escalating above $3, as the secretary mentioned, there's been a dramatic increase in exploration and development. But there's a lag time of about 12-18 months. I don't think that most interstate natural gas transmission systems are full now unless it means in the wintertime, when they're taking a lot of supplies out of storage. I think the situation is going to normalize itself, but what -- the situation we're in today is the direct result of the price collapse a couple of years ago. And it's taking the gas industry some time to recover.

REP. BURTON: Mr. McHugh?

(Off mike.)

REP. BURTON: Oh, excuse me. Mr. Shays?

REP. CHRISTOPHER SHAYS (R-CT): Thank you. I welcome all of you.

You get somewhat reluctant getting into this issue, because if we're honest with each other, it's Republicans and Democrats who are in this together, and both share blame. The administration shares blame, and Congress obviously has things we can do.

But as we do our specific issue, I'm just interested to know, the Energy Department, which doesn't have other distractions, I'm just interested why it wasn't giving the clarion call that we were going to be having this problem. Why -- as you admit, Mr. Richardson, why were -- why was the administration caught flat-footed on this?

SEC. RICHARDSON: Well, first of all, I never admitted that. And secondly, we are not flat-footed.

We have been pushing -- in your region, the domestic heating oil crisis is the biggest problem --

REP. SHAYS: But --

SEC. RICHARDSON: -- and we have been saying that we needed a Northeast oil reserve. We have been saying that stocks are low. We've been working with the home heating oil people on transportation.

REP. SHAYS: Mr. Richardson, let me just --

SEC. RICHARDSON: We've asked for authority for the Congress to deal with this reserve, which is in your state --

REP. SHAYS: Let me --

SEC. RICHARDSON: -- and we need it passed.

REP. SHAYS: Let me just remind you, though, you did have a meeting with New England members. Mr. Sanders was leading the charge, and he was asking both that we utilize the Strategic Petroleum Reserve. And he put forward the home heating reserve bill in which we signed on. It wasn't initiative of the administration; it was initiative of Mr. Sanders, in which we all readily agreed. And it was a surprise to me that it kind of came out from a rank-and-file member and not from the administration.

But let me ask you this: Why are you blaming Congress and specifically Republicans for the fact that the Energy Policy Conservation Act hasn't moved forward, when it's Mrs. Boxer that's holding the bill up? The last time I checked, she was a Democrat.

SEC. RICHARDSON: Mr. Chairman, first of all, I didn't blame any Republican; I said the Congress has not passed this. And there have been a number of holds. You mentioned a Democratic member. I was not aware of that. The other holds have not been by Democratic members. But I'm not -- I don't think we need to dwell on that.

We need this legislation passed. I need full authority for the trigger on the Northeast home heating oil reserve, for the Strategic Petroleum Reserve. We need to pass it. I don't care what is holding it up; we just need to get it done. This is for the national interest. I'm not trying to point fingers; I'm just stating a fact. It's not authorized.

REP. BERNIE SANDERS (I-VT): Mr. Shays, would you yield for a --

REP. SHAYS: No. If I could just continue my questions, please -- yesterday we heard testimony about changes in the domestic oil marketplace since the 1980s, resulting in a far less vertically integrated supply and distribution system. In your views, just who or what is, quote, unquote, "big oil," and what is their role today's domestic energy market?

SEC. RICHARDSON: The FTC conducted an investigation about why the price differentials were so high in some parts of the country. I think what the FTC, in their preliminary investigation, concluded -- and that is not a complete report, because they still are working on it -- is that environmental factors -- the reformulated gasoline, three to six cents -- were not the cause for this increase, for this spike; that the causes were several: transportation problems, pipeline problems, market problems. I think that was perhaps what your question refers to.

Mr. Shays, I'm not here to blame any industry or any members or any causes. I just think that we need to work together to have a comprehensive policy that deals with supply and that deals with demand.

We have three weeks to go in the Congress, and there are a number of necessary steps that need to take place, too.

In the same vein, the executive branch also has authority to take several steps, some of which the president is considering, that deal with the present crisis. So --

REP. SHAYS: The president, though, and the vice president, which you refer to as the Clinton-Gore administration, has been making strong attacks against big oil. And I just want to know what "big oil" is, and then we go from there.

SEC. RICHARDSON: (Chuckles.) Mr. Shays, this is a political campaign. I am the secretary of Energy for the Clinton-Gore administration. I'm not interested in blaming anybody; I want to fix the problem, and I want to fix it with you.

I think the -- it's been referred that large oil companies have been doing quite well lately.

Their profits are up. The American people, I think rightfully so, had questions in the Midwest about why the price spikes increased dramatically. The price of oil is $38 a barrel. That's unacceptable. But I don't want to --

REP. BURTON: Is Big Oil responsible for the $35-plus a barrel?

SEC. RICHARDSON: No, it's a variety of factors. It's the market; it's many other reasons.

REP. BURTON: Well, wouldn't OPEC be number one?

SEC. RICHARDSON: No, I think that OPEC has been working with us, quietly, in the last three instances they have raised production levels. Not enough. We operate on the free market. OPEC is a cartel. We opposed their production cuts in the past. But the fact is that we have a demand problem.

REP. BURTON: Isn't it true, though, that the administration earlier on was concerned with $10 a barrel and was encouraging OPEC to limit supply to get that price up a bit?

SEC. RICHARDSON: No, that's flatly wrong. And --

REP. BURTON: You weren't concerned about domestic production that started to go down because we couldn't produce --

SEC. RICHARDSON: Well, yeah, of course. And I warned this. And I am publicly on record as saying that $10 a barrel per oil is not good. That's not good for the market, it's volatility, it hurts a lot of states in our country that produce domestic oil and gas. The stable price that I think is ideal is between $20 and $25. But we think that the market should dictate those forces.

REP. BURTON: Two last questions. The Strategic Petroleum Reserve, which, admittedly, many members of Congress have encouraged you to release, so I'm not suggesting that I wasn't part of that, and also a part of the home heating reserve -- there are others who respond to our effort to do that with some concern to distortion in the marketplace, as you've just made reference to, but a concern that, for instance, with the home heating reserve, that people aren't -- suppliers aren't going to build up a reserve and inventory if they're concerned that all of a sudden the administration, whichever administration, decides to release it and significantly reduce price. So there's a sense that maybe we're actually going to have less supply rather than more because of this reserve.

SEC. RICHARDSON: The home heating oil reserve is just 2 million barrels. That we don't anticipate would affect the market. It's only there, as many of you constructively suggested, for a supply emergency. And the language -- the trigger authorizing me to use it, Mr. Shays, is based on -- not on the price, but on the supply emergency. I welcome that. I don't want to base it on price. I think it should be on supply emergency.

What the home heating oil operators lack is an incentive, as you said, to stock product reserve. We have to give them incentives to do that. We've been working with them, transportation, a number of other measures, their interruptible contracts, and we have a good dialogue with them. Some have suggested -- and I'd welcome your thoughts -- a tax credit for them to store home heating oil, a small tax credit, to give them an incentive to store because, as you said, they are not storing right now because prices are so high.

REP. SHAYS: Thank you. And what would be the trigger for releasing the Strategic Petroleum Reserve? What should be the trigger, so we know it's not a political decision?

SEC. RICHARDSON: Well, that's already in statute. The trigger is a national supply emergency. You're talking about the Strategic Petroleum --

REP. SHAYS: Yes, sir.

SEC. RICHARDSON: Because we have the Northeast Reserve.

REP. SHAYS: Right.

SEC. RICHARDSON: There the language is supply interruption.

REP. SHAYS: Okay. It's a little nebulous, though. I mean, in other words, the president can do it and say there is an emergency.

SEC. RICHARDSON: Yes.

REP. SHAYS: Yeah.

Let me just end with this question. In a recent appearance before the House Committee on International Relations, you were asked if Governor Bush was responsible for today's high oil prices. Your answer, and I quote, was "No." Is that still your position?

SEC. RICHARDSON: Governor Bush?

REP. SHAYS: Yes.

SEC. RICHARDSON: No, it's not his fault.

REP. SHAYS: Thank you.

REP. BURTON: Mr. McHugh?

REP. JOHN MCHUGH (R-NY): Thank you, Mr. Chairman.

Just to kind of fill out the record, what Mr. Shays and, Mr. Secretary, you were talking about on RFG, I'm not familiar with the Federal Trade Commission Study. I am familiar with a study done by the Congressional Research Service that found that 25 percent of that -- Secretary Browner's shaking her head, but I can read the English language.

MS. BROWNER: Yeah, we'd be happy to supply for the record -- I actually have that with me -- the FTC finding.

REP. MCHUGH: If I may -- I'd just be delighted to have you supply all that information. But still, the Congressional Research Service found a 25 percent of that increase -- which is not even a majority of the increase -- but a substantial part was due to that. And the Energy Information Agency part of Secretary Richardson's own Department of Energy found, if I can read the English language correctly, quote, "The new product required a substantial change in the blend recipe and in the characteristics of some of the components to make the new product." It went on to talk about the significant difficulties of that reformulation on the price. You may want to forward that information to Secretary Richardson as well, because apparently his EIA isn't aware of it, either.

Mr. Secretary, I agree, we have to work together. I go home to a part of the United States that encompasses the Adirondack Mountains, hundreds of miles of Canadian border, where it will be snowing very soon. And I don't think my people are concerned who's right and who's wrong, and I sure am not going to check their voter registration card before I see if we should help them or not. I know you well enough to believe very strongly you share that sentiment as well. So I'd like to talk a little bit less about the longer term approaches -- not that they're unimportant -- but rather what we can do now to avert or at least to ameliorate what will be a crisis of life and death proportions in areas that are served by people such as Congressman Sanders, myself and many others.

I made the comment yesterday that it's hard to think about politics when it's snowing in your district seven months out of the year. It's hard to rationalize the current price of a gallon of oil based on statistics that average it out over two decades when your main industry has, as is true in both Bernie Sanders' and my district, is the dairy industry and you're receiving the same price for your product today that you were 20 years ago. And I would suggest that a hundred percent increase in the cost of home heating fuel, a hundred percent, approximately, cost increase in the price of diesel fuel that runs your tractors that allows you to make a living as meager as it is, is truly an emergency.

OPEC has talked about a target of $28 a barrel for oil. Where do we stand -- and by "we", I mean this country -- on that target? Is that a reasonable cost? We've heard a lot yesterday from people in the oil industry who said that the great anomaly was the $10 a barrel of oil. Fine. Let's accept that. Is 28 reasonable, or is that an objective that we should accept now, or -- how do we react to $28 a barrel?

SEC. RICHARDSON: Congressman, what we have said is that 10 is too low, 30 -- now 30-plus -- is much too high. What we have said ideally is between $20-$25. Naturally, 28 is better than what exists today. Nonetheless, OPEC has established what is called a price span. Anytime there is between 22 -- if it exceeds $28 -- and you mentioned that 28 -- they would automatically increase production if it's, I think, 20 days by 500,000 barrels. That has not always happened.

Our view is that the market should dictate these forces. But we think that for producer and consumer countries 20 and 25 is good for economic growth, to quell recessions, and to deal with the basic supply and demand laws.

What has happened, Congressman, is a dramatic increase in demand throughout the world. It's not just our country, it's Europe and Asia. And I share your concerns very much about your region. This is why we think the Northeast Home Heating Oil Reserve is important. The president -- there's a real acute home heating oil shortage in the Northeast. We're very worried about it.

REP. MCHUGH: And that's why I wish to explore further -- and I was an early supporter of Congressman Sanders' bill, a cosponsor, original cosponsor, and I was proud to do so, and I commend the president for creating it by executive order. I think it will help. I hope it will help, but I'm not sure it's going to be enough.

You talk about market forces. I'm a Republican, and generally a market-oriented kind of guy. But the market is not working sufficiently right now. And it seems to me when OPEC increases -- as they did about two weeks ago -- their pledge, an additional $500,000 a barrel (sic), and your North crude oil goes up to over $33 a barrel within hours; we've got to do something more.

I'm very concerned that the president -- the administration -- has not taken the steps, or seen fit to release the Strategic Petroleum Oil Reserve supplies. If we don't do that, thinking only in the short term, what can we do to ensure that this winter won't be a catastrophe for many people in the colder climes of this country? What other remedies are there, short of hoping that OPEC will sufficiently increase production?

SEC. RICHARDSON: Congressman, we will continue to urge OPEC to consider increasing production because it is obvious that the world needs more oil.

Secondly, on the Strategic Petroleum Reserve, whether it's a sale or a swap or other proposal, the president is actively considering that right now. At this very moment, a decision is imminent. He may decide not to tap it. We've been very reluctant to tap it in the past because of the language in the legislation that it should be a national supply emergency. We used it during the Gulf, we used it very sparingly.

What else can we do, Congressman? I think we can work together on additional low-income energy assistance funds. I know in your district you have a lot of moderate-income and poor people that could use this. We're also -- and I'm glad you mentioned the North Heating Oil Reserve -- we need to get that passed, even with executive order, the trigger for its use -- is important.

We also believe that heating oil deliveries are very important, that they take place without any transportation or pipeline problems. We work with the Coast Guard to ensure their ready access into the harbors that reach you.

We have had a number of emergency efforts in the event of a home heating oil shortage -- exercises with regions and states to deal with the problem, including, I believe, your state.

REP. MCHUGH: Well, I appreciate that. Shortages are one thing, fuel disruption is another. Affordability is the most important and that's what disturbs me and I think that that's the key question here that's being avoided. In fact, as one of the strongest supporters of LIHEAP, there's an economic reality that the more you take out of the market through LIHEAP, the higher price pressures you place on people who are at the lower income levels who don't qualify, many of whom live in my district. So that's -- that's not the answer either.

The final -- the final comment on this is that there has to be a release of SPR. There is no other way that I see, and it's not that I'm unwilling to entertain it, for any reason -- political or otherwise. But the only way a crisis of price is going to be avoided -- not supply interruption, but affordability -- is through SPR. So I hope you'll continue to press that with the president because that's, it seems to me, the sole relief.

Secretary Browner, in your comments, you spoke about your pending regulations to reduce the sulfur level of on-road diesel.

MS. BROWNER: Yes, in my written testimony, I did speak about the diesel. I would be happy to speak about it now.

REP. MCHUGH: You did not in your oral?

MS. BROWNER: No, I was talking about last year's rule to remove sulfur from conventional gasoline, not from diesel.

REP. MCHUGH: I misunderstood. I was reading while you were speaking, and I didn't bring the proper nexus. I apologize. Well, let's talk about the proposed reduction. That's a 98 percent reduction in the sulfur levels on road diesel. I know I heard you speak about the flexibilities and the opportunities that you're trying to access in working with industry and such.

It can come as no secret to you that the industry is very concerned; not just the diesel-producing industry, but the manufacturing industry that will use these diesel supplies to power their machinery, are concerned that, number one, the technology today simply does not exist to accommodate this kind of reduction. In my chairman's own state of Indiana, Cummins Manufacturing has stated, and I quote, "Cummins has been in this business for 80 years, and we don't know if these standards can be met and what the total cost is, how possibly can EPA? With no explanation or justification, EPA has chosen to propose a regulatory scheme without the meaningful exchange of technical information and ideas that preceded prior proposals for such far-reaching standards. Extraordinary and as yet undeveloped technology will be needed, and huge investments in time and resources will be committed." They go on to say this is what they feel is an unachievable and unworkable approach.

The other thing that troubles me is that the Department of Agriculture -- (pause) -- thank you, Madame Chairman, I'll try to be brief -- the Department of Agriculture asked that EPA should provide more information to demonstrate that fuel supplies to farmers in rural areas will not be interrupted as the industry converts to the ultra- sulfur diesel fuel. The industry offered 90 percent. Apparently, the EPA is consistent on 98 percent, has refused to extend the public comment period, even when the administration's own Department of Agriculture says this is ill-considered. I'm curious how you'd respond to those kinds of objections.

MS. BROWNER: First of all, this effort to reduce pollution from on-road vehicles -- cars, SUVs, diesel, trucks and buses -- has been the work of the EPA and the administration for seven to eight years now. This is not a new idea, this is not something we have come to lately.

Specifically with respect to diesel, diesel fuel today has approximately 500 parts per million sulfur. It has a very, very high sulfur content. With that high sulfur content comes a whole host of public health -- particularly respiratory -- issues. We have made a proposal to reduce the pollution that comes out of the tailpipes of large trucks and buses. The way you change the pollution out of the tailpipe is you make adjustments in the fuel, you make adjustments in the engine, you add things like catalytic converters. You know that there are companies who have raised questions, and we are in dialogue with those companies, as we did when we set the car and SUV standards last year.

I would also like to note for the record, there are companies that are supporting our proposal. For example, BP/Amoco has written in support of this 15-part-per-million diesel fuel standard that we have proposed. There are manufacturers -- the companies that will make the catalytic converters, the companies that will make the technologies to meet the tailpipe standards. They are supporting our proposals. There are even engine manufacturers that are supporting our proposals.

Having said all of that, this is a complicated undertaking. We have been at it for many years.

We are listening to all of the parties concerned. We are trying to honor requests from many, many governors -- I don't think we've heard from a single governor who is opposing these proposals -- to help them clean up the air their people breathe.

One of the most important things we can do at the national level is to look at the on-road diesel fuel -- and this is important because you're going to hear people talk about all diesel fuel. We are talking right now about the diesel fuel that is used on the road, not off the road, not in farming equipment, but in the 18-wheelers, in the buses.

REP. MCHUGH: So we go back to the division of fuel that the chairman pointed out even further in his comments. And apparently 90 percent reduction voluntarily has been rejected, and you refused to extend the comment period. How can you --

MS. BROWNER: I will -- again -- and let me note that that is some companies' position, it is not all companies' position.

When you look at what comes out of the tailpipe, if you want to clean up that goop, that stuff that we all hate sitting behind, that fog, if you will, that comes out of the large trucks, the diesel buses, you have to do two things. You have to clean up the fuel. When you clean up the fuel, that allows you to put on the first-ever catalytic converters. How many of you knew that? Catalytic converters do not exist on the large diesel trucks and buses. The clean fuel is necessary.

I might just point out, while BP-Amoco says 15 is fine, others in the industry have said something higher. You should know where Detroit is, you should know where the engine manufacturers -- they want 5 ppm of sulfur content, not the 15 which we have proposed.

By way of saying this is a complicated issue. We are engaged in a thoughtful process. We are committed to finishing this because -- and I think this is important -- if there is one thing I have heard over the last seven and a half years from CEOs in this company, it is give them as much time as possible to meet environmental standards. The sooner we finish, the sooner they know, the sooner they can start looking how to most cost-effectively meet these standards.

Secondly, we are working -- for example, I had a lengthy meeting with the CEO of Cummins yesterday. They have their position. But we did take the time, despite their position of opposition, to hear what they had to say about how we might be able to structure the flexibility. They may ultimately never agree with us, but we are open to anyone who wants to bring us a proposal on flexibility.

REP. MCHUGH: So I assume that's a "no" you won't extend the comment period?

REP. MORELLA: (Sounds gavel.) Speaking of time, actually --

MS. BROWNER: We have not made any final decisions. We are reviewing everything that we have received. We are committed to getting the public health benefits that will come from cleaner diesel engines and fuel.

REP. MCHUGH: So you may extend --

REP. MORELLA: The gentleman -- the gentleman's time has expired.

REP. : Madame Chairman?

REP. MCHUGH: All I want is a yes or no.

MS. BROWNER: Thank you.

REP. MORELLA: And in deference to the fact that we did give more time to this side, we will extend to the minority side an extra five minutes. So I'll recognize Mr. Waxman for 35 minutes, and maybe another answer -- yes or no -- could be part of a response to Mr. Waxman.

REP. WAXMAN: Thank you very much for giving us the extra time. And we appreciate the witnesses being here.

And I appreciate the tone under which Mr. McHugh addressed this issue, because what he pointed out in his time was that we've got a problem in this country and we need to work together on this problem. It's not a Democratic or Republican problem. We are facing an energy crisis in some parts of our country with heating oil prices -- and maybe even availability -- being very, very high. And we see electricity rates in California, maybe other places, soaring. Gas prices are rising.

So we need to address these problems. It's our responsibility, both the Congress and the administration. We're seeing that we're greatly dependent on foreign oil, and we're able to be manipulated by OPEC.

The way the government works, the president -- and all of you represent the president and his administration -- proposes ideas, but then the Congress is supposed to dispose of these ideas. And the administration has proposed a number of initiatives that would help resolve our country's short- and long-term energy needs.

Secretary Richardson, I'd like to begin by asking you about some of these administration proposals.

One of our basic safeguards against oil price manipulation by OPEC is the Strategic Petroleum Reserve. My understanding is that the president has urged Congress to reauthorize the presidential authority to utilize the Strategic Petroleum Reserve in times of energy crisis, but Congress hasn't done so. Could you describe why the administration believes reauthorization of SPRO is important?

SEC. RICHARDSON: Well, Mr. Chairman, the reauthorization of the Strategic Petroleum Reserve, the -- is essential because the ability for the secretary of Energy to advise the president when it's a case of national emergency shortages, when -- you also have to manage the Strategic Petroleum Reserve. We've got 570-plus million barrels that has been a very wise investment, and you have to manage it, you have to replenish it, you have to maintain it. So that full authority to use it, the authority for the trigger and the national supply emergency, is needed.

Plus there have been a number of, I think, add-ons relating to the authorities relating to some energy initiatives here that are part of that bill. And we need it passed. It's not passed.

REP. WAXMAN: What are the consequences if Congress continues to block this reauthorization of the Strategic Petroleum Reserve?

SEC. RICHARDSON: I think a questioning of the executive branch's and my authority to use the Strategic Petroleum Reserve in time of emergency. And we think that it's needed, as a very urgent priority, along with the Northeast home heating oil reserve, the trigger to use in case of an emergency. Let's say sometime this winter in New England there's a home heating oil crisis, and we haven't resolved it, and I have -- I don't have the authority to use it.

REP. WAXMAN: One of the other areas we can deal with the energy crisis is to reduce our dependence on foreign oil by increasing energy efficiency, if we used our energy resources more efficiently and effectively. Over the past several years the administration has proposed tax breaks to encourage Americans to purchase energy- efficient cars, as well as homes. What's happened to these initiatives, Secretary Richardson?

SEC. RICHARDSON: They've languished -- $4 billion worth of tax credits on energy efficiency for homes, for fuel-efficient vehicles, for buildings. Chairman Waxman, we think that we can dramatically improve our energy resources in this country by having increased energy efficiency, but you have to have incentives for that to happen. The partnership for a new generation of vehicles with the oil -- with the auto companies to have more efficient engines, to have SUVs that are 40 miles per gallon, a lot of the issues that Administrator Browner has championed in fuel efficiency, they're lagging. And we need that to pass to have an energy policy that is based on -- that deals with the supply needs of the country but also with demand.

REP. WAXMAN: So the administration has proposed these ideas of some tax incentives to become more efficient. The Congress hasn't acted on them. And it seems to me that what we see is we're not making the progress towards energy independence that we could if Congress would act to work with the administration to pass this legislation.

SEC. RICHARDSON: And you made an excellent point about renewable energy. We have to reduce our dependence on foreign oil. It's 57, 58 percent now. If we invest in new technologies, as you said, and we invest in wind and solar and biomass, in bioenergy, in fuel cells, these are worthy investments. And only 7 percent of the administration's budget in that area in the past seven years has been funded -- seven.

REP. WAXMAN: Let me draw your attention to the question of electricity restructuring, because at yesterday's hearing we heard from witnesses who had recently experienced sharp rises in electricity rates and brownouts. Two years ago the administration proposed legislation that would have provided for restructuring of our nation's electric utilities. Could you describe the key provisions of this proposal and how this proposal could help address some of the problems we currently face with our electricity system, and tell us -- if Congress acted on the administration's proposal to modernize our electric utilities?

SEC. RICHARDSON: Well, regrettably, one of the House chairmen dealing with this issue said the electricity restructuring bill was dead in the Commerce Committee, which is the main vehicle for passage. We regret that. What our bill does, Chairman Waxman, is increase competition, it will improve the environment, it'll save the customer money. What we want to do is several things: one, deal with the fundamental problems that exist of inadequate transmission, generation facilities, improved energy-efficiency efforts in our electricity grid, push for independent power operators so that utilities and other power sources can invest in our electricity grid that is badly in shape, that needs modernizing.

What you have is a dramatic increase in demand and an electricity grid that has not had strong authority and strong investments to keep it refurbished. The bill gives Chairman Hoecker and FERC the authority to take several steps to make our grid more reliable and efficient. That's languished too. And after the brown-outs and black-outs around the country, after the fact that over 26 states have already had restructuring legislation in their state legislature, including California, the federal bill would have had rules of the road that enabled a lot of federal statutes that are harmful to be removed. And regrettably, this bill is not moving.

REP. WAXMAN: Well, what we've had is administration proposals to reauthorize the Strategic Petrolem Reserve, to give tax breaks for energy efficiency, to have a partnership with the automobile industry to produce cleaner and more efficient automobiles. We've had proposals for electricity restructuring. We've had ideas from the administration, specific ideas and proposals for funding for conservation and renewable energy, and none of that has been moved in the Congress of the United States.

Now let's look at what some of the things are that we've seen in the Congress, initiatives here. Congress hasn't been receptive to your energy proposals, and I suppose it's because the leadership in the Congress thinks it has some better ideas. I'd like to get your comments about some of these other ideas that they have. Every year, since 1995, the Republican leadership has introduced a measure known as the Department of Energy Abolishment Act, which would have abolished the Department of Energy. What's your view on whether this proposal will help advance energy policy? I know it'll cost you your job, but -- (laughter) -- is this a constructive way for us to deal with our energy policy, just abolish the Department of Energy?

SEC. RICHARDSON: Mr. Chairman, I'm not going to be humorous. Sometimes I wondered whether that didn't make sense in light of my recent -- but no -- (laughter.) Let me just say, of course not. The Department of Energy has very valuable functions. It deals with our nuclear weapons, electricity, renewable energy. It deals with a lot of very important national security programs with Russia and nonproliferation programs. It's the ultimate science agency in the government. It's a very important department. That's not the way to deal with a problem.

REP. WAXMAN: Absolutely not. And we can laugh about it because it really is a laughable idea that a response by the leadership of the Congress of the United States and sponsored by many members of this committee, including one member who said, well, the administration has failed. But their answer was to abolish the Department of Energy.

And another answer they've had is, let's allow drilling in the Arctic National Wildlife Refuge. What -- does that make sense?

SEC. RICHARDSON: No, we're opposed to that, Congressman Waxman, because we think that it's a very ecologically sensitive area. The caribou and other wildlife, we believe, would be harmed. We think there's sufficient other area in Alaska that could be drilled that is already available that can properly deal with our energy needs. We think that there's some very, very sensitive parts in the country.

And by the way, the offshore drilling in California and Florida was congressionally mandated.

So it's not something that came out just from one branch of the government. It came from both of --

REP. WAXMAN: Not only was it congressionally mandated, but it was congressionally mandated on a very strong, bipartisan vote. Most members of Congress, whether Democrat or Republican, don't want to go out and have oil rigs off our coast. We don't want it in California; I don't think people on the East Coast want it, and their representatives all across the country said no to that idea.

Now, another way we can deal with this energy problem is to set up standards for automobiles that are known as CAFE standards, the Corporate Average Fuel Economy. That's to make sure that the average fuel efficiency standards that we require for cars are going to mean that we have less reliance on fuel. In fact, Honda has brought a car to the market using a hybrid electric technology that gets 70 miles to the gallon. Toyota will soon be selling a four-passenger car that achieves over 60 miles to the gallon. And Congress has blocked the Department of Transportation for the last five years from even studying whether greater fuel efficiency is feasible. As a result, fuel economy levels have stagnated, and since the 1980s CAFE standards have only required that new cars average 27.5. Honda's getting 70. Congress has said we only -- we're going to allow 27.5 miles per gallon and light trucks average 20.6 miles per gallon. It just seems to me we need to be addressing our fundamental energy problems, we need to address our dependence on imported oil and our reliance on an antiquated electric system. But Congress hasn't acted on these issues. Instead, we do nothing, and when something inevitably goes wrong -- and we're now seeing it, our system going wrong -- we search frantically for someone else to blame. And this is the political season.

So what we have are hearings where -- one of the members asked the first question: Why has the administration failed to deal with the energy crisis? Well, that's not taking responsibility that we all have, you have and we have in the Congress of the United States.

Administrator Browner, I want to ask you some questions, because yesterday we heard a number of different claims from majority members that suggested environmental regulations in general and the Clean Air Act in particular are causing our energy problem. I want to talk about some of these issues. We heard there's simply too much red tape and environmental regulation. We had a lot of colorful analogies: for example, the National Petrochemical and Refiners Association testified that EPA has created a regulatory blizzard for the nation's refiners.

Now, you addressed this issue earlier about this claim that you're not allowing permits for new refinery construction. Chairman Burton made a big point of stating that no new refineries have been built since the early 1980s, and he alleged that it was due to permit requirements under the Clean Air Act, and he went on to blame the failure of EPA to approve new refineries as one of the major causes of today's high gasoline prices. Ms. Browner, do you know how many applications EPA has received since the early 1980s to build new refineries?

MS. BROWNER: For brand new, ground-up --

REP. WAXMAN: Brand new refineries.

MS. BROWNER: We may have gotten one in 25 years. One.

REP. WAXMAN: Well, is it possible for EPA to issue a permit for new oil refineries if no one's applied for it?

MS. BROWNER: No. It requires a company to come forward and make an application. Many come forward to expand their existing facilities, and those get granted. But a new one would require a company to come forward and make the application.

REP. WAXMAN: I raise this question because I think it's highly misleading to say that you're not giving permits for new refineries, that's the reason for the problem.

MS. BROWNER: Completely misleading. They're not coming to us. And I spend a lot of time with the petroleum refiners of this country. We work closely with them on a lot of fuel issues. They don't come in and meet with us on building new refineries. We're there, we're available if that's what they want to talk about.

REP. WAXMAN: But what they are talking to you about is -- and they're getting permits from you -- is to build not new refineries, but to consolidate and expand their existing refineries.

MS. BROWNER: Yes.

REP. WAXMAN: And that's the trend that I understand is continuing. Oil companies are not asking to build new facilities; they want to modify and expand the existing ones. Can you tell us whether that's happening and whether you're giving out permits, or what's happening with their efforts to expand and modify their facilities?

MS. BROWNER: Absolutely they are expanding their facilities. And we and the states do grant these permits. I think I mentioned earlier that in the last two years, we've had 12 applications for expansion of existing facilities. Five -- seven of those have already been issued, five are currently pending and, we presume, will be wrapped up in a timely manner.

And what's happening is you can't just look at is it 200 facilities and then, you know, 155, uh-oh. You have to look at what are the 155 capable of doing. And that's what that chart shows. Their capacity is actually going up, and we are granting the permits to allow that to happen. We would welcome a permit for a new refinery if someone wants to bring it. We'll give it the full review.

REP. WAXMAN: And how long does it take?

MS. BROWNER: For the expansions, most of them are managed within 12 months. About half of them are managed within five months.

REP. WAXMAN: I just want to cite for the record, CITGO applied in March and is expected to be approved within two to six weeks. Valero applied in July and is expected to be approved by the end of the year.

MS. BROWNER: Correct.

REP. WAXMAN: Exxon Mobil applied in June and is expected to be approved by the end of this year. And as I understand, there have also been two applications in Minnesota; one has been approved and one is pending.

MS. BROWNER: Correct.

REP. WAXMAN: Now let's turn to the issue of electricity generation. At yesterday's hearing, we spent considerable time discussing California's energy situation and new power plants that are currently expected to come on line. In that discussion, the Clean Air Act was repeatedly blamed for the length of time it takes to site energy projects. For instance, allegations were made that implied that it takes six to seven years to get a permit under the Clean Air Act to site high voltage transmission line. Another witness mentioned an anecdote of 15 years being required to site a high-voltage transmission line.

Ms. Browner, we've investigated these allegations. They don't appear to have any basis in fact. My understanding is that the Clean Air Act permits are not required for siting a transmission line. Could you clarify the committee whether there are any requirements for transmission lines to be permitted under the Clean Air Act?

MS. BROWNER: There are no Clean Air Act requirements. There are no Clean Air Act permits required to site a transmission line. Those decisions are made by states under any number of laws that they're responsible for, but we do not engage in the siting of transmission lines.

REP. WAXMAN: In the case of power plants, as distinguished from transmission lines, there are clean air requirements.

MS. BROWNER: Yes.

REP. WAXMAN: And the Clean Air Act does require that new power plants be permitted under the Clean Air Act. Why is that the case?

MS. BROWNER: The Clean Air Act looks at the emissions from power plants, and, based on those emissions, Congress required us to set up a permitting program. But there, too, Mr. Waxman, it's important to understand what the real facts are. We have, and the states have, received in the last two years, including some very, very recently, 300 applications for electric turbines. Over 60 percent of those have already been issued. They moved through the process very rapidly, again, on the order of approximately 12 months on average. The states take the first step in this. We frequently do not become involved except to concur in what the state is requiring in terms of pollution reductions. And we all work together and it moves very quickly.

REP. WAXMAN: My understanding is that the commission's process rarely takes longer than 18 months.

MS. BROWNER: Correct.

REP. WAXMAN: You say an average of 12 months.

Now, I also understand that over the last few years, hundreds of applications under the Clean Air Act have been filed for new gas turbine electric generation. These applications have been filed under the Prevention of Significant Deterioration part of the Clean Air Act. How long does it typically take for a PSD permit to be approved?

MS. BROWNER: Again, those are moving on an average of 12 to 18 months.

REP. WAXMAN: So what you're saying in essence is that once again the facts just don't support the rhetoric that we've been hearing.

MS. BROWNER: If there is a seven-year permitting process, we are happy to look at it.

Our numbers do not show that. I do want to remind all of the committee members that because of the Clean Air Act, you all made the decision that the states would have the first bite at the apple. We see it only after they have come through an initial process. We generally concur in what the states are doing.

REP. WAXMAN: Ms. Browner, we've gone through some of the allegations with you right here, on the record, about the costs of the Clean Air Act. What your answers indicate is that the allegations of delays and high costs don't have much basis in fact. My experience is that this frequently happens when industry complaints are closely scrutinized.

I've been in the Congress for 25 years. I sat on the committee that dealt with the energy policies and the Clean Air Act. It's not this committee; it was the Commerce Committee. And the fact is, industry regularly overstated the cost of complying with environmental regulations. When we were considering the Clean Air Act of 1990, which passed almost unanimously, signed by President Bush, we had industries come in and tell us that the costs to comply with that law were virtually going to bankrupt the economy, and of course nothing like that has happened. And I want to give examples, because the record -- people forget with the record is.

Every time we have a hearing, somebody comes in and makes these wild charges. Yesterday, we heard -- yesterday at this hearing we heard from Stephen Simon, a senior executive at Exxon/Mobil who raised concerns about the costs of EPA fuel regulations. But his company has a history of exaggerating compliance costs. When we were considering the reformulated gasoline provisions of the Clean Air Act, Mobil wrote to members of Congress that the requirements should not be adopted because -- and I want to quote -- they wrote to us, "the technology to meet these standards simply does not exist today," and then it turned out to be completely wrong, untrue. The reformulated gasoline provisions went into effect in 1995 and have brought about tremendous clean air benefits. Just so people understand that.

In addition to trying to make new cars cleaner by emitting fewer pollutants, we try to make the gasoline burn in a cleaner fashion as well. That's the reformulated gasoline issue. Has that been a success, and have they, the petroleum companies, been able to comply?

MS. BROWNER: It's been a tremendous success, in terms of cleaning the air, and in a very cost-effective manner. And similar, we believe, and we have every reason to believe, that the low-sulfur gasoline requirements which are now in place and will start to take effect in 2004 will similarly be very cost-effective. And just as an example, let me point again to the fact BP/Amoco is already selling the low-sulfur gasoline, and not with a price differential. They are already selling what we are going to require all companies to sell beginning in 2004, today, in a number of cities, and they will be adding more cities to that list in the coming weeks and months. I mean, that is a real, I think, testament to he fact that when we set these standards, not only do we achieve a level of public health and environmental protections, but we're doing it in a sensible way that works for the businesses of our country.

REP. WAXMAN: I just want to give another example of the kind of statements we hear at hearings that turn out to be absolutely wrong. The utility industry, when we were looking at trying to adopt legislation to stop acid rain, they exaggerated the costs. The chemical industry said that if we phased out chlorofluorocarbons it would cause massive disruptions. The auto industry said they couldn't meet new tailpipe standards.

Yet each one of these statements turned out to be wrong. Once we adopted the law, President Bush signed that law, and all of these industry groups went ahead and not only complied, but even did better than the law required, under many circumstances.

And so I think it's important, when we hear these exaggerations by industry groups, to keep that in mind, especially when their answer is to drill on our coastlines and go up and drill in Alaska, and that's their answer. That's their answer to the energy crisis.

Now, Secretary Richardson, I'm going to yield my time to some other members, but you made a statement I just wanted to ask you about, because I just -- and I know you don't want to blame anybody, and you want to be a statesman.

You've been at the U.N., so you know what being a statesman's all about. (Soft laughter.) But I was sort of taken aback when you said you don't think OPEC should be held responsible for the crisis that's happening in this country. And I know we're to blame ourselves when Congress doesn't act, you know, we don't anything to reduce our reliance on fuels. But OPEC's a cartel. They've got a monopoly. They can turn off and on the spigot, and they know that we're dependent on their oil. Why don't we just admit that they're playing games with us?

SEC. RICHARDSON: Chairman -- Mr. Waxman, let me be very careful, because I have to deal with these energy ministers all the time.

And I do want to be clear. I believe that OPEC, the last three meetings they had, in which they were considering increasing production, they did so -- a lot of it was their own reasons, but our quiet diplomacy, I believe, worked. I think that they have acted responsively in terms of the increases -- 3.5 million barrels more than existed at the time.

Obviously, the markets have not responded. The world needs more oil. So I don't want to blame OPEC for the misfortunes of a world that has dramatically increased demand and a number of intersected energy problems that we have.

I believe our policy towards OPEC, which is one of quiet diplomacy, constructive engagement with them, pushing for increases in production -- 2.5 million in their March meeting, 700,000 in their meeting in June, and 800,000 meeting (sic) at their last meeting, and possibly more soon -- has worked. I think Saudi Arabia has showed dramatically positive leadership.

REP. WAXMAN: Well, Mr. Secretary, I understand what you're saying. But the answer to OPEC is for this country and the West to become less dependent on them. And I hope the high prices that they're forcing on us and the games they're playing will be a signal to all of us that we've got to wake up and become more energy- efficient and less dependent on foreign oil for our own economic well- being and our national security. I don't like the idea of OPEC having that much control. We saw what happened in the '70s, and we're seeing the exact same thing again. And the best way to stop this is for us to take the actions that we need to take, and I don't think --

SEC. RICHARDSON: There's no question that markets and not cartels should set prices. You're absolutely right. And that -- we do need to dramatically reduce our reliance on imported oil. There's no question about that.

REP. WAXMAN: Thank you. I want to yield to Mr. Kucinich --

REP. SANDERS: Could I ask how much time there is remaining on this side?

REP. WAXMAN: We're going to yield and --

REP. SANDERS: But there's a limited amount of time.

REP. WAXMAN: But they'll move on to the five-minute rule.

Mr. Kucinich -- I'm yielding Mr. Kucinich a few minutes, and then we'll see if we can get to you, Mr. Sanders.

REP. DENNIS KUCINICH (D-OH): I understand there's about 12 minutes left, and I'm willing to go for three minutes.

In some of the documents, in preparation for this hearing, we were told that the -- first of all, I want to say something. I want to thank Secretary Richardson and also Carol Browner, who I've had an opportunity to work with closely over the last few years, for your work for this country. You've both done outstanding -- an outstanding job, and I really want to thank you for that.

I haven't had a chance to work with Mr. Hoecker, so I want to direct my questions to you. (Laughter.)

MR. HOECKER: Thank you!

REP. KUCINICH: We are told that natural gas now sells at a record high of 5.22 per million British thermal units, more than three times the 1.60 futures price in March of 1999. Back home in Cleveland -- you know, this hearing gets kind of global at times -- back home in Cleveland, Ohio, people are experiencing sharp increases for the price of natural gas, and it's September. And we know -- you know, we know the difference between September and January in Cleveland; trust me. Why are we seeing such a steep rise in natural gas prices, even before families are turning on the heat?

MR. HOEKNER: Well, I think the explanation was the one I gave earlier -- that we have a deliverability squeeze. There is, I think plenty of --

REP. KUCINICH: What is that? What is a deliverability squeeze?

MR. HOEKNER: Well, what it means is that the production from domestic wells has declined seriously as a result of a price collapse a couple of years ago; that the industry's production area hasn't recovered from that yet, and that there will be a lag time until adequate supplies reach the market to drive the price back down to more reasonable levels.

REP. KUCINICH: You know, our time's limited here, so I -- excuse me for interrupting --

MR. HOEKNER: That's fine.

REP. KUCINICH: -- but I want to ask you this: Now, in the meeting you had yesterday in Ohio, the reporting that came out of that meeting, that's cited in the Cleveland Plain Dealer here, said that there's adequate supplies. So on one hand, we have some people in the natural gas industry saying, well we don't have adequate supplies; others are saying we do have adequate supplies. But we're seeing, already, anticipations of even higher prices.

My question to you is -- I heard your remarks -- how do you thwart market power? Are you ready to exert pressures on the market to keep the rates down? And are the rates subject to discipline by you? And if you're monitoring them, what do you intend to do for my constituents and for people in the Midwest who, right now, are faced with some horrible choices in their households when these rates start to go up?

What is the Federal Energy Regulatory Commission going to do for the American people?

MR. HOEKNER: That's an excellent question and -- our concerns about the impact on retail customers is going to have to be addressed largely at the retail regulatory level in the states.

You will recall, Congressman, that Congress decontrolled the price of natural gas in the 1970s and '80s. It is an unregulated commodity, and we have a real market out there and this market is reflecting a supply-demand imbalance right now.

The problem, perhaps, is somewhat definitional in the sense that I think everyone would agree this country has adequate natural gas reserves -- enough for decades and decades. What we don't have is ample gas in the pipeline, in storage, and the market is -- and a lot of natural gas now is traded in the forward markets, on the NYMEX, and the market is saying that its value is greater in the interstate market. We don't control that.

REP. KUCINICH: Thank you. I know there are other members who have questions.

I thank you, Mr. Chairman.

REP. WAXMAN: We have practically run out of our time, but I'm going to yield to Mr. -- Mr. Sanders has seniority, so let me yield to him two and a half minutes, if we could, and then we'll see if we can get more time. I apologize to my colleagues.

REP. SANDERS: Thank you, Mr. Chairman.

Two points. I want to -- I want to thank you for all of the work that both of you have done in so many areas, but there is something that I want to raise to you today. I'm going to read from a publication. And this is what it says:

"Venezuelan proposal detailed at Washington meeting.

"The U.S., September 20th, rejected a proposal by Venezuela's PDVSA in which the state company would stock its crude storage terminal in the Bahamas with heating oil and sell the additional distillate directly to the United States government."

Quote, " We appreciate the offer of storage, but there is currently no need for storage of crude or product in the U.S.,' a DOE spokeswomen told Placks (sp)." Placks is the publication. "The spokeswoman said that while the U.S. welcomed PDVSA's offer to boost distillate production, the DOE urged Venezuela to put the additional product on the market, as soon as possible' rather than attempting to make a direct sale to the U.S. government. 'There is no need for U.S. government involvement in the purchase of this distillate,' the spokeswoman said."

As far as I know, we have a crisis in the Northeast regarding home heating oil. If Venezuela is prepared to sell us this product at a reasonable price, why don't we buy it?

SEC. RICHARDSON: Congressman, we think they should put it on the market. Venezuela has had proposals like this before. What we like to see is distillate on the market. And Venezuela has been a constructive partner in a lot of these OPEC discussions. But it is our view that while it's an interesting proposal, it would be better accomplished by them putting this distillate on the market.

The second point I want to make; there will be a lot of reports that India, Saudi Arabia, other parts of the world, have sufficient distillate that they want to sell us, that all we have to do is go out and get it. Those reports have not been confirmed.

So with this proposal that the Venezuelans, our friends, have been making, our view is this is great, you have the distillate; put it out on the market.

REP. SANDERS: I'm not sure that I agree.

Let me raise just two other brief questions. I have very little time.

Mr. Waxman raised the question of OPEC being a cartel. Now, I am not a great fan of the WTO, but as I understand WTO rules, cartels are in violation of free trade. Now, I don't understand why the U.S. trade representative is running all over the world -- we had an agreement with China the other day about free trade. Why doesn't somebody in the United States government say that this cartel is in violation of free trade agreements? Why don't we take them to the WTO? Are they in violation of free trade? I think the evidence is overwhelming they are. Anyone disagree with me? I don't see any -- I'm listening.

If they're in -- we just passed a free trade agreement with China yesterday. I voted against it. Why aren't we standing up to these guys? I think that it's something -- I'll pick up on what Mr. Waxman said before. There is something very, very strange about our relation with OPEC. And let me be honest about it; I voted against the war in 1991. But we lost -- people shed blood there, we have thousands of people who are suffering from Gulf War illness today. And there is something -- I think the Vermont Air National Guard is now over there protecting the airspace. And I think that being treated by our OPEC, quote, unquote, "allies," who we supply military equipment to, who we prop up, who are billionaire rulers -- I don't know if they've allowed in Kuwait women to drive, yet, or something, if they're making progress in freedom in that respect. I think there's something funny going on and we're not hearing the whole truth about it.

Let me just ask Ms. Browner a question. I want to applaud you for stressing what I think is the $64 issue, and that is energy efficiency. Can you, very briefly, in the very little time that I have left, just tell the American people what it would mean in terms of the savings of energy in this country if we move forward boldly in terms of energy efficiency?

MS. BROWNER: I think the best thing to do is look at our track record to date. For example, our Green Lights program is saving during peak reduction in 2000, 6,100 milliwatts. When we look at programs, from Green Light to computers to other types of equipment we use in our homes, we believe that energy efficiency could save the average American family on the order of $400 in annual electric, home- heating, et cetera bills.

REP. SANDERS: And if we became much more energy efficient, isn't it clear that we could break our dependency on Mideast oil to a significant degree?

MS. BROWNER: We could certainly reduce it to a significant degree. I mean, I think that -- you know, there's this sense out there that somehow or other we did this energy efficiency thing back in the '70s and we're done. The technology has advanced, the industry has advanced; there are a number of things we can do, and they are incredibly cost-effective to do them, and yet we cannot get Congress, unfortunately, to support our funding request so we can go out there and do it.

REP. SANDERS: Thank you.

REP. BURTON: The gentleman's time has expired.

Mr. -- who is next down there? Mr. Ose? We will now go to the five-minute rule.

REP. DOUG OSE (D-CA): Thank you Mr. Chairman. Five minutes?

REP. BURTON: Yes, sir.

REP. OSE: Thank you, Mr. Chairman. First of all, I want to diverge a moment and thank Secretary Richardson for the -- I dropped him a note earlier because I didn't know if I'd get time. I want to thank you for the assistance in Sacramento on the -- (word inaudible) -- reactor. That project is a success, and will continue to be so. And your participation has been noted and appreciated.

SEC. RICHARDSON: Thank you.

REP. OSE: I want to look briefly at electricity into the California market. Who among you is probably the most knowledgeable about Bureau of Reclamation electricity? (Laughter.)

SEC. RICHARDSON: Chairman Hoecker.

MR. HOECKER: I am, sir.

REP. OSE: All right, Mr. Hoecker. (Laughter.) If I understand correctly, about 10 percent -- let me back up. The federal government has two agencies that are significant generators of electricity. One is the Corps of Engineers, the other is the Bureau of Reclamation.

MR. HOECKER: That's correct, mostly in the Northwest.

REP. OSE: And about -- well, you've got Bonneville, and you've got Western Area Power Administration and all the others. But they use facilities that are controlled by the Corps or the Bureau.

MR. HOECKER: Correct.

REP. OSE: Okay. The question I have as it relates to California is, there's the Sierra Nevada region, and then there's the Desert Southwest region, both of which contain Bureau and Corps projects that generate electricity into the grid for use in California and western states. Is that accurate?

MR. HOECKER: That's correct.

REP. OSE: Okay. About 10 percent of their total generation is used or routed to investor-owned utilities -- 10-15 percent, the rest going to municipalities, water districts and things of that nature. Is that accurate, 10-15 percent?

MR. HOECKER: I don't know the exact number, sir, but certain entities in the West, public power entities, have preference power. They have first dibs on that production.

REP. OSE: Right. Well, I've looked at this -- your recent lay- in. Suffice it to say that after you follow the preferential allocation of the power, about 10-15 percent comes to the public market, it's sold through market-based rating and distributed accordingly.

The question I have is that in June of this year we had a severe shortage of electricity in California, the consequence of which was that San Diego's consumers, those who rely on San Diego Gas & Electric, just got hammered in terms of cost of electricity. Are you familiar with that situation?

MR. HOECKER: Yes. It's actually been worse in August and then a little bit in September. But June really hit San Francisco as well.

REP. OSE: Okay. And I was going to get to August and September, because I know I'm --

MR. HOECKER: Fine.

REP. OSE: -- on Monday of this week something happened that I want to come back to.

I have, Mr. Chairman, a limited number of information about Bureau projects and their power generation over the last five years, starting in 1996. And what I want to get to is that if these companies -- excuse me, if these facilities are generating power into the marketplace, the benefit of which to some degree accrues to the consumer in San Diego, then we ought to in a period of significant price spikes run those facilities flat out. And we ought to be providing as much electricity into those markets as possible to keep the price down. Would that be a reasonable assumption?

MR. HOECKER: Yes, within respectable reserve margins that's probably appropriate.

REP. OSE: A respectable reserve margin would be what -- 5 percent, 10 percent?

MR. HOECKER: Well, it's changed over time. I mean, we used to think reserve margins of 15 or 20 percent were appropriate, and in this market it's well below 10 percent.

REP. OSE: Okay. And that ties into stage one, stage two, stage three alerts and how you figure out where the blackouts and brownouts go and all that sorts of --

Well, the point that I want to bring up is that we have the Hoover Dam in the Desert Southwest region which is running, I would say, over the past five years pretty much close to capacity. We have the Davis Power Plant -- same thing. We have the Parker Power Plant -- same thing. The Deer Creek Power Plant -- these are all in the Desert Southwest region and the Bureau's operation -- same thing. The Elephant Butte Plant -- same thing. The Navajo Plant -- same thing. And we're talking about hundreds of thousands of megawatts of aggregate electric generation.

What I'm curious about is why, when we have such severe electric shortages, we aren't running Glen (sp) Canyon flat out. We're running Glen (sp) Canyon roughly at 50 percent of capacity in the June, July and probably August timeframe. And I don't understand that. Who made that decision and why?

MR. HOECKER: That's information I don't have, sir. The Bureau of Reclamation or the Corps may have it, but I don't.

REP. OSE: I'd like to enter this into the record, Mr. Chairman --

REP. BURTON: Without objection.

REP. OSE: -- and perhaps copies can be given to Mr. Hoecker.

MR. HOECKER: I do know that in the West this year generally it's been a bad water year, and a lot of major hydro facilities have not run near their historic capacity.

REP. OSE: I would probably concur with you, and that's why I checked the others. I mean, Navajo, granted is a coal -- large coal- fired. But these others are, in fact, hydro plants. And there is no significant variance in their production levels. So I checked that hypothesis, because I particularly was concerned about that.

REP. BURTON: The gentleman's time has expired. We'll get back to you. We have more questions.

REP. OSE: Thank you, Mr. Chairman.

REP. WAXMAN: Mr. Chairman, I want to yield my five minutes to Mr. Tierney.

REP. BURTON: Mr. Tierney?

REP. JOHN F. TIERNEY (D-MA): I thank you, Mr. Waxman, Mr. Chairman.

Mr. Richardson, I yesterday had an opportunity to question a gentleman from Exxon-Mobil about whether or not, in fact, his company had reduced production over the course of last year by some 30 percent, because that's what had been reported. And, in fact, he acknowledged that they had.

And it's been reported that not only that company but a number of other of our domestic producers, so-called Big Oil, have been cutting our production. So that I would assume that it's not just OPEC and non-OPEC foreign oil-producing entities that are not producing as much as we would like. We have a problem here at home.

I then asked him whether or not they had made great profits. And I think it's interesting to note that in fact the oil industry has experienced significant benefits from increases in oil and gasoline prices. The 10 largest oil companies reported tremendous increases in profits in the second quarter of 2000. Overall, those 10 companies reported second quarter profits of $11.1 billion, a 182 percent increase compared to the second quarter of 1999. In the first and second quarters of 2000, total profits for these 10 companies were 20.8 billion, exceeding the total annual profits for all of 1999. profits for Exxon-Mobile was $4.5 billion, a 276 percent increase from second quarter profits in 1999. From Chevron, their profits were increased 290 percent; for Conoco, it was 300; Phillips Petroleum was 550 percent; Sunoco was 727 percent. Exxon, Chevron and Conoco all reported record profits in the second quarter of 2000.

Stock prices for these oil companies have obviously increased significantly. The average stock price for the 10 largest oil companies has increased 14 percent.

Companies with the largest increase in stock prices were Phillips Petroleum, 43 percent; Tosco, 23 percent; Ultrimar (ph)-Diamond Shamrock, 20 percent.

And in addition to oil companies, other companies have benefitted from the increase in oil prices as well. For example, Haliburton, the world's leading provider of oil field services saw its stock price increase by 34 percent from January 1 to September 15, 2000. All this, Mr. Secretary, while they're reducing production.

My question to you, sir, is the administration dealing with these domestic oil producers as well as with OPEC and non-OPEC foreign suppliers to make sure that they are producing at the rates they should be to keep our prices down and our fuel stocks available?

SEC. RICHARDSON: Congressman, I have had numerous meetings with oil companies, big and small, urging them to increase production, urging them to get more product into the market, asking them what specifically we can do to help with their transportation and access and regulations to just get more reserve into the market -- home- heating oil, every possible product.

Without trying to defend the actions of anybody, I do want to point out that a lot of these -- a lot of these decisions they make on production, they're -- you know, they're basically business decisions.

REP. TIERNEY: I think their profits show that. (Laughter.)

SEC. RICHARDSON: Yeah. And, you know, their profit, you can't compel them to increase production. You can urge them. You can jawbone them. We've done that. I think most have -- you've pointed out --

REP. TIERNEY: Well, I appreciate you answer, Mr. Secretary. My point is, and I think you've been good in pointing that out, you've been very diplomatic, as is your bent, but the fact of the matter is while we hammer away at OPEC and others, we've got a problem right here at home from the big free marketers who don't want any government involvement, but they're not exactly doing things that would help this country at a time of crisis. And I think that's important to note.

Mr. Browner, we talked about refineries, and there hasn't been a refinery built in the Northeast area for that 25-year period because the companies haven't applied. Does EPA have any regulations dealing with storage facilities?

MS. BROWNER: For the bulk storage facilities?

REP. TIERNEY: Exactly.

MS. BROWNER: And the underground storage tanks? Yes, absolutely.

REP. TIERNEY: Can you tell me whether or not there have been any applications to increase the storage capacity in the Northeastern area in the last recent period of time?

MS. BROWNER: We should answer that for the record. We think there probably has been. We're not aware of how much. So we'll answer that for the record.

REP. TIERNEY: Okay.

Mr. Secretary, Northeast reserve that's being planned, and I know that there are two sites in New Haven, Connecticut, and one in Woodbridge, New Jersey. Common concern -- I know the answer to this, but I'd like to hear you put in on the record -- common concern from people is will that reserve, because it's located in Connecticut and New Jersey, actually be beneficial to Massachusetts and points north if in fact it becomes necessary to use it? And how will it get there, and so forth?

SEC. RICHARDSON: Congressman, it's for the Northeast. Your area will be protected. We're working out all those contingencies right now. The progress on setting up the reserve is going well.

REP. TIERNEY: Great. And lastly, the storage or suppliers, people involved with that have been saying that they have a problem with what the call carry. In other words, if the price is higher in January than it is right now -- all again, these are free-market people who want the government to stay out of it, but they're saying now they have a problem and what they really need is an incentive, so the government they would like to go in and write them a check or give them a tax break to help them on that carry. While I can understand and appreciate that, and I'm really amused by their change in tone as to what they think the role of the government is here, would it not be somewhat more reasonable or fairer to the taxpayer if we gave them a low-interest loan of some sort, a revolving loan process?

Do you think that's worth doing? Do you think that's part of the solutions to help them through this carry period, and is that a reasonable way to approach it?

SEC. RICHARDSON: Yeah, I think loans -- and we try to put them in touch with the Small Business Administration -- a lot of these home heating oil operators -- as you know, Congressman, because I attended a meeting in your district of a lot of those --

REP. TIERNEY: You did and Mr. Mazur did, who is here, and I want to acknowledge he and Mr. Shages for the great help that they were in those hearings.

SEC. RICHARDSON: Did they do okay? All right. (Laughter.)

REP. TIERNEY: They do great.

SEC. RICHARDSON: I think ways to incentivize them are not harmful. Now, we have not accepted the concept of a tax credit. It is being considered; a small credit to get them, for instance, to store more, to keep more in their stocks. They have not done so, and I think at that meeting they explained why. They said prices are so high, if we stock, all of a sudden there will be price volatility and we're out of business, and we don't want to do that.

So I think a tax credit, modest, triggered, may be something that we're considering. Loans, certainly, government loans -- this is through the SBA -- are something that we partially have, but perhaps could expand.

I just don't think, Congressman, that these small home heating oil operators have been the villains in this whole process.

REP. TIERNEY: No, and I think I'm talking about the people who store it, you know? The suppliers, and they're not so small, in a lot of cases, and they're looking to have their carry covered and I don't mind trying to resolve that problem, but I just want to make the point, these are the people that want government off their back. We're happy to get involved in the right amount of government intervention, but perhaps a loan program might be better for the taxpayer than a giveaway.

REP. BURTON: The gentleman's time has expired. Mr. LaTourette.

REP. STEVEN LATOURETTE (R-OH): Thank you, Mr. Chairman. Yesterday, Mr. Secretary, we had the -- the oil companies were here, and a chart that I'm going to ask the staff to put up in just a minute. I think the representative was from Citgo, who wasn't at the hearing yesterday. But I made the observation that when I learned to drive we had high-test and regular gasoline, I guess, and those were your choices. This map from Citgo was designed to illustrate all of the different blends of fuel that may be required to be stored in different parts of the country to comply with various regulations.

You talked about jawboning and working with the oil companies on issues of transportation. One problem that they talk about is the fact that when we get to the winter driving season, you need this many blends of gasoline and in the summer driving season this many blends of gasoline. I just had a company in my district called Lubrizol came in -- and they want to pitch Mr. Percheseppi (sp) in a couple of weeks on a new product that they're making called "PuriNOx" that -- they claim that it reduces NOx emissions by 30 percent, and particulate from diesel. And I said, "This is great. It means jobs, a lot of money, for where I'm from." And they were going to go out to Mr. Waxman's state. They said, "We're going to go pitch it to California, too, because they have some air quality regulations that some of the rest of us don't have."

REP. OSE: That's my state, not Mr. Waxman's

REP. LATOURETTE: Well, it's Mr. Ose AND Mr. Waxman's state, and many other people, as well -- (laughter) -- live in California. But maybe -- and maybe this is for both Administrator Browner and you, Mr. Secretary. Don't we, maybe, can't we solve some of our infrastructure problems if we go back to the notion that whatever gasoline you decide, Mrs. Browner, or your successor decides is the best for the environment during the winter and summer, that we go to that, rather than having these 50, 60 -- I think there's 29 different blends of gasoline, if I understand it right? And whichever one of you wants to jump in and --

MS. BROWNER: (Chuckles.) The secretary is telling me it's my area. We don't disagree with you. I think that part of the challenge is you need to separate out on this map those that are local, that EPA has absolutely nothing to do.

REP. LATOURETTE: Right.

MS. BROWNER: And as you well know, a lot of cities, for a variety of reasons, have decided to kind of set their own gasoline recipe, Detroit being one of the older ones. But there's a number of those up there, and when you talk about the 26 different blends, a number, a large number of those actually are, in fact, local city decisions.

You know, I'll make a suggestion. I don't suppose it will be popular with all, but you could go to one clean gasoline standard for the entire country. I mean, part of the issue occurs because for reformulated gasoline, which is about a third of the country versus conventional gasoline, you do have issues in terms of reformulated gasoline depending on where it's sold in the country, in terms of weather and volatility. I mean, you could fix that by going to one clean gasoline recipe for the country.

What that would mean, though, is you would have places who don't necessarily need it to clean their air buying it, and that would be objectionable, I don't doubt, to some.

REP. LATOURETTE: Yeah, but you know, I don't think the air -- my air doesn't stop at the border of Ohio and Pennsylvania --

MS. BROWNER: That's right.

REP. LATOURETTE: And it goes all over the country.

And those of us in Ohio are blamed by those in the Northeast for polluting their air, and we blame the folks in Wisconsin. So it seems to me that the argument that was made by the oil companies that part of the problems with spikes in delivery is we have all these boutique gasolines and they've got to swab out the pipelines and the tanks and everything else, could be minimized if we went to one brand.

MS. BROWNER: Mr. La Tourette, I do think it's important to understand, it is Congress that named the cities that would get the cleaner gasoline, it was not the Environmental Protection Agency. It was Congress. So it would require a change in the Clean Air Act.

REP. LATOURETTE: And that brings me to my next point. When you were here in June -- I want to talk about the cities of Chicago, St. Louis and Milwaukee. And when we, again, had the oil companies here yesterday, they made, I suspect -- and they wouldn't agree with me -- but I suspect that they got caught taking a gamble in June. They saw that you had granted an enforcement discretion for St. Louis, and I think that they gambled that you would follow suit in Chicago and Milwaukee, and they lost.

MS. BROWNER: Well, there was no basis for them taking that gamble. They don't use the same pipeline. The issues were different.

REP. LATOURETTE: Maybe not. But since that time, and the question I have of you is, have you had a chance to look at what the Congressional Research Service concluded relative to the legality, the statutory legality that was used to grant a discretion -- whatever it was called -- enforcement discretion for St. Louis and deny for Milwaukee and Chicago? Have you had a chance to look at that, or your folks have looked at that?

MS. BROWNER: Actually, maybe there's two different Congressional Research Service memos. The one I've seen -- and it may be the same one that you're referring to -- looked at Midwest gas prices. I don't know that it looked at the legality of the situation in St. Louis versus the other cities. I'm not familiar with that.

But I will tell you why we did it for St. Louis. St. Louis had a pipeline go down.

REP. LATOURETTE: I know they did. The Explorer pipeline in St. Louis got 70 percent of their gas from it.

MS. BROWNER: Right.

REP. LATOURETTE: I just want to, if you could -- I'm looking at the memorandum of June the 28th, 2000. And if you haven't seen that --

MS. BROWNER: No, I have not seen that. I've seen the June 16th.

REP. LA TOURETTE: Okay. If I could ask you and/or your staff to review it --

MS. BROWNER: Certainly.

REP. LA TOURETTE: -- and respond to the committee in writing as to their conclusion that the enforcement discretion exercised for St. Louis, Missouri, was in violation of 80 CFR 80.73, and that not granting it for Chicago and Milwaukee when requested was also suspect. And so any thoughts that you have on that --

MS. BROWNER: We'd be happy to take a look at that.

REP. LA TOURETTE: Thank you.

Mr. Chairman, my time's expired.

REP. BURTON: Yes.

Ms. Schakowsky.

REP. JANICE SCHAKOWSKY (D-IL): Thank you, Mr. Chairman.

I wanted to focus, as did Mr. Kucinich -- who I appreciate has allowed me to go first, and you, Mr. Chairman, as well -- on natural gas. We face a real crisis of cost in Illinois. I showed this chart -- this actually bill insert that I got in July in my bill from Nicor that showed that we should expect that what we paid for $410 worth of gas last winter, we could expect to pay $610 this winter. That was in July. We understand that the October prediction is going to be $750; from $410 to $750. This is going to pose an enormous problem to not just poor families, but to ordinary working families in my district and in the service area of this utility company.

I have some basic questions about natural gas pricing, considering we're talking about a 100 percent domestic market, and why have the spot wellhead prices doubled? I don't understand.

Let me just ask my questions. Why did production drop when the demand increase was predictable and predicted?

Does the cost of natural gas track oil prices, regardless of supply and demand? Is there any relationship at all between the cost of production and the cost to consumers?

And I have to tell you, Mr. Hoecker, when I read your testimony, I was concerned about a rather complacent attitude that I felt was expressed in that; that you said that consumers are still saving money on natural gas, compared to pre-competitive prices; that you say the commission will be monitoring the gas supply and price situation very closely this winter to assure that competitive pipeline transportation markets continue to work in the public interest.

I don't think we can explain to my constituents and consumers in our area that any of this is operating in the public interest. They're going to be wondering how the heck they're going to pay their gas bills, particularly when they look at the profits of the gas companies, the fact that it is entirely domestic. And I thought that maybe you could clarify this and hopefully reflect some of the urgency that I feel and I think that many of my constituents feel.

MR. HOECKER: Well, your question's a great question, and it's one that sort of tracks the sentiment that we heard in California two weeks ago, when we were there, on electricity prices.

We're very aware that this country runs on electric and natural gas, that we need reasonably priced and stably priced supplies of energy; no question about that.

What I am hopefully getting across is that the commodity itself, natural gas, has been decontrolled. And there are lots of explanations as to why the price has varied this year, compared to previous years. And I know that's not very satisfactory to American energy consumers.

What the FERC can do about that is to encourage our colleagues at the state level, who are in charge of rate stabilization and LIHEAP, and in terms of ensuring that their utilities make prudent natural gas purchases, to exercise their authority with respect to retail rates.

And what we can do is to ensure that that -- when I say the "interstate natural gas pipeline market," I mean exactly that; the part of the -- the piece of the pie that we regulate is the interstate pipeline system that takes the gas from the producer or the processor and delivers it to the city gate, to the Washington Gas/Lights of the world that distribute it.

REP. SCHAKOWSKY: Well, maybe Secretary Richardson, then, can deal with the larger question just of natural gas prices, if you're only dealing with the pipeline.

(Pause.)

(Soft laughter.)

SEC. RICHARDSON: Congresswoman, I'm sorry. I was trying to have a conversation --

REP. SCHAKOWSKY: Well, I think it's a similar question to why was production so low when we knew that there were -- we were going to have a problem, and now prices are so high that we have a crisis.

SEC. RICHARDSON: Demand is high. That's number one.

Number two, U.S. gas production has been relatively flat. That's the second reason.

Gas storage levels have been below normal, and basically alternative fuel markets have been very tight.

So I think you have those four problems and the price issue, the capacity issue.

Now we are -- the president will some time very soon announce some initiatives from his Interagency Task Force on Natural Gas. We, as I said, Congresswoman, have a proposal before the Congress on what is called delayed geological expensing, which enable the natural gas producers to drill more and have an incentive to drill more.

We also have up here infrastructure improvements for pipelines. You know there have been several pipelines that have burst; that we need to find ways to repair them, to get them functional, to get them operational. And that is an initiative that we need to deal with too.

But those are the -- basically four reasons why we have this spike in prices.

REP. SCHAKOWSKY: Thank you. We look forward to an announcement by the administration. Thank you -- the president.

REP. BURTON: The gentleman --

REP. : Mr. Chairman?

REP. BURTON: Yes?

REP. : Mr. Richardson has stayed about an hour and 15 minutes over what he had -- originally was supposed to stay. And I just wondered, how will the chair proceed here?

REP. BURTON: Well, after just talking to you, there's two more people that have questions for him -- I think Mr. Sanford and myself, and --

REP. : I don't have any further questions, Mr. Chairman.

REP. BURTON: That will be about 10 minutes. So if you can stay 10 minutes, we should have you out of her, Mr. Secretary.

SEC. RICHARDSON: (Chuckles.)

REP. BURTON: Can you handle that?

SEC. RICHARDSON: Thank you, Mr. Chairman.

MS. BROWNER: Do I get to go too?

REP. BURTON: Well, we have a few more questions for you. If you don't mind staying for maybe another 25 or 30 minutes, we should have everybody out of here. But I know he has to leave. So if we can get you through in 10 minutes, that will -- and then we'll try to get you out of here right away as well.

Mr. Sanford?

REP. MARK SANFORD (D-SC): I thank the chairman.

And I apologize for the delay, Bill.

I guess I have just a couple of questions for both of you all. It was interesting, the gentleman from Vermont I think raised a very interesting point, and that is we have an administration that has said it advocates a rule-based system that comes with WTO, we have a trade representative who is constantly arguing that very point, and yet we haven't seen a lot of activity from the standpoint of doing something about, you know, OPEC members and the cartel that they hold.

And so I would simply ask you, as secretary of Energy, I mean, have you lodged a formal complaint with the WTO based on the cartel that's held by OPEC?

SEC. RICHARDSON: No, and I wouldn't do so, Congressman. That would not be helpful. I don't think that it constitutes a WTO violation.

REP. SANFORD: So a cartel held by OPEC, going -- colluding on prices does not constitute a breach of the rules-based system, as outlined by WTO?

SEC. RICHARDSON: Our view is what is desirable is the free flow of oil, based on market forces. That is our position. Now --

REP. SANFORD: Well, that's a wish list. And that obviously doesn't exist, given what OPEC is doing.

SEC. RICHARDSON: Well, as I said before, OPEC -- the last three meetings they've held, they've taken decisions that are positive for the international community -- more production. We encourage them to do more because those are the signals that are coming from this country and from the world.

I'd prefer to maintain a dialogue with them rather than fighting them in courts.

REP. SANFORD: Okay, so no action taken on WTO.

How about encouraging to our administration to eliminate the no- fly zone over Iraq?

SEC. RICHARDSON: Why would we want to do that?

REP. SANFORD: Okay, no. How about elimination of military sales to those OPEC members, based on the fact that they're colluding on prices of fuels coming back to the United States?

SEC. RICHARDSON: We, the United States, have a lot of strategic interests in the Gulf, including the containment of Iraq. We have strong relationships, security relationships, with Saudi Arabia, with Kuwait. That would not be in our interests.

REP. SANFORD: So that would be an action that you would not be willing to take?

SEC. RICHARDSON: No.

REP. SANFORD: And similarly, if not a case in the courts through WTO, how about some kind of revoking of the normalized trade relations that they now enjoy with our country? Fall under the same category?

SEC. RICHARDSON: Same category.

REP. SANFORD: I don't mean to be harsh on this. But I think it's -- my point is that we're unwilling, as an administration, to ask these things of a foreign country, in this case a group of foreign countries colluding on oil prices to America's detriment, while at the same time the remedy that you're offering in one part suggests invading the Strategic Oil Reserve. To me, that doesn't make sense. In other words, we'll put our own military at risk by bleeding down the Strategic Oil Reserve, but we won't ask this of a foreign country.

SEC. RICHARDSON: The president will decide in the next few days what to do on the Strategic Petroleum Reserve. This use of the reserve has been, as you know, extremely limited. It's a very important decision, but it's a few days away. It is based on whether the president believes the American consumer, the home heating oil crisis -- the American consumer would be harmed, and he will not hesitate to take the steps that are needed.

So Congressman, we have been very, very judicious in the use of the Strategic Petroleum Reserve. There was enormous pressure to use it all year, and we haven't.

REP. SANFORD: I understand that, and I respect that. But my concern is we've been even more judicious in asking allies in the Middle East to do certain things than to use our own Strategic Oil Reserve, which is, I thought, there for a very specific reason, and that is to be there in the place of military contingency.

SEC. RICHARDSON: Congressman, we asked Saudi Arabia to increase production; they did. We asked OPEC countries to increase production; they did. That is good not just for the United States, but for world markets. Now, that doesn't mean we should rely on their imported oil or their activity. But they are a reality. They control a large supply of the world's oil. Many of those countries we have strong relationships with -- Saudi Arabia, Kuwait, Indonesia, Nigeria, United Arab Emirates, Qatar. We have strong relations with them.

REP. SANFORD: I understand. I understand.

SEC. RICHARDSON: There are some that we don't. We don't talk to them --

REP. SANFORD: Sure. Right.

SEC. RICHARDSON: -- Iran, Iraq, Libya. You know, we don't talk to them much, so --

REP. SANFORD: Right.

REP. BURTON: The gentleman's time has expired.

REP. SANFORD: I had some more zinger questions, though.

Thank you.

Thank you, Mr. Chairman.

REP. BURTON: Let me just take my five minutes and let you get on your way, Mr. Secretary.

You just alluded to the Strategic Petroleum Reserve. Lawrence Summers and Mr. Greenspan oppose using that. And, of course, the vice president today called for releasing fuel from the Strategic Petroleum Reserve. You said the president will be making a decision on that. Do you have any opinion you're going to express to him?

SEC. RICHARDSON: Mr. Chairman, any advice I give the president is confidential. You know that.

I would like to say that Secretary Summers and I share the same view, that the use of the Strategic Petroleum Reserve is very selective, that is has to be under the right circumstances. I think our views are fairly similar, and they have been. I saw that article. The president has a wide range of options, including some of those that the vice president proposed. And a decision on whether to use the reserve will be made shortly, in a few days. That's all I can say.

My advice to the president is based on the fact, on whether we believe that the administration -- we believe the American people would be harmed by, for instance, a home heating oil shortage, whether the high energy prices. I just had consumers and truckers and a lot of people talk to me. There's serious problems that --

REP. BURTON: I think you've answered our question, and I understand the concern that you have for the American people and the heating oil problems. But I guess, you know, after two days of hearings and listening to the people who testified yesterday, there's a divergence of opinion on where the problem lies. The energy producers say there's environmental regulations that are strangling them, there's no enough pipeline capacity. There's a whole host of things that they said, which has been refuted or disagreed with today. But here's what it appears to me. I don't know if it appears to my colleagues, but to me.

It appears to me that there really is no strategy for dealing with the natural gas problems. We've got in our forests out West, we have a lot of government-owned land where there's great natural gas reserves. We could -- which could be very efficiently pumped out of the ground at higher levels than what they're giving in the pipeline now. But we're not exploring them. So there doesn't appear to be a strategy for natural gas, there doesn't appear to be a strategy for the problems that reformulated gasoline and the many varieties of fuels that are having to be made are causing. There appears to be no strategy for increasing our domestic production of oil.

I mean, we keep talking about dependency on foreign oil. We have oil that can be pumped out of the ground in various parts of the country environmentally safely that we're not going after. And we continue --

SEC. RICHARDSON: On that, Congressman --

REP. BURTON: Let me just go through all of these, then you can respond.

SEC. RICHARDSON: Okay.

REP. BURTON: And so we're not reducing our dependence on foreign oil. There's no strategy for speeding up the process of getting permits for electric power plants, according to the people yesterday.

I mean, the comments were that the transmission lines, it's taking up to seven years. And I won't go into that all again, but you can respond to that. And there seems to be only a patchwork strategy for dealing with our home heating oil problems, such as Strategic Oil Reserve or the new storage facilities you're talking about.

So, I mean, it's frustrating to me, when we have a hearing, to hear one thing from the industries and another thing from the government, and then we as congressmen and senators, when we try to put all this together and decide what we can do to help, we get some suggestions from you that are limited to legislation that's pending before the Congress, some of which is being held up by people in the other party, and we say what can we do to help the American people?

So I'd like for you just to respond to that, if you would.

SEC. RICHARDSON: Well, Congressman, I wasn't at your hearing, but I've heard these complaints before. I think what we need is we need action. You need to pass a number of initiatives that some of these industry people, even, advocate.

Let me start out with one. The industry has wanted oil and gas credits for marginal wells. The president has proposed that. We're for that. The Congress hasn't passed that.

We've proposed tax credits for energy efficiency. More funding for alternative sources of energy; as I said, boosting our own people. We've proposed electricity deregulation, which most utilities in the country want. You know, for there to be whining and blaming the government I think is just -- is just wrong.

I think what you as the Congress needs to do, and I say it respectfully, as somebody that was with you for 14 years, is sort out the different points of view, but look at the facts. And the fact is that the president's initiatives on a wide variety of supply and demand energy policies have not been passed.

REP. BURTON: Well.

SEC. RICHARDSON: And you can't blame us for not having a policy when a lot of it -- like, elemental, the reauthorization of the Strategic Petroleum Reserve, this Northeast home heating oil reserve is not passed, it's not approved. And --

REP. BURTON: Well, let me just conclude by saying that we've got a problem this winter. There's going to be a spike in gas and oil prices. Diesel fuel is up. The truckers around the country are screaming to high heaven. And it's going to, evidently, get worse with the new EPA requirements. At least this is what we're being told. And so all I can say is that I hope -- well, I hope that we can --

REP. TIERNEY: Will the gentleman yield?

REP. BURTON: No, I won't.

REP. TIERNEY: You're going to just continue to misstate what we've been listening to all afternoon, or at least give Ms. Browner an opportunity to once again set the record straight?

REP. BURTON: You had seven minutes. Now your time is expired.

REP. TIERNEY: Sir, you've had more than ample time also, but you're using to create a --

REP. BURTON: (Bangs gavel.)

REP. TIERNEY: -- misstate the facts.

REP. BURTON: You're out of order.

REP. TIERNEY: And so aren't you, sir.

REP. BURTON: You're out of order. I'm the chairman of the committee. Now, just --

REP. TIERNEY: That doesn't give you license, sir, to go out there and misstate the facts or to go on and on beyond your time.

REP. : Regular order.

REP. TIERNEY: Either please give her the time to answer you and set the facts straight --

REP. BURTON: Regular --

REP TIERNEY: -- or stop.

REP. BURTON: We are going to give Ms. Browner the time to answer. Mr. -- Secretary Richardson is under time constraints, and I was making comment within the seven minutes, which you had, which is more the five, and you interrupted me.

Now, what I was saying to the secretary is that I hope that we can reach some kind of agreement so that those spikes in oil and gas prices this winter will not make life unbearable for a large segment of our population.

And I want to thank you very much for staying beyond the time that you said we could, and we really appreciate your being with us.

And now I will yield to Mr. Kucinich.

REP. DENNIS KUCINICH (D-OH): Thank you, Secretary -- Mr. Chairman. Secretary Richardson, thank you. And I want to thank, again, the other members of the panel.

In listening to this exchange today, a few things have become obvious.

With Secretary Richardson's leadership, we asked OPEC to increase production and they did. The United States asked nine of OPEC nations to increase production. They did. The United States asked domestic producers to increase production and they decreased production. And, as some of them have added, while they're decreasing production, they're saying, well the problem is, you know, clean air regs.

Domestic producers have decreased production and their profit is going through the roof, which means when they come back to the market with that oil, they're going to make even more money. Here's one member of Congress who objects to that, and I would hope that the administration knows that they have another tool at their disposal if these domestic oil companies do not respond, and that tool is price controls.

Now, I know that's heresy in a free-market economy. But, as Mr. Hoecker said earlier, I mean, there are limits to what a free market can do. You know, a free market is wonderful, but if people can't afford to get to work in their cars, or they can't afford to heat their homes, then we have to ask some questions about the free market. We don't just keep going back to the people and telling them to pay more. That's not fair.

Now, Mr. Hoecker stated that natural gas supplies for immediate consumption are short. How many months has FERC known about this shortage, Mr. Hoecker?

MR. HOEKNER: Well, the "shortage", as you put it, is a shortfall in winter storage, and we have been watching it within -- and it's largely within historic tolerances. Right now the gas storage for the nation, generally is at around 71 percent full, which is down about 10 percent from last year. The experts that I've consulted tell me that it's going to pick up dramatically in the next few weeks.

REP. KUCINICH: Well, Mr. Secretary had stated that production is flat. I'm asking you if FERC has investigated the possibility that natural gas companies are underproducing natural gas to drive up corporate profits. Because that's what it seems the oil companies are doing.

MR. HOEKNER: Well, I can tell you that, based on our understanding of the market, gas producers shut-in their wells and basically went home. A lot of people left the business at a time when natural gas at the wellhead was being priced at $1.60. The market wasn't there for them; they quit producing. And now we're living with the consequences of that.

Are they continuing to underproduce? At least on the gas side -- and a lot of these folks are the same folks that produce oil, domestically. The rig count has doubled just in the last few months, so they're back out there again. The difficulty is that the supply response is going to lag 12 or 14 months until it hits the market. When it does that, prices will come back down.

I would also say that the price --

REP. KUCINICH: Wait -- excuse me.

MR. HOEKNER: Sure.

REP. KUCINICH: I mean, you assume prices are going to come back down.

MR. HOEKNER: I assume. I assume.

I have to mention again that we don't regulate the commodity. But this is what -- this is what I have found out because I am as concerned as you are, sir, about the price of natural gas.

REP. KUCINICH: What can you do when these gas companies are pricing three times what they've priced before? And why is the supply response so slow? What can you do?

MR. HOEKNER: What can we do? We can make sure that the interstate pipeline market is equipped to deliver those supplies as soon as they come back online. And we have a very good, very efficient, very adaptable interstate pipeline system that's very competitive.

Right now the gas purchasers in your home town can buy from different suppliers -- from different basins. It's a very workable system.

They can hedge. They can engage in financial instruments to protect themselves against risk.

REP. KUCINICH: You regulate interstate rates, right?

MR. HOECKER: Interstate transportation rates.

REP. KUCINICH: Right. You regulate those.

MR. HOECKER: Yes.

REP. KUCINICH: Okay. Can you do anything about that, about the price of the interstate rates? You monitor them.

MR. HOECKER: We think the price of interstate transportation is regulated, and we have rate cases all the time. And could we, for instance, cap those rates or drive them down arbitrarily? Our statutes require us to do investigations and make those decisions based on costs and the --

REP. KUCINICH: Final question: Will you investigate?

MR. HOECKER: We'll look at them, yes, sir.

REP. KUCINICH: Thank you. Thank you.

REP. BURTON: We are just about near the end here. We'll yield to the people who are remaining and then let our guests go home.

Mr. Ose.

REP. OSE: Thank you, Mr. Chairman. I want to go back to the electrical markets with Mr. Hoecker, if I could. This is a map, and it's difficult to read, but -- obviously it's a map. This is a map of Southwest United States, and you can see there, you have desert Southwest region; you have the Sierra Nevada region; you have the Rocky Mountain region; and you have the Upper Plains region. If you look in the desert Southwest region, you'll see a number of plants which I highlighted earlier, those being Elephant Butte, Deer Creek, Parker, Davis, Hoover and Navajo. And with the exception of Navajo, those are primarily hydro facilities.

I want to go back to my central point here, and that is that these are facilities that are under the control of the Bureau of Reclamation, which is one of the largest electric generators in the country, just by virtue of having all these facilities. And the thing I specifically want to reference is that in July -- June and July of this year, compared to June and July of last year, you'll note a significant reduction in the generation from Glen Canyon has occurred. And that corresponds almost exactly with the electric price spiking in southwestern California, around San Diego.

So the issue is, why did the Bureau of Reclamation, which is an agency of the Interior Department, reduce by over half the electric generation out of Glen Canyon in the face of severe price dislocations in San Diego?

MR. HOECKER: Again, it's information I don't know. I suspect it's because of the supply of water. But I -- but in all my hearings in California and investigations about California, the withholding of generation capacity from out of state, the deliberate withholding, is something, frankly, no one else has brought up.

REP. OSE: Well, I just want to -- I want to put to rest the supply of water issue, because I checked that. Along the Colorado River, which is where Glen Canyon is, where Hoover is, all along that Colorado River basin, there was no reduction at Hoover. There was no reduction at these other plants up and down the Colorado in terms of -- I mean, 2 or 3 percent, but not 50 percent.

So my question comes back, why did the administration allow a 50 percent reduction in the generating capacity at Glen Canyon in the face of severe price dislocations in San Diego?

MR. HOECKER: Well, with all due respect, that's something you'll have to ask the administration.

REP. OSE: Okay. Well I want to go back -- I know the answer. I just wondered if anybody else did. There was a law passed in 1991, P.L. 102-575, which the gentleman from New Mexico actually voted for, which directed the Department of Interior to engage in some work along the Glen Canyon stretch, the purpose of which would be to analyze the impact on the environment of low-flow releases from Glen Canyon. And it's very interesting, because it's actually a very, very appropriate use of government authority to investigate this. And in the interest of protecting the consumer, the legislation gives the secretary, in conditions of -- let me find the exact words -- "the secretary may deviate upon a finding that deviation is necessary and in the public interest to respond to hydrologic extremes or power system operation emergencies."

Now I'd suspect that what happened in San Diego qualifies under a power system operation emergency. There was no hydrologic extreme.

So what we had was legislation passed by this Congress, supported by Mr. Richardson, by Mr. Waxman, and others, that said, "Analyze this, but keep in mind that if we have price dislocations in our markets that we serve, you have the ability to waive the requirement and jack up the generating capacity." Those circumstances came to pass, and this administration ignored them. And in fact, for the first time, on Monday of this week, they actually did grant a waiver. And in fact the generation at Glen Canyon did go up and respond to significant increases in demand in California.

I want to know why, in June, July, and August -- we don't have the August number here, but I can guarantee you it's going to be similar to the 200-and-odd thousand there -- why, in June, July, and August, this administration sacrificed the interests of electric rate payers in San Diego, when they had the freedom to answer the call for electric generation demand.

MR. HOECKER: Well, you have me at a loss. I don't know the answer to that.

REP. OSE: Mr. Chairman, my time's expired. I'll --

REP. BURTON: Well, if you can -- if you could get that information for us, it would be very helpful -- for the record.

MR. HOECKER: I will ask the Department of Interior to help provide --

REP. BURTON: And we'll get that to Mr. Ose.

REP. JOHN TIERNEY (D-MA): Mr. Chairman, first, I'd like to submit for the record three documents. The first is a statement from the automakers calling for cleaner -- clean diesel rule, the second is a press release from the Engine Manufacturers Association, and the third are comments from the state and local air-pollution administrators. Each of these groups support the EPA low-sulfur diesel rule.

REP. BURTON: Without objection.

REP. TIERNEY: Thank you.

Ms. Browner, I was listening to what I thought was a mischaracterization of the -- what -- the testimony that we've heard today in terms of EPA's role in this situation, and I'd like to give you just a moment or two to sort of recap for us and set the record straight for the third or fourth time, so that maybe we don't have to hear it again.

MS. BROWNER: Thank you very, very much.

First of all, with respect to permitting delays, you heard testimony, apparently, yesterday about all sorts of delays, up to seven years. That is not because of any action by the Environmental Protection Agency. We do not cite transmission lines. We do not permit transmission lines. If you actually look at the numbers -- and we will provide all of the details to you, and you're free to come and look at all of our records -- we are moving electric generating permits through the system, in cooperation with the states, on a 12- to 18-month basis. Whatever delays are, they are not because of the Environmental Protection Agency.

Secondly, I think it is important -- and I thank the congressman for noting the support we do have on our proposal. But we have not adopted a diesel standard yet, and for people to be talking about what this will do before we have made any final decisions strikes me as somewhat premature.

Secondly, our proposal would require these clean diesel fuels in 2006, not tomorrow, not next year, but almost what, six -- five and a half years from today.

Third, we are working with those in the industry who will work with us, as we did on low-sulfur conventional gasoline, to incorporate a whole host of flexibilities.

I would note that on our low-sulfur gasoline rule, this affects almost every refinery in the country. We get sued regularly at EPA -- by environmental groups, by businesses -- for the decisions we make. We were sued by one small refinery on that rule -- not all of them, one. And we are looking to resolve that issue. I think that is an indication of how well we worked with the industry to both meet the public health standards and provide the flexibilities.

There are other issues, Mr. Chairman, that you have mentioned, that I still would like to the opportunity to clarify. And I know you want to have an accurate record. For example, you made reference early on to the dyes and some other issues, and I don't want to use the kind gentleman's time, but hopefully I will be able to share that with you before the hearing ends.

REP. TIERNEY: Thank you. I think somebody referred to it as "corporate whining," and I probably wouldn't be that strong in the wording, except to say that I think a lot of times businesses, because that's their job -- to make a profit -- they do these preemptive strikes and try to do something that they don't want to do.

Mr. Hoecker, you mentioned during the course of your testimony that you could no longer affect the amount of gas that was in the supply or whatever, because it had been decontrolled. Was there a time when there was some control or government regulation on the supply of gas?

MR. HOECKER: There was. Between 1954 and the late 1970s, when the Natural Gas Policy Act was passed and for some period after that, because price controls were phased out.

REP. TIERNEY: And if we had that law still in effect today, would there have been some remedial action that could have been taken to avoid what we've just gone through, a period of, really, depletion in supplies and now a lag period waiting for it to build back up?

MR. HOECKER: Well, ironically, when that law was in effect, the consequence of it was to create a chronic short supply in the country. We had price controls at a point when production was continuing to decline. Our reserve picture was very bleak in the late '70s. We didn't allow natural gas to be used for boiler fuel uses; that is, for electric generation or industrial purposes. We didn't allow natural gas to be used for a variety of things, and we were curtailing supplies because we thought it was a very, very limited resource.

When the price of natural gas was decontrolled, what we found is that we had an ample supply. People went out looking for it. And I think I can say with confidence that the industry expects natural gas supplies to be durable for the next half century, if not a whole century.

REP. TIERNEY: Yet we still find ourselves in a situation, although we have plenty of it, we can't seem to get it when we need it.

MR. HOECKER: Well, what happens is that when you create a market, you live with some of the vicissitudes of that market, and when -- to use the words of the CEO of Anner-Darco (sp) yesterday, when I was at the conference in Ohio, he said, "The real energy crisis was when natural gas was at $1.60 and oil was at $10 a barrel." For them, that's true, because they just got out of the business. A lot of small producers, especially, quit producing.

That is an unfortunate situation, because cheap energy does two things. Number one, it diminishes production and it also disincents American consumers from being efficient and conserving their energy resources.

REP. BURTON: The gentleman's time has --

REP. TIERNEY: Thank you both.

REP. BURTON: The gentleman's time has expired. Let me just say, before I yield to my colleague, that that's one of the reasons why you need a long-term energy policy, because if you have these wide fluctuations in the price of -- spot price of oil or gas, you have to have a long-term policy that sets some kind of consistency, and we don't have that.

I yield to my colleague, Mr. LaTourette.

REP. LATOURETTE: Thank you, Mr. Chairman. Chairman Hoecker, Congressman Kucinich, who was here earlier, and I come from the same part of the country, and the banner headline of today's Cleveland Plain Dealer was that people in Greater Cleveland are going to pay $70 a month more this winter for their natural gas bills, as we heat our homes going into the winter. And I listened very carefully to your responses to everybody that's asked you questions, but I want to talk about pipelines, which I think are within the purview of your organization.

Do we have, if the producers were finding it economically feasible to produce, do we have sufficient pipeline capacity today to meet the needs, particularly in the northeast part of the country?

MR. HOECKER: I believe we do. I think we're moving in the right direction. The commission has certificated 8,000 miles of interstate natural gas pipeline since 1995. That represents a delivery capacity of about 17 million cubic feet a day, and -- or 7 billion cubic feet a day -- and as the demand for natural gas increases, we expect to get requests for more interstate pipeline capacity.

But we have certificated some major facilities in an environment where landowner objections and environmental problems are very important and those folks are very vocal. And we have to take that into account.

Even pipelines that we have certificated for the Northeast are not being built at their original designed capacity because the project owners have not been able to find the market for some of that original proposal. What that tells me is that we're doing it just about right. And that means that we're going to continue to consider applications for more capacity, but that we're not going to do it at such a rate that we're going to create a capacity glut, which is going to cost consumers a lot of money.

REP. LATOURETTE: You talked a little bit earlier about the natural gas folks having the ability to hedge. Are you familiar with the term "interruptible contract"?

MR. HOECKER: I am.

REP. LATOURETTE: Could you explain just for the committee's record what that is and how those work?

MR. HOECKER: Well, an interruptible contract for pipeline transportation simply means that you buy at a lower rate and you take the risk of being curtailed at some point if supplies are short or if capacity is short.

REP. LATOURETTE: In all markets that are volatile folks use things like hedging and futures to stabilize prices. Are those tools available to the natural gas industry?

MR. HOECKER: They're very available in the natural gas industry, yes.

REP. LATOURETTE: Are there any disincentives that you're aware of -- governmental, tax or otherwise -- that prevent or inhibit the natural gas folks from becoming involved in hedging or futures to stabilize the price of natural gas?

MR. HOECKER: 'The natural gas folks"? By that you mean -- ?

REP. LATOURETTE: The producers.

MR. HOECKER: The producers. No, I'm not aware of any.

REP. LATOURETTE: Thank you.

Mr. Chairman, I don't have any more questions. I would just ask unanimous consent that the CRS report that I was chatting with Administrator Browner about of June the 28th 2000 be included for the record.

Ms. Browner, I've made a copy for you, too, so that you can that with you.

MS. BROWNER: Thank you. Certainly.

REP. LATOURETTE: And if somebody wants the balance of my time, I'm happy to yield it to them, or I'll shut up and yield back the balance of my time.

Mr. Ose from California, who shares California with Mr. Waxman, as we all recall -- (laughter) -- apparently -- I'd be happy to yield the balance of my time to you.

REP. OSE: Thank you, Mr. LaTourette. The folks from Ohio have always been generous, and I appreciate it. So --

Ms. Browner, do you think we need more generating facilities in California, electrical generating facilities in California?

MS. BROWNER: I would not want to pretend to be an expert on this issue.

REP. OSE: Well, based on the -- based on our --

MS. BROWNER: I mean, based on what I've read and what I have heard, I certainly think that is a question that's worthy of very serious consideration. But I in no way would want to -- I am not an expert on issues like that. I can certainly talk to you about, if you want to have more generation, what might be some of the cleaner types of generating facilities. But I am not an expert on the demand side.

REP. OSE: Mr. Chairman, I see my yellow -- Mr. LaTourette's yellow light has come on. We'll come back to the cleaner generating facilities on my next round. Thank you.

MS. BROWNER: (Aside.) Another round?

REP. MCHUGH: I thank the chairman.

Yes, ma'am. First, let me just check off the list. I got a bizarre question I've always wanted to ask you. And that is, you know, Al Gore's book "Earth in the Balance" and all that sort of thing, there's been so much talk about the basically minor portion of that book that dealt with -- you know, if you increase the tax on fossil fuels you could basically do more to clean up the environment than anything else you could do out there. Agreed? Disagree? Where are you on that?

MS. BROWNER: I think the work -- and I'm sure the vice president would agree with this -- of cleaning up the environment requires a wide array of activities and tools, and that this administration has been doing its level best within the authorities granted us to do just that.

REP. MCHUGH: But you'd agree it'd be one of the tools?

MS. BROWNER: I did not say I agreed or disagreed.

REP. MCHUGH: Well, I'm asking you to pick one.

MS. BROWNER: I don't want to. (Laughter.)

REP. MCHUGH: Fair enough! (Laughs.) Touche. But the -- I mean, that's what these exchanges are all about, though, is trying to get to the bottom line of those --

MS. BROWNER: I'm not in charge of those policies. Again, I am really happy to talk to you about clean air.

REP. MCHUGH: Well, that's what we're talking about, though.

I mean, the argument was that if you increased the tax on fossil fuels, you could do more to clean air than anything else you could do out there, and I'm asking your opinion on that.

MS. BROWNER: I'll tell you everything we're doing to clean the air for your citizens, and all the citizens of this country.

REP. MCHUGH: I'm sure you're doing many different things, but I'm asking your specifics on that one thing.

MS. BROWNER: I'm doing everything I can within the authorities Congress has granted me.

REP. MCHUGH: So you just don't want to answer the question?

(Pause.)

MS. BROWNER: I'm answering it within the area of my expertise --

REP. MCHUGH: No, I understand you choosing not to answer it, but I was just asking your opinion.

MS. BROWNER: Sir, I have an area of expertise, and I am more than happy to speak to my area of expertise. I have the utmost respect for our vice president.

REP. MCHUGH: Certainly.

MS. BROWNER: He has been at the forefront of virtually every public health environmental issue in this country for as long as I can certainly remember.

REP. MCHUGH: I wasn't doubting that. I was simply asking your opinion on that part of the book, and you're saying you choose not to answer. Fair enough.

Second question. Supply and demand. Economics 101 would say, all right, you know, supply is, in part, controlled by regulations around that supply. In other words, that's the funnel through which supply reaches end product. And, you know, there are all kinds of unintended consequences that go with any piece of regulation. Since that piece of regulation is out of bounds in terms of your willingness to answer it, I would ask --

MS. BROWNER: There is no regulation of that sort at the EPA. There's not.

REP. MCHUGH: Again, but we're going there right now -- which is, if you think about the different pieces of regulations that have been promulgated by the EPA, some have had good consequences, in terms of raising or lowering fuel prices, some have had bad consequences. And I'm asking you to do the David Letterman routine, which is give me the top two that you think have raised fuel prices the most, and the bottom two that have lowered fuel prices the most.

MS. BROWNER: Can I suggest that these are complex issues. They don't lend themselves, with all due respect, to a David Letterman routine. I am happy to talk about the cost and the benefits associated with these --

REP. MCHUGH: Okay, we can take David Letterman out. But I would just ask --

MS. BROWNER: -- with the decisions that we make.

REP. MCHUGH: -- if you'd pick one or two that had some very positive consequences --

MS. BROWNER: Cleaner gasoline. Without a doubt, cleaning up the nation's gasoline, removing things like toxics -- benzene, sulfur -- are some of the most cost-effective things we can do to improve air quality and to protect the public's health -- to reduce respiratory illness, to reduce premature death, to reduce asthma attacks in our children. They are, without a doubt, some of the most cost-effective things that we can do.

Now, I said in my opening statement, and I'm happy to say again, I am the first to recognize that when we move forward to protect the public's health, to protect our environment, there are costs. But they are pennies compared to the benefits that clean air is bringing the people of this country. And there is study after study -- and I'm not just talking about EPA's study --

REP. MCHUGH: Sure.

MS. BROWNER: -- there are studies after studies that have documented it --

REP. MCHUGH: And I wouldn't dispute those at all. I wouldn't dispute those at all.

MS. BROWNER: And as one member noted earlier, the most fascinating --

REP. MCHUGH: But I would go -- in that I only have five minutes, and we're down to about a minute left -- if you were to pick out one thing, though, wherein there was an unintended consequence of EPA that resulted in higher cost to the consumer, what would that one thing be, from the standpoint of fuel price?

MS. BROWNER: I'll give you an example, actually, outside of the clean air program. I'll give you the example of brownfields. Without a doubt, when this Congress adopted the Superfund legislation almost 16 years ago, an unintended consequence of that legislation were the brownfields sites, the lightly contaminated sites that the developers, the bankers, the lenders, the cities wouldn't come to address. Now, fortunately, we've had a program to try and solve that. We need Congress to give us some legislation. But without a doubt -- and I don't dispute your premise that there can be both positive and unintended consequences. I think that is a clear example of it.

One of the things we did -- and, Mr. Chairman, if I might have a little bit of extra time here because I think this is an important issue, and I'm sure the committee does, too.

When we were setting the new tail pipe emission standards for cars and SUVs, and the fuel standards that get you what actually comes out of the tail pipe -- it's the catalytic converter, it's the engine, it's the gas you put in that gets you the actual air quality benefits that you breathe -- we spent a lot of time, I personally spent a lot of time with both industries that would be affected, asking them how we could avoid unintended consequences.

And I'll give you an example of an unintended consequence that I believe has, in fact, been avoided. Detroit told us over and over again that they are about to have a clean diesel engine for cars. They've got it in Europe. They can bring it here. It could be two to three times more fuel efficient. But we had to structure our standards to allow for that clean diesel engine, and we did that. And they have said that repeatedly, that we set up the program to meet the public health benefits. We didn't change anything we asked for on public health, but we avoided a consequence of keeping those engines out.

Now, if we're going to bring those engines in, we had to do that last year. This year we have to get them the clean diesel gasoline, and that's the second piece of it. But we do look at both the intended consequences and the unintended consequences.

REP. BURTON: The gentleman's time has expired.

Before I yield my time and go ahead and start the clock, before I yield my time to Mr. Ose, let me just say that we're going to give you whatever time you need to respond to anything that we've talked about earlier.

MS. BROWNER: Great. Thank you.

REP. BURTON: But you made the point that they have only received one application for a new refinery at the EPA in the last 25 years, suggesting that the lack of refinery capacity is industry's fault. It's so unprofitable to build a refinery in this country that there really isn't much point in submitting an application because of the requirements. And you can respond to this after Mr. Ose finishes. This was, I believe, a misleading statement. And there's no strategy for dealing with the fact that refineries are strained to the breaking point and they would like to expand and/or build new ones. Well, I'll let you respond after Mr. Ose --

MS. BROWNER: Well, if I could --

REP. BURTON: Well, let me let -- because I'm going to yield my time, and then you can respond as you wish.

Mr. Ose?

REP. OSE: Thank you, Mr. Chairman.

Ms. Browner, I want to go back to -- we started to just discuss briefly the air quality issue and what the particulate matter discharge would be from any given facility. In my district, in Sutter County in California, we're under construction on a gas-fired turbine. I think the projected generating capacity being somewhere around 400 or 500 megawatts.

MS. BROWNER: That's pretty common, mm-hm.

REP. OSE: The issue there is that the nitrous oxide emissions on that plant will be about one-twelfth of the emissions from a plant of similar capacity elsewhere.

Now, the challenge that I see, -- and I really want to talk about the Prevention of Significant Deterioration Program -- because the challenge I see is that if we're going to encourage industry to create these plants that are so much more positive on a relative scale for the environment, and that can provide peak or swing power for our economy, one of the things, it seems to me, we need to do is bring some certainly to that process on the PSDs.

Now, in this particular plant's case, it went through local jurisdictional review. The board of supervisors there passed on it. There was an environmental document. Everything was real clean, simple, done, and then the current PSD process allowed a window after that local review for someone to file an appeal. And the result of that was that an individual who lived roughly 100 miles away came, filed an appeal over the, if I recall correctly, the air quality impacts, and it cost four months immediately. In other words, there was an immediate shutdown of construction. The appeal was eventually denied on the basis of, you know, lack of factual basis.

MS. BROWNER: Well, I think on the basis of standing. The complaint was found to have no standing.

REP. OSE: All right. Well, the issue that I have is, is it possible for us to take the PSD appeal process and correlate it to the appeal process in California law under SECWA (sp)? So you don't have that extension, if you will. Like you have the SECWA (sp) appeal process right now, and then you have the PSD appeal process.

Is it possible for us to take the PSD process and correlate it to the SECWA (sp) process?

MS. BROWNER: About half the states have done that, and we are fully supportive of that. California has not chosen to do that. Let me back up for a second, because I think this is where some of the confusion that may exist between what people said yesterday .

All but one state now handles air permitting for all facilities. It is not EPA, in the first instance. They use the federal authority, but they handle the day-to-day permitting process; application, review, and granting. For the one state, we do it. We also do it for Puerto Rico. About half of the states have chosen to handle any appeals that may come as a result of a permitting decision; half have not. If they choose not to, then we are required to handle the appeals process.

REP. OSE: Can I ask your indulgence? My time is about to expire, and I want to go to one other question, and then -- the chairman -- the chairman's going to allow you to respond.

MS. BROWNER: The chairman said I could have whatever time I needed.

REP. OSE: The other issue that I --

MS. BROWNER: Well, excuse me, with all due respect, you've made some statements that I think would benefit from an explanation.

REP. OSE: And I'm willing to sit, and I'm very interested in your response.

MS. BROWNER: Well, I'd like to do it on the record in public, because this is a statement about an agency that I run, and I feel like they're not -- we don't have the full story.

REP. OSE: I'm just looking for what can we do legislatively to try and correlate those?

MS. BROWNER: I think one possibility, as I've already pointed out, is that half of the states handle the appeals process. California has chosen not to.

REP. OSE: Okay.

MS. BROWNER: And we're happy to work with them on doing it. Mr. Chairman, I really feel strongly about setting something straight here.

REP. OSE: My only other question was --

MS. BROWNER: Well, the chairman said I could. (Laughter.)

REP. BURTON: We're not going to stop the clock on you.

MS. BROWNER: Yeah, but I'm going to be sitting here alone. I can see that coming!

REP. TIERNEY: No, you're not. I'm going to be here.

MS. BROWNER: Mr. Tierney's going to stay with me.

REP. OSE: I will commit to staying, because I'm interested in your answer.

REP. BURTON: Well, finish so she can answer.

MS. BROWNER: Thank you.

REP. OSE: Okay. My other question was that we have a choice of whether to import oil from foreign trading partners or increase production somewhere, somehow, here domestically. And the question that I have is that on a relative scale in terms of environmental consequence, are we better off importing oil, where we don't have the various air quality protections, from foreign sources, or are we better off, from an environmental standpoint, producing more oil here domestically, subject to all of our regulations? It's obviously a --

REP. BURTON: The gentleman's time has expired. We'll let her answer all these questions.

MS. BROWNER: I think that is a complicated question, and I think that it is complicated by many factors. For example, the whole issue of greenhouse gases. That is a global problem. It doesn't really matter where the greenhouse gas comes from. We all will experience the consequences of the warming or the changing of the Earth's climate. So if you analyze it from that perspective, my attitude would be, you need environmental protections in all places to ensure that you're not contributing to an increase in greenhouse gases.

I think it's hard to answer that absolutely. You know, I do believe that all of the work that we can do that we do with other agencies to, if you will, upgrade, upward harmonization of environmental standards globally, are of a benefit to all of us. I think we need -- my sense is, when you look at our oil supply, we need a mix, domestic and foreign. My sense is that there is a lot more we can do from a domestic perspective in terms of energy efficiency, in terms of renewables.

We've got a bill up here in terms of renewables in the gasoline, which would help our farmers, which would help our cities who pick up all those yard clippings, they can turn it into biomass and it can become part of a renewable fuels program. So I think it's a combination of activities.

If I might just return to, I think, the specific permit that you brought up. Start to finish, it was 13 months -- from the time the final application was submitted. A couple of points to note, first of all, twice the company changed their application. They themselves changed what they were looking for, and that does result, obviously, in additional review. They made the changes. We weren't even involved at that point. The state was.

EPA very quickly looked at what the state had done and concurred.

A(n) appeal was filed. California doesn't handle those, so it came to us. Our entire time for the appeal through our Environmental Appeals Board was 11 weeks. That is hardly -- well, I'm happy to give you the dates that things were received.

But I'd like to point out something. In the Appeals Board we appear as a party. We don't appear as the party filing the appeal. In this case we appeared in support of the company against the party filing the appeal.

Now, I think these are important facts that have not been stated, as far as I can see from yesterday's record. It's simply "the EPA stood in the way." We didn't stand in the way. We came in on the side of the company. We think these facilities are good facilities. We have been supportive of them. And I hardly think a 13-month permitting process where the company themselves made adjustments is an unreasonable permitting process.

Now, I can't speak to what local government requirements may be, I can't speak to what PSC requirements or whatever you call your state regulatory -- what is it, a PSC out there?

REP. OSE: That's Mr. Waxman's PUC, normally. (Laughter.)

MS. BROWNER: I can't speak to any of that. But I can speak to what we do. And I would like the record to reflect that in the case of the Clean Air Act requirements it was a 13-month process. And that is -- I can name a lot of facilities in your state. We have another one that was a 14-month process. We have another one that was a 14- month. We have one that was a 16-month. I mean, this one was 13.

I would also like to point out there are not many appeals to the Environmental Appeals Board. Right now I think we have three pending for electric turbines. One was resolved I think in 10 days. One was resolved in --

STAFF: Three and a half months.

MS. BROWNER: -- three and a half months, and one is about to be resolved. People do have rights. They should be able to raise questions that they believe a mistake was made. We move expeditiously. And when we have an opinion, we come in on the side of the company.

REP. OSE: My question was is it possible to correlate the appeal period under EPA with the appeal period under SECWA (sp)?

REP. BURTON: Excuse me --

MS. BROWNER: Why doesn't the state -- if the state would take over the appeals process they would -- it's their appeals process. They could incorporate whatever the federal appeals process would require, I would think. They could put it into theirs; they've chosen not to. I don't know why California made that decision, but that's the decision they made. And we'll be happy to talk to them about it.

REP. BURTON: Excuse me. Let me just say the gentleman's time has expired. If we have more questions, any of us, for Ms. Browner or Mr. Hoecker, all we have to do is write them and I'm sure they'll respond. We'll ask them to respond for the record.

And as I said, Ms. Browner, if you have further things you'd like to clarify, we'll be happy to listen.

MS. BROWNER: I would. I would like to spend a moment clarifying one other point. You've been most kind to allow me the time, and you put up some bottles earlier with some dyes in them and suggest that this was silly requirements on the part of, I don't know, IRS, somebody -- probably us. Let me explain why these dye requirements exist.

These are not interchangeable fuels. One of these fuels has only 500 parts per million sulphur; the other is in excess of 3,000, maybe higher. America's truckers don't want that 3,000 parts per million sulphur fuel -- home heating, off-road fuel -- in their trucks. That is what the dye is for. It is also for the IRS to make sure they're collecting the right tax. And I know we all agree that collecting the right tax is not overcharging, not undercharging. But surely we also agree that protecting the trucker and the public health, that's what the dyes are for. So when someone is moving the product around, they know are they dealing with a high sulphur content or a low sulphur content.

Now, I also understand that there were some complaints about this means you have to drain a tank -- you know, obviously, people have residuals in their tanks when they bring in a new fuel. Surely that's not the problem.

Mr. Chairman, with all due respect, I cannot for the life of me understand why anyone who's involved in this business would think that dying two radically different fuels -- they are not slightly different, they are radically different fuels -- is a problem.

Thank you.

REP. BURTON: Thank you, Ms. Browner, Mr. Hoecker. We really appreciate it. You've been very helpful, and I appreciate your being kind with your time.

MS. BROWNER: Thank you.

REP. BURTON: We stand adjourned. (Sounds gavel.)

END

LOAD-DATE: September 22, 2000

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