Copyright 2000 Federal News Service, Inc.
Federal News Service
April 7, 2000, Friday
SECTION: PREPARED TESTIMONY
LENGTH: 2119 words
HEADLINE:
PREPARED STATEMENT OF DANIEL LASHOF, PH.D SENIOR SCIENTIST ON BEHALF OF THE
NATURAL RESOURCES DEFENSE COUNCIL
BEFORE THE
HOUSE COMMITTEE ON THE JUDICIARY
SUBJECT -
SOLUTIONS TO COMPETITIVE PROBLEMS IN THE OIL INDUSTRY
BODY:
Summary
* The United States can
not produce its way out of vulnerability to oil price spikes. The price of oil
is determined primarily by international markets, which will affect U.S.
consumers regardless of the level of domestic oil production.
* Rolling
back environmental standards governing the oil industry would not significantly
effect oil prices, but would damage irreplaceable natural resources.
*
The United States can and should reduce its dependence on petroleum by
increasing the fuel efficiency of vehicles, particularly SUVs and other "light
trucks."
My name is Daniel Lashof, and I represent the Natural Resources
Defense Council, where I am a senior scientist and director of the global
warming project. I appreciate the opportunity to appear before you today. My
testimony will address appropriate policy responses to our nation's excessive
dependence on petroleum.
For over ten years I have been active on
national energy policy issues. I recently served on the Energy Research and
Development Panel of the Presidents' Committee of Advisers on Science and
Technology, which produced a report to the President on Federal Energy Research
and Development for the Challenges of the Twenty-First Century. Previously I
served on the Federal Advisory Committee on Options for Reducing Greenhouse Gas
Emissions from Personal Motor Vehicles. I hold a bachelor's degree in physics
and mathematics from Harvard University and a doctorate from the University of
California at Berkeley.
The Natural Resources Defense Council is a
national, non-profit organization of scientists, lawyers, and environmental
specialists, dedicated to protecting public health and the environment. Founded
in 1970, NRDC serves more than 400,000 members from offices in New York,
Washington, Los Angeles, and San Francisco.
In this testimony I will
make three main points. First, the United States can not produce its way out of
vulnerability to oil price spikes. Second, rolling back environmental standards
governing the oil industry would not significantly effect oil prices, but would
damage irreplaceable natural resources. Third, the United States can and should
reduce its dependence on petroleum.
1. The United States can not produce
its way out of vulnerability to oil price spikes.
Oil is a global
commodity. The price of oil is therefore determined primarily by international
markets. This will continue to be the case regardless of the level of domestic
oil production unless the United States wants to return to an era of price
controls and de facto rationing, which is not an experience that anyone is
anxious to repeat. In other words, as long as U.S. oil markets remain open, the
price of gasoline in Chicago, Detroit and Washington will fluctuate with global
oil prices, even if the United States did not import any oil. Changes in
domestic oil production will, therefore, only affect oil prices to the extent
that they influence the global supply/demand balance. The United States,
however, only produces about 12% of global petroleum supplies, so even large
changes in domestic production will have only a marginal effect on global
markets. Over the long term, the U.S. share of global production will inevitably
decline further. The United States has only 2 percent of world oil reserves,
while Gulf State OPEC members control about two-thirds of proven reserves.
Opening the coastal plain of the Arctic National Wildlife Refuge to oil
exploration would not appreciably change this situation. USGS's mean estimate is
that 3.2 billion barrels could be economically produced, which would add just
0.3 percent to global reserves.
In contrast, the United States is
responsible for about 25% of world petroleum demand. This fact alone indicates
that the we can have a much larger impact on global markets on the demand side
than on the supply side. This conclusion is strengthened by the fact that there
are large untapped energy efficiency resources whereas our most abundant and
accessible oil resources have already been exploited. I will return to this
point in part 3 of my testimony.
2. Rolling back environmental standards
governing the oil industry would damage irreplaceable natural resources
The data presented above makes it clear that rolling back environmental
standards would be totally ineffective as a policy response to recent oil price
spikes. This would, however, put irreplaceable natural resources at risk. The
oil industry has made significant progress in reducing the environmental impacts
of its operations, but oil production remains an inherently damaging and risky
activity that is simply incompatible with protecting fragile natural resources,
such as remaining coastal wetlands and wildlife refuges. For example, offshore
oil and gas development continues to result in oil spills, the release of
drilling waste, dumping of contaminated "produced water" and on shore impacts
from terminals, pipelines and other facilities:
Oil spills. This is the
most obvious impact of offshore development. While platform blowouts resulting
in large spills are rare, pipeline spills are not. According to DOI statistics,
from 1986 through 1997, some 2 million gallons of oil was spilled from OCS oil
and gas operations. In January of this year, an oil pipeline in the Gulf of
Mexico ruptured after becoming fouled with an anchor from a drilling rig and
spilled some 94,000 gallons of crude oil into the Gulf about 120 miles south of
New Orleans.
Drilling waste. Drilling operations generate more than a
thousand tons of drilling waste per well. Toxic pollutants in drilling waste
include lead, naphthalene, arsenic, copper and selenium. Suspended solids in
drilling waste can smother bottom dwelling organisms and alter critical benthic
habitats. Disposal of OCS drilling wastes typically involves dumping it over the
side untreated.
Produced water. "Produced water" (brine in the formation
that is brought up along with oil from a well), is generated in massive
quantities by production operations. Produced water contains a variety of toxic
pollutants, including benzene, toluene, and the radioactive pollutants Ra 226
and Ra 228 (produced water generated off Louisiana has been found to contain
levels of radioactivity higher than that permitted to be discharged by nuclear
power plants and higher than the level that distinguishes hazardous from
non-hazardous waste under RCRA).
Onshore impacts. Offshore oil and gas
extraction typically requires extensive onshore industrial development to
process and transship oil or gas. Pipelines, storage facilities, processing
facilities and other industrial infrastructure built to support offshore oil and
gas has resulted in substantial environmental damage to coastal resources.
For example, a study done for NOAA in the 1980's conservatively
estimated that offshore pipelines crossing coastal wetlands in the Gulf of
Mexico had destroyed more coastal salt marsh than exists in New Jersey through
Maine. Particularly in areas where little infrastructure presently exists,
onshore impacts can be expected to be substantial.
Renewed calls for
opening the Arctic National Wildlife Refuge to oil exploration are generally
accompanied by claims that the environmental impact would be minimal, yet a
review of the impact of existing oil development in Alaska tells a different
story. Once part of the largest intact wilderness area in the United States,
Alaska's North Slope now hosts one of the world's largest industrial complexes.
More than 1,500 miles of roads and pipelines and thousands of acres of
industrial facilities sprawl over hundreds of square miles of once pristine
arctic tundra. Impacts include air pollution, spills and waste:
Air
pollution. Oil operations on Alaska's North Slope emit tens of thousands of tons
of oxides of nitrogen annually, which contribute to smog and acid rain. In
addition, North Slope oil facilities release tens of thousands of tons of
methane, a potent greenhouse gas that contributes to global warming.
Spills. Each year, hundreds of spills involving tens of thousands of
gallons of crude oil and other petroleum products and hazardous materials occur
on the North Slope. In 1995, approximately 500 spills occurred involving more
than 80,000 gallons of oil, diesel fuel, acid, biocide, ethylene glycol,
drilling fluid, produced water, and other materials.
Waste. Oilfield
activities generate tens of thousands of cubic yards of sewage sludge, scrap
metal, garbage, and waste every year.
3. The United States can and
should reduce its dependence on petroleum
Almost thirty years after the
first OPEC oil embargo the United States is still dependent on petroleum for 97%
of its transportation energy needs. As a result, two-thirds of our petroleum
consumption goes to fuel transportation. With average efficiencies declining for
new vehicles, and a 21 percent increase in miles driven between 1990 and 1998,
the petroleum dependence of transportation is continuing to rise.
CAFE standards helped double vehicle efficiencies from
1975 to the late 1980s, reducing the impact of high oil prices on consumers.
This is the most effective policy that Congress enacted in response to the oil
crises of the 1970s, and it can be used again to protect citizens from
fluctuations in oil prices such as those we are now experiencing. Unfortunately
since 1995 provisions in the transportation appropriations Acts have prohibited
the Department of Transportation (DOT) from even examining the need to raise the
Corporate Average Fuel Economy (CAFE) standards. As a result of
this rider and the growing market share of SUVs, the average fuel economy of all
new passenger vehicles is at its lowest point since 1980. Congress should allow
DOT to implement the law as intended, and study the technical feasibility and
economic practicability of raising standards.
SUVs should be held to the
same efficiency standards as other passenger vehicles, by ending their
classification as light trucks. The weaker CAFE standard for
light trucks was intended to allow for legitimate differences between commercial
vehicles and passenger vehicles, but allows SUVs to consume one-third more oil
per mile than cars. With SUVs and other light trucks now accounting for half of
new vehicle sales, this unintended loophole must be closed. The technology
currently exists for SUVs to meet the tighter standard for cars, at an estimated
additional cost of $575, which is recouped in less than two
years from savings in gasoline bills (UCS, 1999).
Recent analysis shows
that CAFE standards could be raised to over 40 miles per gallon
for new cars and light trucks by 2010. This would result in oil savings of about
3 million barrels per day below business-as-usual projections, with a net
economic gain for consumers of $69 billion over the life of the
vehicles (ACEEE, 1998).
To complement higher fuel economy standards,
Congress should enact tax incentives to encourage consumers to purchase energy
efficient products, and to spur the production of energy from clean, renewable
resources. By providing a direct financial reward, incentives can help to
overcome market barriers to the full commercialization of new technologies. The
tax code already provides incentives for some efficiency and clean energy
measures, but major areas are currently left out of what could be a
comprehensive tax policy.
In particular, "hybrid" vehicles integrate a
conventional gasoline internal combustion engine and on-board battery-electric
power into a single drivetrain. These vehicles have the great advantage of
requiring no additional fueling infrastructure, and are likely to provide a
transition path to electric and fuel cell cars. Hybrid cars available
commercially for the first time this year in the U.S. are capable of fuel
efficiencies of 60 to 70 miles per gallon, 2 to 3 times that of the average new
passenger vehicle. Consumer tax incentives for clean highly-efficient hybrid
vehicles would facilitate the rapid commercialization of this promising
technology.
References ACEEE (1998). Approaching the Kyoto Targets: Five
Key Strategies for the United States. American Council for an Energy Efficient
Economy. August 1998.
PCAST (1997). Federal Energy Research and
Development for the Challenges of the Twenty First Century. Report of the Energy
Research and Development Panel, The President's Committee of Advisors on Science
and Technology. November 1997.
UCS (1999). Greener SUVs: A Blueprint for
Cleaner, More Efficient Light Trucks. Union of Concerned Scientists, July 1999.
USGS (1988). Arctic National Wildlife Refuge, 1002 Area, Petroleum
Assessment. USGS Fact Sheet FS-040-98, May 1998.
END
LOAD-DATE: April 8, 2000 
