Copyright 2000 Federal News Service, Inc.
Federal News Service
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)
LOCATION: HOUSE
RAYBURN OFFICE BUILDING, ROOM 2118 WASHINGTON, D.C.
WITNESSES: ENERGY SECRETARY BILL RICHARDSON EPA
ADMINISTRATOR CAROL BROWNER FERC CHAIRMAN JAMES HOECKER
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 
