House Hearing, 112TH Congress - Pathways To Energy Independence: Hydraulic Fracturing and Other New Technologies

PATHWAYS
TO
ENERGY
INDEPENDENCE:
HYDRAULIC FRACTURING AND OTHER NEW
TECHNOLOGIES
HEARING
BEFORE THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
MAY 6, 2011
Serial No. 11236

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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

DARRELL E. ISSA,
DAN BURTON, Indiana
JOHN L. MICA, Florida
TODD RUSSELL PLATTS, Pennsylvania
MICHAEL R. TURNER, Ohio
PATRICK T. MCHENRY, North Carolina
JIM JORDAN, Ohio
JASON CHAFFETZ, Utah
CONNIE MACK, Florida
TIM WALBERG, Michigan
JAMES LANKFORD, Oklahoma
JUSTIN AMASH, Michigan
ANN MARIE BUERKLE, New York
PAUL A. GOSAR, Arizona
L R. LABRADOR, Idaho
RAU
PATRICK MEEHAN, Pennsylvania
SCOTT DESJARLAIS, Tennessee
JOE WALSH, Illinois
TREY GOWDY, South Carolina
DENNIS A. ROSS, Florida
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania
California, Chairman
ELIJAH E. CUMMINGS, Maryland, Ranking
Minority Member
EDOLPHUS TOWNS, New York
CAROLYN B. MALONEY, New York
ELEANOR HOLMES NORTON, District of
Columbia
DENNIS J. KUCINICH, Ohio
JOHN F. TIERNEY, Massachusetts
WM. LACY CLAY, Missouri
STEPHEN F. LYNCH, Massachusetts
JIM COOPER, Tennessee
GERALD E. CONNOLLY, Virginia
MIKE QUIGLEY, Illinois
DANNY K. DAVIS, Illinois
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont
JOHN A. YARMUTH, Kentucky
CHRISTOPHER S. MURPHY, Connecticut
JACKIE SPEIER, California
LAWRENCE J. BRADY, Staff Director

JOHN D. CUADERES, Deputy Staff Director
ROBERT BORDEN, General Counsel
LINDA A. GOOD, Chief Clerk
DAVID RAPALLO, Minority Staff Director
(II)
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CONTENTS
Page
Hearing held on May 6, 2011 .................................................................................

Statement of:
Grove, Shannon, Assemblywoman, 32nd Assembly, District of California;
Rock Zierman, chief executive officer, California Independent Petroleum Association; Tupper Hull, vice president, Strategic Communications, Western States Petroleum Association; William Whitsitt, Ph.D.,
executive vice president, Devon Energy; and Steve Layton, president,
E&B Natural Resources Management Corp. ..............................................
Grove, Shannon .........................................................................................
Hull, Tupper ..............................................................................................
Layton, Steve .............................................................................................
Whitsitt, William .......................................................................................
Zierman, Rock ............................................................................................
Letters, statements, etc., submitted for the record by:
Cummings, Hon. Eljiah E., a Representative in Congress from the State
of Maryland, prepared statement of ............................................................
Grove, Shannon, Assemblywoman, 32nd Assembly, District of California,
prepared statement of ...................................................................................
Hull, Tupper, vice president, Strategic Communications, Western States
Petroleum Association, prepared statement of ...........................................
Layton, Steve, president, E&B Natural Resources Management Corp.,
prepared statement of ...................................................................................
Whitsitt, William, Ph.D., executive vice president, Devon Energy, prepared statement of ........................................................................................
Zierman, Rock, chief executive officer, California Independent Petroleum
Association, prepared statement of .............................................................
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(III)
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PATHWAYS
TO
ENERGY
INDEPENDENCE:
HYDRAULIC FRACTURING AND OTHER NEW
TECHNOLOGIES
FRIDAY, MAY 6, 2011
HOUSE OF REPRESENTATIVES,
OVERSIGHT AND GOVERNMENT REFORM,
Bakersfied, CA.
The committee met, pursuant to notice, at 10 a.m., at the Kern
County Board of Supervisors Chamber, 1st Floor, 1115 Truxtun Avenue, Bakersfield, CA, Hon. Darrell E. Issa (chairman of the committee) presiding.
Present: Representatives Issa, Farenthold, and McCarthy.
Staff present: Lawrence J. Brady, staff director; Kristina M.
Moore, senior counsel; Ali Ahmad, deputy press secretary; and Michael R. Bebeau, assistant clerk.
Chairman ISSA. Full committee will come to order.
This field hearing is on Pathways to Energy Independence and,
particularly, on Hydraulic Fracturing and Other New Technologies.
The Oversight Committee mission: We exist to secure two fundamental principles. First, Americans have a right to know the
money Washington takes from them is well spent; and second,
Americans deserve an efficient, effective government that works for
them.
Our duty on the Oversight Government Reform Committee is to
protect these rights. Our solemn responsibility is to hold government accountable to taxpayers because taxpayers have a right to
know what they get from their government. We will work tirelessly
in partnership with citizen watchdogs to deliver the facts to the
American people and bring genuine reform to the Federal bureaucracy. This is our mission, and this is what we are here for today.
This weekend, national gas prices surpassed $4 a gallon. Thats
no surprise to the people of California, who are tiptoeing, on high
steps, toward $5. A number of factors are included in this. Our
committee will, in fact, look at all of them.
Let there be no mistake. Today is not about only one part of the
cost of natural gas, oil, and other sources of energy. Consumption
from China and India are rising, thus stressing a world that had
a norm of supplying mostly Europe and the United States with its
fuel. Many of the wells that produce oil and natural gas have been
operating for decades or even, here, a hundred years.
Here in Bakersfield, we discover an early set of wells that still
produce and can produce much more. Were here today to talk
aboutsorryto talk and listen to experts who can help us underCOMMITTEE
ON
(1)
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stand how we can safely extract more, not less energy from this region. It is very clear that America suffers from a willingness to
buy, a willingness to consume, but not nearly enough willingness
to produce domestically.
Hydraulic fracturing or fracking is largely responsible for the
increase in natural gas production. The proven technology has revolutionized the extraction business, particularly in natural gas. But
let us make it very clear. Hydraulic fracturing or fracking is not
new. It is the improvements in a 60-year-old technology that we
are so interested in.
In North Dakota, we have a stunning example, where horizontal
fracking for oil production has increased 7,500 percent in just 5
years. Pennsylvania, one of the areas first used for oil, has the
same potential, as does California. But to recognize that potential,
we are going to have to listen to all the concerned citizens; we are
going to have to recognize that in America today, there are safe
ways to do things and then there are shortcuts.
Our committee is interested in making sure that no industry
ever again takes shortcuts, as we believe occurred in the Gulf. At
the same time, oil and natural gas will be produced somewhere in
the world to meet our consumption needs. Our goal is to make sure
that the safest possible activity goes on in the United States and
the maximum amount that can be extracted is extracted safely.
America has the highest standards for drinking water. EPA is to
be commended for what theyve done. At the same time, clean
water without, in fact, an economy operating are mutually exclusive. Most of what we do in the way of clean air, clean water are
the result of a vibrant economy that is able to support technologies
that make theseclean air and clean water more available and
more abundant, not just here but around the world.
So as we look at this issue today, let me make it clear. We will
be looking at the entire group of issues, including ways in which
we can produce more and consume less.
President Obama has set goals for increased production and increased safety. We, as one-half of one-third of the government, seek
to make sure that his goals of clean, safe, and abundance of American fuel is able to be met by his administration through the work
of this Congress and Oversight.
Before I recognize other Members for the opening statements, I
would like to add one more thing for the record. Ill be including
a comment of the committee on the announcement of the Presidents fracking advisory panel. Secretary Chu has appointed a
panel. Weve reviewed it.
I guess Ill ask. Any of you hear about it in time to be included
in that Commission? No.
From what we can find, this is a Commission that lacks operators. It lacks people with the experience in the production and appears to be a combination of, if you will, intellectuals and opponents of all natural gas, oil, and other fossil fuel production.
So were hoping, through this letter in the record, and a followup
to the administration, that this Commission can be expanded so
that its consensus is a consensus of the entire industry and beneficiaries and not simply those who have already decided they dont
want the end product.
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And with that, I would recognize the gentleman from Texas, Mr.
Farenthold, for his opening statement.
Mr. FARENTHOLD. Thank you, Mr. Chairman. Im honored to be
here today in California, another great oil-producing State. As I
drove in last night
Chairman ISSA. Theres another.
Mr. FARENTHOLD. Yes, there is.
As I drove in last night, I looked around and kind of smelled the
air and got a feeling of the community. When you go into a town,
theres just kind of a vibrancy, a feeling you get. And I was commenting to Jessica Blake, who was with me, a member of my staff,
who actually grew up in Midland, Texasand we both agreed
Wow, this is West Texas with the mountains in the background
and a few degrees cooler. So Im honored to be here, and I feel
right at home.
We have created a situation in this country where gasoline prices
are so high that its affecting every area of our economy. The food
that we eat, every good or service that we purchase is affected by
the increasing cost of gasoline and the increasing costs of energy.
We are producingwe are importing the bulk of our oil and gas
from foreign countries, many of whom are not our friend.
Energy independence, increased domestic oil and gas production
is an important economic issue, its an important jobs issue, and it
is also an important national security issue.
So I would like to thank our panel here for taking the time to
come talk to us and let us explore and understand better the technologies that have been usedin use for over 60 yearssafely for
increasing oil and gas production here in California, at home in
Texas, and now throughout the United States of America. I look
forward to the testimony. I look forward to asking some questions
to the witnesses, and would also like to thank Mr. McCarthy and
Mr. Issa for having me here. Thank you.
Chairman ISSA. I thank the gentleman. And it now gives me
great pleasure to recognize your hometown hero, one of my heroes,
someone who I knew when he was in leadership in the statehouse
and was pleased when he came to Congress and even pleased when
he passed me by to be one of the top-ranking members of Republican leadership.
So Im the chairman, but Kevin McCarthy is the boss. We now
go to the gentleman from California.
Mr. MCCARTHY. That was very kind.
I do want to thank Chairman Issa. Hes been going up and down
throughout the Nation. Kern County is not new to him; hes been
throughout here.
But the work that hes done through his committeehis committee is Government House Oversight. And for too long, government has not had the oversight. We have passed a lot of different
pieces of legislation, but weve never gone back and had the accountability. And his is the one committee that brings accountability back to government. And hes done an extraordinary job
with it so far. And the one thing I want to thank him for is coming
to the 22nd Congressional District.
And when you look at the challenges, when Blake talked about
the security of America and jobs from the ability to have energy
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independence, theres probably no better district in the Nation than
the 22nd District. We go from the Mojave Desert to the Pacific
Ocean. We have the fourth largest potential in wind and the Nations fourth largest in the State for solar. You can go across; you
can find a nuclear facility in San Luis Obispo; you can go out to
find geothermal in Ridgecrest.
As Kern County knows, we produce more than 70 percent of all
the oil in California, 10 percent of the Nation, 1 percent of the
world. Its more than a hundred years; so the technology has to be
different. But as technology has changed our life, as I look across
into this field of individuals, they all have different forms of canvas.
When we landed on the Apollo, with the Apollo landing on moon,
there is more technology in my BlackBerry today than there was
on the Apollo. It has made our life better. And just as that technology has improved, it has improved our ability to use the resources of America instead of paying someone else for it. When we
send our money someplace else, we send our jobs someplace else,
but we also constrain our economy.
Now, we are the Saudi Arabia of natural gas, but do we have the
ability to bring it up? Weve watched fields more than a hundred
years old. And there are independent representatives here in the
oil business that many have sold them and moved on.
We find in Kern County you haveOxy is based here. Well, government sold them their field for $3 billion, and they thought they
got a really good deal out of it because they didnt think anything
would extract. One of the largest finds undiscovered in the last little bit is out there.
So theres new potential each and every day. Our decision has to
be as Americans, do we want to control our own future, do we want
to invest in America, and do we want to use that technology to protect our environment at the same time and make it better than
were using it today? And its almost every week Im able to go out
and see a new form.
In Kern County, our oil happens to be thicker; so we have to enhance it to get it even to come up. But we have now used new technology where we are first in the world putting in solar panels out
there to put the steam in. It is a new approach, a new style, and
thats what we believe in, America reaching the new opportunities.
Winston Churchill always said about America, You can always
count on them to do whats right after theyve exhausted every
other option. I think thats right when you look at our energy policies. We put in an energy department because we want to become
energy independent. We import more today than when we created
that department.
We have to be honest with ourselves. We have the resources in
America; we have the ability. If we make the decision that we do
not want to utilize our natural resources, that doesnt mean were
not going to get it from somewhere else; it just means were going
to pay somebody else, somebody else is going to have the jobs, and
its going to cost our own economy. And weve watched that, and
we watch the world continue to grow.
Thats what todays hearing is about. We want to protect our environment; we want to do it in a common sense, sound way that
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makes the investment right here, and we want to utilize the technology that allows us to do it.
Its a little ironic that the chairman of this committee probably
knows technology better than anybody else inside Congress. He
was very successful in business, based upon technology, and he
continues to enhance that ability and apply that. But also, he understands accountability, and thats what he wants to apply to government as well. Thats why he goes out across the country and
has a hearing and goes directly to where it can have an effect.
So I want to thank the chairman, and I want to thank the committee, and I yield back.
Chairman ISSA. I thank the gentleman.
Just another reminder, weve probably got the third highest
ranking Republican in half the time that Ive been in Congress.
We now recognize our panel of distinguished witnesses.
Assemblywoman Shannon Grove represents the 32nd District of
California and is also an entrepreneur and a very successful one
at that.
Rock ZiemanZiermansorry about that, Rockis chief executive officer of the California Independent Petroleum Association.
Dr. William H. Whitsitt
Mr. WHITSITT. Whitsitt.
Chairman ISSA [continuing]. Whitsitt is executive vice president
of Devon Energy, which is the largest U.S.-based independent oil
and gas producer. And as I was reminded, both a Californian and
an Oklahoman depending, and we miss you here.
Mr. Steve Layton is president of E&B Natural Resource Management Corp. of California, a California-based independent oil and
natural gas exploration company. Thank you for being here.
And Mr.is it Tupper?
Mr. HULL. Yes, it is.
Chairman ISSA [continuing]. Hull is vice president of the Western
States Petroleum Association, which represents large and medium
oil producers and a frequent testifier on these kinds of important
issues.
Pursuant to the committees rules, I would ask you all to rise to
take an oath.
[Witnesses sworn.]
Chairman ISSA. Let the record reflect all witnesses answered in
the affirmative.
This is a field hearing. And although many of you, who Ive seen
in Washington in the past, understand the formality of Washington, its a little different here. Youre not going to see adversarial questions and can we get you in 20 questions and cut you
off as youre answering. Anyone that comes to a field hearing, Republican or Democrat, generally comes to listen. So although we
would like you to try to stick to more or less 5 minutes because
your entire opening statements are going to be placed in the record,
as we go through the questioning, dont be surprised if Blake comes
in and says a followup to what I say or Kevin comes in.
The idea is were here to listen, and were here to learn. At the
same time, if one is answering and you want to pipe in, dont wait
to be asked. We want to make the record complete with the knowledge that you bring to us to take back to Washington.
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And with that, Mrs. Grove or Ms. Grove, I will recognize you
first, mostly because youre first on the schedule but also because
youre the lady present.
STATEMENTS OF SHANNON GROVE, ASSEMBLYWOMAN, 32ND
ASSEMBLY, DISTRICT OF CALIFORNIA; ROCK ZIERMAN,
CHIEF EXECUTIVE OFFICER, CALIFORNIA INDEPENDENT
PETROLEUM ASSOCIATION; TUPPER HULL, VICE PRESIDENT, STRATEGIC COMMUNICATIONS, WESTERN STATES PETROLEUM ASSOCIATION; WILLIAM WHITSITT, PH.D., EXECUTIVE VICE PRESIDENT, DEVON ENERGY; AND STEVE
LAYTON, PRESIDENT, E&B NATURAL RESOURCES MANAGEMENT CORP.
STATEMENT OF SHANNON GROVE
Ms. GROVE. Thank you, Mr. Chairman, and thank you Congressman McCarthy and Members and guests. Im Assemblywoman
Shannon Grove, but before I became elected to serve the people of
Kern County, Ive been a business owner. And my business is primarily a third- or fourth-tier contractor to the oil, construction, and
agricultural industries.
And my hope here today is to bring some common sense regarding our domestic oil production for these two very important reasons: The security of our Nation and jobs. We have a vast supply
of fossil fuels, oil, in California, and we barely are tapping into
them. Think about this. For every barrel of oil that we cannot
produce here we are importing from a volatile foreign nation. Most
of it comes from volatile foreign nations. And why are we, as Americans, relying so much on energy from foreign nations when we
have the ability, the technology, and the people who need jobs in
our own State, our own county, and our own Nation right here able
to do it?
For example, I know one smaller, kind of mid-sized producer that
has a platform; and, if allowed, this platform can produce an additional 30,000 barrels of oil a day. So if you think about that, and
youre conservative, if we were allowed to produce 100,000 barrels
of oil a day additional to what we produce now, California could reduce 20 percentor excuse meincrease 20 percent of its oil production, and you would reduce that from the Middle East countries.
Equally important is our national security or jobs, private sector,
non-taxpayer funded jobs. Our Nation has one of the highest unemployment rates ever. And here, in our energy-rich district that I
represent, its at an all-time high of 1712 percent unemployment.
Some of our Kern County cities are close to 40 percent unemployment, and thats completely unnecessary. Jobs domestic oil production would produce are great paying, high quality, non-taxpayer
funded, much needed jobs.
So with over 2 million people out of work in our great State,
more across the Nation, our national security and our economic
hope of the future must realize its potential that we are leaving in
the ground. Allowing increased domestic oil production begins to
solve both of these very important issues, our national security and
private-sector jobs that are much needed in our Nation.
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Let the people of the United States and California get back to
work, reduce our dependency on foreign oil, and make America
stronger, and stop this full-out assault that we have on a very prosperous industry that provides jobs in our Nation. Its the No. 1
thing that we needpeople need to get back to work. And this industry provides jobs and has provided jobs and technology throughout history.
So thank you for letting me be a part of this today, and Ill keep
my opening remarks brief.
Chairman ISSA. Thats very un-Washington-like.
[The prepared statement of Ms. Grove follows:]
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STATEMENT OF ROCK ZIERMAN
Mr. ZIERMAN. Thank you, Mr. Chairman and members of the

committee. Im Rock Zierman, the CEO of the California Independent Petroleum Association.
Were a trade association that represents about 470 companies
independent oil producer companies, royalty owners, and service
and supply companies that have operations here in California.
About 160 of those are actual oil and gas producers that range in
size from small producers, with just a couple of wells; to large, multinational corporations that produce hundreds of thousands. The
definition of an independent doesnt have to do with size. It has to
do with the fact that theyre not an integrated company; they dont
refine, market, transport petroleum products at all.
Independent producers produce 70 percent of Californias in-state
production of oil and 90 percent of its natural gas. As a State, our
instate production represents 38 percent of what we consumeour
refineries and our consumers and on the oil side. The rest, as Ms.
Grove mentioned, has to be tankered in. And 14 percent comes
from Alaska, but theyre also declining. And so the rest of the marginal wells have to come from foreign countries, primarily Saudi
Arabia, Iraq, and Ecuador.
Independents is the main driving force behind exploring for new
oil and natural gas reserves. Over 90 percent of domestic oil and
gas wells are drilled by independents in the United States, and
their role is increasing.
In 1999, major oil companies invested $31 billion in drilling programs while independents invested $18 billion. By 2007, the role
had totally reversed. Majors invested $49 billion and independents,
$77 billion, for a total of $126 billion. And that was 4 years ago.
Obviously, the numbers are quite larger today, which leads us to
the next point, which is drilling for oil and natural gas is expensive, and its getting more expensive. In 1999, it cost $100 per foot,
on average, to drill a well in the United States. By 2008, that had
risen sixfold, to $600 a foot.
A recent study concluded that, on average, independents reinvest
150 percent of their net income back into drilling operations. That
means they have to go out and get equity partners for capital or
they have to borrow from banks in order to continue their operations.
Capital budgets, by definition, are driven by how much capital is
available. And obviously, the market price of oil plays a significant
role in determining how much capital is available; but other factors, such as risk and return on investment, also contribute.
Oil and gas operations, as with all mining operations, are producing a finite resource; therefore, producers are basically going
out of business every day. So in order to survive, producers have
to drill to find new resources or employ new technology to better
extract existing oil fields, and that takes money.
So if your goal is to increase domestic oil and gas production, you
cant hamper the availability of capital. And unfortunately, thats
precisely what the administration has proposed in their last three
budgets. The administration claims that Big Oil is receiving subsidies from the U.S. Government, and nothing could be further
from the truth.
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And Ive listed a number, in the record, of these tax treatments.
And Ill just mention two: One is intangible drilling costs, which,
by the way, are not available to any of the integrated majors, only
to independents. And these are expenses, expensing, of non-salvageable items that can be expensed in the current year that they
were incurred, just like any other business can. If a shoe salesman
buys shoes for $10 and sells them for $20, he doesnt depreciate the
shoe over 7 years, he expenses it.
So these debates are about the proper accounting method of expensing these things. These are not subsidies that are given, cash
payments from the government, for certain activities. And as I
mentioned, a lot of the other ones are listed in the record. Id be
happy to address those with any questions.
But the bottom line is it takes a lot of capital to drill for new
oil and gas production. So lets not hamper the access to the capital
by raising taxes on our domestic independent producers, but let the
sector continue to create jobs and meet the energy needs of our citizens. Today, they employ about 4 million people, which represents
over 3 percent of our total U.S. workforce. And thats what we need
to foster in the future. Thank you.
Chairman ISSA. Thank you.
[The prepared statement of Mr. Zierman follows:]
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Chairman ISSA. Doctor, theyve all been running under time; so
theres extra time if you need it.
STATEMENT OF WILLIAM WHITSITT
Mr. WHITSITT. Thank you, Mr. Chairman. Thank you to members

of the committee for the opportunity today. And I want to thank
the local residents with whom I had a great conversation before the
meeting today. And they had a number of good questions.
What Id like to do is chat a little bit with you and discuss what
is truly a revolution caused by technologythe chairman alluded
to itand this is the natural gas revolution in the country today.
The game has changed, the revolution is here, the paradigm has
shifted, and there is no going back.
This is a piece of shale from 8,000 feet below the prairie of Oklahoma. And Id like to pass this around to the committee. And also,
its fine to pass it around to the audience too. The natural gas is
actually trapped in the pores of this core sample, and this is the
key to the revolution.
What Id like to do is start with a little geology lesson here. This
is geology for non-geologists. And you can follow either in the printed testimony or on the screen. But traditionally, we were looking
for oil and gas that was produced in that lower band, that gray
area there, source rocks. These are shales that Im referring to
here. And that oil and gas cooked for 340 million years. The little
critters and plants would migrate through porous zones up until
they were trapped by an impermeable layer of rock. And you can
see that shown there toward the right in the small red area. Well,
that led us to find or try to find a number of these little trapped
areas. And thats why you had so many wildcat wells that were less
successful or more.
And then back in the 1990s, beginning in Texasand Ill have
more to say about thatGeorge Mitchell had the idea that we
ought to be able to produce natural gas right from the source rock,
and he started drilling vertical wells and fracturing them, and the
economics just didnt work out all that well.
So in 2002, Devon Energy that acquired Mitchell, began to marry
the technologies of hydraulic fracturing and horizontal drilling to
begin to produce gas from the Barnett Shale of Texas. Thats the
picture of where it is.
And well go to the next slide. And youll see that in the early
part of the last decade, the wells wereshown on the black line.
Those were vertical wells. You can see production rates and the
production tailing off out into the future. And then look what happened, with the blue line there, when we started marrying the hydraulic fracturing and the horizontal drilling to produce this gas,
huge initial production rates in these wells in the last 40 or 50
years.
Lets go to the next slide. You can see the history of the shale
plays around the country with the use of this marriage of technology. And you can go to the next slide to see the projections that
EIA has in the dark blue there for our gas resource production into
the future based on this technology. This is a depiction of the areas
around the country where we have shale fairways and the ability,
potentially, to produce a lot more natural gas for this country.
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And if you go to the next slide, youll see that has already begun
to have a very significant positive effect on consumer prices. Those
are three different projections by the EIA over the past 3 years,
ending up at that red line on the bottom, that show the different
price projections based on this increase in supply.
And if you go past this slide to hydraulic fracturingthis is what
Id like to spend a little more time on. Hydraulic fracturing is, of
course, the putting of large quantities of water, sand into the
ground, pulling the water out of the sand, holding the fractures
open. And we have a little bit of animation here that will show you
what it is that were doing.
First of all, we drill the well. And then were going to re-run it
from the beginning here, hopefully. And youll see that the well is
drilled obviously from the surface out into a lateral that can be
many thousands of feet long. And then once we complete the drilling of the wellIll tell you what. Im not sure if thats going to
work so well, but well just talk about it from here.
You can see that the drill string is pulled out, and then the well
is actually perforated with a perf gunyou see that happening
hereinto the shale formation. And after the well is perforated
you can see the length of the distance of the perforationsthen the
sand and water, with some additives, is put in under very high
pressure, and we begin to frack the shale formation.
The frack stages can be multiple. Here, we put a plug, and then
well come back into the well and do the same kind of fracture
stimulation treatment along that horizontal part of a well. And
then the water is flowed out; the sand stays, holding the fractures
open; and the surface equipment is, by in large, removed and only
a small amount remaining; and the gas is produced. So thats basically the hydraulic fracturing process.
If we go to the next slide, youll see that one of the big concerns
about hydraulic fracturing is addressed here by our well construction. We, under State regulation throughout the country, put pipe
or what we call casing through any freshwater zones that usually
occur hundreds of feet below the surface. And we may be fracking
as much as 15,000 feet below the surface. But we seal off the water
zones before we start the operation. And you can see that depicted
here.
If you go to the next slide, youll see just a depiction of the equipment thats used on the site. That equipment virtually all goes
away after the frack job. And you see some numbers there with regard to the amount of water we use. We can talk about that later.
If you look at the frack fluid components that have gotten a lot
of attention recently, the bottom line is that 9912 percent of what
goes into these wells is basically sand and water. And, of course,
most of that, obviously, being water. And the fluids are not all that
mysterious. In fact, theres a very robust Web site that has been
in operation now for a little over a month called FracFocus that
was actually created and is operated by State regulators under the
Groundwater Protection Council and the IOGCC on which producers are beginning to post what goes into every well thats hydraulically fractured.
This is a shot of the actual screen, the forum that you can call
up. You can search this by well location, by company, by coordi-
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nates, by API well numberlots of different waysand find out
whats in any well thats hydraulically fractured once this site is
fully operational and all postings are on it.
The site is also extremely goodand Ill say this to the residents
in the audience and to othersbecause it actually has wonderful
explanations, in a very robust way, about what Ive talked about
in terms of why we hydraulically fracture wells, how its done,
what the additives are, what theyre used for, and a lot of other information that I think takes some of the mystery about hydraulic
fracturing away.
So we conclude by saying that hydraulic fracturing has been, as
the chairman pointed out, in use for many decades. Our first well
in Oklahoma was fracked in March 1949. Weve done 100,000 of
them and well-regulated by States. FracFocus is up for fluid disclosures. And we are continually improving our industry practices,
and the States are continuing to work to make sure that they have
the right regulatory framework for all of us.
So with that, Ill conclude. And Ill be happy to answer questions.
Chairman ISSA. Thank you. Youve answered many questions by
your presentation.
[The prepared statement of Mr. Whitsitt follows:]
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Chairman ISSA. Mr. Layton.
STATEMENT OF STEVE LAYTON
Mr. LAYTON. Thank you. Good morning.

Chairman ISSA. I think you need to turn your mic on.
Mr. LAYTON. Good morning. My name is Steve Layton, the president of E&B Natural Resources Management Corp., and it is an
honor to appear before this committee as a representative of the
independent oil and gas producers operating here in the San Joaquin Valley.
E&B is a California-based, privately owned, independent oil and
gas company. We produce approximately 7,000 barrels of oil each
day and have 140 employees. Our primary objective is growth and
the replacement of our reserves.
It is important to note that E&B, along with many other independent oil producers, as Rock mentioned, reinvest virtually every
single dollar-and-some that they earn in order to replace produced
reserves and hopefully grow our respective companies. This significant and ongoing reinvestment of cash-flow by oil and gas companies is a vital but often overlooked part of the way this industry
must manage its business in order to stay in business. This is exactly what has happened to E&B as well as many other companies
in the United States, over the past 5 to 10 years particularly.
In 2003, E&B produced approximately 1,500 barrels of oil per
day, but by reinvesting cash-flow, along with the financial support
of banks, we implemented a growth strategy that ledled by field
redevelopment and acquisitions. Today our production is in excess
of 7,000 barrels of oil a day, and our employee count has grown
from about 20 to 140. I would also like to mention that this production growth being matched by the job growth is something that
were very proud of at E&B.
Today I would like to focus on development, also known as organic growth to some, because it is this type of production growth
that is important to all of us given the universal concerns about energy security. The industrys ability to grow production has been
enhanced significantly by advances in exploration, drilling, production, and completion technology, including the fracking that weve
heard about just now. But these gains, as great as they are, can
be offset to a considerable degree by the ever increasing burden of
statutory and regulatory impediments that we face.
Californias and most on-shore fields are very mature, having
produced, in some cases, for more than a hundred years. The easily
captured, easily produced oil has already been exploited. For this
reason, the application of new technology has been a critical part
of our efforts to increase the production in these mature fields.
Perhaps the greatest evolution of technology in the San Joaquin
Valley involves the use of steam to heat and mobilize oil that would
otherwise be almost impossible to extract. Steam has been used for
over 40 years; yet, the technology continues to be refined, augmented, and improved and continues to unlock large volumes of
previously inaccessible reserves.
More specifically, I would like to reference a small parcel that
E&B owns in one of the nearby heavy oil fields. Five years ago, this
5-acre lease was producing just a few barrels a day. In 2007, we
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made a significant investment in the property and now have drilled
more than 20 wells and implemented a modern steam drive. With
the help of new drilling, completion, and thermal technology, this
little 5-acre parcel is now producing almost 300 barrels a day and
will produce in excess of a million barrels of oil before it is depleted. That equates to 1 million barrels of energy security from
just 5 acres.
In other fields, we have benefited greatly from the use of horizontal drilling to sweep and capture large untapped areas of very
mature oil producing reservoirs. The use of horizontals has given
us the ability to access substantial new reserves in these old fields.
One of these fields happens to be the primary driver of E&Bs
growth, and it is the site of a significant and ongoing drilling and
redevelopment program.
In the 1990s, this field was on its last legs and appeared to be
headed for abandonment. About 5 years ago, we began the redevelopment program that started with re-drills and, eventually, new
vertical wells. And with the help of advances in well-completion
technologyIll mention fracking againand improvements in artificial lift systems, our redevelopment efforts proved successful.
Last year we stepped things up a notch with the addition of a
horizontal well development program. Not only now are we able to
access reserves that would have been left behind, but after just 1
year, were now generating over 10 percent of our production with
less than 3 percent of our wells. We do expect this trend to continue and ultimately lead to a production rate in excess of 5,000
barrels a day. This is from a field that was almost abandoned 15
years ago.
Finally, when it comes to technology, Id like to highlight the use
of 3-D seismic imaging to help capture untested and undrilled
sands containing significant quantities of oil and gas. In our case,
weve acquired 3-D seismic over several hundred square miles of
land recently, including several mature, old oil and gas fields, some
having produced since the early 1940s and 1950s.
3-D seismic is usually thought of as a tool to help explore for new
oil and gas fields, but it is also a very valuable tool to help hunt
for untapped reserves in and around many of the tired, old oil
fields that are all over California and many other States. It has
been said by many that the best place to find oil is in an old oil
field. Well, with the help of 3-D seismic and numerous other technological assets we have at our disposal, that statement is more
true than ever.
Moving on to the impediments. In a nutshell, just as technology
unlocks new oil and gas resources for companies, such as E&B, to
exploit, new rules and regulations and permitting delays combine
to hamper that effort. While unregulated and environmentally destructive practices have no business within our industry, I would
like to point out just a few examples of what I view as burdensome
regulations that have directly impacted our ability to produce more
oil.
The first concern is Federal permitting and multiple Federal
agencies. In our case, permits necessary to proceed with one of our
3-D surveys were delayed substantially by the U.S. Fish & Wildlife
Service. The first permit to conduct the survey was submitted to
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the Bureau of Land Management in December 2007. More than 16
months later, the required biological opinion was finally issued by
the Fish & Wildlife Service. This delay paralyzed the project for almost 2 years.
Then in early 2010, we made a decision to expand the project by
about 30 percent, which did require a modification of the project
area. Upon review, the BLM, in fairly short order I will say, notified us that they believed the modified survey area met all criteria
of the original permit and approved the plan. Unfortunately, Fish
& Wildlife didnt see it that way and offered no explanation of why
they disagreed with the BLM. The net result of these conflicting
messages was a delay in this project for almost an additional year.
Thats a total of 3 years of delays because of these permitting
issues.
The second example concerns the impact of various environmental laws, more specifically, The Endangered Species Act. This
region has numerous threatened and endangered animals and
plants. Regulations are in place that require operators to survey
and determine whether any of these species would be impacted by
development in new areas. This, of course, is common sense and
environmentally sound; yet, these same laws apply to expansions
and development within existing fields.
For example, in one of our largest fields, we intend to implement
a steam flood that is directly adjacent to a very successful steam
drive project operated by a larger company. To produce the steam
necessary to heat the oil, we need to install a gas pipeline to fuel
the steam generators. As part of the permitting process, a biological study is required, including one to determine if the blunt-nosed
leopard lizard lives within the area of the pipeline. This actually
requires two biological surveys, one in April and another in October. Our concern is that this project is already in a very highly impacted area adjoining existing thermal operations.
Furthermore, much of the pipeline route follows existing pipelines; yet, none of this seems to be given any consideration within
the permitting process. It will be October before we can complete
the survey, which could very well keep this project from being developed for over a year.
Finally, I want to bring to the committees attention an example
of some impediments we also face on the State level. In our case,
it concerns permitting delays for another steam drive project.
In July 2010, we submitted an application to the California Division of Oil and Gas to reactivate a previous steam drive. Ten
months later, we have yet to receive authorization for this multimillion dollar project even though steam floods are currently underway in sections directly adjacent to ours. No explanation has
been offered by the Division of Oil and Gas for this delay.
In summary, it is without argument that the San Joaquin Valley,
despite its age and regulatory challenges, holds significant additional oil and gas reserves that companies like E&B, using the latest technology, can exploit. If we can access these reserves in a
timely and reasonable fashion, I have no doubt that all of the companies operating here in the Valley can add significantly to our Nations domestic oil and gas production and will hire, train, and provide continued employment to thousands of new workers. This will,
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without doubt, improve economic growth throughout this region
and, more importantly, will aid in the quest to provide our Nation
with a secure energy future. Thank you.
Chairman ISSA. Thank you.
[The prepared statement of Mr. Layton follows:]
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Chairman ISSA. Mr. Hull.
STATEMENT OF TUPPER HULL
Mr. HULL. Mr. Chairman, thank you very much. My name is

Tupper Hull. I am representing the Western States Petroleum Association today, and were very pleased to have the opportunity to
address you.
Western represents major petroleum, integrated petroleum companies that operate in California and other western States that we
represent them in, as well as some of the large independent producers that Rock mentioned and independent refiners as well. We
do think its very important that this hearing is being held in Kern
County, as others have mentioned. Kern County is responsible for
producing about 72 percent of the oil thats produced in California
today. And California, as you know, is the third largest oil producing State in the United States.
Chairman ISSA. I apologize for interrupting you, but I talked to
the gentleman from Alaska, and he said as Alaska declines, he prefers that we mention were No. 2 now.
Mr. HULL. You anticipated. For a period of a couple of months
earlier this year, we were No. 2. Now weve slipped back to No. 3.
So I had to correct my testimony. But were giving them a run for
their money.
As others have mentioned, you know, the technology has played
such an important role in California, and not just prolonging the
life of the oil production but in the livelihood of the tens of thousands of men and women that work in this industry, men and
women who earn really good salaries and bring a tremendous
amount of expertise and diversity to this region as well as other
oil-producing regions in California.
You have asked us to talk about pathways to energy independence with a focus on hydrofracking, and Im going to let others here
with a great deal more expertise in hydrofracking address that specific issue. But we dont think any discussion about energy independence, or we would probably say energy security, is complete
without mentioning the 1012 billion barrels of oil that the U.S. Geological Survey estimates is offshore of California in undiscovered
but technically recoverable reserves off the coast.
To give you some sense as to what 1012 billion barrels would
mean to Californias energy security, if all that could be produced,
it would and could replace all of the oil we currently import from
foreign sources for 36 years. If you just look at our largest foreign
source of oil, which is Saudi Arabia, that 1012 billion barrelsexcuse mecould replace all Saudi imports for 155 years. It is a tremendous resource and one that we believe deserves consideration.
Now, were very aware of the tragic event that took place in the
Gulf of Mexico last year. We spent a lot of time explaining to the
media and others our view on that and why the production that
takes place in California occurs under conditions that are entirely
different, very different, than what is taking place in the Gulf of
Mexico in their deepwater exploration. The reserves on the outer
continental shelf in the Pacific are in much shallower water; the
pressures typically are much less than what was found in the
Deepwater Horizon accident. And the safety equipment that is em-
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ployed and the technology thats used is much more accessible on
the production facilities in California.
For the last 40-plus years, a billion barrels of oil has been produced off of the California coast. And during that time, according
toand I apologize. I cant remember BOEMREs full name. Its
the former MMSestimated or has said that a total of 850 barrels
of oil have been accidentally released in the Pacific during that 40plus years.
Now, make no mistake. Thats 850 barrels too many. Our members get up every morning with a goal to ensure that not a drop
of oil spills in any form during their operations. But over a 40-year
period, we believe thats not just a commendable safety record but
it reflects the kind of commitment and technologies that have been
developed to protect the environment while providing important energy resources to the Nation.
The issue of energy security is particularly acute in California
because as we say, California is an energy island. We are not connected to other refining and producing areas of the country by pipelines. Consequently, when there are upsets in supply or international events like were experiencing now that impact oil supplies, its very difficult to shift and move supplies around to balance
the markets. And so Californians pay a price in volatility and upward pressure on prices because of this isolation.
And so for that reason, we believe oil produced in California is
the most secure source of oil for us, it is the lowest cost source of
oil. And we believe this conversation youre having today is the
most important conversation from an energy perspective that we
can have. Thank you very much.
[The prepared statement of Mr. Hull follows:]
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Chairman ISSA. Thank you. Thank you all for your testimonies.
As I said, this is a less formal environment; so I dont think were
going to do 5 minutes. I think were going to go around multiple
rounds, and Im going a little bit in reverse order.
Mr. Hull, when you said 850 barrels into a billion barrels, any
guess, just with the ships that come into the United States, how
much was spilled in the same time off-loading per billion barrels
of imported oil?
Mr. HULL. I wouldnt venture to guess. Its not really a number
my members would be happy to have me carrying around and talking about. I mean, obviously
Chairman ISSA. Would it surprise you to know that just the stuff
coming out of bilges, that we regulate, far exceeds that.
Mr. HULL. I dont think theres any question that the risks associated with tankers and the volumes of oil that are coming into
California every day to serve this market far outweigh the risks of
producing here in the State of California in the Federal waters offshore.
Chairman ISSA. Mr. Layton, Im going to ask you a question, and
pretend that Im representing the other side of the equation for a
moment. I think it would be helpful.
Isnt it true that youre in an incredibly profitable industry, one
in which the American people pay far more for their fuel than one
would ordinarily figure it takes to extract and deliver it?
Mr. LAYTON. This industry, without question, is experiencing a
very profitable period. You can look at the earnings releases of the
public companies. I guess it depends on how you view it. If
Chairman ISSA. Well, let me give you the followup for a second.
Whenever you have a really profitable industry, one in which foreign competition is not really competition because we need them,
therefore, we must buy from themits not a question of Do we
buy from you? Or Do we buy from Qatar? Or any other place,
whether its oil or natural gas. The fact is: We have to import more
than half of all we consume in oil and beginning to become a net
importer in natural gas if we dont reverse the trend.
In a sense, dont we have a world market, such as Saudi Arabia,
where their lift cost is about $8, that gets into port for $8 a barrelwere delivering them the difference between $8 a barrel and
$140 a barrel. Well, your margins, your lift costs, are dramatically
higher.
What would you expect, for example, the lift cost of a typical Bakersfield delivery of a barrel of oil to be, all in all?
Mr. LAYTON. In the steam drive projects that I mentioned in my
testimony
Chairman ISSA. Yes.
Mr. LAYTON [continuing]. We willa typical operation, well
spend $40 to $50 a barrel to extract the oil, including the cost of
steam.
Chairman ISSA. And if you looked at the regulatory costs or, if
you will, the delays, the excess that you spoke about in your testimony, how much of that is, in fact, an additional tax on this lift
cost that you have.
Mr. LAYTON. It is easily another 10 to 20 percent on top of our
regular lifting costs. And it certainly depends on the area. It does
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vary, but it is significant. The delay and the uncertainty, although
difficult to quantify in terms of a dollar-per-barrel lifting cost, it is
equally as harmful as high lifting cost because it doesnt allow you
to plan.
In our business, as I see it, stability equals security. Stability in
the sense that we need a stable regulatory and tax environment operating. And if we have it, we can provide additional oil production
that does ultimately lead to more energy security for this country.
Back to your question on the profitability, as I said, it depends
on how you look at it. If you look at it as a company that takes
those profits and puts them in a shoebox and buries it in the backyard, thats not such a good thing. But if you go to what really is
happeningand I testified to and Rock mentionedthose profits
are reinvested. That reinvestment leads to more energy security.
And if you look at whats happened with the total production from
the United States in the last few years, youre going to see a big
difference in the production curve. Were on the incline now.
Chairman ISSA. I want to go back to that quickly. Youre on the
incline with a $40 cost, of which probably 10 or more is produced
by excesses in regulatory costs, over your competitors because an
$8 competitor is getting $140 a barrel because theres not enough
supply. Is that a fair statement.
Thats what I was trying to get to in that rhetorical question,
that, in fact, you triple your productionif America becomes close
to self-sufficient, the Saudis $140-a-barrel oil, which costs them $8
a barrel, or the Kuwaitis, which costs them $6 a barrel to lift,
theyll have to match the market, which would certainly drop into
the $60, $70.
What Im saying, in a way, is: Arent you here asking us to give
you the ability to produce enough to actually reduce the price of oil
and the excess profitability that exists in the world today?
Mr. LAYTON. If we, as producers, are successful in what I think
is a universal quest, to grow production, we understand the net result will be lower oil prices for the rest of the country. I mean,
thats what happens with supply and demand. You have more supply, the price goes down. And were trying to provide more supply.
Chairman ISSA. Mr. McCarthy mentioned my background in
business. Ive worked a lot in engineering, but the truth is that my
love was economics. And theres nothing I like more than figuring
out if you drop the price of energyand almost everything we
produce and everything we do is leveraged off energyyou drop the
price of everything else.
So thank you for your comments on that.
Mr. FARENTHOLD. Thank you very much, Mr. Chairman. At the
risk of being inhospitable, my first question to Mr. Hull is: You
mentioned California was No. 3 and Alaska was No. 2 in oil production.
Chairman ISSA. Or the other way around.
Mr. FARENTHOLD. Or the other way around, depending on the
month. Who is the solid No. 1 then?
Mr. HULL. I dont seem to recall that fact, Congressman. Its
Texas and I started my career at the Houston Post back many
years ago and covered the industry and found it fascinating.
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Mr. FARENTHOLD. Let me visit, then, for a second, Mr. Hull,
about theyour group represents a wide variety of companies,
from the big ones to the little ones.
Mr. HULL. Primarily the large companies. We have a small membership of 26 companies. Were not a broad-based organization.
Were the household names in the oil and natural gas business.
Mr. FARENTHOLD. So if somebody were going to refer to the evil
oil companies, they probably would be referring
Mr. HULL. It would be Big Oil, yes, sir.
Mr. FARENTHOLD. So let me ask you. You hear about record profits within your industry, and youre always hearing about dollar
amounts, but can we talk a little bit about percentage amounts?
Whats the typical percentage on return on yalls investment.
Mr. HULL. Whats fascinating about the periods we go through
nowbecause I get to handle a lot of these questionsis we never
really talk about this when the prices are depressed. I think we forget that in 2008 we had a period of extraordinarily high crude oil
prices in August. By December, crude oil was trading at $30 a barrel, and the price of gasoline came down by a comparable amount.
So we think its important to talk not only about percentages
because youre right. These are the largest commercial enterprises
on the face of the earth. The billions upon billions that are invested
and required to bring these resources to market are enormous. And
over a period of time, when you balance out the highs and the
lows
Mr. FARENTHOLD. An average.
Mr. HULL [continuing]. The oil and natural gas business makes
about 6 to 612 cents for every dollar they sell, their gross sales.
Mr. FARENTHOLD. How does that compare to other industries.
Mr. HULL. About a penny, a penny and a half less. So if youre
an investor, manufacturing, as a whole, is generally more profitable than the oil and natural gas business over time.
Mr. FARENTHOLD. And also, youre typically public-traded companies, the bigs.
Mr. HULL. Right.
Mr. FARENTHOLD. And the owners of those companies, typically,
what, pension funds, mutual funds? Those are some of your largest
shareholders.
Mr. HULL. Absolutely.
Mr. FARENTHOLD. So pretty much probably anybody in this room
or watching on the Web, if they have a retirement plan or own a
mutual fund, are probably the owners of one of your companies.
Mr. HULL. Absolutely. I dont have the exact figures right in
front of me, but youre absolutely right. The vast majority of owners of Big Oil are pension funds and individual investors who have
their retirement savings in these companies ownership.
Mr. FARENTHOLD. I apologize for goingjust questioning with
you. I hope Ill have another round or two so I can ask some other
people.
I wanted to visit a second about offshore. You talked about offshore in California; you talked for a minute about the tragedy with
the BP blowout in the Gulf of Mexico. Being from Texas, lets talk
a little bit about the Gulf of Mexico, if you wouldnt mind.
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The U.S. oil companies arent the only ones drilling in the Gulf
of Mexico, are they?
Mr. HULL. You know, I dont believe so. But I have to be honest
with you. Our purview includes only the western United States. Im
not familiar with whos operating in the Gulf of Mexico.
Mr. FARENTHOLD. As a lawyer, I dont ask you questions you
have to answer to.
And youve actually got China drilling off the coast of Cuba;
youve got the State oil company in Mexico thats drilling in the
Gulf of Mexico as well.
So regardless of what amount of regulation we put on our domestic oil companies, were not going to have any effect on what China
and Mexico do. We cant change the way they drill.
Would that be an accurate statement?
Mr. HULL. I think thats correct, sir. I mean, I think the chairman mentioned too that while we are seeing prices at these very
high levels, apparently related to the unrest in the Middle East,
the longer-term picture is not just, you know, theirthese other
emerging economies are very actively and aggressively out in the
world market looking for new production opportunities, theyre buying a tremendous amount of oil, and its creating upward
Mr. FARENTHOLD. So do you think a better regulatory scheme or
better way for the taxpayers to spend their money, rather than
making it more difficult for yall to drill in the Gulf and compete
and make permitting and all these regulations, might be to invest
a little bit of time and money some response, training and technology, so in the event something happened in a well owned by or
operated by another country, wed be able to respond to that as
well as if something happened locally.
Mr. HULL. I lost the question. I apologize.
Mr. FARENTHOLD. Rather than putting excessive regulation on
our domestic companies, making life difficult for them to compete,
lets say, in the Gulf of Mexico, where youve got Mexico and China
also drillingsomething happens on a Mexican and/or a Chinese
drilling rig and theres a blowout or a leak or something, wouldnt
we be better off, rather spending our time and effort regulating domestic companies, coming up with responses that would benefit
any worldwide oil company, training and technology?
Mr. HULL. Well, I think the U.S. oil and gas industry have led
the world in developing those kinds of responses. In California, of
course, we have huge resources on standby 24/7 to respond and
have developed, along with other regions of the country, this technology that really is used worldwide to respond to any accidents
that occur.
Mr. FARENTHOLD. Well, Im over time. Ill let everybody else have
a turn.
Chairman ISSA. I assure you, we willas long as our witnesses
are willing to indulge us, we would like to learn all we can.
Mr. MCCARTHY. I thank all the witnesses for their testimony.
And it really comes down to why were having the hearing and why
were having this challenge. We use more energy than we produce
in this country. Having said that, that means we have to get it
from somewhere else; so we pay for it from somewhere else.
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The challenge that Ive always faced in this job is: There are
many times we think in Californiawe realize other States compete with us. We have the ability to say which State produces
more. We watch every day when a company leaves California or
somewhere else because they maybe give a little better price. We
never really think that America competes with other countries, but
we do. And energy is probably the No. 1 industry that you can find
that could happen. If we make it harder here, we will still buy it
somewhere else.
Now, this country has faced a lot of challenges. And normally
when we face a challenge, we meet a goal and we go forward.
Weve done that in World War II. We achieved our goal. When we
found that Russia went to space first, we made a goal for us and
in a decade, we were going to go to the moon. We faced our attention on that.
For too long in energy, we only face our attention when the problem gets too big, and then we put our attention there, then we forget about it when it comes down so dont have the ability to go
there. If anybodys ever lived in a community that has oil, youve
seen the booms and the busts. If youve lived in this community,
you watched a time where the cost to lift it was more than the barrel you could even sell it for. But you could not shut it down so you
had to maintain it.
I have found that the country gets very divided. Now, a time that
we all get united is usually during the Olympics. Why is it that we
cheer for our country? We never ask them whether theyre Republican or Democrat. But the other reason why we cheer so strongly
is because America gets a level playing field. We do a 100-yard
dash, we all start at the same starting line; we all have the same
finishing line.
So weve got to think from that mindset too, that when we make
stuff more difficult here, someone else can still be drilling someplace else that have different protections on the coast then we
would have.
And so taking some of that, I thought some of thissome of this
ability is what I saw here today. I loved the presentation where
youve actually shown how it was going.
Now, technology has changed. And probably the best analogy Ive
heard from somebody, if you think of a bathtub and you fill it with
waterpicture that underground, thats a natural resource. An old
way of doing it was putting a lot of straws into the bathtub and
trying to get that water out. Horizontal is fundamentally different.
Now we can just go to the drain and use one. So thats one over
the land, and thats one ability to bring it up in a different capacity, and its environmentally safer.
When oil was first discovered in Kern County, it was untapped.
It was a lake. Theres pictures of people in a boat, not of water but
of oil. Its a fundamentally different place of where we have it now
and our protection.
But I want to take that technology a little further, and I want
to followup with Mr. Whitsitt.
When you do the fracking, you had shown in your graph that
there has been some people bring up the issue about the water
table and the protection. If you can walk me through that one more
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time to show where fracking goes and where the water table is and
what protections we have in going and using the technology.
Mr. WHITSITT. Great question, Congressman. Water tables or the
aquifers that are drinkable are essentially shallow, and with very
few exceptions, as Ive indicated, a few hundred feet below the surface.
The States require and we, with our practices, implement a very
strict regimen of sealing off those water sources at the surface or
close to the surface with multiple layers of steel and cement, and
then the frack job is done through those layers that seal off the
water.
Mr. MCCARTHY. And when you normally do the fracking, how
farther down is that from the water table, itself.
Mr. WHITSITT. Thousands of feet, in most cases. Certainly 15,000
feet is not uncommon. We, at Devon, are doing 8,000 to 10,000 to
12,000 feet, and so youre well below, far below the water sources.
In CanadaI will mention tooand this goes to other things
were doing to try to protect both water quality andquantity and
quality. We actually in our heavy oil operations in Canada have
found ways to use non-potable water; so we use no freshwater to
generate steam. And were trying to find areas where we can do
things like that all the time because we are very much in tune with
concerns that are very legitimate, particularly in the west, about
water issues.
We also try recycling where we can; we do it where we can. And
we also blend water; so we use flowback water to put in the next
job, if were able to do that. And were making progress on that
technology all the time as well.
Mr. MCCARTHY. Now, we all know that one form of energy is not
going to get it done. We also know that as advancements go, we
will have renewables that have great potential for the future, but
we need that bridge. The challenge that we have is that we have
to have a policy that allows us, with the ebbs and flows of the cost,
to actually bring the cost down. Because our economy, 70 percent
is based on consumption.
With the price of oil rising so rapidly, what happens is: People
are still paying that cost to business, and theyre taking consumption out of the economy; so our economy drops. But that price still
goes someplace else and goes out to another economy.
So, Rock, you brought up insight talking about the taxes, that
they are very similar and the same taxes based upon any other
business. Which of you could explain that a little further.
Mr. ZIERMAN. Well, theres been a lot of discussion about whether
or not oil companies receive subsidies. And I was trying to make
the distinction between a subsidy and a tax treatment.
In fact, first of all, the actual components that are within the administrations budget that they want to eliminate target independent producers, not major oil. So thats the first distinction.
Most of those tax treatments are not available to major integrated
oil companies; theyre only for the independents.
But the second, more important point that I was trying to make
is: A subsidy is a cash payment from the government for doing
some sort of activity. Its quite different if you are having a debate
within the IRS about how to treat a certain expense. And we woule
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be happy to have that debate. But keep in mind, the only way that
you have this debate and the only way that you have these expenses is if youre deploying capital. And thats exactly what our
companies are doing is theyre deploying capital. And the question
is: How best can they redeploy the new capital?
And thats what a lot of these tax treatments were designed for.
Given the fact that this is highly risky, its very expensive, and our
energy security depends on it, the taxes in the teens and 1920s,
a hundred years ago, were designed in order to encourage the rapid
reinvestment of this capital back into the oil and drilling programs.
And thats exactly what weve experienced.
Mr. MCCARTHY. If you do not invest the risk, you cannot get the
tax.
Mr. ZIERMAN. Thats correct.
Mr. WHITSITT. Can I just add one point here, please? Id just inject for Devonand we are a large independent exploration and
production company.
The recent proposals by the administration, just on the intangible drilling costswhich are the real costs, as Rock has pointed
out, in drilling a wellits clearing the land, doing the environmental remediation. If those proposals were put in place, it would
cost Devon about a billion dollars in the first year. And that would
equate to our complete drilling program in the Barnett Shaleas
I mentioned, is where the shale revolution really started, and its
the most prolific area in the country.
To us, we have to say, What is that all about? That looks to
us like it is totally a wrong-headed policy that actually would penalize the companies that are most efficient at producing domestic
resources that power this Nation.
Mr. MCCARTHY. I want to go to Assemblywoman Grove because
she has witnessed, oneand kind of all your presentationsthe redundancy of regulation, not just with oil, with renewables, trying
to findfrom wind and solar out in East Kern.
But from her own personal experience in a business, finding out
because of what California does, were setting up business in another State.
So I wonder if you can touch on, one, redundancy, what you are
viewing outside in the district as well with our ability to produce
more energy in America.
Ms. GROVE. Thank you. With all due respect, I would like to address just one thing prior to. We talked about taxes or tax that you
guys were just addressing.
Industry, meaning the oil industry, is now at 41.4 percent of tax.
And if California liberal politicians have their waywhat were
fighting up in that building right nowand they did a 1212 percent
oil severance taxit will increase the industry tax to 53.9 percent.
Now, to give that number some perspective, if you take Apple in
2010, they paid 28 percent of its revenue or profit to the governmentApple didwhile it generated more profits than Chevron.
So in perspective, the oil industry is being punished on a tax base
andthan other employment agents or industries.
If you go back toMr. Chairman, you had a question earlier
about the average products of goods and profit. And everyone in
business knows that somebody could say, Well, you run a $25-mil-
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lion-a-year corporation, but after you pay payroll taxes, workers
comp, liability insurance, and you get down to net profit, its less
its around $100,000, not in the millions.
So if you take Apple, for instance, again, in a comparison, the average products sold are about 25 percent above the cost of materials and production for marketing and sales. And if you use that
for the samein comparison to with Exxon, Exxons profit margins,
in comparison, were about 8.7 percent. And thats hardly the windfall that people are proclaiming.
If you take the oil industry as a whole, they have 1112 percent
basic on profit and making that the 45th most profitable industry
of the year. That is hardly close to the top 10. So just to clarify
those two things.
And then back to your question, Mr. McCarthy. Im sorry. You
know, from a business standpoint, being a third- and sometimes
fourth-tier contractor for the oil industry, the job multiplier that we
haveand I ran on jobs. You know, we have 212 million people unemployed in the State of California, which affects our Federal revenue as well. And when I ran on jobs and you look at what industry can place in these jobs, you talk about the job multiplier.
A lot of individuals in the testimony have referenced the oil industry jobs. And Im going to name a few local companies. If you
take one oil field job in a platform, you have engineers, and you
have site engineers, you have chemical engineers, you have mechanical engineers, you have people that are the job multipliers
is what I call them.
If you build a site, you have an excavation crew, a site crew, a
gravel crew. The gravel is produced someplace, mainly in one of the
facilities that we have either on the Grapevine or in Mojave. You
have trucking companies that transport that gravel to the site. You
have everything from all those companies that are supported by
oilor Big Oilsmall oil, independent oil. These are small businesses that thrive on this industry. You have people that supply
more paper and pencils and products, like from Stinsons or
OLearys. Youve got the simple things like Mona at Speedway
Market where 90 percent of the people that go to work in the oil
fields stop and purchase stuff from her for their daily consumption
of food and breakfast.
So when you look at the small business that thrives on this industry, the jobs that are created and not created from private business because of the limitations with permit delays through the Division of Oil and Gasor Ive seen projects delayed out in the oil
industry where a blunt-nosed leopard lizard is onsite and they
CAUTION-tape it off and everybody sits around and waits for this
lizard to leave.
You talk aboutMr. Layton talked about a description of a job
thats being delayed, where the activity of this blunt-nosed lizard
is at certain times of the year; so you just have to stop working
until this lizard finds its way to another location or goes into some
type of hibernation. Those things dont make any sense when it
comes to job creation.
The oil industry and job creators are very conscious of things
that need to be done to protect our environment and our land, but
California and the Department of Fish & Game and Federal EPA
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is way overreaching and has become completely unreasonable, to
the hindrance or full-out assault to private-sector job creation.
Chairman ISSA. Assemblywoman, if I can followup on that. Is
there really any difference, in your estimation, between the crazy
or the excess, as youre describing, in oil and the same excesses
that are occurring that are delaying green energy roll-off? Because
this is also an area of the State that has the potential to provide
an awful lot of solar and other energy. Dont you find the same
thing to be true, that the same self-inflicted wounds are hurting
our ability to reach any reasonable goal of renewables?
Ms. GROVE. Thats exactly true. And its not only in renewable
energy. You takein East Kern, which I represent as well, there
was a solar plant that wanted to put a solar facility in the Mojave
Desert, where the sun is, and it was not able to do that because
of a Mojave ground squirrel.
You look at industryjust private business industry across
from development. I have a developer in Taft whos had a certain
piece of property who cannot develop that property and provide affordable housing in Taft, where we have a large oil production
area, because of squirrels that live on that property. And you have
to tag them and put a little antenna on them and transfer them
toyou know, double the amount of property.
So the environment
Chairman ISSA. You saw all that on Animal Planet. It was very
impressive, the tracking. Its not very productive for mankind, I
guess, but
Ms. GROVE. It is not, and not productive for job creation in our
State and in our Nation. You know, I recently had the opportunity
to go to Texas. And it was very interesting
Chairman ISSA. And see the Governor, I understand.
Ms. GROVE. I did. I got to meet Governor Perry.
And what was interesting is that we talked tothe Department
of Railroad oversees their permit process in Texas for someIm
not really sure about that, because the Railroad isthe permit
process.
And keeping the same environmental protection, protecting our
land and being conscious of our planet, they issue permits within
2 to 5 days, project permits, where were sometimes delayed for up
to years. That, and then the environmental delays with endangered
species on these projects and properties causes jobs that we desperately need here in our State and our Nation to be delayed as
well.
Chairman ISSA. Rock, you said something, and I want to try to
put it in the record in a way that people who are not involved in
the oil industry can understand.
You know, I came from the electronics industry. We watched the
government come up with this interesting one thatour patents. If
we had a patent and we went through and we paid the legal fees,
we had to amortize the patent over the life of the patent. All the
cost we pay to lawyers. So you pay the lawyers today; you finally
get your patentand by the way, if they turned down the patent,
you could write it off.
But you actually had something worthwhile; so you got it, and
you had to amortize. Then if you had to sue somebody to defend
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your patent, you had to put all of that into, if you will, a long-term
depreciation schedule because the government wanted your profits
today, even if you had spent them in trying to create profits for the
future.
Isnt that basically the same kind of wrong-minded thinking that
American companies are seeing? Except in your case its a drill bit,
that when you dull the drill bit, you break a bunch of equipment
as youre drilling down, and you set it aside and send it off to salvage. Its gone. Youve spentyou bought it, you paid for it, you
spent it, and you disposed of it. They now want you to amortize
that over the useful life of the oil well.
Isnt that essentially whatbecause you say intangible. And to
me, money out of my pocket that I know I spent, that they want
me to pretend I didnt spend for 20 years, thats not intangible. Is
that the intangible were talking about here today?
Mr. ZIERMAN. Thats exactly right. Were talking about mud, cement, testing, some drilling operations that youre talking about,
all the things that are happening before a well is completed or any
production has come online.
Chairman ISSA. You know whats amazing is America is a funny
place. We talk about how we support business, we really care about
it; but people in Washington, in my position, have done some amazing things.
I was in private business when NAFTA was passed. And whether
you were for or against NAFTA, 1 day I found out NAFTA had
been signed, and I found out as a result of NAFTA, I was going
to have to wire-transfer weekly my payroll withholding taxes instead of sending a check. And the reason was because your predecessor, Bill Thomas, and all the other guys, they had a couple of
billion they needed revenue to make NAFTA pencil out. So they got
it by accelerating the speed with which every business in America
would send money to the government. Now, it only scores a onetime event because they just accelerated the speed with which they
got it from a couple of weeks or a quarter for small companies to
immediate.
Were still doing that today, and its one of the frustrations I
have. I want your industry to expense everything, absolutely, that
is consumed. I certainly want you to capitalize your long-term assets. If youve got a casing there, its reasonable to have it over the
life. But I want your capital to be put back to work as quickly as
possible. I want Devon Energy to have a smaller bank line to put
in more wells. And the amazing thing is, I cant get my government
to go along. I cant even get the Ways and Means Committee to go
along.
Let me go to another question that I wanted to understand, because fracking, which is not new technology, isnt what were talking about here today. What were talking about is better fracking.
Is that right?
Mr. WHITSITT. Thats right. The new applications of fracking.
Chairman ISSA. And if I understood correctly, if were concerned
about the watershed, weve been concerned about it for 60 years,
because youve been fracking for 60 years.
Mr. WHITSITT. Correct.
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Chairman ISSA. And we should knowwe shouldnt need Secretary Chu to endlessly study something youve been doing for 60
years.
Let me understand something. When you go down once but you
go far further, as far as what you yield, the only difference in that
is that you haveonly have one area of risk, which is that casing,
for far greater gain. Is that correct?
Mr. WHITSITT. The casing is placed for a couple of reasons. One,
weve been talking about, obviously, is to protect the water sources.
Thats primary, and it happens in every well. There are other applications of casing, to prevent the hole from collapsing and those
kinds of things. But the fact isand what I think youre alluding
to isthat weve been doing this for a long time. The technology
gets better; the materials gets stronger; the knowledge of how we
do thisand many times we do it along that horizontal length of
pipeit all improves. And weve seen remarkable efficiency gains.
And one more thing that is really remarkable today is: Were
doing much more of what we call pad drilling, where we can actually do these multiple horizontal wells from one surface location so
that we dont have to disturb the surface multiple places around
this gas field. So, again, the technology just continues to improve.
Chairman ISSA. Well, and thats what I was leading to. And I appreciate your clarifying my questionable question, because this is
something where Im still learning what youve spent a lifetime
knowing.
Youve got less exposure to the watershed because youre going
less times for the total amount youre getting.
Mr. WHITSITT. Correct.
Chairman ISSA. Your risk, of course, always iswhen you first
drill through a water area, until you get it sealed and youre comfortable and all the tests are done, theres always some risk.
Lets just say hypothetically that you hit oil, because, on occasion, the earths oil is much closer than you thought it would be,
but you eliminated all that risk before you start going horizontal.
So in a sense, horizontal is getting more from this already mitigated, small risk that you had when you first drilled, whatI
guess in Oklahoma iswhat is it, 1.2 million wells theyve drilled
or something?
Mr. WHITSITT. Weve drilled a lot of wells and fracked 100,000
of them in Oklahoma.
But also, the other point I would make too, Congressman, is that
in the shale plays, in particular, which is really the revolutionary
thing now, once we are there
Chairman ISSA. This is heavy, by the way. Anyone who didnt
pick this upwhen I set it back down, youve got to figure, this is
pretty darn dense rock.
Mr. WHITSITT. Its pretty amazing that were actually getting the
gas to migrate through that rock to the wellbore.
And what I was going to say is that, also, when we are doing this
in the shale plays, it almost becomes ain those particular areas
something that we can replicate with less and lessalmost zero
risk. Of course, theres always some.
But I thinkin the Barnett Shale, I dont think we had a dry
hole in thousands of wells for Devon. But thats because weve fi-
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nally nailed this technology. Its right to your point, that its American ingenuity, its innovation, trying to put these things together
in different ways in these different shale plays.
Chairman ISSA. Now, Im only going to have about two more
questions, but theyre going to probably be ambiguous; so steer me
through to the right answer to the questionable question.
When you used to go down and try to find a pocket of gas, methane, etc., all the combinations of what you find down there, it was
hide-and-go-seek, and then when you found it, it could be quite a
surprise. There was a risk because this is volatile; you dont know
what pressure youre going to poke into and so on. Youre out of
that business for the most part. Youre going into a low pressure
but into rock rather than into a big pocket of gas with this technology.
Isnt that true?
Mr. WHITSITT. Well, the pressures do vary. There are some highpressure areas and lower-pressure areas.
And I would say too that, as was mentioned earlier, along with
the improvement in the completion techniques of the fracking and
the drilling of the wells, we have had very significant, and continue
to have very significant, seismic and geophysics type of technology
improvements. And, again, its putting all that together so that we
know where were going to find resources more accurately and we
can drill fewer wells to find them and have more success.
Chairman ISSA. The reason I ask that question is: Like most people who dont know your technology, who watch TV, I had watched
some years ago about what happens if you hit that pocket and you
shatter the impermeable layer that had kept it there for a long
time. You can, in fact, have natural gas flowing freely to the surface, and that has happened a few times in history, at least enough
for television to capture it.
In the case of this technology, youre going through the impermeable layer, through the sand that was already there, back into
the core rock that had not released it. So in a sense, its a much
safer operation because youre not up against, if you will, the great
protection against gas free-flowing up.
Mr. WHITSITT. Its much safer, and its much safer for other reasons as well, which is that our materials and our processes and our
practices are so much better today as weve learned through the
years because of the very incidents that youve talked about.
Chairman ISSA. Now, one last question for you, and then Rocks
got an answer for a question that I asked earlier, I think.
This is a heck of a solid piece of rock. I looked at your presentation. And as I look at you going diagonally here and then there,
I get the feeling that theres no question youre releasing more than
otherwise was released. Is there available technology or an available percentage you can give me? What did we used to get when
we just caught what happened to have bubbled up and was sitting
there under the withholding chamber, what are we getting today
when you frack, typically, and how much is really down there if
you continue to improve your fracking to where you can sort of get
it all?
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Mr. WHITSITT. Well, I dont know how to answer the first part
of the question in a global sense, but if you look at that one slide,
theres a very dramatic representation from one area.
But I will say that the Potential Gas Committeeand these are
the resource estimators that are the experts in this country and,
really, known worldwidetheyve just come out with yet another
estimate of more natural gas thats recoverable in this country,
something on the order of probably in North America, 2,500 trillion
cubic feet, at least 20 trillion or so a year now.
So you can see. Its well more than a hundred years, it continues
to grow with technology. And thats got to be exciting for the country.
Chairman ISSA. Well, certainly for those of us who heard that we
were going to get our last drop of oil or our last drop of gas and
we were going to need renewables already because it was all going
to be gone, to find out that theres plenty more, obviously, Im excited about oil, because I dont want us importing oil from unfriendly areas. But Im even more excited about natural gas, because all of the green lobbyists who have ever come to see me
and many havethey all talk about how if we can just get off that
dirty coal and get onto clean natural gas, what the benefit would
be. Thank you for what your company is doing to take us from X
carbon per Btu to a fraction of what it would be if we go from coal
to natural gas.
And, Rock, you get the last answer to that question.
Mr. ZIERMAN. Well, I just wanted to mention another application
of the directional drilling, and that is: Offshore California. Offshore
production is a very emotional issue on the West Coast, but I want
people to be cognizant of the fact that you can utilize this technology offshore California as well by using existing platforms or
even onshore locations. You can directionally drill to some of the
10 billion barrels that Tupper was mentioning without installing
any new platforms.
And I will also mention in closing that the MMS made that prediction in 1985. They have not been permitted since then to update
their reserve numbers. That same year, they estimated that in the
Gulf, there were 9 billion barrels of oil potential; 25 years later and
6,000 platforms later, which is whats been installed in the Gulf,
the reserve number is now 45 billion. So even though weve been
producing from 6,000 offshore platforms for 25 years, we have five
times as much reserve. And that gets to Steves point: Where the
oil is where the oil is. And it has been in the past.
Mr. MCCARTHY. Mr. Chairman, can I just touch on that.
We have Vandenberg Air Force Base there. You have the ability
on the base to drill horizontally out; so youre never even offshore.
And theres one thing that happens in Santa Barbara thats
much different. We have a natural seepage of oil onto the beach.
And an individual came to my office that was showing me the statistics of the growth of that and what that does to the birds and
the environment and the others. The ability to take that out, where
the natural seepagewhere you can control it, where its coming
through, to protect the environment from the seepage in the direction of where its going. And you can do that now, because of tech-
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69
nology, in a much more environmentally safe way that you talked
about.
Mr. ZIERMAN. In fact, the seepage is over a hundred barrels a
day. So when Tupper was talking about the 800 barrels over 30
years, or whatever the figure was, represents about 8 days of what
Mother Nature does every day.
Mr. MCCARTHY. And if you would relieve that and direct it, it
would not be causing environmental concerns and problems that it
is currently.
Mr. ZIERMAN. Thats correct.
Mr. MCCARTHY. I yield back.
Mr. FARENTHOLD. Thank you very much. Id like to ask a couple
of questions to Mr. Whitsitt. We appreciate your operations, actually, in South Texas. Youre a great employer.
Chairman ISSA. You keep going right to the edge of our indulgence here. I said it was going to be casual and friendly, but, you
know, lets just stop rubbing it in. First of all, you havent said
Oklahoma once. If you keep saying Texas over California, Ill start
rubbing Oklahoma against you, and I know what that does to
Texas.
Mr. FARENTHOLD. Especially when it comes to football.
Chairman ISSA. Exactly.
Mr. FARENTHOLD. But lets talk a little bit about the water. That
is actually of more interest to California than it is to Texas.
Though we are a semiarid State, we have a great deal of water resources.
The bulk of the water that yall use in hydraulic fracking operations, you recycle. I mean, you pump it down there, and you bring
it back. Is that not correct?
Mr. WHITSITT. We recycle where we can. I wouldnt say its the
bulk of the water. Were getting better at this all the time. But
where we can recycle, we can recover about 40 percent of the water
and then blend it with freshwater and that kind of thing.
Mr. FARENTHOLD. So lets compare a fracking operation to
amount of energy produced. If you cant just do this in your head,
thats OK. But I think you were saying that a typical gallon of ethanol takes 120 gallons of water in irrigation. So to create a gallon
of gasoline in a fracked well, its got to be in order of magnitude
different.
Mr. WHITSITT. I think what weve said in the testimony isand
this is very interestingthat the amount of water it takes to frack
a well that will produce, I think, up to 3 billion cubic feet of gas
thats a lot of gaswould produce about 120 barrels of ethanol.
Mr. FARENTHOLD. So lets talk a little bit aboutwere talking
about how much natural gas there is. Were starting to see technology develop where automobiles, buses, and fleets are starting to
run on natural gas. And, again, I apologize if Im getting out of
your area of expertise.
But justif you take the Btu output, or the energy output, of a
natural gas versus gasoline to power a vehicle, do you have an idea
or does anybody on the panel have an idea what the cost of a gallon of gasoline, if we were using natural gas in vehicles, would be?
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Mr. WHITSITT. I think in Oklahoma City, if I remember correctly,
the latest numbers that Ive seen for an equivalent was about
$1.39.
Mr. FARENTHOLD. So the natural gas, $1.39, equivalent of what
were now paying, $5. Potentially a great economic boom. Is that
technologyI assume that technology is pretty close. I mean, I see
natural gas buses everywhere.
Mr. WHITSITT. Well, Congressman, I had a natural gas powered,
dual-fuel Buick in 1995. I had a fueler right in my garage that ran
off my house, house gas system. And that technology is out there.
Its a matter of economics. Its a matter of getting the range on the
vehicles. They are coming. And particularly, with fleets andI
think the market is sorting that out. Its a great benefit to the
country.
Mr. FARENTHOLD. And I remember as I was growing upI guess
it wasit would have been 30 years agowe had butane-powered
farm trucks. Thats a mature technology.
Now, I want to shift back to one broad, kind of general question,
if you would. I noticed in your resume that you actuallypublic
policy was something you studied in college. Lets take a big, broad,
general picture of the energy policy of this country.
As I look at it now, were promoting an energy policy thats looking to do away with some of your tax credits. Were looking at an
increased regulatory burden. If you were going to concoct an energy
policy that was adverse to creating affordable energy for everybodyand maybe I shouldnt ask thiscan you think of something
were not doing to make it worse?
Mr. WHITSITT. Its difficult. Let me just correct a couple of things
that you said and kind of build on that.
First of all, we dont get tax credits.
Mr. FARENTHOLD. YoureI didnt read the talking points memo,
but what the other side calls tax credits are basically the same
fair business treatment that any other industry gets.
Mr. WHITSITT. That question that you asked is a great question
because, first, energy policy should do no harm. And it seems like
weve got things turned upside down on their head now, where we
are trying to do things with energy policy that would punish those
that are doing the right thing efficiently for the country. We are
ignoring sources of energy that are safe and secureIll give you
one example that this committee might be interested in, and that
is, when we look at North America, we have the most sophisticated
gas market in the world. And it is relatively insulated from the rest
of the world. Not totally but relatively.
And the oil market we also haveour largest supplier of oil outside the United States is Canada, and yet we are stalling in putting additional capacity through the Keystone XL pipeline from
Canada to bring more oil into the United States and its incomprehensible why we would be doing that.
Again, the State Department has found the environmental consequences are not great. And we can use the energy; we need it.
And, again, I could go down the list, Congressman, but it really reflects what you just said.
Mr. FARENTHOLD. Thank you very much.
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Chairman ISSA. All good things must come to an end, and in this
case, mostly, its we borrowed this room. So I want to close.
First of all, I want to thank the Courage Campaign, who came
up and gave me a petition with a relatively limited amount of information but an awful lot of people who care about this issue. I
understand there are some other companies and individuals who
brought items today. If youll bring them up before we leave, they
will all be included in the record.
Additionally,
if
you
note
our
favorite
URL,
americanjobcreators.comif you go to americanjobcreators.com, especially for the young peoplesnicker, but please go thereconsider looking and asking yourself what is standing in the way of
job creation. We dont predetermine. We ask you to tell us what
you believe. And be specific. If youll do that, if youll join the endless numbers of people who have done thatoriginally it was based
on a few letters sent out and then a demand by job creators around
the country to have an opportunity to tell what they believe is stopping them.
With that, I will ask unanimous consent that we leave the committee report open for 7 days so that all Members can include
opening remarks and other extraneous material. We will, as I said,
collect information today and through americanjobcreators.com.
Id like to thank our witnesses. Youve been very kind with your
time. I would also suggest that if answers, based on our prompting,
come to you, please include those. We want to make the record
complete. This is the first on this particular portion, but we will
be looking at all aspects of energy self-sufficiency in the days to
come. So dont be limited in your response.
And with that, the hearing is adjourned.
[Whereupon, at 11:52 a.m., the committee was adjourned.]
[The prepared statement of Hon. Eljiah E. Cummings and additional information submitted for the hearing record follow:]
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House Hearing, 112TH Congress - Pathways To Energy Independence: Hydraulic Fracturing and Other New Technologies

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PATHWAYS

Serial No. 11236

For sale by the Superintendent of Documents, U.S. Government Printing Office

14:59 Oct 13, 2011

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

LAWRENCE J. BRADY, Staff Director

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Hearing held on May 6, 2011 .................................................................................

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Mr. ZIERMAN. Thank you, Mr. Chairman and members of the

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Mr. WHITSITT. Thank you, Mr. Chairman. Thank you to members

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Mr. LAYTON. Thank you. Good morning.

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