The Honorable Ralph Regula utilization companies as well as environmentally related mitigation technologies and processes. Among the successes we have delivered through this program and which we expect to become commercial are: subsurface cleanup of hydrocarbon contaminants, ⚫ surface cleanup of contaminated waters, and ⚫ enhanced recovery of oil using downhole steam generators. Additionally, we are extremely proud to have successfully moved a remote sensing technology for contaminant monitoring into the marketplace. This success means that industry will have real time information on the nature of environmental contaminants. This success also establishes the credibility and importance of the Cooperative Research Program. We, again, strongly urge the subcommittee to support this important program at increased funding levels and specifically provide the WRI cooperative agreement with $5.5 million to support both the basic and jointly sponsored research programs at WRI Sincerely yours, J Speight Dr. James G. Speight Chief Executive Officer Western Research Institute THURSDAY, APRIL 25, 1996. DEPARTMENT OF ENERGY WITNESS HON. HAZEL R. O'LEARY, SECRETARY OF ENERGY, DEPARTMENT OF ENERGY Mr. REGULA [presiding]. Okay, we'll call the committee to order and get started here. We're happy to welcome the Secretary of Energy, Ms. O'Leary. Before we start, I'd like to set the stage. What is the energy situation in the world and in the United States as you look at the next twelve months. I guess what prompts my question is that I noticed the price of gasoline creeping up rather significantly. Is there a message in all of that? INCREASE IN GASOLINE PRICES Secretary O'LEARY. Well, I think that there are always messages, and the message that I read this week and this month, just after the sale of the government's portion of SPR to pay for our retrofits in the Strategic Petroleum Reserve, is that the market has been moving up all through this season in terms of price. Normally one would expect this. It's the rebound preparing for the early spring requirements for motor gasoline, and it always comes after harsh winters. What we see in this very dramatic price spike-and this certainly was true with respect to spot prices all this week—is a further reduction in what would be traditional stocks at this time of year actually caused many people keeping their stocks low because they thought that the negotiation between the UN and Iraq to allow the sale of oil for food and medicine would cause the price of petroleum to be reduced because of that influx of new supplies into the marketplace. One point of fact that we all ought to know now is that the negotiation between the UN and Iraq blew up two days ago, and there will not be new negotiations for another thirty days or more. That means that most of those who bet on very low stockpiles now have to make a decision whether to go back into the market. The interesting thing is that over the past three days, when there were indicators that the Iraqis would walk away from the table at the UN, we've seen the price dissipate, go down just a little in the last two days. This is true for futures as well. Futures for West Texas intermediate crude were at about $22 and some change per barrel two days ago. I think that West Texas is down to $21 per barrel now simply because it's as though we've done "just in time" with our stocks of petroleum, and it is clear now that one cannot bet on lower prices because there are no supplies there. What this points out to me, and to those like you Mr. Chairman, who have been in the business so long is how one occasion in terms of supply disruption can so volatilily impact the market place. Mr. REGULA. So what you're saying is that the market is fragile. Secretary O'LEARY. The market is extremely fragile and will continue to be. If we look out to the next five or six years with a growing population and energy demands, mostly outside of the United States, you can see that that continued pressure on oil supplies and oil prices will be a very relevant fact of our lives. Mr. REGULA. What is the spot market? Around $21? Secretary O'LEARY. I should have checked this morning, but I think that the spot is around $19 or $20 per barrel for West Texas. But it was higher by almost $0.81 two days ago. The point I wanted to make is that these conclusions that you and I come to are shared by many others including Jim Schlesinger-we don't have to mention almost any other Secretary of Energy who has been watching for the long term our increased dependence on supply of oil from the Middle East. Alan Greenspan, I think, in his last testimony before the Congress made the same remarks relevant to balance of payment. Mr. REGULA. You're saying that we're going to be more reliant on imports. Secretary O'LEARY. More reliant and, therefore, more vulnerable with respect to its economic impact, and I think back-and I always like to use this as a marker as well-to the early 1980's when we were just rebounding from the price shocks of the first supplier interruptions and then the war in the Middle East. I remember foolishly having to buy a house in Georgetown. I can remember that my early mortgage rate was approaching 20 percent. That was a result that we all understand now of energy price shocks and its rebound into the U.S. economy. The loss of trillions of dollars. Mr. REGULA. I was here in the late 1970's when we went through the energy crisis and we met late nights trying to figure out what to do about lines at gas pumps. Americans aren't very tolerant of shortages. Well I'm going to suspend for a couple of minutes while I go over and vote. Okay, we'll get back here. Madam Secretary, your full statement will be made a part of the record, and if you'll summarize for the members, then we'll go from there. OPENING REMARKS Secretary O'LEARY. I'd be happy to summarize, Mr. Chairman. You opened up the records with some inquiries regarding what's happening with energy prices. We all concluded that the market is volatile, and we were beginning to conclude, I believe, that the economic impact of volatile energy prices can and, in my experience, has shown a rebound in our economy to make a very drastic impact. You had also commented that the American public does not tolerate energy lines very well. It's unfortunate that they do not see nor understand the impact of dramatically rising energy costs and understand that those are even more difficult to tolerate over the long term. I need to compliment this committee, because as I look back to the early days of the first oil crises, I'm understanding that especially this subcommittee provided the wherewithal to permit us to get at how we relieve some of those impacts. Mr. REGULA. I would say that then we were under the chairmanship of Mr. Yates. Mr. YATES. That's true. [Laughter.] Secretary O'LEARY. And so we have always been focused on ways to reduce the growing dependence on Persian Gulf oil though we have not always agreed upon the means. Alas and alack, however, we see that with growing population and energy requirements that our needs have not been reduced as dramatically as we'd like. But I want to come to that discussion because I also want to focus on the fact that, through the groundwork laid by this committee, the Department of Energy and other agencies who have responsibilities in this area have done an extraordinary job, I believe, especially in the long run and in the early years to get at this. I would start with energy improvements in terms of energy consumption and point out to you that since the early 1970's the Gross Domestic Product has grown by some 75 percent while at the same time our energy consumption has grown by almost 20 percent. We worried about and discussed whether we could intervene and disrupt the lock step between the Gross Domestic Product and energy consumption. In point of fact, we have, and we've done it really through the use of technologies in which this committee has invested so deeply. I need to point out to you that I don't have to tell you this, but the General Accounting Office has told you after going in and taking a very hard look at whether our energy efficiency programs have paid off. In examining only two programs, they see a payoff of $8 billion. In point of fact, you should know that the U.S. taxpayer has spent $7 billion in these programs. And we've only done the scrub on two of them. So you see that the potential is there both in terms of energy savings, which is the mark that the General Accounting Office used, but more importantly, in backing off the use of petroleum, the creation of jobs, and also improved health benefits. The health benefits have been improved and therefore reducing health risks will permit us to quantify much, much greater savings. I'd like to move very quickly from that area and point out to you another area where, if you would believe critics of, it turns out, this committee and the Department of Energy, they say we've given no return to the U.S. taxpayer. In the Clean Coal Program, now a decade old, the American taxpayer spent about $2.4 billion. The size of the entire program is, of course, larger because the industry has paid its fair share and so have some State and local governments. But the question we ought to be asking is, what has been returned to the U.S. economy as a result of that investment by the U.S. taxpayer, and again we can quantify it, and have others believe it. Already in a program which is relatively immature in terms of deploying the technology in which we have invested, we can count $9 billion in sales already granted. But if you want to look further Mr. REGULA. Is that sales of clean coal technology? SALE OF CLEAN COAL TECHNOLOGY Secretary O'LEARY. That's correct, sir. With a burgeoning market, in Asia as well as in South America, or Latin America and Central America, you can understand what the impact is. We have people now who were with me when I was at Wabashan integrated gasified clean coal plant-in Indiana, the South Koreans, the Chinese, the Indonesians were all there wanting to buy this technology. So the projection for sales available, when you look at a place like China or you look to Indonesia, where they have no recourse but to use coal, that is clean coal. The benefit to the United States is even much greater because we're not talking about retrofit of old plants anymore. We have designed coal plants of our own that will give us clean coal technology at the same cost of any traditional power plant. That's what the investment has given us. Mr. REGULA. Is that using low sulphur-or high sulphur coal, too? Secretary O'LEARY. That is generally using some of the better sulphur coal. We have other technologies for the clean up of high sulphur coal. I think that the last time I appeared before this committee, I talked about the clean coal, the scrubbing and the drying product of Rosebud Synfuel plant, a power plant owned by Montana Power and NSP, which is now using higher sulphur, and cleaning it up and bringing coal to market and producing kilowatt hours at the busbar which is competitive. If you are looking for results, these investments in technologiesI choose not to call them programs-these investments in technology have paid off, and we need to talk about that. We need to continually focus on impact in terms of competitiveness as well as job creation. We need also to talk about its impact on the environment. If we don't like to simply stop with the environment, we then need to talk about the fact that we've greatly improved health and therefore reduced health costs. These have been outstanding programs. I could go through the same exercise on the demand-side management in the demand-side management area with respect to lighting and buildings. I could talk about refrigeration. But I am sure that if I would shut up, that on questions and answers I'll get to talk about what you want to talk about. Hello, Mr. Nethercutt. Mr. NETHERCUTT. Hello. Secretary O'LEARY. How are you this morning? It's nice to see you, sir. Mr. REGULA. Are you finished? Secretary O'LEARY. Yes, I thought I would be quiet and let the questions and answers get it done. [The statement of Secretary O'Leary follows:] |