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Our Nation's Energy Issue

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Location: Washington, DC


OUR NATION'S ENERGY ISSUE -- (House of Representatives - November 07, 2005)

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Mr. PEARCE. Madam Speaker, I thank the gentleman from Pennsylvania (Mr. Peterson) for bringing this important issue to the floor of the House.

I understand the issue. My father worked in the oil fields. My father actually began life as a sharecropper in west Texas, and I was born in 1947. There was a drought in 1947 and 1948, and my father was a sharecropper on dry-land farming, which is peculiar to that particular area; and with no rain, literally they went broke. Mom and Dad picked up the three kids they had at that point, eased across the New Mexico line to where we had the oil fields. Actually, it is the Permian Basin that is there in west Texas and eastern New Mexico, and this is where Dad raised six children.

I was able to get a college education. My brother was the first to get a college education, but all these things came because my father was working there. He was just a worker in the oil industry, and from my earliest days I have watched the oil industry drill in and out of the cycles of high and low prices. Frankly, I do not think that we have enough capacity, not enough oil wells really to drill in the United States right now to lower the price of oil that is at a historic high of about $70; but as the gentleman has pointed out adequately time and time again, the natural gas price is an internal price to the United States.

Natural gas does not move back and forth between markets, and it is possible for us to drill enough to begin to lower that price of gas. That is why what we are going to see this winter is we are going to see our seniors on fixed incomes and low-income families paying an extraordinarily high price for their natural gas.

Many people, and especially our friends on the other side of the aisle in this body, are pointing to the industry and saying they are price gouging. The truth is that it is a market price set by our policies for the last 20 or 30 years. Even today, the Governor of the State of New Mexico has brought suit to stop drilling for natural gas in New Mexico, and New Mexico is one of the largest producers of natural gas.

You have people who claim to have good intentions; but at the bottom, they are obstructing the drilling of these wells which would help us to lower the price. The price of natural gas is simply an economic outcome of an increasing demand.

The U.S. Government is requiring that we convert electrical producing plants, our utility plants that create electricity. They are converting those at the direction of the U.S. Government from coal to natural gas. That has increased the demand. On the other side, we have not increased the supply. So you have a demand and supply imbalance which creates a higher price.

If the people who are bringing suit to stop the production of gas wells and the permitting of gas wells on public lands, if they were to drop those objections, we would begin to see more economic activity, more drilling of wells. That would increase the supply, the balance would come back, and the price would begin to moderate.

But for some reason, we have people in this country who are willing to obstruct, even at the risk of losing major industries; and the gentleman from Pennsylvania (Mr. Peterson), my friend, has pointed out well that the chemical industries are among the first who feel this because they use a very large amount of natural gas in the production of their products.

One of the other industries that experiences the great pressure that comes from the high natural gas price is farming and also the production of fertilizer.

Our economy and our way of life in this country has two basic parameters that it depends on. Our way of life depends on two different things in our lives, that is, an affordable food supply and an affordable energy price. Affordable energy is the bedrock of many of our industries. Our economy is fueled by affordable energy, and so right now we have prices that are above $14. The price is up and down, but historically our economy and our way of life is built on $2 gas, and now it is $14. You just cannot experience those kinds of increases without experiencing the economic pressures that come along with it.

We are going to find it both in the lowering of our economic base and status in the country, and also in our personal lives. So there is a twofold threat, but I will tell you that the second way we are going to find it is in increasing food costs. I was just talking to farmers in our area this past weekend, and they are telling me that they are getting three and four bales of cotton per acre; and yet because of the irrigating cost, the price is just the same. The net profit is the same as what they had experienced before.

Now, exactly the same thing is happening with our food crops, and we are going to see the cost of food on the shelves begin to increase. So we are going to have a double effect on our families and especially those families with limited income; and still we have people, our friends on the other side of the aisle in this institution, who are willing to obstruct and say, no, you cannot drill here. You cannot drill in my backyard. You cannot drill off the Outer Continental Shelf. You cannot drill in ANWR. You cannot drill in Alaska.

I am sorry, but when do we begin to recognize that we are paying the price for that obstructionist policy that they are willing to engage in? It is time for us to have some common sense and to recognize that the technology of drilling oil wells has changed tremendously in the past 30 years. These arguments that are directed at an industry that existed 30 years ago have been bypassed, and yet they still hold the arguments in place.

We are able at this time in our history to drill one single well bore and come down to, say, 10,000 feet; and we can turn the bit and start moving sideways laterally and achieve drilling into areas that previously we could not do.

When we begin to understand the new technologies, we begin to see that many of the complaints are dated into the past, and so we are paying a higher price of gas at the pump. We are paying more to heat our homes. We are at risk of losing industry, and we are going to pay more for our food because we have got people who are responding to the past practices.

In Alaska, many times we have the observation that we cannot drill there because it will destroy the tundra. What we are doing in Alaska now is we build ice roads. We build those ice roads in the wintertime. We drill in the wintertime; and when spring comes, the ice thaws, the roads are gone, and all we have is the one pipe sticking up out of the ground.

Actually, when people talk about the way that drilling is going to affect the wildlife, we find that the herd there is now five times larger than when we first laid that first Alaska pipeline from Alaska down to the southern 48. The objections are running the risk of destroying the economic base of this country.

Right now we have people that are willing to come across the oceans to get to this country at any price because of the hope and the opportunity that exists here that does not exist in many other nations in the world. Here we have a group of people that are willing to obstruct and break that promise of hope and opportunity that draws people from around the world, that hope and opportunity that gives your children and my children, that gives your grandchildren and my grandchildren some promise for the future, and other things that cannot be explained. We are running the risk of giving that up.

I see the gentleman has other comments. At closing time, I would have other comments, but I really appreciate the gentleman bringing this important conversation before the body tonight.

Mr. PETERSON of Pennsylvania. Madam Speaker, there are a couple of issues maybe we can both talk on.

You talked about fertilizer and the cost to farmers. I know those prices have doubled a couple of years in a row, and it has been a huge, huge cost to farmers.

Forty-four percent of our fertilizer industry has left this country in the last 3 years because of natural gas prices; and if we do not deal with them, they will all leave. Our farmers will be using Russian or South American fertilizer, and this is a tragedy because a lot of people have been employed in this country in the fertilizer business. They make money making the fertilizer, storing the fertilizer, then hauling it to the distribution centers and to our farmers.

The question I wanted to ask you is, today, we are drilling in old, tired fields that we have been producing out of for years. They are drilling deeper; and like I said, they are drilling horizontally trying to get more gas. We are drilling more than twice as many wells as we historically did.

If your problem is putting a hole in the ground, that is going on in spades today; but we are not getting more gas. We are getting the same amount of gas that we were getting before when we were drilling half as many wells.

If we were in fertile, productive fields, we could probably drill a lot less holes in the ground, am I wrong there, and have a lot greater production of gas because we would be in new, fertile fields where the gas pressure is high and we would get great production.

Mr. PEARCE. Madam Speaker, if the gentleman would yield, the gentleman is exactly correct. Let me use some numbers to tell you about the way the situation exists.

Today, we use about 22 trillion cubic feet of natural gas a year. The estimates are that by 2025 that we are going to need 30 trillion cubic feet.

Now, we are able to have a supply that just about equals that annual consumption, but we do not have any large pockets. And, in truth, the amount of wells, the numbers of new leases have declined significantly in the past 7 or 8 years. So we really do need access to the dramatic deposits, and the Outer Continental Shelf. Keeping in mind that we use 22 trillion cubic feet, the Outer Continental Shelf has about 400 trillion cubic feet, the most dramatic source of natural gas that is available.

I know that when my father worked for Humboldt back in the 1960s and 1970s, they were saying that oil in our particular town, and gas, would be gone by 1980. That seemed to be so far out in the future. And then the 1980s came and went; we were seeing those declines the gentleman was talking about.

But in truth we are finding new stimulation techniques. But the stimulation techniques cannot keep up with the increasing demand. What we need is access to more sites with more gas. And it has been a disappointment that the regulatory agency that is in charge of this, the Department of the Interior, has not found ways to really encourage those leases.

Right now, I do not think that the Department of the Interior requires any particular office to describe the amount of natural gas or oil that they produce. Now, that is curious because our entire economy is based on these things, and we do not even measure them. So I have made suggestions, and we still hope that they will be listened to, that we begin to hold these field offices of the Bureau of Land Management, the BLM offices, accountable for the amount of contribution they make to the national energy plan, the amount of contribution of oil and gas reserves they have available and that they are actually producing, and the number of wells where they are finding good, safe environmental ways to drill.

Instead, what we are finding is that for a 3-month period we shut down all drilling because we have some prairie chicken that they say breeds in that season and the sound of the rotary rigs might interrupt the breeding process. Now, that is not what I know to be true about the typical breeding process. The sound of nothing tends to interrupt that, but maybe the male prairie chicken is particularly sensitive. But in truth we are finding reasons to justify actions that are tied to the past, and our entire economic future is at stake.

I yield back to the gentleman if he has other observations.

Mr. PETERSON of Pennsylvania. Well, the thing I have found, and I was at dinner tonight with some friends, some scientists, and they were stunned to know about the difference in prices. Everybody thinks that oil and natural gas is a world price, and I have to explain that to most people. When I explain this issue in my district, I just do not have people opposed to the production of natural gas on the Outer Continental Shelf because they know that we desperately need it to heat our homes, to run our businesses and to make products.

It is such an integral part, and it is the clean fuel; as I said, it is almost the perfect fuel. If we could produce enough natural gas that the price was more affordable, maybe a little less than gasoline and fuel oil costs, it could be the bridge to the future. It could relieve the need for building more refineries, which will take years. It can relieve our need to increase our dependence on foreign oil from unstable parts of the world.

Now, there are those who think liquefied natural gas is the way to go, and I do not really want to get into that discussion tonight, I think it can be helpful, but many are pinpointing our whole future. That means we build the most expensive ships, we build very controversial ports to bring the gas back, because you chill it, you put it in ships, bring it back here, regasify it and put it in these ports; and many people look at those in a very negative fashion, plus it is very costly.

But I am even more concerned about where we get it. We get it from countries like Algeria, Nigeria, Libya, and Russia. Do we want to be further energy dependent on Third World countries that are unfriendly, with unstable governments, when we have such an ample supply here? There are many who feel that the Outer Continental Shelf has more than twice as much gas as the gentleman mentioned, 400 trillion cubic feet, but one of the reasons we do not know is we have not really measured it. The law has prevented us from having modern seismographic measurements of what is on the Outer Continental Shelf for either gas or oil.

I want to share something I have here. Osram Sylvania has three plants in my district and 14 plants in the Northeast, and here is what they said in a letter that I received from them, dated October 26: ``In the past 5 years, we have seen natural gas prices escalate from $3 per Mcf to well over $10 on the spot market. As compared to natural gas costs in 2000, our bills in 2005 will be $24 million higher. In fact, for 2004 to 2005 alone, gas costs for us have escalated by $7 million. This is the single largest rate of increase in any of our costs of production. At current supply levels, we expect to see gas prices exceed $12 per Mcf in '06 and '07,'' I think that will happen this winter, not next winter, ``which will add another $7 million to our energy bills. Accordingly, since 2000, the rate of annual increase will exceed 25 percent.'' That means their cost of gas went up 25 percent a year.

Here is the important part. ``Furthermore, while the vast majority of our production is based in the United States,'' that means they are making their products, and part of these are light bulbs, they are all, almost all, made in the United States, ``nearly 60 percent of our competitors' products are manufactured outside of the United States, some in Europe, where natural gas costs are less than $5 per Mcf, and Asia, particularly China, where gas is less than $4 per Mcf. By 2007, competitive disadvantage will be over $20 million on top of the wage gap versus China, which is already overwhelming.

We are deeply concerned that if natural gas prices continue to skyrocket, our competitiveness will erode, having unhappy consequences for a U.S.-based manufacturing strategy.

While some people may argue that passing the cost on to consumers is the remedy, price increases in the lamp market, with so many global competitors, it is an impossibility. Price increases to consumers to cover natural gas cost increases should be unnecessary as long as a timely, viable natural gas strategy is implemented. Globally competitive energy costs, especially natural gas, are a necessity to maintain our financial vitality and keep good paying and suitable jobs in the United States.

We agree with you that coastal offshore drilling for new natural gas supplies carried out in a responsible and expeditious manner is the most important priority in new energy legislation that should be taken up and enacted by Congress before the end of 2005.''

Would the gentleman from New Mexico have any examples he could share?

Mr. PEARCE. There is one thing I would like to go back and touch on a bit, Madam Speaker.

The gentleman pointed out adequately some of the objections to LNG, but the main objection that people unfamiliar with LNG are going to eventually raise, and I have LNG in the district, so I know what it takes to deliver LNG to a house. You put in a 500-gallon tank. This is just a steel tank, and you put it in either the back or the front yard. You have a truck come up and you offload that high pressure gas into these 500-gallon or 1,000-gallon tanks.

Now, people try to hide the fact that they have an air-conditioning unit outside their house. They put landscaping around it, or they will berm up around it, or they will put bricks around it to where it looks like a piece of the house. But a 500-gallon or a 1,000-gallon tank is really going to be hard to plant a hedge around. And if you do that, you always have to have it serviced. If it runs out, it is like the gas in your car, when it runs out, then you no longer heat your house until you get that truck to come back out again.

I remember spending winters in Arkansas. I was stationed at the Air Force Base there at Blytheville Air Force Base. I flew in Vietnam during the Vietnam War. But there in Blytheville, I had one of those 500-gallon tanks out by my house. And the one time we had like 20 straight days of ice storms, many people in that area were running out of gas and the trucks could not get there.

Now, this is not the sort of dependable, affordable delivery mechanism that Americans are used to. They are used to natural gas that comes through the house in lines they do not see. They turn on the tap and the furnace is always running, day and night. It runs off a thermostat. So life will be significantly different if we decide that LNG is our solution to our natural gas problem.

Again, many, many things are causing the price of natural gas to go up, but one of the things is the bureaucratic delay and restrictions to the approval of drilling new wells. When leases with access into known and proven reserves, and these are not leases that are in pristine areas where there has never been drilling before, these are leases in areas that have been drilled before. So there is no real objection that, listen, we are contaminating a new environment in a sensitive area. It is just that the agencies either have been directed or, for whatever reason, come up with reasons to delay, terminate or reduce access to the Federal lands that are available. This is all occurring during a time when we are seeing this skyrocketing price of natural gas, which is threatening the livelihood and the way we live our lives. So those elements are some that we need to be aware of.

I would mention to my colleague that during the last 4-year average period we have seen a decrease of almost 30 percent of our ability to drill on public lands and Federal lands from the previous 8-year average. So we really do have some bureaucratic restrictions that are creating bottlenecks in the approval process to where we can go on and put a nice clean hole in the ground that goes down and taps into this gas reservoir.

Gas wells are typically very clean producing. They do not have a pump jack that stands there and pumps up and down. They just have the center pipe coming out of the ground and then a series of valves on that, and then it goes straight to the pipeline. Usually it has to be refined in some small amount before it goes on to the consumer, but it is a safe, easy delivery mechanism. And why we have people who are willing to obstruct that has always been beyond me.

I am not exactly certain how much time we have remaining, so I will yield back to the gentleman and will get a couple more thoughts ready.

Mr. PETERSON of Pennsylvania. Madam Speaker, as someone who has been in the business, the gentleman can speak to this, but I often describe a gas well as a 6-inch hole drilled in the ground. A steel pipe is placed in that hole, it is cemented at the bottom, it is cemented at the top, and then we hook it to a pipeline system and we let gas out. Is that a fair description?

Mr. PEARCE. It is. And people a lot of times unfamiliar with it will say, well, does that not contaminate the water? Well, in southeast New Mexico, where I live, we get our water from the Ogallala aquifer that lies underneath five different States. The process has a way of running pipe through those zones with water so that we never do get drilling fluids out into the water. We do not get the fresh water back into the well.

We usually have three concentric series of pipes at the surface down to about 800 feet. We have very large, sometimes 13 1/2 or 13 1/8 , that size of casing, that will go down to about 800 feet, then another string maybe down to 1,500 or 2,000 feet. And, finally, we have the 6-inch string the gentleman is talking about that runs on to the total depth of the well. We then go in and put cement outside of that pipe.

The particular company that I owned really was charged with going in and repairing those strings of pipe as holes got in them or as problems came along. The science in the industry has come a long ways in the many years since my father was in the business, and I can remember growing up when there were environmental problems.

But I will tell you, most of the young people working in those companies now are as environmentally sensitive as anyone you know. They take care because none of us want to contaminate the water for our children, and we do not want to contaminate the surface of the soil for our children. So they have used the large companies' budgets to do research and development, provide new technologies, new abilities, new safety processes. Those things should be considered when we are dealing with the ability of our people to make payments for their energy even in today's market.

I just hope that the Nation is listening as you present your comments. I know you have been tireless in supporting these causes. I would like to mention that your amendment that you presented during the energy bill hearing had five or six very common-sense modifications to the Endangered Species Act. It is not going to hurt the recovery of any single species; but what it did, it untied the bureaucracy, untied the hands of the bureaucracy to where we can get just a little bit of common-sense adjustments for some of the approval processes for drilling.

In my visits back to the State since then, people are extremely complimentary about the amendment you got added into the bill. It is time to take another step. Let us look at the factors, let us look at those policy decisions for the last 30 years that have caused these situations to exist.

I will tell you that we cannot cure the problem before this winter. For those people who are saying we are going to do something before the wintertime, it is not possible. We have dismantled the drilling industry to the point that back in the 1970s and 1980s, we had over 4,000 rigs running. Today we have 1,200 and they are all working, but we cannot give up three-quarters of our industry's capacity and respond the way we should be responding.

But if we will take corrective steps and make common-sense judgments that the gentleman is presenting, I know by next year we can begin to moderate this price that has been created by our own decisions, the decisions of the government to not pursue those current supplies of energy that could help modify the prices.

The energy bill we passed this summer has good long-term incentives for renewables. There are six or seven kinds of renewables in that bill. There is biomass, nuclear, geothermal, there is solar, there is wind, there is hydrogen. All of those have great stimulations, but they are not market oriented right now. You cannot go out and fill your car. And if you had a hydrogen fuel cell car, you cannot get it serviced. If you had solar power in your home, there is no one to work on it. My brother has been in the solar industry in Denver for over 20 years. He still teaches school and does a solar business together because he cannot make a living just on the solar business alone.

We must recognize that if we are to modify and moderate the cost to our consumers, we have to have a long-term strategy of conversion to different supply sources, but in the meantime we must be doing something to lower the price of gasoline at the pump and lower the price of natural gas into our homes.

The gentleman is exactly correct in what he is proposing. I would encourage us as a body to really move forward on the suggestions that I know he has presented. A bipartisan group, Members from both sides of the aisle, recently introduced that bill that would allow us to begin to expand our drilling into the areas with the greatest promise. I think that is extremely important for us to step up to the plate, take responsibility for our past, and take control of our future.

Mr. PETERSON of Pennsylvania. Madam Speaker, the point I want to make tonight, and we were debating this issue on the Interior bill, sooner or later we will open up the Midwest and improve the permitting process. We are having a hearing on natural gas on Wednesday. I would like the gentleman to come and be my adviser. We will have the Energy and Interior Departments there, and we will be there all morning dealing with the natural gas issue.

If we do not deal with this issue, and the gentleman said it best, we will sooner or later. If we deal with it now, we will maintain the fertilizer business in this country. We will maintain the petrochemical, polymers and plastics, steel and aluminum and brass. All of those businesses, I have talked to their CEOs and associations. They have spoken for the last couple of years, but Congress and this administration have had a deaf ear. They cannot compete having natural gas prices twice that of Europe, three times that of Taiwan, China and Japan, five times that of South America, and 10 times that of Russia and be competitive. There is just no way they can make those products in the United States.

We will be saying good-bye to several million jobs in this country that are the backbone of the blue collar workers in this country who have a good job that pays benefits, they can afford a home, afford a new vehicle, and send their kids on to college and have the American Dream. We are going to say good-bye to those.

Mr. PEARCE. Madam Speaker, there are people that are amazed that we can make the assertion that we are going to lose an industry. They do not think it is possible. I would simply refer them to the timber industry. In the timber industry, we used to have 22 saw mills in my district. New Mexico had 22. Now we have two. Both of those remain in my district, and they are struggling to say alive.

In one forest alone, we are growing 50 million board feet of timber a year, and yet we cannot get the Forest Service to cut 12 million board feet. That would be enough to economically keep that mill running. We have given up the entire infrastructure of that industry, and we are in the process of giving up the entire infrastructure of our chemical industry and our potash industry. These are good jobs that are being outsourced, not outsourced because of greedy CEOs, but outsourced because of the policies of obstruction that many in this country are willing to push, and some of our friends on the other side of the aisle.

Mr. PETERSON of Pennsylvania. Madam Speaker, too many of our urban Members do not understand that timber is one of the most renewable resources. I come from the hardwood forest of Pennsylvania, one of the best timber areas in the country; and I also come from an original oil well and some of the early gas wells, but we do not compare to the southern production in energy.

I want to share a release put out by Dow Chemical. Mr. Liveris, the CEO, noted that the domestic price of natural gas, which was approximately $2 per million Btu 6 years ago, exceeded $6 in February of this year, increased to $10 in the days just prior to Hurricane Katrina, and then jumped to $12 immediately after the hurricane struck the gulf coast.

We all know when the first Canadian air comes south and goes all of the way down the coast and jacks up the use of natural gas, and the prices always spike, they will go even higher. When he wrote this, the price of natural gas was $14, which is equivalent to $7 per gallon for gasoline and $28 per gallon for milk. He noted that this renders the United States chemical industry, which uses natural gas as a fuel and a raw material, simply uncompetitive with the rest of the world. It does the same to aluminum, it does the same to brass, it does the same to steel, it does the same to polymers, plastics and fertilizers. Those industries will leave our shores. Several million Americans will not have a decent job, and a lot of them will not have money to take their vacation on our beautiful coastlines.

Mr. PEARCE. Madam Speaker, we had an opportunity to be in the Resources Committee when we had testimony from the union workers in the pulp wood industry and the timber industry in the Northeast. They were there saying that well-meaning individuals told them they could get jobs in tourism. That is what the answer is from the people who would obstruct good solid industries: you can get a job in the tourism industry. Those good workers came before the committee and said we want our jobs, the ones we grew up with and understand. They are good, clean jobs. The trees grow back, they are renewable; and yet there is a deaf ear by many in this country to the plight of working Americans.

I hope that the gentleman's efforts are successful because our future, our economic future in this Nation depends on good policies coming from this body, good choices coming from this body; and I would encourage the gentleman to continue his efforts to have common sense prevail and have us drill for natural gas in the continental U.S. and off the Continental Shelf.

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