Price of Gasoline

Floor Speech

BREAK IN TRANSCRIPT

Mr. THOMPSON of Pennsylvania. I thank my good friend from Texas for hosting this hour.

I actually do think this administration has an energy policy, and it's all about shutting down all of the domestic use of the resources we've been blessed with in this country. It's about cutting our supply, eliminating our domestic supply.

When I looked at your chart you had in terms of gas prices reflecting 2009 and 2011, I know at the White House the President is asking the Attorney General to put together a task force and is trying to find the bad guys of who's causing gas prices to be so high right now, which are pushing over $4 a gallon. There's only really one thing that impacts gas prices, and that's supply and demand, and demand around the world is going up. As you really captured nicely in the documentation, Congressman, the problem is that this administration has shut down access to domestic supply, and we're making us more and more foreign-dependent. Right now, with what's happening in Libya, we only get 2 percent of our oil resources from them. Just that 2 percent with what's happening in that country, we're seeing gas prices now push over $4 a gallon.

I'd like to contrast that with the shale gas that you talked about because, in Pennsylvania, we are blessed with it. Also, let me claim my heritage. I have the privilege of representing Titusville, Pennsylvania, where Edwin Drake drilled that first well 151 years ago, and we're very proud of that. Also, the 17 counties I represent in Pennsylvania are right in the heart of the Marcellus natural gas shale, and in the middle of one of the worst recessions we've had since the Great Depression, gas prices--and you captured them--are spiking at just record heights. If we had a chart there that showed natural gas prices, it actually is a record low. It's a little over $4 a cubic foot. Normally, in importing our domestic gas from other countries, natural gas would probably be somewhere around $11 or $12 a cubic foot, but today, it's $4-something a cubic foot in the middle of the worst recession. This winter was a tough winter in Pennsylvania, and the folks all over the State, including those in center city Philadelphia, are paying some of the lowest gas rates, which is only because natural gas is domestically produced.

It just speaks to the importance of a strong domestic supply program, but the policies of this administration make that almost impossible for our oil. They're going after natural gas, trying to stop that as well, and that is driving up costs. I find that it's not only so terribly damaging on our economy and jobs but that it's just immoral when we've been blessed with these resources. They were provided to us for a purpose, which was to be able to use them and go after them and do it as good stewards, and we know how to do that today.

Mr. CARTER. If my friend would yield just for a minute, what is the unemployment rate in Pennsylvania right now?

Mr. THOMPSON of Pennsylvania. The unemployment rate is lower than the national average is. I have a couple counties in particular. Tioga County is one of them, which is in the heart of the Marcellus natural gas. It is probably the first time in history that that county's unemployment is below both State and national averages, and it's because of the natural gas industry.

Mr. CARTER. It's because of those new jobs that were created by this marvelous find in Pennsylvania.

Mr. THOMPSON of Pennsylvania. It is, and all the related jobs. Absolutely. You're right.

It's not the drilling jobs, but it's the hotel jobs and it's the restaurant jobs. I've got manufacturers right now that are sitting with jobs that they can't fill. We hear a lot about unemployment, but these are good jobs. They pay a significant amount of money per hour with good benefits. It's a great employer, and they're sitting there with these job openings, looking for folks to fill them. Now, some of the people they've had working for them have moved on into the gas field, and they've created new opportunities. So producing domestic energy produces domestic jobs, and it's so important.

Mr. CARTER. Reclaiming my time for just a moment, a lot of people don't realize that, when you're talking about the production of oil and gas, there is much more to putting up a rig on a piece of land than just driving out there and putting it up. You build roads. You build fences. Road builders don't drill a single drop of oil or gas, but they build the roads. That's a job. That's multiple jobs. In Louisiana, in the marshy parts of the country, they used to build wooden roads to get out to these rigs. All this creates jobs for all the side industries of the oil and gas industry. Just like any other industry, there are side industries that feed the big industry, and they all create jobs in a country that dropped below 9 percent but has now jumped back this month above 9 percent again, after one of the longest stretches of high unemployment in the country. I'll just use my family as an example.

My daddy was born in Kentucky, and my mother was born in Tennessee. In fact, where my mother lived may be pretty close to being underwater right now. In fact, she lived right close to the river in Tennessee. In the Great Depression, there were no jobs in their part of the country, but there were jobs in Texas because of the oil industry, so they both came down to Texas to get jobs in the oil industry. Now, they both ended up in the oil industry, but they started out where my mother was in the secretarial pool for business and my daddy was a teacher, an accounting professor; but they got jobs in the oil business, and it was always good to our family.

I don't lay any bones about it. I was raised in an oil and gas family, and my dad was a gas man. I've seen it make our State prosper, and of all the producing States that I've ever visited, they've prospered. Look at what it has done for Alaska. Look at Louisiana. Look at New Mexico and Oklahoma and what it has done for those States and those economies. To take and target an industry and go after that industry the way this administration has done--but not only that, I don't even understand the Yucca Mountain deal. I don't understand the no uranium leases. Now the President, in a couple of speeches, said we'll switch to nuclear. I think that may have changed now since the Japan disaster.

But we can't do it without uranium. There's a new process, you maybe could, but that's a different story. Historically, you can't do without uranium. You've got to have the location to store spent fuel. Americans need to wake up and say, wait a minute, we need energy.

I just was talking to people today that said the EPA was going to try their best to shut down wood-burning fireplaces. My gosh, I mean, how are we going to get warm? You guys up north, how are you going to get warm in the winter time if you're going to take away your coal and your natural gas and the price of oil is going to be through the roof and you can't afford that? You can't even burn wood in your own fireplace? What's wrong with this picture?

Mr. THOMPSON of Pennsylvania. Well, you're right. The demand side impacts gas prices as well, and it has been very well documented that two countries in particular are increasing their thirst for oil, and it's going to drive up the demand for oil worldwide, and that is China and India. It's expected just within the next few years the demand for oil is going to go up 10 to 12 million barrels a day. That's in addition to what the world is using today; and if that occurs and we don't increase our domestic supply, we don't have a board big enough to show where that red line is going to climb to in terms of gas prices.

It is absolutely critical. That's why I'm so proud. I'm on the Natural Resources Committee. We passed out of there a matter of a number of weeks ago not one but three pieces of legislation. Last week, the House passed out of the House of Representatives H.R. 1229, Putting the Gulf Back to Work Act. This week we're going to be working on H.R. 1230, Restoring American Offshore Leasing Act, and that will make a difference.

Now, critics will say, oh, well, it would be a year or more until you produce one barrel of oil once we pass that act, and that is true because it takes awhile to get that rig set up and get it produced, but we only have to look back to 2008 when President Bush and this Congress finally lifted the Outer Continental Shelf ban moratorium, and on the day that that was lifted and Congress lifted that and we gave the approval to go ahead with issuing permits again, on the day they voted on it, the price of gas in 2008 was four-something a gallon. The very next day it was two-something a gallon.

It makes a difference. It communicates that America is willing to use its own resources, that America is not going to be dependent on the Middle East, on Libya, and on Saudi Arabia, on places that are so volatile today that we don't know if there's a revolution or demonstrations or riots or terrorism that we're not going to have access to that 30 percent of our energy resources that we use today.

The best predictor of future performance is past performance. So we know if the Senate does the right thing and passes these acts that we're going to have and will pass out of the House of Representatives and the President signs it, gas prices will come down; but, unfortunately, the best predictor of future performance is past performance, and under this administration, they're going to continue to limit and eliminate our Americans' access to the domestic resources that we have right here in this country.

Mr. CARTER. The great surge in the cost of gasoline that we were just talking about, that surge was the result of basically two things. You named one of them. The other one was they had a small fire in an Illinois refinery, but the speculators look and they say, we're fighting capacity shutdown and we have a limited refining capacity because we haven't built a major refinery in this country in 25 years.

Mr. THOMPSON of Pennsylvania. Right.

Mr. CARTER. Because of the burdensome rules we've come up with and the fact that we can't permit them. So they look at refining capacity and they look at the other issue, and they say, wait a minute, if there's not a shortage now, there's going to be, and they run the price up. Then when that opens up, hey, the market gets back to normal again, and every time that happens the driving public of America suffers. They're suffering today, and they're suffering on top of the highest unemployment, longest period of high unemployment in modern times just about.

This is one of those what we call kitchen-table issues, when the family gathers around the kitchen table to figure out how they're going to make the budget work especially if Mom or Dad are laid off. One of the things they're looking at is the cost of that fuel, fuel to heat their homes or cool their homes. Down where we come from, we want it cool. They look to see how much it's going to cost them to get to and from school, to and from work, how they're going to conserve energy, maybe they're going to car pool. They're making these kinds of decisions, and yet the government seems to be making these gigantic decisions to shut off supply and then wonder why we have an energy crisis in this country.

This is not rocket science. This is the law of supply and demand. We have the biggest demand. If we can't meet our demand, we've got to go to foreign oil. If there's a fight in Libya, we may not use much of that foreign oil right now, but somebody else does; and if it's at risk, then they are going into another market to get their oil and that makes our market go up. It's all worldwide market in our oil and gas.

I don't understand why people think they're gouging you. They're making excessive profits, and I understand the payment on CEOs and I am not defending any payment on CEOs in any industry. It's not just the oil industry that pays big bucks for CEOs; but if you look at the history of the oil and gas industry, their percentage on investment is lower than most average manufacturing facilities, somewhere between 6 and 8 percent return on their investment. And you say what investments? Well, I think I said earlier, those offshore drilling rigs that drill in the Gulf of Mexico and now have all been moved off the coast of Africa, Indonesia and off the coast of Brazil, those rigs cost $1 billion, and they can cost you operational-wise in a 24-day period almost $1 million to operate. They are expensive. And if you hit nothing but dust when you get down to the bottom of that well, you have blown a whole lot of money out the door, and that's just lost. Then you drill the next well to try to get it back. We've gotten better at looking for it and finding it, but it's still a gambler's business when you get down to it.

But this is caused by the government to a great extent. You can't create an environment of uncertainty in any market, I don't care what the market is. If you create the idea of uncertainty, it affects the market. It also affects the psyche of the people, and that's kind of what I don't think they're getting.

So their solution is to tax it. If it moves, tax it. The problem with that is do you really think the CEO of Exxon is going to pay the taxes if we increase taxes on the oil and gas industry? No. You and I are going to pay those taxes when we fill up our tank. If you go and ask the question, they will tell you at your local filling station. They used to publish it in Texas on the pump how much of a gallon of gasoline was taxed. It's a whole bunch. Direct and indirect tax make up a large amount of the cost of gasoline, always have, and I come from a time where we used to have 19 cents a gallon gasoline in Texas. Try that on for size. I could go buy a dollar's worth of gas and drive all week.

I yield to the gentleman.

Mr. THOMPSON of Pennsylvania. I thank the gentleman from Texas.

I think a point in terms of the profits that oil companies make, it really is what most industries, whether it's a manufacturer or service industry, make right around 6 to 8 percent; but yet you have to answer who is benefiting from that. I would find it hard to believe that there's not a lot of Americans that benefit from that because their pension programs are investing in the portfolios they may have. Their pensions are investing in those types of companies and benefiting from that 6 to 8 percent margin that these companies are delivering.

Those who will speak against using oil, they say, well, we don't have enough. We use so much, but we only have 2 percent of the proven reserves. Here's the facts. Frankly, when they define proven reserves, they just look at conventional. They don't look at unconventional. They don't consider shale gas. They don't consider shale oil. They just look at conventional reserves. Then they really don't look at probable.

For probable, there is 10 to 20 times that much available in terms of probable. And then when you get the estimate, there is enough oil out there to really, I think, meet the needs of this country for as long as we need to. Now, I'm not saying forever because I think at some point, there will be a new energy source that comes along. It may be generations until we get that. It may be hydrogen-fueled cars. I don't know what it is, but we are going to have that kind of new science in the future. But we have plenty of oil to meet our needs right now.

In terms of natural gas, what we know now from all the reserves in Texas and Pennsylvania and the Outer Continental Shelf and, frankly, throughout the West, we have at least 200 years of natural gas, and that's just what we know about. And the unknown is--but it's pretty consistent--is that the technology gets better and better and better. It's only with the advent about 60 years ago of the development of horizontal drilling that we have been able to really access the full potential that we are getting now on natural gas. I know that the engineers and the scientists out there are looking at new and better ways to get out more of this resource that God has really blessed us with as a country.

I think we really do need an energy policy in this country, and it ought to be one that is centered around the full use of and access to domestic energy resources. We ought to be doing the research too, obviously, for new development. And energy efficiency is important as well, whether it's transportation or heating or electricity or appliances being more energy efficient with it. But those three things alone, all centered on domestic use of energy resources, that's the kind of energy policy this country needs.

Mr. CARTER. Reclaiming my time, I agree with you 100 percent. It's the same thing when we took over this House floor 3 years ago in the dark because they turned out the lights on us, turned off the mics, and we talked for about 2 or 3 weeks on, what we want is all of the above. We are for every energy resource that is available, but we want that energy resource to be as available as possible to be competitive in the market. I mean, everybody's got their own little bailiwick. And corn farmers love ethanol, but it's got to compete. Sun has to compete. Wind has to compete.

They invariably call us oil and gas guys ``anti-wind people.'' Wrong. Texas has the largest wind farm in the

United States. There's no State with more of those wind turbines than the State of Texas because out in the West, the wind blows all the time. It's like a gold mine for wind. What do you think Boone Pickens is talking about when he's talking about all that wind energy out there? And his idea of putting natural gas-burning cars on the road is a good idea. I support it. Because when we hear that now with the discovery of shale gas and the ability--we just started to tap it. It is just a small part of the future.

By the way, it would be real interesting to find out if some of our colleagues that are so opposed to natural gas, if they knocked on his door and said, Sir, we would like to talk to you about making a lease for a share of the profits on drilling for natural gas on your property. And I wonder if they would say, Oh, no. I wouldn't take that, those hundreds of thousands of dollars that I might make from you developing that resource. No, I don't believe in that stuff. I don't think so. Whenever you produce wealth, wealth enhances a nation. And your natural resources are a part of the wealth of the Nation, always have been and, my friend, they always will be.

Mr. THOMPSON of Pennsylvania. I just want to come back to the point you talked about in terms of ethanol, wind, solar. It could be anything. Anytime that you take a new energy to commercial level, commercialize it, but you do it artificially, you do it with subsidies, you use taxpayer dollars to sustain it in the market, that's just wrong. And it's not real. If something is ready for prime time, if it is ready to be commercialized, it will stand on its own. It will create a market that people want to come and buy it and use it. So as we look forward to an energy policy, I think we need to be very careful about what we artificially commercialize, what we subsidize.

Natural gas is real. Oil is real. Both of them will stand on their own. It doesn't need subsidies in order to provide energy for folks. It will do it in a way that is market proven. But there are other markets out there--and you've named a couple of them--that if we take away those subsidies today, they would collapse. They wouldn't exist. So, frankly, I think that's a disservice to the American taxpayers.

Why are we commercializing energy resources? You know, I do believe in research; and that's where our focus should be, as opposed to prematurely commercializing something that doesn't stand on its own. I have a lot of appreciation for the national energy labs in this country. They are scientists. They don't have an agenda. They are just looking for that new energy source, and they are very credible in what they do. And that's where our emphasis should be, not prematurely commercializing energies that are unsustainable. We really should make sure we invest in research and development.

Mr. CARTER. Within the last 3 years, I have met two different individuals--one of them very recently--who have a scientific plan to refine garbage at your garbage dump, solid waste, normal throw-it-in-your-garbage-can stuff, go out there and, through a multiple process, produce gasoline and capture all the CO

2 to be used--in Texas we take CO

2, put it back down in the ground in old wells, and reenergize those wells to bring more oil to the surface. And the leftovers, after this burning process to create the gasoline, refine the gasoline out of garbage, leaves an ash that is good to plow into fields in certain parts of the country to refurbish the fields.

That's the kind of thinking we want. That's great. That's a good idea. And because we're talking energy and we're having energy policy, those good ideas come to the fore. That's what we want. That's how we're going to solve this problem. But we're not going to solve it by shutting down what we have now in hopes that there is going to be this miraculous overnight discovery that's just going to make everything great, like we find some kryptonite or something, and it runs the whole country. Wrong. It ain't going to happen.

This is a frustrating time for those of us that are in energy-producing States because we have people that literally don't like the production of energy, but they complain about the production of energy. They want to tax it.

By the way, the majors, the big boys, they don't get subsidies on their stuff. That's for wildcatters. They drilled, but most of their production is overseas. And we, to some extent, by having bad energy policy in the United States, we have driven people to the benefit of other people in the world. Nobody thought about drilling off the coast of Australia or drilling off the coast of Indonesia, which is a very unstable volcanic area over there, until they were kind of pushed out of American waters. And then they started looking in places like the North Sea, off the coast of Africa, Nigeria, Indonesia; and these are now major production fields. They've benefited from our lack of foresight under some administrations to continue to enhance our native industry. More power to them. That's good for them. But we have it here too.

I still think there is plenty of oil in Alaska and lots of it. And they haven't even started looking for natural gas up there. They probably have got as much natural gas as anybody. There's an international thing going on; most people don't even know about it. I learned it from the Coast Guard. Because of the receding ice from the North Pole--and I won't get off into global warming here today, if that's it--whatever it is, because it's receding, there is now a waterway. There is now a northwest passage across the top of North America. You can sail from the Atlantic to the Pacific.

Also, if that water stays open, you can drill for natural resources there. The unclaimed international water gets claimed by who puts the most activity in that water. And one of the questions is, the Russians are pouring in ships and trawlers and other things into that whole area up there, the part we claim is so much. The Canadians claim so much. But there is a lot more that seems to be developing. And why are they after it? It's not for fish, my friend. It's oil and gas.

I thank my friend from Pennsylvania for joining me.

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