Mar 28 2012
Statement by Chairman Bingaman
“A week or so ago, I came to the floor to talk about the general issues of gasoline prices and domestic energy production. I believe it’s important for us to use accurate facts as we are talking about our energy challenges and we work on energy policy issues. Only by using actual facts can we identify policies that will hopefully bring down the price of gasoline at the pump over time.
“So, I would like to focus on a particular aspect of our domestic production – that is, production on Federally-owned land. This is something which has been the subject of a lot of political discussion, both out on the Presidential campaign trail and, to some extent, here in the Senate.
“Let me first note that, with respect to the price of gasoline and the impact of domestic production on the price of gasoline, this chart called U.S. Oil Production and Gasoline Prices during the period 1990-2011, I think, makes the point very well. That point is that the price of oil is set on the world market. What we produce domestically does not have a significant effect on that market. The red line here represents increases and decreases in domestic production of oil, and the blue line represents the price of gasoline, and clearly there is not a lot of correlation between those two.
“It’s worth looking again at this chart. I think it makes the point that as U.S. production has increased from 2009 to the present, oil prices have also increased. So, increased production has not resulted in lower gasoline prices, and it cannot. That’s because the price of oil is set on the world market and the price of gasoline is, in effect, pegged to the price of oil.
“So, increased domestic production – while important for our country and for many reasons – it does not bring us lower gasoline prices. Our policy approach must be to find ways to use less oil and be less dependent on the volatility that we see here in world oil markets. And we know how to do that, we know how to decrease our vulnerability to those world oil markets. And we’ve made some, in my view, enlightened policy steps to accomplish that. We got a good start in the 2007 energy bill; it was a bipartisan bill.
“In that bill, we required the use of more biofuels – that is, home-grown energy which is not traded on a world market. We required the use of those biofuels in transportation. We required that vehicles of all sizes be more fuel efficient. We’ve seen dramatic results from that, and we have hopes for even greater results in the future.
“This chart shows the real progress we have made in reducing our reliance on imported oil. It was about 60 percent of our consumption in 2005 and it is now down closer to about 45 percent in 2011. The Energy Information Administration projects that this progress will continue and their projection is that, under current law, if we do nothing else, imports should drop to around 38 percent of our oil consumption by 2020. I, for one, hope we’re able to do some other things and bring that dependency on foreign oil down even more.
“One way to continue that improvement is to support the expansion of our renewable fuels industry and support efficient vehicle production. In the context of our debate about energy tax policy, we must use some of our limited taxpayer resources to encourage a diverse supply of energy and of fuels both. Promoting homegrown advanced biofuels and highly-efficient alternative vehicles needs to remain a priority for our country.
“Yesterday, we had a hearing in the Finance Subcommittee on Energy, Natural Resources and Infrastructure, and the purpose of that hearing was to explore how the expiration of a number of tax incentives directed at advanced biofuels, and at energy efficiency, and at renewable energy, has affected those industries. I hope very much that we can find a way to work together to keep those incentives in place and continue to make progress in developing these alternative ways to meet our energy needs.
“Unfortunately, there are those involved in these discussions who persist in focusing almost entirely on how can we increase domestic production, instead of on any other policy that can help us to use less oil. While we know that domestic production will not significantly impact gasoline prices, at the very least, when we discuss domestic production, I think it’s important that we get the facts right.
“There is an ongoing misunderstanding or misstatement of the facts about production of oil on Federally-owned land. Let me address that for a minute. One of the Republican candidates stated last week in the context of gasoline prices that ‘[p]roduction on government lands has gone down under Obama.’ Indeed, he went on to suggest – without any basis that I can determine – that increasing domestic production of oil would reduce the price of oil by $1.13 a gallon. How he came up with that number, I have no idea. But it is important that we all work from the same facts.
“Here are the facts. It is undisputed that overall domestic production of oil has increased, not decreased, over the last three years. We have a chart that makes that point. Let me put that up. This chart shows the three years of 2006, 2007 and 2008 – the last three years of the Bush Administration – we produced 1.78 billion barrels of oil. During the first three years of the Obama administration (2009, 2010, 2011), we produced 2 billion barrels of oil. One of the witnesses we had at a recent hearing in the Energy Committee was James Burkhard, a managing director of IHS/Cambridge Energy Research Associates, and he described our situation in this country as the ‘great revival’ of U.S. oil production.
“Over the last three years, the U.S. increase in oil production was far greater than that in any other country in the world. The United States is now the third largest oil producer in the world, after Russia and Saudi Arabia.
“This trend also is true if you look at the subset of domestic oil production which we would define as federally-owned resources; that is, oil production on Federal land. This chart, I think, illustrates it very well.
“Production on Federally-owned land is higher in every year of the Obama Administration than it was in the previous Administration. Between 2006 and 2008, we had a total of 1.78 billion barrels of oil produced on Federal land. Between 2009 and 2011, the total is over 2 billion barrels of oil being produced on Federal land.
“Secretary Salazar testified to the Energy Committee recently that oil production from the Federal Outer Continental Shelf increased by 30 percent between 2008 and 2010. Offshore production decreased somewhat between 2010 and 2011, because of the BP disaster in the Gulf, but it still remained higher than it was in 2008, and that production, of course, is increasing substantially again in 2012.
“The Energy Information Administration suggests that clearly the decrease that was experienced in 2011 in offshore production was due to the Deepwater Horizon disaster. It projects that domestic oil production will increase over the next 10 years, in part due to ongoing development in the Gulf of Mexico. The projection is that it will increase by over 1 million barrels per day as compared to 2010. Annual oil production onshore on Federal lands has increased by over 8 million barrels between 2008 and 2011; it is now over 111 million barrels.
“So, oil production has always fluctuated a bit from year to year on Federal lands and on private lands. There is no doubt that will continue to be the case. The important point here is that we need to put to rest – once and for all – the claim that the Obama Administration is causing a reduction in production of Federally-owned resources. That simply is not the fact.
“We also should be aware that the industry has access to a great deal of productive Federal acreage that it has not yet developed.
“This chart is instructive. This is ‘Total Federally-Owned Acres Leased for Oil and Gas Development in 2011.’ You can see that there are 74 million acres that are currently under lease – this is Federal land, currently under lease, both onshore and offshore. The striking thing about this chart is that roughly 25 percent of this is actually being produced and producing oil and gas at this time. There are many reasons for that and I am not accusing anyone of not diligently pursuing this. I’m just saying that there is a lot of land under lease, a lot of area under lease that is available for production, and I assume that the companies that have leased it are aggressively pursuing that production.
“This final chart that I want to show covers the number of acres offered to industry for lease on the Outer Continental Shelf – all of which were in the resource-rich Central and Western Gulf of Mexico, and the number of those acres actually leased. As you can see from this chart, the blue area is the area that was offered for lease but not purchased and the red is the area that was actually leased. The Administration, of course, has announced that they will have another lease sale in the Central and Western Gulf of Mexico, and this will cover an additional 38 million acres. There is a very substantial amount of land being offered for lease.
“It’s useful to keep in mind that Federally-owned oil production today is about 37 percent of our total domestic production. Many of our oil resources are located on private lands or on state lands, and resources from all of these areas are important in meeting our energy needs.
“We need to produce domestic oil responsibly. There a lot of good national security and economic reasons for that. I always have supported doing that. But to suggest that some change in policy regarding domestic production is going to change the price of gasoline at the pump is just disingenuous. In order to move toward policies that will work to moderate the impact of gasoline prices in the future, I think it’s important we be honest with our constituents and ourselves about what the factors are that influence that price.
“We enacted some policies in 2007 that have been helpful. I hope we can build on that work at a time and on an issue of such great importance to the future of our country. I hope we can work together stick to the facts. If we do that, I believe we can develop and enact policies that can provide real help in the long-run to our constituents who are suffering from high gasoline prices.”
Click here for a video of his speech.
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For more information, please contact
Bill Wicker at 202.224.5243 or Bill_Wicker@energy.senate.gov
Rosemarie Calabro at 202.224.5039 or Rosemarie_Calabro@energy.senate.gov