Prepared Witness Testimony

The House Committee on Energy and Commerce

Subcommittee on Energy and Air Quality
March 5, 2003
10:00 AM
2123 Rayburn House Office Building

Thank you, Mr. Chairman. I am pleased to be able to present the Administration's views on the need for comprehensive and balanced energy legislation, and where appropriate, our views on specific proposals before this committee.

I. Introduction

First, I would like to compliment you, Mr. Chairman, and the entire committee on your leadership in tackling these important issues once again.

To almost no one's surprise, the turbulent times on the energy front continue. From our first week in office, we knew that the United States faced an energy crisis long in the making. In addition to the California electricity crisis, you will recall that consumers faced unparalleled rises in natural gas and gasoline prices, and OPEC was in the midst of a series of production cuts that aimed at higher prices for crude oil.

That is why President Bush so quickly directed the completion of a comprehensive and balanced national energy policy.

II. The Long-Term Challenge

What was true in the beginning of 2001 is still true: we have a series of long-term energy challenges that require action now. These challenges are present along the entire energy continuum, and affect the environment and economy, the generation and transmission of electricity, and commodities ranging from crude oil and its associated products to natural gas.

The issues that relate to electricity pose their own set of challenges and possible policy responses, which I will address later. But the other challenges can be summarized by one phrase: energy security. To be more specific, the United States is increasingly dependent on foreign oil and may not be far from the point at which we no longer can assume a domestic-or even a North American-supply of natural gas that fully meets demand.

Thus, before I address some of the policy issues before this committee and Congress, it is worth analyzing the premise of growing dependence on foreign energy. I will use the analysis presented by the Department of Energy's independent analytical arm, the Energy Information Administration, in its Annual Energy Outlook 2003 (AEO 2003), and will confine this brief review to petroleum specifically and total energy supply and demand.

A. Petroleum Trends

The historical record shows substantial variability in world oil prices, and there is similar uncertainty about future prices. Three AEO2003 cases with different price paths allow an assessment of alternative views on the course of future oil prices. The three price cases are based on alternative assumptions about OPEC oil production levels, primarily from the Persian Gulf: lower output in the high price case and higher output in the low price case. However, with its vast store of readily accessible oil reserves, OPEC is expected to be the principal source of marginal supply to meet demand increases in all scenarios.

By 2025, OPEC production is projected to be 61 million barrels per day (more than twice its 2001 level) for the "Reference" case. Based on growth in world oil demand of about 2.0 percent annually, projected prices in real 2001 dollars reach about $27 per barrel in 2025. In nominal dollars, the reference case price is expected to exceed $48 per barrel in 2025.

In the high world oil price case, OPEC production is assumed to only increase to 46 million barrels per day by 2025 (about 25 percent less than the reference case) and prices rise by about 3 percent per year from 2001 to 2015. Prices remain at about $33 per barrel (in real 2001 dollars) after 2015 as market penetration of alternative energy supplies become economically viable at the higher price and cap oil prices.

In the "low world oil price" case, with assumed greater expansion of OPEC production to 71 million barrels per day by 2025 (about 15 percent greater than the reference case), prices are projected to decline from their high in 2003, reaching $19 a barrel by 2010 (in real 2001 dollars), and remain at that level to 2025.

U.S. petroleum consumption varies, not only with oil prices, but the level of economic growth. While projected U.S. petroleum consumption varies with the projected price of crude oil, from 28.2 million barrels per day in the high world oil price case to 30.2 million barrels per day in the low world oil price case in 2025, the largest variation is with different assumptions about the rate of economic growth. Total petroleum consumption in 2025 ranges from 26.9 million to 31.8 million barrels per day in the low and high economic growth cases, respectively.

In the reference case, gross domestic product is expected to increase by 3.0 percent per year between 2001 and 2025. In the high economic growth case, GDP grows at a faster 3.5 percent per year and in the low economic growth case at a slower 2.5 percent per year. However, while petroleum consumption varies with each scenario, it increases in all cases from today's level.

In 2001, net imports of petroleum accounted for 55 percent of domestic petroleum consumption. Dependence on petroleum imports is projected to grow in the reference case, reaching 68 percent in 2025. The corresponding import shares of total consumption in 2025 are expected to be 65 percent in the high world oil price case and 70 percent in the low world oil price case.

The growth in the share of petroleum accounted for by imports has received little notice in recent years. Expenditures on petroleum as a share of GDP have fallen from a peak of 9 percent in 1980 to only 3 percent today. The OPEC share of U.S. petroleum imports has fallen from a peak of 70 percent in 1977 to 47 percent in 2001. More importantly, the share of U.S. petroleum imports originating from the Persian Gulf is about 23 percent today versus a peak of 28 percent in the late 1970s.

However, as the marginal source of supply, OPEC and, ultimately, the Persian Gulf are expected to be become increasingly important for future supplies to the United States and the world. By 2025, 53 percent of U.S. petroleum supply is expected to come from OPEC, including 26 percent from the Persian Gulf.

Although crude oil is expected to continue as the major component of petroleum imports, refined products are projected to represent a growing share. Growth in domestic U.S. refinery capacity is expected to remain constrained by regulations and economics. While total capacity is projected to grow by 3 million barrels per day between 2001 and 2025, all of the growth is at existing refineries. No new grassroots facilities are expected to be built over the forecast period.

Growth in total U.S. petroleum demand in the reference case, from 20 million barrels per day in 2001 to over 29 million barrels per day by 2025, is projected to outstrip U.S. refinery capacity. As a result, refined petroleum products are projected to account for a growing portion of total net petroleum imports, reaching 34 percent of total net imports by 2025 (6.7 million barrels per day) in the reference case, up from a 15 percent share of total imports in 2001 (1.6 million barrels per day).

This means that the U.S. will increasingly rely on foreign refinery investors to provide not just the volume of petroleum product needed by U.S. markets but products that meet the required characteristics (e.g., sulfur content, octane levels, etc.) of the U.S. supply slate. This decreases the flexibility and direct control that U.S. policymakers have in dealing with petroleum supply issues.

B. Total Energy Trends

Another way to analyze our energy picture is to look at our total energy consumption and balance it against our total energy production.

Total U.S. primary energy consumption is projected to increase from 97 quadrillion Btu in 2001 to 139 quadrillion Btu by 2025 in the reference case, 1.5 percent per year. It is important to note that the reference case already assumes continued improvement in energy-consuming and producing technologies, consistent with historic trends. Without these improvements, total primary energy consumption would otherwise grow to about 200 quadrillion Btu by 2025.

The difference between reference case consumption and domestic energy production is the level of net imports (all energy types) required to meet projected U.S. energy consumption levels. Because of slow growth in domestic energy production, total net imports are projected to grow from about 26 quadrillion Btu in 2001 to almost 50 quadrillion Btu in 2025.

As I mentioned earlier, this already assumes that future gains in energy efficiency take place at the same impressive rate as in recent years. Nonetheless, the EIA also analyzed what it termed a "high technology" case, with an even more aggressive decline in energy intensity.

With more rapid decline in energy intensity, total energy consumption could be reduced to levels below that shown in the reference case. In the high technology case, it is assumed that increased spending on research and development will result in earlier introduction, lower costs, and higher efficiencies for end-use and electric generation technologies than assumed in the reference case. Due to a faster decline in energy intensity in the high technology case, total primary energy consumption is projected to be 6 percent lower in the high technology case by 2025, at 130 quadrillion Btu.

With lower levels of total consumption, net imports are also reduced. However, the reduction in imports is partially offset by lower levels of domestic energy production resulting from a decline in the energy prices that producers see with lower consumption levels. Net energy imports decline to 45 quadrillion Btu by 2025 in the high technology case from nearly 50 quadrillion Btu by 2025 in the reference case. The result is that even in a case with an accelerated decline in energy intensity, the U.S. will still be highly dependent on energy imports to meet future consumption needs.

III. Rising to the Challenge: President Bush's National Energy Policy.

These trends are a concern. We long ago ceased to fully provide for our petroleum needs domestically, and though most of our natural gas can be supplied currently by North American production, the trend here is also toward a greater share for imported gas.

Quite simply, we are at the mercy of events and decisions over which we have often limited-sometimes no -control. When winters and summers are mild; when no refineries or pipelines break down; when supply from abroad is abundant and reliable, we do not feel this dependency. But when almost anything goes wrong, the markets react instantly, and we confront the higher prices and volatility that have become by now an almost reliable cyclical phenomenon.

President Bush recognized that to prevent those problems from becoming a permanent, recurring feature of American life, we needed a long-term plan for energy security that would promote reliable, affordable and environmentally sound energy for the future.

Almost two years ago, President Bush presented his solution, a national energy policy, to the American people.

The key to the comprehensive plan's approach was the recognition that over the next 20 years our country would demand large and timely increases in energy in order to keep our economy growing, keep Americans working, and keep the nation secure.

The National Energy Policy helped define six general objectives to ensure America's continued growth and prosperity:

First, we would aggressively reduce demand by employing energy efficient technologies and encourage sound conservation measures as essential components of our energy policy.
Second, realizing that even the most aggressive energy efficiency and conservation programs would not be enough by themselves to bring supply and demand into balance, we resolved to increase energy supply, with an emphasis on domestic supply.
Third, to ensure energy security, we would maintain a diversity of fuels from a multiplicity of sources.
Fourth, we would dramatically upgrade our national energy infrastructure so as to more efficiently and reliably deliver energy from the source to the consumer.
Fifth, we would accomplish our energy production, consumption and conservation goals while building on our successful record of environmental protection.
Sixth, realizing that our energy challenges would extend beyond the next two decades, we would provide a vision of the future in which solutions to these challenges would transform our energy future.

IV.National Energy Policy Achievements

Above all else, the underlying goal of the National Energy Policy was to strengthen America's energy security; and pursuant to this goal, the Administration has made significant progress in the past two years.

This Administration has made great strides toward increasing domestic energy supplies and diversifying foreign energy sources. The President's decision to move forward on Yucca Mountain, and Congress' subsequent approval, will ensure the continued viability of the nation's nuclear industry. And the President's Coal Research Initiative continues to demonstrate great promise for the development of new technologies for cleaning - and potentially eliminating - coal emissions and thereby protecting the viability of this nation's most abundant energy resource.

As part of our efforts to modernize and expand the infrastructure we have established an interagency Task Force on Permit Streamlining that has been instrumental in coordinating the permit process for many infrastructure projects, joined with Congress to enact Pipeline Safety legislation, and begun construction on the Path 15 transmission line to ease electricity congestion in California.

The Administration's commitment to encouraging conservation, boosting energy efficiency, and expanding the potential for the use of clean renewable energy is demonstrated in the President's request for increased weatherization funding, and the largest request for funding for the Department of Energy's Office of Energy Efficiency and Renewable Energy in 20 years.

Our promise to protect the environment for future generations is the foundation of proposals such as Clear Skies, which will substantially reduce the amount of pollutants resulting from the production of electricity and through the Administration's Brownfields initiative which seeks to return abandoned industrial properties to beneficial use allowing location of combined heat and power facilities on remediated lands.

V. Transforming our Energy Future.

Of particular significance, however, are two Presidential initiatives that I would like to take a moment to highlight. The National Energy Policy recommended that the President direct the Secretary of Energy to develop next generation technologies, and it specifically focused on hydrogen and fusion.

A. Hydrogen.

The President soon carried out this recommendation by announcing the FreedomCAR initiative, a program designed to greatly accelerate the pace of development of hydrogen vehicles.

The potential benefits of hydrogen-fueled vehicles are incredible.

Hydrogen can be produced from diverse domestic sources, freeing us from reliance on foreign imports for the energy we use at home.
When hydrogen is used to power fuel cell vehicles, it will do so with more than twice the efficiency of today's engines.
And hydrogen-powered vehicles would have a tremendous positive impact on the environment, as they would produce none of the harmful emissions that we see with today's gasoline-powered fleet. In fact, the only byproduct of the fuel cell is pure water.

These factors also led to the development of the President's Hydrogen Fuel Initiative, which he announced just over one month ago during the State of the Union Address.

Today's gasoline-powered vehicles are fueled by an infrastructure that is the result of nearly 100 years and 1 trillion dollars of investment. It is remarkably efficient, and it is everywhere. Initially, we won't need a hydrogen station on every corner, and our hydrogen production will not need to match gasoline production overnight. But we needed a plan for making the necessary research and development breakthroughs to enable industry to develop a fueling infrastructure that would allow hydrogen vehicles to operate alongside their gasoline counterparts, that would be ready when the vehicles are entering the marketplace, and that will grow with the use of this new technology.

The President's Hydrogen Fuel Initiative provides this plan for the future hydrogen economy, and it has already generated tremendous enthusiasm among the energy and auto industries--partners that will be integral to transforming our nation's energy future from one dependent on foreign petroleum, to one that utilizes the most abundant element in the universe.

As the President has said, his goal is to see to it that the first car driven by a child born today could be powered by hydrogen and pollution free. Pursuant to the FreedomCAR partnership and Hydrogen Fuel Initiative, we propose to focus $1.7 billion over the next five years on several significant barriers to hydrogen, fuel cell, and advanced automotive technologies:

First, we will work to lower the cost of fuel cells by another factor of ten. If we were to mass-produce the fuel cell designs we have today, they would cost approximately $300 per kilowatt. The comparable cost of a modern internal combustion engine is $30 per kilowatt, so we have our work cut out for us to make this technology competitive.
Second, we will endeavor to lower the cost of hydrogen, which is approximately four times more expensive than its gasoline equivalent today. Our 2010 goal is to bring down the cost of the hydrogen equivalent of an untaxed gallon of gas to $1.50. The way to do that is by developing cost effective, efficient means of production and distribution.
Third, we will undertake research aimed at devising new methods to store sufficient amounts of hydrogen fuel aboard a vehicle, to provide consumers with a driving range of at least 300 miles between refuelings.
Fourth, and most critically, we will work to solve the overarching infrastructure challenges, to develop a hydrogen-based delivery and refueling infrastructure like the petroleum-based one we now have.

If we are successful in this endeavor, we estimate that industry could make a commercialization decision on fuel cell vehicles, hydrogen production, and refueling infrastructure by 2015. A positive decision would lead to hydrogen fuel cell vehicles in the showroom by 2020, and by 2040, this could reduce oil use in light duty vehicles by over 11 million barrels per day--an amount of oil that approximates that which America imports today.

B. Fusion

A second element of the National Energy Policy technologies recommendation received much attention domestically and internationally when President Bush recently announced that the United States would make a major commitment to the development of fusion energy.

Fusion is the process that powers the sun and the stars, and our best scientists believe it may become the ultimate energy source for earth as well. In the stars, hydrogen atoms combine under extremely high temperature and pressure to produce helium and energy. The envisioned fusion energy plants would harness this process here on earth, relying on an abundant fuel that is readily available to all nations: simple seawater. Fusion energy plants would produce no harmful emissions, no long-term radioactive waste, and because no fissile materials are required in the fusion process, it presents virtually no proliferation threat. It promises to be the ultimate safe, clean, abundant energy source, and it may be the energy source for the future.

The great promise of fusion, however, presents great scientific challenges, challenges we believe we can meet if we engage the talents of experts from around the world. That is why on January 30, 2003, President Bush announced that the United States would join with the international community to develop the International Thermonuclear Experimental Reactor. When built, ITER is expected to achieve the first sustained burning plasma, an essential next step in demonstrating the feasibility of commercial fusion energy systems. In his announcement, the President noted that ITER is "an ambitious international research project" that will "advance the effort to produce clean, safe, renewable, and commercially-available fusion energy by the middle of this century."

Both our hydrogen initiative and our fusion energy research program will, of course, depend on Congressional funding and approval, and we look forward to working with Congress to ensure that these initiatives are fully supported.

VI.Principles Guiding Energy Legislation.

Hydrogen and fusion present a long-term promise, and are primarily focused on research and development. But there are a number of proposals that can be implemented now. Some require action by the Administration-indeed, three-quarters of the National Energy Policy's 105 recommendations can and are being done by actions in the Executive Branch. However, some of the most important actions require legislative action.

Let me outline a few of the principles that the Administration believes should guide the development of energy legislation, and the goals we think we should achieve.

A. Modernization of Wholesale Electricity Laws

The Administration strongly believes a comprehensive energy bill must include a sound electricity title that modernizes our Nation's antiquated wholesale electricity laws.

Our overarching goal is to ensure that Americans have abundant, affordable, clean and secure electricity supplies.

Developments in the electricity industry in recent years have brought the industry to a crossroads. While the move to competitive markets has fostered enormous benefits, some serious problems have given rise to a significant policy debate, especially over the past two years.

We have three basic policy choices.

First, go back to comprehensive rate regulation for wholesale power sales. Have FERC set regulated rates for each jurisdictional utility. Abandon reliance on market forces and competition as the underpinning of Federal electricity policy.
Second, maintain the status quo. Defer making decisions on major policy issues. Continue to straddle the fence.
And, third, complete the transition to effective competition in wholesale power markets.

Going back to comprehensive rate regulation is not really an option. Too much has happened, and too much has changed. The process of change introduced into electricity markets by past Federal and State policies is probably irreversible.

Preserving the status quo is not a real option, either. The status quo has meant dramatic price spikes in wholesale power markets in California and the West, attempts to manipulate power markets, a dramatic expansion of generation by many independent power producers and the subsequent challenges some have faced as a result, and stagnant investment in an inadequate transmission grid that restricts entry into regional power markets.

The Administration believes that there really is only one viable policy choice: completing the transition to effective competition in wholesale power markets designed to generate and deliver reliable, abundant and affordable electricity.

The evidence of the price benefits derived from increased efficiencies can already be seen. As imperfect as the market has been, wholesale power prices declined by 23 % from 1985 to 2000. Even when one takes into account the volatile price increases of 2001, the decline from 1985 is still 12%.

Well-functioning markets will, we believe, lead to lower costs for consumers and businesses. But there is more than simply the benefit of lower prices. A well-functioning market brings its own rewards. As confidence is gained that the system is reliable and capable of coping with high-demand for electricity, there will increasingly be less need for restrictive and prescriptive regulation. And that is the point when much-needed investment is likely to be attracted -- investment in new technologies, and in improved generation and transmission facilities that produce additional energy and environmental benefits.

When the opposite is true - when uncertainty reigns, when reliability is questioned, when prices seem detached from market forces - investment vanishes.

What is required to complete the transition is new and aggressive reform, and that requires new legislation and new, streamlined regulatory regimes.

The reforms that lead to greater competition are embodied in the following principles:

Prevent market manipulation and market power abuse.
Promote reliability of electricity service.
Ensure open access to the interstate transmission grid.
Eliminate undue discrimination in wholesale power markets.
Ensure that customers have the ability to respond to price in real-time.
Encourage investment in new generation and transmission facilities.
Support transmission policy options, including participant funding, that appropriately allocates costs; and
Lower barriers to entry to electricity markets.

The Federal Energy Regulatory Commission has already taken a number of steps in these directions. For example, FERC already has begun a rulemaking to establish incentive-based and performance-based rate treatments to encourage construction of new transmission facilities, and has acted to make regional transmission organizations a reality.

However, legislation still is needed, and the Administration believes that much of the Electricity title in the draft House bill is a strong step in the right direction. Because the Administration supports efforts to ensure open access for all generators to the wholesale electricity grid, the open access language in section 7021 of the draft House bill is a desirable goal, and we support that goal. The Administration also supports establishing mandatory and enforceable reliability rules that will reduce the chances for power outages. Therefore, we support section 7031 of the bill concerning electric reliability.

The Administration agrees that the Public Utility Holding Company Act (PUHCA), an outdated law that restricts utility investment, should be repealed, and so we support Subtitle D of the Electricity title in the House bill. We also have advocated reform of the Public Utility Regulatory Policies Act (PURPA) in an innovative and competition-friendly manner as contemplated in Subtitle E of the Electricity title.

The Administration supports FERC's ability to review mergers and prohibit abuses of market power. As a result, we oppose section 7101 of the bill, which would repeal FERC's authority to review mergers. The Administration supports enacting legislation to further protect consumers against unauthorized disclosure of personal information, unauthorized switching of electricity service, and unethical individuals and companies in this industry. As a result, we generally support Subtitle H of the draft bill and look forward to working with you on some of the details of this subtitle.

We also believe that to facilitate an effective national electric transmission grid for the benefit of consumers, last-resort federal siting authority for high-priority transmission lines is needed. Therefore, we support the concepts of section 7012 concerning siting of transmission facilities. However, we still are reviewing the details and legal ramifications of this proposal. We believe the Tennessee Valley Authority and the Power Marketing Administrations (PMA) should be an integral part of the national grid and relevant authority should be included in the bill. We also generally support Subtitle B of the draft bill concerning transmission operation, though we do have some concerns about the regional transmission organization section because, among other things, it does not explicitly provide for Federal cost recovery when a PMA joins an RTO, or for preserving prior contracts and third-party financing obligations of the PMAs. We look forward to working with you to address our concerns.

Finally, the Administration supports the ban on roundtrip trading, the increases in criminal penalties, and the other modifications made to the Federal Power Act in Subtitle G of the draft bill. We are still studying the provisions of Subtitle F concerning Renewable Energy, but it appears that the bill contains much we can support there as well.

B. Energy efficiency and conservation

A comprehensive energy policy must be balanced, and must include initiatives that foster both supply and demand side improvements-and importantly, those which increase energy efficiency and energy conservation. The Administration has strongly supported efforts to increase energy efficiency, and I am pleased to note the Chairman's inclusion in his energy legislation of agreements reached to this end by the energy conferees of the 107^th Congress.

C. Tax Provisions

Comprehensive energy legislation must increase energy conservation and efficiency. Nearly every dollar of the NEP's energy tax proposals for FY 2002-2012 would be devoted to increasing efficiency, conservation, and renewable energy. For example, the NEP includes a consumer tax credit for the purchase of hybrid and fuel cell vehicles. Other fiscal incentives include extending and modifying the tax credit for producing electricity from environmentally friendly sources, such as biomass and wind; providing tax credits for energy produced from landfill gas, residential solar energy systems, and investment in combined heat and power; and extending the ethanol tax exemption. It is imperative that the tax provisions of comprehensive energy legislation reflect the President's priorities of environmental protection and energy conservation and maintain the fiscal discipline reflected in the FY 2004 Budget.

D.Renewable Fuels Standard

The Administration strongly supports a renewable fuels standard that will increase the use of clean, domestically produced renewable fuels, especially ethanol, which will improve the Nation's energy security, farm economy, and environment. The Administration also supports the inclusion of a market-based, national credit trading mechanism - such as that included in Section 5052 of the draft legislation - that will increase efficiency and reduce costs.

E. Alaska Natural Gas Pipeline

The Administration strongly supports the construction of a commercially viable Alaska natural gas pipeline as a critical part of our energy security portfolio, and believes that market forces should select the route of the pipeline. Although no such provision appears in the House draft, the Administration reiterates its strong opposition to a price-floor tax subsidy--and any similar provision--because it would distort markets. It is also likely to undermine Canada's support for construction of the pipeline, setting back broader bilateral energy integration.

F. ANWR

As I've stated earlier, the Administration firmly believes that a balanced, comprehensive energy plan is imperative to the long-term strength of our economic and national security. This balance must include a recognition that we must also increase domestic production in order to reduce our rising dependence on imported oil and gas; and key to achieving this balance is the President's proposal to open a small portion of the Arctic National Wildlife Refuge (ANWR) to environmentally responsible oil and gas exploration and development.

As you are aware, primary responsibility for managing the vast public resources of this nation rests with the Department of the Interior. Secretary Norton has set a goal of forging strong partnerships with Federal and State agencies, Tribal governments, and all of the stakeholders-including the Congress-to create greater opportunities for the responsible development of energy resources on Federal lands.

The Department of the Interior has taken several actions to advance the goals of the National Energy Policy, including the approval of a 5-year Oil and Gas Leasing program to ensure that the Outer Continental Shelf remains a solid contributor to our nation's energy security; completion of the EPCA inventory, which provides an estimate of undiscovered technically recoverable resources and proved resources of oil and gas; and recent collaboration with the Department of Energy on a joint report that identifies and evaluates renewable energy resources on public lands. The Bureau of Land Management will use this report's findings to prioritize land-use planning activities, and to increase the development and use of renewable energy resources.

G. Price-Anderson

The TheAdministration strongly believes that comprehensive energy legislation should include long-term reauthorization of the Price-Anderson Act. Price-Anderson ensures prompt and equitable compensation for the public in the unlikely event of a nuclear accident.

In the Bob Stump National Defense Authorization Act of 2003, Congress extended Price-Anderson for DOE contractors until December 31, 2004. In the recent omnibus appropriations act, Congress extended Price-Anderson for Nuclear Regulatory Commission licensees only until December 31, 2003. We need a long-term extension of this important law, and therefore we applaud the draft House bill's extension of Price-Anderson to 2017.

We have only recently seen the provisions of the draft bill concerning financial accountability, safety, security and other matters relevant to the nuclear power industry, and look forward to working with Congress to ensure that the bill achieves its intended effect without detracting from the quality of potential contractors, or compromising security, anti-terrorism or non-proliferation efforts.

H. Strategic Petroleum Reserve

As was demonstrated by the President's decision to fill the Strategic Petroleum Reserve to its current statutory capacity, the Administration recognizes the tremendous importance of this national resource. We applaud the Chairman for including permanent SPRO authorization in the legislation.

The Administration intends shortly to initiate a study to determine the optimal size of the reserve. The results of this analysis are necessary to determine the full range of impacts on markets and national security of any decision to adjust capacity following its expected fill in 2005. We believe such an analysis is an important first step when considering an expansion of the Reserve above the current goal of 700 million barrels.

At this point, I thank you for the opportunity to testify before you today, and I welcome any questions the Committee might have.

Printer Friendly

Comprehensive National Energy Policy

I. Introduction

A. Modernization of Wholesale Electricity Laws

D.Renewable Fuels Standard

F. ANWR

G. Price-Anderson