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tal programs that we have funded through our authorization power in the Department of Energy and elsewhere.

I don't think that a National Energy Policy that ignores the law of supply and demand is going to be accepted by the American people; they are going to be looking for what's the cheapest way to pay their bills. At the same time, I do think that we ought to diversify the eggs in our energy basket, and I hope that the Secretary has some rather good thoughts along those lines.

Thank you.

The CHAIRMAN. We appreciate those wise words.

I'll recognize Mr. Scheuer, the distinguished Vice Chairman of the Committee.

Mr. SCHEUER. I thank you, Mr. Chairman.

Admiral Watkins, "by no means can George Bush's Energy Policy experts be proud of their draft since the plan does not concentrate on saving energy but on increasing supplies. Despite the oil shocks of the 1970s and 1980s, the market economy is still the leitmotif of the U.S. Energy Policy, if there is such a policy. But this policy has made the United States dependent upon imports and strangled its own production." Admiral, these aren't my words, the words I just spoke were an editorial, a recent editorial from the very moderate, thoughtful newspaper the "Suddeutsch Zeitung. This is what they feel, and I read directly from their editorial page and I'll be reading excerpts from other prestigious newspapersThe CHAIRMAN. Is that a New York newspaper, Mr. Scheuer? Mr. SCHEUER. No, but it's from the land of my forefathers, so I respect it; and it is a newspaper that is internationally respected. Admiral Watkins, you are one of the stars of this Administration and you are one of the finest public servants I have ever had the pleasure of meeting in 25 years of service in this body. You are truly a formidable leader and thinker. And it just pains me beyond belief that the very excellent draft of a National Energy Policy that you sent up to the White House, a thoughtful, creative, constructive draft that had a fine place for energy conservation, that gave dignity and true consideration to energy efficiency, and gave depth and true consideration to alternative sources of fuels, I am sorry that that met the treatment of a team of surgeons and they didn't take the surgeons scalpel to it, they took the meat axe to it. If I had to name the surgeons, it wouldn't be difficult-Sununu, Darman, for starters. It is a source of deep regret to me. I hope one of these days they will liberate you and let you exercise the high intellectual power that you have given the Government, the thoughtfulness, the vision of the future so that you can really fulfill your vast capability in devising constructive and thoughtful energy policies for our country.

I thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Mr. Scheuer.

Mr. Boehlert, are you going to enlighten us with a brief statement?

Mr. BOEHLERT. I will, Mr. Chairman.

The CHAIRMAN. The briefer, the more enlightening it will be. Mr. BOEHLERT. All right. I thank you that, and I will ask permission that my entire statement appear in the record at this point. The CHAIRMAN. Without objection.

Mr. BOEHLERT. But at the risk of appearing to be a New York cabal, following on what my colleague Mr. Scheuer has said, I would like to say to you, Mr. Secretary, that the draft proposal before us falls under the heading of "expectations unfulfilled." Never have so many had reason to expect so much from so few and been so greatly disappointed.

Now, having said that, let me also say, as my colleague Mr. Scheuer did in a spirit of bipartisanship, that I am here to help you. And I think you are one of the good guys. I think your battle is not with us; your battle is with the Office of Management and Budget. I look forward to your testimony, I look forward to the opportunity to pose what I think are some pertinent questions to you, and to working with you to develop what the Nation really needs, and that is a National Energy Policy that makes some sense for the future.

Thank you, Mr. Secretary.

The CHAIRMAN. Thank you very much, Mr. Boehlert.

And now it gives me great pleasure to recognize our distinguished chairperson of the energy subcommittee, who has probably devoted more time and effort to this than any other member of the committee, Admiral, and I am sure you have encountered her wisdom over the years that you've been here, Mrs. Lloyd.

Mrs. LLOYD. Thank you very much, Mr. Chairman. I ask unanimous consent that my entire statement be a part of the record. The CHAIRMAN. Without objection.

Mrs. LLOYD. Admiral Watkins, we welcome you today, as we do your distinguished Assistant Secretary Henson Moore. I think you will recall that when you assumed your office as Secretary of Energy that I said that you had a very distinguished career in the United States Navy but you would do our country no greater service if we devised a National Energy Policy. And we're here today finally to roll up our sleeves and tackle the difficult business of building this comprehensive energy policy, which you know is certainly long overdue. We cannot throw away or discard any energy technology; Mr. Secretary, we need them all in a balanced approach if we're going to meet our needs for the 21st century.

Although we have areas of controversy, I do want to commend the Department of Energy for their efforts to tackle finally this very difficult issue. It is a thankless task for you and I think that we all knew there would be dissent and disagreement with whatever plan that was devised. For nearly two decades now we've been debating and arguing over energy policy without any results. So, I would hope that this strategy, although many of us in the room have difference of opinion, would serve as our base upon which we can finally work to build a long-term energy strategy that our Nation certainly needs.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Mrs. Lloyd.

I am going to recognize other members who have important contributions to make, and I know of at least one. Mr. Smith, I recognize you.

Mr. SMITH. Thank you, Mr. Chairman.

Mr. Chairman, while I congratulate the Administration on its initiative to create a National Energy Strategy, I have concerns

that the strategy does not adequately address the concerns of the independent oil producer. I realize the National Energy Strategy is a jumping off point but it offers little support for the independent producer who accounts for 41 percent of our domestic production in the lower 48 States. The opening of the Arctic National Wildlife Refuge and the Outer Continental Shelf, though needed, does not address the need to rely more on the surest, environmentally safest production of the U.S., that of the lower 48 States.

The strategy places emphasis on developing new technologies to recover oil left behind by conventional oil production methods. Yet, the President's own budget cut research and development for fossil fuels in half.

Also omitted from the strategy were tax incentives to encourage domestic exploration and production of oil and natural gas. We need a much stronger commitment from the Administration for the domestic production of oil and gas by the independent produc

er.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Mr. Smith.

The Chair will be glad to recognize Mr. Wolpe, if he wishes. Mr. Wolpe is the new Chair of our Översight Subcommittee, Admiral, and he will have a mission to keep on your back if necessary.

Now the Chair repeats its welcome to you, Admiral, and to your colleagues, our distinguished former colleague Mr. Henson Moore, and we also welcome Linda Stuntz from your Department.

The floor is yours.

STATEMENT OF HON. JAMES D. WATKINS, SECRETARY, DEPARTMENT OF ENERGY; ACCOMPANIED BY: W. HENSON MOORE, DEPUTY SECRETARY, AND LINDA STUNTZ, DEPUTY UNDER SECRETARY

Admiral WATKINS. Thank you very much, Mr. Chairman.

As you know, the President issued the charter for the National Energy Strategy on July 26, 1989. During the ensuing 18 months we've held 18 hearings, we've had 448 witnesses come before us, we've covered representatives from 46 States, and we've received 2,000 serious written submissions. The Interim Report that we submitted in April of 1990 was merely a compendium of public comment to scope the breadth and depth of the issue surrounding an attempt to build a National Energy Strategy that's integrated and comprehensive.

Following that set of hearings, we conducted seven months of intensive inter-agency analysis, and that was done through the President's Economic Policy Council, which is basically a council made up of representatives from, in this case, 16 different Federal agencies. We held five EPC cabinet meetings, two of them with the President, and I've had private sessions with the President.

One of the things that has come out of this I think is that we need to recognize, and particularly with this committee, that we have a comprehensive analysis to back up the Strategy. Never before have we had the integrated analytic underpinnings that would support the complexity of issues that we have, and that we must deal with these then in a comprehensive way. This will be

hard up on the Hill, with so many different committees we have to go before, to be able to say that if you want to insert something in this Strategy, then let's agree on the analytic approach to see how it interfaces with all other elements. And I think one of the tragedies of the past 20 years, that we talked about as "no energy policy", is the very fact we have been unable to do this for whatever reason. And I think now we have to start taking these individual items and say, fine, let's look at that in balance with other alternatives that we have placed in this strategy in integrated fashion. And we can show you and we will share with you that analytical base, and hope that we would be able to find new harmony and dialogue on many of these very contentious issues which have faced the Congress for many, many years, and some of which are still not resolved, much as the situation pertained in the Clean Air Act debates.

We believe as a result of all of this, that we've accomplished our mission given to us by the President and we've laid a foundation for the future. We believe embodied in this Strategy are powerful ideas for America's future. One thing we found that there simply is no single, simple answer to America's energy challenges. It is nice to have a simple solution, but there wasn't any in our deliberations. This comprehensive and balanced Strategy includes nearly 100 ideas, but those ideas here are converted to initiatives: It is an action program affecting virtually every aspect of the way we produce, use, and transport energy.

Now, I would like to review some key elements, and I would like to refer to a variety of figures, which you have both in front of you and we have displayed for both those in the room as well as those in the dais. The reality is the United States and the rest of the world will continue to rely on oil for the foreseeable future and Persian Gulf producers will remain critical players in the oil market.

Now, figure 1, which you have before you now, on the ordinate there you see millions of barrels per day against time, with 1990 in the middle, where we've been in the past, where we're going in the future. I want to explain this and I won't have to do it on many graphs then. What you're seeing on the right side of 1990 are the projected supply and demand situation reflecting oil imports and total oil production.

The current policy base is that base defined in Appendix C to the Report. And it is important that we all know what's in that base. Basically, it is everything that is in law, in regulation today, on the books and projected, except for Clean Air Act, and this bill and a couple of other items. But I do think it's important we know what we're talking about here. We found it was very important to integrate Clean Air Act as a module, very important module, in this Strategy because of the interlocking relationship between clean air and everything we're trying to do in a long-term energy strategy. So, at the top there in the heavy blue, you see oil imports and where they might have gone without the Strategy by the year 2010. You also see down below the total U.S. production enhanced by the Energy Strategy options that we have in it. And then to the degree you see the vertical white lines there on the lower lighter blue out there beyond 1992 or 1993, that's the representation of the uncer

tainties of the actions. In other words, the optimistic as opposed to the somewhat very conservative. We think that's a reasonable range of expectations out there for the American people.

Now, what this figure 1 illustrates is the fact that the NES attacks the challenge of increasing energy security in a balanced way. It reduces our need for oil by 3.4 million barrels a day by the year 2010, and it increases domestic supplies of oil by 3.8 million barrels a day by the same year.

On the demand side, the aim of the NES is to introduce alternative fuels and technology, expand the use of domestic natural gas, and increase the efficiency of all our vehicles. And we do this by using alternative fuels in fleet vehicles; accelerating research and development on electric, gas turbine, and fuel cells propulsion systems, and on high efficiency conventional engines; by intensifying R&D on more efficient industrial processes in aircraft bodies and engines; by scrapping older cars; increasing ride-share commuter benefits; and wider use of intelligent vehicle highway systems.

On the supply side, the aim is to use superior production technology and environmental safeguards to increase domestic production, including: advanced research and development for enhanced oil recovery technologies, access to a discrete portion of the coastal plain of the Arctic National Wildlife Refuge, and access to certain portions of the Outer Continental Shelf.

Now let's talk about the international aspects, which are critical to this element of the Strategy. The NES proposes diplomatic and trade initiatives to expand production capacity in areas outside the Persian Gulf, mainly in the Western Hemisphere, Europe, and developing nations, and to expand their strategic stocks.

Now, turning next to another issue. I would like to talk about what will the NES accomplish now regarding energy imports. As you know, we have been importing about 8 million barrels of crude oil and refined products per day, which is nearly 13 percent of total daily world oil production. By reducing our consumption, we reduce our imports and, hence, the demands we place on the world market. This reduces our vulnerability and that of our allies to disruptions in world markets.

This slide here shows that in less than 20 years without the National Energy Strategy, imports would rise to approximately 65 percent of domestic consumption. Working with tandem with other Administration initiatives, the National Energy Strategy proposal will reduce our oil imports by 3 million barrels a day in the year 2000, almost 6 million barrels a day by the year 2005, and 7 million barrels a day by the year 2010, and basically hold it then at the 4045 percent level, with a degree of uncertainty shown in the vertical line.

Additionally, the important regulatory reforms contained in the National Energy Strategy for the natural gas market will expand U.S. fuel-switching capabilities and increase the Nation's flexibility to respond to unforeseen events in the oil sector.

Now, what will the Energy Strategy accomplish regarding energy efficiency and conservation; that's the focal point of a great deal of attention so far on the Strategy. We've made great strides in the last two decades to improve energy efficiency. We power an economy 50 percent larger than the 1973 economy with only 7 percent

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