25th of july. we discussed the issues was how the press was going to move forward at that event. and i would have had some other conversations. >> questions on that theme. it annex -- contacts with news international papers between september 2010, and the 14th of july, 2011, there are fifteen phone calls, after that there's only one and that's with mr. harding, including -- excluding one social interaction mr. meyer and attending by mr. harding. i don't know if we draw any . >> yes. be.

>> i think it's fair to say, i didn't have particular good relations with international news befores phone-hacking in particularly the -- improve to post phone-hacking. and, you know, our relation -- or contacts would be much more limited. i do say, i'm no sense because two decades back i'm not engaged in relationships with the foreign newspaper i am engaged in relationships with, you know, you would expect me to do at the time. >> thank you. now, section a, question a. move away from that. find a different question. i'm grateful to you for

complying this. do you think t a good idea it is kept and then made public or is it just window . >> definitely. i think that it acts as a check in a way what politicians do in the engagements they have and transparency, the good thing in this respect, and it means you make a judgment, not just about the invitation that you receive, but with accepting it. i hope i would make the judgments in any case. but i think it's quite a bit reinforcement. i think --ic there's a question about the political editors. i think the lest that previously published that didn't include lists -- i think you got make a proportionate. if you make it every single

accommodation with every journalist, you're going to get in deep bureaucratic waters. >> there is a relationship between the poll population and journalist -- politician and journalist to follow because it's important for them to get the message across and journalists -- the reason i ask the question because i'm conscious of plols policy and the way it's not working out. i wonder whether you fear there is a risk it might become sub subterranean in the sense you the editor, but one of your staff that meets a representative of a journal of press and how you deal with that other than by cultural change? >> i think it's -- the contacts go on have gone on will continue to go on as we speak. and, you know, many of those

contacts. i think that's inevitable, the bad thing you -- that's a good thing. because i want people to know about our views, my views and parties would say the same. if i decided to take a appropriator on a holiday with me, you know, i don't want to do that. but, you know, it's a -- it's a good backstop of transparency. i think that's the way i will put it. >> and that is what -- that isn't reality. it's intellectual check and that requires the rigor of understanding what lies behind it. it isn't just a piece of paper, which therefore, is exactly the same message your staff would understand. of course, they must have contact to get the message across. but equally being balancinged,

being appropriate comes into the whole message. is it a fair message of what the sort of thing does? >> very well. indeed, precisely. >> it's been only the theme of transparency, you say in question a on top of page 06822. is the only way to minimize the, risk. it is necessary and sufficient. is that a correct understanding of where you're coming from? >> just a second to remind myself of this. yes, but i hope when we come on to recommendations for the future i can indicate what i think our immediate policy -- i have a position on this. i believe that we should not

take poll tissues out of media policy completely but as i say any my evidence, question five, there should be a higher bar in relation to politicians going against the authority's decision. i think i suppose the transparency is important, and in the relation to media politician on specific idea. big ideas. >> thank you. are you returning to that question, right? question nine now, this is the influence the media had on the content and timing of government's decision making on policy and operational issues, effecting the media. you say the particular need for the the reality or the perception of undue influence being exercised by interested parties, and moving on to the next paragraph, i said it a number of times news international tony blair said we

pay attention to the abour. are you saying it remains in the realm of perception of undue influence or in the past to reality? >> i read a lot of evidence. the way i very specifically view this i believe we are looking for needs andrew march after the phone-hacking with the scandal both, i said in the interview, that we were too close in the sense that it meant that when there were abuse by the press, we didn't speak out. the consequence too close, but now different people i refer to you your other evidence different phrases for that word to unhealthy. a whole range of other

adjectives being used. other ways of thinking about the issue. but it was a sense of fear, i suppose. in some sense or unwillingness or worry or anxiety about speaking out on the issues. [inaudible] of the public any other organization in our other life being in what happened that actually be taken earlier. >> there's a page 6610 in the section of your interview with mr. mar on the tenth of july, you define too close, you said in the following respect we didn't speak out on some of the major issues. and mr. marr summed it because mr. murdoch was too powerful. >> actually, that's mr. marr's question.

he says, actually, he says, indeed because you're making a judgment about you would support what you can -- i think that's changed. do you feel, you remember of course even at that stage labour was too close to news international or not? >> i think the sense in which i think too close whey mean by too close i think is really the term we didn't speak outen the issues where there was increasing evidence of news international's behavior. i think rebecca brooks to the committee in 2002, 2003, where the police were raises. and, you know, i think the whole question of abuses by the press

by some sections of the press was if a sort of a kind of come part meant losed -- compartmentize something knew about. and had a sense of but it was just needed for government opposition the place you were going to do. partly it relates to -- so you said at the beginning, which is the history of looking into the area and without success. >> so even as late as 2008 to 2010, part of the thinking which may underlay what mr. blair said in which you cited was that the bound government in your view? >> well, i mean the browne government did -- about some of

the things to change the lobby system. it was getting at the main issue. now he said yesterday, he didn't feel he had a main -- mandate to deal with the main issue. that issue was off the table, basically. a couple of questions in relation to the brown period. if i can describe it another participate and the first question is this, were you aware of off the record briefings against tony blare and other prime minister and particularly . >> and i believe in 1999 he left. left the government in 1999 one of the reasons he left was because of operation. i can't point you to direct

evidence. one of the things he did was he briefed including within the government. on damon mac bride the cabinet minister, i raised a specific concern i had with mr. browne i believe in september of 2008 within about some of the mcbride's evidence. >> okay. that's as far as i think i need to take. that point. did you feel, look at the this period, that the government in particular mr. brown was obsessed with the news in the press or not? >> i think the the permanent campaign i think it was his phrase. and in politics, the permanent campaign the media i think in a way makes the public campaign

part of the -- i didn't think mr. brown was any more obsessed about it than mr. blair or anybody else, really. >> and moving forwards, then, the period when you were in opposition. the piece in the nighttimes which -- "new york times" came on the first of september, which is twenty five days before you became leader of the opposition. were you aware that mr. brown had tounge the cabinet secretary seeking inquiry following the publication of that piece? >> the prime minister? i think yeah, i must have been aware of it. i must have, aware of it.

i definitely blame -- let me refigure my memory. i knew after the election he sent me something in the bundle after this. he discussed having a publishing inquiry before the election as i understand it. i believe i found it after that. i can't recall having conversations about it before the election. i remember his speech when he talked about the the inquiry. that was july. i couldn't have known about it. i didn't know if it was public at the time. was it public at the time? >> it wasn't public at the time, but the consideration given to the public inquiry before the election took place in march of 2010, and it was involved and . >> which election are we talking about mr. or the general election. >> i think he was talking about the election. i think we were talking about

that event. just a sound about subsequently. there was a further request mr. brown made in september, the 7th of september, 2010. >> i don't think i know about it. it's hazy. i don't think i know about it. >> getting back to the new "new york times" piece, i was in the middle of a period for you, did you -- did that piece come off the radar or not. >> yes. from the guardian and in september which had words from me in it about the allegationses and -- allegations surprisingly because of the nature of the allegations was about the prime minister andy coulson and what the implications were for him. i don't think i read the piece, i think i read "the guardian" i

remember being being on the campaign tour, and i definitely, you know, caught the andy coulson part of this. >> it didn't cause you to ask for a public inquiry or anything. >> no. >> moving forward to the next year, asked me to put you news corporation summer party on the 16th of june, 2011, when you met rupert murdoch, the question is did you raise the issue of phone hacking with him or any other senior news corporation executive. >>. >> i i say on question fifteen. just for convenience. i explain it. i recall a short conversation with rupert murdoch a few minutes before the party. with i believe i should have

raised the issue of phone-hacking with him. which is something i should have said. why because in retrospect and i called for inquiry or review later to do in april, there needed to be an inquiry set before the police inquiry. i think it was too much business as usual as news international about the change very soon after . >> can you remember how long you stayed at the party, approximately? >> i can't remember. i really can't remember. >> okay. those are the questions i've been asked. there's one final question from a participant. he draws to attention a text

message with mr. adam smith sent to mr. mitchell, the other way around, mr. schmich l to mr. smith, on second of february, 2007, we can bring -- prfn we can bring it up on the screen for you. on the file. come up in a minute. there we go. it says i did tell the labor letter what was thinking. whether you assist on the matter. you can tell us where we are on in the chronologies, this is the second of february. what's happening at this time? >> the bid is not being rereferred to the competition.

it was understood at that the time undertaking were not being considered. they were not forly enough to paroling element in march of 2011, if that helps. it may be that you have no rex or maybe you do. >> i didn't. i don't think i met -- i'm pretty sure i didn't immediate fred micel. -- michel. meeting of the opponents of the bid proponents of the bid i don't know. >> be careful because times he referred to people recipients of that provides information which actually means a member of that person's staff. >> well, we simply don't know.

i've been asked to bring that to your attention. you've addressed it. so that deals with those items. and as i look forward in your statement to question 13, which questions about mr. tom he was recruited by you in december 2010, there's one of your two communications advisers, is that correct? >> correct. >> can you tell us, please, about the recruitments process in a nutshell. who was primarily responsible

the democratic job and i became the leader in september and i believe they were both on the daily mirror and december that it must have taken us a couple of months or so. the fourth the time for 11 years between 1999 to 2010 to what extent was that history relevant to the merits.

>> it was relevant that he'd been a significant political reporter. that was certainly relevant because he would want somebody that knew the lobbying relationships and it wasn't the lobby, but he wasn't someone that had a particularly close relationships with executives in the news international for an example of rebekkah brooks. >> dirty politics published in 2005 didn't i think make any specific allegations. also, as suggested, he might have been involved in some way. was that specific issue one that you discussed? >> it's complicated because when i hired him, lord ashcroft

hadn't yet made the allegation he would later make but he had made his way into lord ashcroft's bank account. adel was an obligation that he needed the fall in july once the whole situation arose. when he did make the allegation i asked about it, he denied it, my chief of staff the former editor at the times, the person that had been like his boss said he believed the allegation was on true. >> so at the time when you hired him in december can you remember specifically what question you asked? >> i would have asked had he done anything that would bring

myself and himself into disrepute in relationship to the job that i was asking him or might be asking him to do. >> can you covered what happened subsequently. on a slightly different issue, paragraph ten in our bundle there is an e-mail he had a hand in the to the 27th of january, 2011 making it clear that the issues i call the plurality and phone tapping issue shouldn't be linked. was that something that match your own assessment at the time? >> it was a position that i

agreed with people on this issue why do i say this and why do we take the position that we do? it was because we thought we had the robust positions. a robust position on phone hacking which is a police inquiry and a robust position on the 25th of january we had it referred to the commission. at that point mr. hunt was pursuing the undertakings. we had a robust position on the front bench on the phone hacking and what was then being bombarded with questions about this. this is a essentially what we call on people later we would change our view after the revelations. at that point we didn't believe

him. >> that your view changed in july, 2007, is that correct? >> yes, it did. >> in relation to what happened in 2011 it actually started in july and april you collect together the key even under paragraph 14 fer statement which we can probably confine ourselves to the highlights and the indexes themselves in this bundle. >> its tab number three in the the whole collection. >> i'm with you now. thank you. >> the first relevant even to is the 19th of april, 2011, when you asked for a review after the police increase had been completed and the criminal cases that slowed from it.

what sort of preview were you thinking of at that stage? >> i think i wasn't entirely sure. at that stage i felt that the allegations about half, i can't run for what had been exactly transpired in the time previous to that, but the allegations are around meant let's leave it to the police felt to be inadequate, and i thought it was all right to think out on this and would be up to tempo about the positions because i thought things were getting to a stage where something more needed to be said about what would happen after this, and that's why i said what i did and i wasn't sure whether it would be a review or increase the level marketing needed to be put down let's have some people prosecuted and that would be the end of it. >> but they would naturally have

to await until the police inquiry had completed. can i ask you please the bottom of the page is 590 you said that your view was the regulation continues to be the right and. were you are doing it remains the status quo. >> i wouldn't use that phrase now. that's partly because my thinking has evolved, and it's the long freeze. i refer the phrase the prime minister used and other people, too, independent regulation. >> one has to read the sentences together. self regulation continues. we don't want the government in the press so the point you're making is your talking about a binary option either it's the government or itself. >> i think you are right i think

the language has moved on and correctly so. >> i think what i was worried about is the outcome should be government regulation of the press and a way that could be misconstrued what. >> the fifth of july, 2011, and you did call for a public inquiry. this is page 06593 towards the end of that interview which is with chris gibson of itt in the middle of page 06953. you said there should be a public inquiry after it is complete, so that was your first call for what has become this inquiry. there was an interview i think

on the seventh. i would ask you to deal with one point that she raised of you. 06600, she suggests you were slow at the mark tom watson said you were house guilty as cameron not letting the family down but simply not pushing hard enough on this issue you're running to catch up and you obviously gave an answer there and you answer the same now? >> yes. if i can take an opportunity that that moment what is significant about that moment,

that interview wasn't calling for the inquiry, important as it is to the long-term future, it was calling for an rebekkah brooks to go into the position. i knew at that moment this would be seen by news international as an act of war, but so i think in retrospect i would have preferred if i had more earlier i would talk about the inquiry in april and what i did in july. >> did they ask of the hayman island trippi and use had i learned lessons from that episode. what lessons precisely are to be learned from this episode if any? >> i think cut transparency is

part. it's not about who paid you have dinner with or who you meet but to speak up without fear. there should be no interest to powerful in the country whether it is banking or in the press or anywhere they don't speak out about if they think there is wrongdoing because that is the job of democracy is to speak out. that is what people elect us for what and that is the most important lesson that i learned from all of this. >> in the eighth of july in your speech you were coming out with ideas for putting it out of its misery. you still use the terminology of the former self regulation. this is page 0667 were. when we look at what we it should possessed by way of its

attributes, were you are looking for far greater independence and investigative power in the recommendation section of your statement. but are we are moving there in your thinking towards the sort of position that you are at now? >> roi yes, and in a way but the reality is that at this moment we are probably three or four days after the initial revelations of speaking out again having to dramatically changed in my view. i thought it was important to stop to give some interpretation where this was going to go because i was worried at that point that there would be a big hullabaloo and then people would all sort of forget about it what so i thought it was important to put the marker down i don't say that the proposal was

necessarily what right but the broad picture is similar to where i would be at the moment. there's a longer is sturdy the interview in the sunday breakfast show on the tenth of july that starts with a 06608. when there's one point now that i would like to deal with what. at the bottom of 06609, his question suggested that you may have been warned of the line that you recall of the labor party and wasn't sure what your answer was to that question. were you being warned privately that this was something you shouldn't be doing? >> that's not really my recollection.

certainly it's the case that what i did was controversial. what i did on that tuesday morning was controversial. i gave the interview about mrs. brooks and the inquiry and all of that we want and that was actually pretty clear on what to say almost universal support of the idea that this has got into the stage really where we needed significantly. she had already come the interviews for saying that as it turned out so i think there was broad support for what i was doing. >> we have a break for the shorthand writer.

senate finance chairman max baucus called the tax code in important driver of energy policy today had a committee hearing on the role of energy

policy in the u.s. tax code. cementer bachus continued to lay the groundwork for a tax reform plan to raise more revenue to cut the federal deficit. witnesses included former oklahoma senator don nickels who pushed for energy related tax incentives and oil executive who heads republican presidential nominee mitt romney's energy advisory team. this is at two hours. >> anything worth doing is worth doing right. i couldn't agree more. our country is at a pivotal moment in energy policy. there of never been so many worthy energy options that are worth doing and worth doing right. thankfully we are already making progress in the energy portfolio. we have robert kennedy to drive that progress further. when i first ran for congress america was reeling. gas prices had doubled in 1974

to 20% of american gas had no fuel at all. a was clear that we could never again allow american to be so dependent on a single source of energy. since then we have boosted the border rivers efficient and productive energy policy. advances in technology mean more domestic oil and natural gas are available than ever before. we also have more renewable clean energy sources but we can do more. we are still i think too reliant on fossil based energy sources. 94% of energy used in transportation sector comes from oil. only 10% of electricity consumption is generated from a renewable or clean energy sources. our country needs a diverse energy sector like we have in my home state of montana. i will just read little bit. we are in energy state. we are one of a dozen states that produce more energy than we

consume. in eastern montana at the edge of the formation next to north dakota my colleague to my right knows this all too well because an even greater formation in north dakota hannah montana our oil and gas fields are going through a renaissance. technology has unleashed khalil and gas potential and created thousands of jobs. in central montana the turbine plants are wind farms in montana are now powering 100,000 homes and wind farms are being built. in western montana biomass power and its electricity to the grid. montana also produces 45 million tons of coal and we are leading the way on carbon captor sequestration. national energy policy i think should replicate a lot of this mix. if we don't develop u.s. energy policy it will continue to be a

subject of the foreign dictators and sudden spikes and a price of oil for hurricane or one regime change away from the gasoline. that would be disastrous for the economy. a 1 dollar increase in the price of gas would cost americans $110 billion a year. we are all too aware of that in our state. the tax code is an important driver of energy policy. tax incentives as i mentioned provide 85% of the energy sectors federal support. these provisions cover almost every conceivable form of energy, nuclear all oil, gas, coal, solar, geothermal. tax provisions also cover a wide variety of energy used for power and home appliances to running massive factories. for these incentives can be improved certainly the type and level of tax incentives varies for different technologies.

some incentives are temporary, others are permanent. in some cases there are multiple incentives and the same technology and the result is inefficiency. provisions that don't create jobs or improve the energy policy should expire or be repealed. right now we are providing direct incentives to select technologies and industries. perhaps we should adopt more technology neutral approach and stop playing favorites. that way we can still help with new energy technology developed but let the markets decide which ones to take. tax reform is an opportunity for the energy sector to make real progress. it can move us further from foreign oil and lead us down the road to a diverse, clean and secure energy resource. so let us seize the opportunity as we develop domestic energy with and also focused on

efficiency, try to make the code must complex and use the tax reform to ensure the company has a more secure and defers energy supply and let us find things worth doing let us do them right. senator hatch. >> thank you mr. treen and i want to thank the chairman for once again holding a critical hearing on the tax reform. we've had a large number of these hearings and they've been very helpful, especially as we go into this next year and the remaining part of this year. it is essential that we continue these discussions herewith which is complicated, unfair and difficult to administer. we cannot afford as a nation a tax cut that prevent our full potential for economic growth. looking at the weaknesses, it is clear that we have a good representation of different viewpoints about the various energy sources addressed through the tax code itself. my hope is that this hearing will contribute to global

comprehensive tax reform in the near future. it is important to conduct examinations today with president ronald reagan's criteria for tax reform as our guide post. we will be looking at the fairness in the system, we will be looking at the efficiency with a particular emphasis on the antigrowth teachers and we will be looking at the complexity of the current tax code. if we keep these principles in mind, on an optimistic that this committee will be in the position to reform our tax code in a way that is better for families, businesses and our economy. i know many of my colleagues on both side of the i hope to achieve a tax reform that lowers rates while broadening the tax base. however from my perspective there's another picture that will be essential for any successful tax reform. tax reform should be about tax reform, not about deficit reduction. we should be simplifying our tax code and lowering rates to create a more fair system that generates the economic growth

necessary to generate jobs and revenue itself. it would be a mistake to call it tax increase tax reform and use the increased revenue to achieve deficit reduction rather than pro growth rate reductions. today we are perspective we focusing on what role if any energy policy should play in the tax code. energy policy is decreasing under the tax code at an exponential rate. yesterday i heard the term and compare the tax code to the high drop one, then headed creature of creek mythology. each time you cut off one had to more grow back. this analogy is particularly out with respect to energy tax provisions. i hope today we can have an open debate about whether going forward there is a role for energy policy in the tax code and if so what it should be. i can keep talking that there's no tax incentive for producing some yes i will just let the

witnesses get to it and i want to thank you again and i look for to hearing from the panel here today. >> thank you. it's now my honor to introduce the panel. especially the first witness. don nickels currently chairman and ceo of the nichols group for 24 years represented the great state of oklahoma, a valuable member of this committee and i just welcome you back when. i remember your incisive and persistent and perceptive plants have few. next ifill is currently the president of resources for the future and for 20 years represented the second district in the u.s. house of representatives no and as a matter of fact phil and i were freshmen in the house would 1974

were fond memories were were of that, sharp no pun intended members of the group. the third witness dr. jorgensen is a samuel w. professor of economics at harvard. turns out dr. jorgensen and on our fellow alumni in the same high school and former chairman of the committee as an alumni from the same high school. good school, two years in a row we didn't make the state championship but had a good basketball team though. >> they won the championship. thank you. finally mr. harold hammes chairman and ceo of the continental resources and served since its inception in 1967.

thank you all for coming and when you all know the practice, just assuming you do, so speak for about five, six minutes every one, all of your statements will be inserted in the record. go ahead. we are glad to have you here. i tell all the witnesses tell it like this. life's short, you can't take it with you, go for it. >> thank you. it's a pleasure for me to be on the panel and to join my colleagues on the panel especially harold him who has built one heck of a company in oklahoma continental resources and doing so much in north dakota and montana but also in oklahoma and they've added hundreds and hundreds of jobs and a lot of valuable resources to this country so it is a pleasure to join him as well. to mentioned talking about tax reform and doing it right i remember being in this body and particularly this committee and in my 24 years in the senate i

love this committee. this kennedy and those that got on and it takes a long time to get on the committee, but it's a great committee and you are doing a really great work and especially if the senate works, so i am a big advocate for regular order and that is the tradition of this committee is marking up bills and having lots of amendments and lots of debate and we did that on countless bills i remember in some of the best times in my service in the senate is when we had tax bills and we considered hundreds and hundreds of amendments in the committee and or on the floor and so i urge you in the process portion of this whether you are talking about extenders or trying to avoid the calamity of the end of this year, beginning of next year or restructuring the tax code regular order is the process and that's the way the senate works and makes it such a special place to be. we also mentioned doing it right and you talk about energy

taxation i ran for the senate because the windfall profit tax. absolutely if congress hadn't passed that in 79i wouldn't be here or wouldn't have been here but it motivated me. i was a state senator at the time and i disagreed with that so strongly so when i say to rewrite i think we are talking about good tax policy and good tax policy is good economics make sense. you don't have to pick winners and domestic production encourage imports. we finally got rid of it. it was a terrible idea. there's other bad ideas that were out there that the administration talked about let's do away with it. they had a comment in their statement that said that on abc is expanding into the car expensing the administration proposed to repeal the storch market by encouraging more investment in the oil and gas industry than what occurred so to the extent it is

overproduction of oil and gas is detrimental to the long-term security and also inconsistent with the administration policy of reducing the carbon emissions. what a crazy statement. crazy stand. good tax policy allows mostly intangible costs are wages. the tax code will should expense the wages encouraged in the year they are made not necessarily credit. this is and a credit against taxes it is expenses so it is expensing of recoverable business expense. jubak to be able to expense that, so i defend that. the also called 199 the subsidy to big oil hogwash. i was on the committee when we created this section a lower corporate rate for manufacturers and some of you may remember i was the manufacturer before coming to the senate, but i argued against and i still think it's bad policy. you ought to have a uniform so when you are reforming the tax

code have the uniform tax rate not a lower rate for manufacturers versus the service companies or other companies. it's very confusing, very difficult and that in the past law we settlement factors get it except for oil. we are not going to give them the full benefit of the section 199 which is basically a three-point reduction in the corporate rate, big oil and gets a couple of points of it, but it's bad policy so we urge you to have a uniform corporate rate and i might mention there are some companies that have both, their manufacturers, financial companies one in the same. and then they have all of this accounting challenge trying to figure out what is what. so where he were trying to come up with a more uniform law were more competitive rate and i think for a buddy, democrats and republicans are talking about that, god bless you, keep that up, lower rate and more

competitive rate, competitive international rate which probably means going to territorial system makes good common sense and to eliminate exemptions and credit along become not deductions but exemptions and credit makes sense. the tax income, we have a lot of income that's not taxed, so you can help lower the rate by doing so. there's also the proposal to eliminating the tool capacity and i would say if you want to have u.s. headquartered oil companies if you eliminate that you're going to double the tax earnings and as a result of that the net result is british petroleum were other foreign countries are going to be winning of the international deals and that would just be a dumb thing for us to do, very shortsighted and i could go on, mr. chairman, but i just think making good tax policy isn't good energy policy it's good tax policy, it would apply to all industries and i would encourage the committee to advance this

work and i compliment the committee to do it and encourage you for as much as can be done this year to avoid the challenges and for totally reforming the system plan would encourage you along that way. i think it's very exciting and hopefully you will be successful. this committee for it to be successful this committee has to leave and i hope and pray that you do. >> thank you. good to have yoo. congressman. >> thank you mr. sherman. i'm delighted to be here and i must quickly say as the head of the resources of the future it's an independent think tank non-partisan hmong lobbying organization and the people are a lot smarter than i am was a these are strictly my comments from my experience in a variety of commissions as well as here in the house of representatives. really quickly my time is

contextual things about where we are in the public policy on energy as well as where the markets are this committee is way ahead on these issues and this is not particularly relevant to think it's important to the public discussion we try to get a better perspective on what really goes on with energy policy and our markets. let me say obviously as everyone here knows energy is absolutely essentials to our modern economy and to any economic growth that we want to have it also has implications for the national security and consequences for health, safety and the environment and our practical problems there is no policy or set of policies and a country here in this committee and everywhere else and frankly the american people and others should do some of their expectations which can be accomplished and how it can all fit together logically. this is a vast country and fast

problem and we are going to come at it in many different ways. but the indicate however there are many things we have done some fielder and some who worked. it's important energy policy which is truth in the democratic administration and congress is that we rely overwhelmingly on private capital to build, produce and distribute our energy in this country, and nobody that i am aware of wants to stop doing that is the major challenge to the government can act on the efficiently do because they are always trying to change and incentivize or restrict behavior by investors or consumers, and many of the initiatives taken do not pay off because they involve millions of decisions by consumers and thousands of consumers by investors that have something under pressure and other values at stake. with this limitation in mind

nonetheless there are many things that do work and what me quickly do a piece of the picture that the terminal beyond client and we have a new picture today compared to where we were ten years ago and it's very important that we recognize this change partly to recognize it is clear to continue to change coming and policy has to accept and work through those changes. first we have a vast array of technologies coming to the marketplace i don't care whether it is a real production, gas production, solar, nuclear efficiencies and technology vehicles is amazing and most of it wasn't predicted to happen by academics or by a government in the turn-of-the-century came out. many of these were quite well known but nobody expected them to take hold the way they did. second, we have a radical change in the supply of natural gas.

again, and anticipated at the beginning of the decade. third, we have a decline began under the predicted in our oil imports which is viewed as very positive from a security standpoint with a projection and will continue if we don't mess it up. fourth, we have a decline in our carbon dioxide emissions in the system with a projected minimal growth over the next decade. this is a positive development. some of it is the consequence of the unfortunate slowdown in the economy. but others represent actual the improvement in efficiencies and fuel switching and other things that have gone on. more to be done for many people in this front this is progress. why did this happen? let's remember the price at the outset because we almost always want to deny it in public conversations in this country. first we had a high rise of natural gas prices at the turn of the century a stand a decade

ago. it's a high rise in oil prices and by the way, again, neither academics nor industry predicted and individuals probably did but the into that to read their books and get rich after the fact. whether they knew it ahead of time isn't clear. it had a powerful impact on the behavior of consumers and government policy. others have been powerful whether it is oil and natural gas supply and nuclear is about to be built in this country in the solar and a whole bunch of resources we require them across the board. many of these technologies that can in the marketplace with reduction for demand reduction

were actually the result of decades of research by the private sector much of it supported and some leveled by the public sector, some like the national laboratories. it's very hard to on sort the mix of which is which but nobody should understand that both are important in government policy and expenditure to help advance these technologies but now we are into the marketplace. and if there of course have been policies that state and federal levels that have helped incentivize this committee itself have been very active in that in the efficient technologies and promoted adoption in the marketplace. many of these policies i would suggest to you fall on the price increases that growth incentives in the marketplace as well as the political incentive for the congress and others to make decisions. let me suggest to you while this

picture is a development to where we were ten years ago obviously it was marked the past couple of years by the massive blow out in the gulf of mexico and the events of fukushima. we are in a position in the world we do things bigger and we are going to be taking big risks and have to be smart about how to mitigate them. ..

>> it makes very clear that this is very much of an industry along with other ngos and others, they say you have to be have responsible development and you have to take this seriously for us to be able to capitalize and maintain this. there are other challenges. excuse me, mr. chairman. i will stop at one remarketed this is changing the picture of all other major sources of energy in this country. we need to think through what is going to be in the that's and

just and will not. >> thank you very much. >> i am a professor at harvard university. i teach in the department of economics since 1969 there. i have devoted a good part of my lengthy career as an economist in regards to the talks that we do to debate today. it is a very great privilege for me to participate in this panel, and to join you in your deliberations. i would like to discuss three issues. i'm going to associate a number with each one of them. the first number that i would like you to remember is 1.5% of the gdp. what is this? a system of environmental taxes

on fossil fuels combustion would generate revenues equal to 1.5% of the gdp. and a minimal tax on natural gas. there would be no taxes on renewable forms of energy like wind's or solar. the 1.5% of the gdp is not -- i want to emphasize -- that does not include any additional revenues from eliminating tax expenditures. like the ones that we are here to hear about today. let me now discussed the second issue. that is the federal government

budget. we have been told by dozens of economic advisers inside and outside the government, we are due for a fiscal clearinghouse at the end of this calendar year for the bush tax cuts of 2001 and 2003 are finally scheduled to sunset as we welcome in the new year. it is also the threat of sequestration, that was legislated by the congress in august of last year. beyond that, another portion of the deficit. the department of the budget office has told you that all this will produce another recession. so the number i would like you to remember here is 2% of the gdp.

this is the difference between the federal revenue of 70% of the gdp in 2011, which is the last year ford which we have real numbers, and 19%, which is the long-term average in the gdp. for the last 30 years. this is the minimum that i think we can expect that revenue will contribute to, to closing the budget gap. we have comprehensive tax reform. the ranking member has reminded us that that is the subject of these hearings. a number i would like you to remember is 7 trillion. to paraphrase that great u.s. senator and two through this building is named for her, a trillion here and a trillion there, and pretty soon you're talking about real money. what does this mean?

>> this is the impact of a carefully designed a system for conference of tax reform. 7 trillion is more than sufficient when added to our national wealth. it puts our labor force back to work and results are fiscal crisis. in short, it would enable us to keep a fiscal policy that is sustainable. let me summarize. we cannot do this with the government's budget alone. we are here to see how all three can be fitted together to solve our budget problem, to clean up

our environment, and to give a positive thrust to the growth of our long ailing economy. thank you very much. >> make you, doctor. good time, too. doctor harold hamm. we will call you doctor for now. >> thank you. >> thank you chairman baucus, thank you member hatch and determines of the committee. it is an honor for me to be here today. i will be speaking on my own behalf. i am not here on the path of the romney campaign for which i serve as an energy adviser. it has been 20 years since i was here before this committee and spoke to the cochair of the committee at that time that are mostly unknown and unconventional at the time, one of them was horizontal drilling come and the other was the aspect of drilling into the

shale, that would produce the best amount of natural gas. and talking about a temporary trigger, textured or to advance fat theory. to advance that theory. over the last 20 years, technologies were developed and thank god we have come a long ways since then. 75% of a leicester's production focused on oil. it started in montana, and that is where we started in senator conrad state and north dakota. we were one of the resident players over there. i might say that only here in america, can a 13 child of a sharecropper, a one-man

operation, turn this into the nation's largest oil company, having discovered that, at continental we have been able to do that. today, i will talk to you on the perspective that sees and geologists that have been in this business for about 45 years. i first started speaking on wail about two years ago. at the time this thing was disparaged and people were trying to get market share. it is a very important segment of our energy picture. nearly all transportation runs on it. there is hardly a jet plane anywhere that burns anything besides oil products. i am also here to talk about these federal tax provisions that allow us to continue the job of the viable american dream

of energy independence that we have begun. these are very important for america. there are 18,000 independent producers that drill 95% of the oil wells in america. we produced 67% of oil, 87% of natural gas that is produced today. we typically invest all that we make, or about 30% more, and our company follows the same pattern as well. independent -- that is what we do. we have no refined operations command i won't get into the tax consequences, senator nickles covers up very well in section 199, foreign tax credits read they could affect the civil law. certainly the idc we will stop this march to energy independence that we have begun.

this tax provision not only allowed us to survive a terrible times and disastrous years of the 80s and 90s, eliminated about 50% of the independents within our ranks. it allows one other real important thing, and that allows us to try and fail and try again. certainly, that is what it took with this. we chilled about 18 uncommercial wells before breaking the code and producing this mighty oilfield that have produced 24 billion barrels. without that, we would not be able to do that. i would like to also talk about some other planers. the george mitchell qwest down there. george was 16 years breaking the code on the barnett. this is largest natural gas field today in texas. it took 16 years to break the code. to get that done.

try and try again, he was able to do it. i might just talk about what we have entered into a in american oil. it is fair to say that we are transcending from an era that was mobile, that oil moved. what we entered into today isn't a mobile portion of the oil on earth. this is estimated to be at least one third larger than the mobile portion was that we produced in this world 160 years -- for 160 years. that is precision, horizontal drilling. we are able to go down 2 miles, then hit that lapel pin with a drill bit. with exact precision that we have developed. independents largely responsible for that development, myself and others. and so we are able to do that

precision drilling. and that is what our mocked this new era that we are into. and certainly, it is a great era. we have had tremendous success in these new resources across the country, and i aptly described the new gas supplies that we have unlocked. some hundred years, i believe it could be even greater than that. it is tremendous. we have seen the imports go down as new productions come on. here in america, they have gone down to about 42% from 60%. we are down to 42% now. it is estimated that marshall atkins -- he has estimated that 26% by 2015. that is just around the corner. also, it would cut our trade deficit by 82% by 2020. it is tremendous where we are headed. and also what is done.

most important, we are into a cheaper regime for both oil and gas for the consumer. lower costs to those consumers here and there. $15 a barrel right now difference between us and [inaudible name]. we are talking about $12 natural gas in the canton -- continent today. what this means to america is better national security, drastically reduced deficit, and budget deficits. jobs creation, good pay, middle-class jobs. what we are doing is, we could add 1.2 million jobs to the 9.3

green jobs currently in our industry by 2030. in the american wealth creation, we are talking wealth creation to her own federal government. $18 trillion value of oil and gas on federal lands. that is the estimate that is out there. we are not talking about creating their own on -- we are talking about you in the states. north dakota doesn't have a deficit. montana doesn't have a deficit. the states don't have deficits. >> some of it you could, sir. >> the big thing is the self-sufficiency in america producing what we need here at home and saving american lives. the unintended consequences, if we are not careful, changing these rules, could be

devastating. we could stop this energy renaissance we certainly do not want to do that. thank you very much. >> we thank the gentleman very much. a couple of questions. first, technology is unpredicted. natural gas is unpredicted. prices are unpredicted. the basic question is, tax policies really matter. the frothing technology was developed -- a lot of new technologies are being developed. probably because the entrepreneurial spirit in the american people, and the question is how much do these incentives really matter? a side question is, which other countries do. do they matter?

are we really just responding to political pressure when the results of people are figuring out how to do a better job? i have a third question. is this committee works through tax reform, the argument is, why don't we have a morning technology-neutral when we have a more technology-neutral deduction, some standard to help boost energy production. if anyone wants to take a crack at it, those are just some my questions. >> the point i would like to make, mr. chairman, are not so much on reducing the tax expenditures that you just enumerated. there is a more important issue

that this committee has worked over the years to limit the use tax expenditures. the things that we are talking about here in terms of expense and development and the percentage of pollution and so on, i certainly agree that those should be reconsidered. the big issue, though, is on the side of the utilization of energy and the use of energy. that is where energy taxes really have to play a role. we have an opportunity to literally -- revenues are equal to 1.5% of our gdp. those are entirely on the side of this. they have nothing to do with technology, technology neutrality. that is another range of issues that is secondary relative to energy utilization. >> what do you mean by energy utilization? >> i mean burning fossil fuels. >> combustion of coal in the

electricity and the burning of oil products, as mr. harold hamm reminded us in transportation, and the use of natural gas. the tax for energy would be primarily -- it would be on call. it would be a modest tax on oil. and a very modest tax on natural gas. that would lead to the substitution that is underway right now. away from coal, which is the most polluting energy source, towards natural gas in the generation of electricity. that is the great environment to opportunity of our time. it just turns out that it produces a lot of revenue. >> so it is a cousin to the carbon tax? >> this is not a carbon tax. >> is a cousin? >> it is a kissing cousin. let's put it that way. this is a tax on the criterion

environmental pollutants, which have been identified for years by the environmental protection agency going back to the clean air act of 1970, and enhanced by the clean air act amendments of 1990. it would focus specifically on the pollution that is associated through these criteria have pollutants. what are those? well, there are course particulates, smoke, fine particular, also in smoke, but less visible, and the list goes on. you can fill out the rest of the list. we have to have taxes that limit this pollution. this is conventional solutions. that is what environmental protection is about.

we have a job that is still undone, that turns out to be a potential source of revenue coming equal to 1.5% of the gdp. >> when you talk about new technologies and i talked about them, entrepreneurs are very important and the truth is the government has been important here, too, and the tax credit on research and development, which i am sure you are more familiar with than i am, is to keep her private sector entities working, to keep our great research institutions like mit and keep national laboratory is figuring ahead, because we don't know which ones of these will work. let's understand, this extraordinary work by mr. harold hamm and others was facilitated by the federal government. seismic 3-d, which allowed a much greater visible invasion into the ground cumin to advance us -- it was a major industry achievement, but it had federal backing to help figure out how you do do you do that, as well as some of these other technologies.

i think you have to be a little careful of ripping all this out and thinking that it is all going to be done out there without somebody who will see the through, a lot of these technologies happened after several decades. the second thing i would say, is the same with production of new kinds of energy sources like wind. i doubt we would have anything like the wind industry that we have today, the federal government had not engaged in research to bring down the cost and upgrade the efficiencies. nor, if you have not adopted the energy policy act production tax credit. the question is really that is still necessary for sustainment. >> my time is expired. >> thank you. i thoroughly enjoy this panel. this particular question is for the entire panel. a number of tax policy experts believe that the tax should

simply be used to raise the revenue necessary to fund a constitutionally limited federal government. these experts suggest that the energy policy should not be part of the tax code. as part of the exercise of lowering the tax rates in a revenue neutral manner, this is one approach to dealing with energy tax provision. i would just like to have your thoughts on such an approach with regard to energy tax reform. let's start with you, don nickels. it's great to have you back. >> tax policy does make a difference. in partial response to your question and the question from senator baucus, if you're no longer allowed him in to come in terms of drilling cost, you would shut down the oil revolution that happening.

that is a big deal. if you don't allow people to have expense, it independents have had it frankly since 1913 or something. >> there would be a teen drive holes in boston. >> exactly. in response to the question on overall tax policy, absolutely. giving the lower rating better break, this committee hasn't done a lot on the international tax front. we have always talked about, but it is really about time. and i think a greater consensus is moving towards a territorial system, which makes sense. we are becoming a smaller world in international competition, and frankly, we shouldn't be giving advantages to our international competitors over our us-based companies. we want more us-based companies to be successful internationally. finally, senator hatch, in

relation to your comment and overall, the tax rates, if you want to have -- you want them to be as efficient and maybe raises much money as they can without doing harm. when we reduce capital gains and corporate dividends, to 15%, we actually raised more money for the federal government. i am very concerned about the clip that is coming on cap gains, the rate in january 1, if the committee doesn't do something, it's going to go from 15 to 25. on corporate dividends, it goes from 15 to 44. the ordinary rate is 3.6. on top of that, were it the presence of obamacare, and another 1.2 on the elimination of this great you go to 34.6, which is tripling the rate on corporate dividends for individuals. corporations are the pay 35%. this committee really needs to do some work, and from your

vantage points and from trying to raise money, if the lower capital gains rates actually raises the money, you take capital gains from 15 to 25 and triple them, i'm afraid the government is not going to raise money. i'm afraid you're going to lose money. and it will hurt real estate and banks known for real estate. >> you are preaching to the choir here. >> senator, i was around, but not on the relative committee in 1986 when history was popular about not using the code for any social engineering. i think it is a good one if we can all subscribe to it. i just don't know any in america that really believe it or not to act on it. i can imagine this committee cannot be inundated.

i think it is a pipe dream of some outsiders that think that in this complex economy, let alone the u.s. economy, that they can follow this. >> nobody is talking about eliminating things like percentage to pollution or the deductibility of development. we are talking about is bringing those tax provisions into line with fundamental economics. that is what the concept of tax expenditures is all about. we are not talking about getting rid of incentives. we are talking about making the neutral, mr. ranking member. secondly, as i emphasized in my written testimony, and in my oil remarks, 19% of the gdp, is a revenue contribution seems to be

a reasonable target. we are below the level now. we are at 70% or below. as i said, 17% is the number for the last real data we have. the congressional budget office has projected that for this year, this calendar year, that number is going to be lower. we need to have some kind of consensus. i'm talking about unanimity. i'd like to see everybody subscribed to this. around the number of 19% is a starting point for this. i think we should have a neutral place for this. that is the point of conference of reform as i see it. >> thank you for making your last comment. >> in regards to the unintended consequences and the governments attempt to equalize things, i want to caution that this tax vaporizes -- if the ibc is taken

away, if we stop the renaissance, we can still raise a lot of money. if drilling ceases or slows down considerably. absolutely one third less drilling would take place without this. >> thank you. >> senator conrad. >> thank you, mr. chairman, thank you for holding this hearing. thank you for the excellent panel. i remember very fondly serving what senator nickles. we let the budget committee together for a number of years. one thing i know about him is his word is gold. even though it is hard to keep his word, he did, which i always admired. congressman sharp, always good to serve with you. you are a thoughtful member. doctor jorgensen, you are a wise man. fortunate to have someone of your quality and character before the committee. mr. harold hamm, thank you for what you have done for the

country and our state. i just want to point out what has happened to dependence on foreign energy. in 2005, we have gone down from 60% dependent to 45% dependent last year. we will believe that we will be 42% and this year. we have seen a dramatic reduction in our dependence on foreign energy, still, we are spending a billion dollars a day to foreign sources. and it is incredibly important to the economics of the country that we make further progress. let's go to the next chart. mr. harold hamm, thank you for making the investment. thank you for taking the risk and thank you for having faith it was worth pursuing because you have helped turn around our domestic production i think it

is in our security interests and the economic interests, and we have to pursue it. that takes us to the westin of incentives. mr. harold hamm, you have focused on intangible drilling costs. can you just tell us, why, in your view, that is so critical. he testified that that were taken away in your company won't come you believe there would be a one third reduction in drilling. is that what your people have concluded? >> it is. i am not a tax accountant. i am a oil founder. but we do have tax cuts that we look forward to, and we have done a study on it, and that has been our consensus.

right off the bat, it takes about seven years for us to get back to normal is that legitimate. >> if that were taken away? >> yes. >> i served on the bowles-simpson commission, a group of six, tried to be part of efforts to get us back on track, because when you are borrowing 40 cents of every dollar, that cannot continue much longer. we have to get a hold of it. part of the issue clearly, almost every bipartisan group has looked at this and said, that tax expenditures have to be part of the solution, because it is now $1.2 trillion a year. that is more being spent to the tax code than all the perverted accounts. i personally believe we are going to have to reduce tax expenditures, broaden the base,.

i personally believe we should lower rates in conjunction with that. to help america to be more competitive. we need lower the corporate rate to be more competitive. we also need to generate more revenue to help with the deficit on top of reforming entitlements and on top of reforming spending, all of which will have to be done, none of which is very popular. but we have to be careful that we don't throw the baby out with the bathwater. what i hear you saying, mr. hamm, is that as you move towards these reform steps, first of all, don't throw out intangible drilling, because that would have unintended consequences. is that what you are trying to tell us? >> that is correct. you know, we have provisions right now that encourage us to invest. we need to invest heavily. right now, there is about -- we estimate 900 billion barrels of oil in place.

in the school petroleum system. >> 900 billion barrels? 900 billion barrels. right now we can get about two or 3%, 2.5% maybe or something like that. if we could move that up to 5%, everybody here can do the math. we are talking double. of the reserves in america. it is not significant. we have a job to do. we have a very significant ones do, and we need the ability to do it. this encourages us. >> mr. chairman, i have just been out with secretary salazar on several of the wells being drilled in north dakota. it is extremely impressive. it is being carefully done, it is being professionally done, it is being done in an environmentally sensitive way. it is being done with great

technology. we think that as well. it is being done, i tell you, i don't think anyone of us would go there and not come away impressed with the professionalism of how it is being conducted. >> i agree with doctor hamm. i went on one of the rigs in montana with secretary salazar, it was a rig in north dakota. what does it take to move the needle up to 5%? >> i think it can be done over time. you know, there's a lot of things we have to figure out. we have to the next that. don't want we have to do that. >> thank you. >> as we begin to consider what comprehensive tax reform would look like, it is important to

discuss goals and objectives other than revenue collection, with the tax code should accomplish. we had testimony before a committee in december of 2011, on alternative energy. and incentives for alternative energy. the income tax code has long been used as a policy tool for promoting u.s. energy priorities. it makes sense to consider whether or not our tax code of the future should further energy priorities. those who want to isolate federal tax incentives for alternative energy and put them on the chopping block me to remember that the oil and gas industries have received massive permanent tax breaks for 100 years. in contrast, tax incentives have existed only a few decades, and have always been temporary. these incentive first appeared in the 70s in a direct response to the oil crisis. these incentives reduce the cost of capital investment for these

fledgling industries that are not yet able to raise capital. any argument made for it laminating renewable tax incentives is intellectually dishonest if it doesn't include a renewal tax incentive. those opposed to incentives, national united states spends more than $400 billion each year importing oil, now more than ever come to the united states needs to ramp up domestic production of traditional energy, including oil and natural gas and coal, and expand alternative fuels and renewable energies, including all of -- i won't name them all. american imports almost 50%, a little bit less maybe, we pay an average of $84 billion a year to

bring that whale here. these costs are never included in the discussion of cost effectiveness of tax incentives for oil and gas, as compared to alternative energy. for sure, we need a tax system that is less complicated, fair, and will make more competitive -- make us more competitive in the global economy. however, there's a long history of using the tax code to promote energy policy, starting with intangible drilling costs and percentage depletion person in 10 provisions that are almost 100 years old. experts in favor of these provisions argue that the provisions are not tax expenditures because they represent ordinary business expenses. enter similar to research and development. yet, the expensing of the research and development costs and intangible drilling costs are exceptions to the rule that such expense should be capitalized and deducted over years.

it is that it provides more cash for additional drilling operations, which results in more jobs. retaining this provision would seem to indicate that the tax code should play a role in our energy. to senator nickles and mr. hamm, does this conflict with the key objectives of tax reform to lower the rates and broaden the base, when lower tax rates also provide more cash for additional exploring and drilling, and also in the context of tax reform, do you agree that intangible drilling costs and percentage depletion provision should also be reviewed? >> under grassley, you haven't changed a bit. [laughter] >> we've been having this debate for about 30 years. [laughter] >> you compared it to rnd. r&d is a credit. r&d credit is dollar for dollar

for your cost for the other is an out-of-pocket costs for wages. i mentioned earlier, before you arrived, i think for texts in this become you should allow every business to be able to expand its wages. i am in favor of putting everything on the table. it is exciting to think what you are it getting ready to do in tax reform, and you should put everything on the table. if you don't allow industries to have expense through out-of-pocket expense, you're going to have some negative consequences. you won't have to dollar gas. i don't think this committee or congress wants to do something that is going to have adverse economic impact. this happens to be the shell --

shale gas revolution. congress doesn't want to mess it up. but i think that you ought to look at every thing. i am all in favor of putting a lot of credit through and deductions through and tax exams. we have a lot of tax exams that are not taxed. tax everything once. you broaden the scope of bunch by doing so. >> mr. hamm. >> i agree. we capitalized on all the hardware that is out there and all that. the wages, in regard to the drilling and, you know, we capitalize in that regard. it is a division that encourages new expiration exploration.

we need look at what will happen down the road. right now we are using 91 million barrels of oil per day. here in the united states we are producing about 10%. if you add chart of petroleum liquids to that chart, it is about 9 million barrels a day. we are producing about 10% of a that today, and that is going up by 2035, 30% more to 112 million barrels. if we are going to produce are part of that, we are going to have to have incentives like we have in place to do that. >> thank you, senator. senator bingaman. >> thank you all for being here. first, i'd like to congratulate mr. hamm and all those in the industry who have been so successful that increasing production. i think it is a good thing for our economy.

honestly, it is strengthening our economy. i have always thought that there are three primary goals that we have is as a country, with regard to energy. one is we want to have an ample supply of reasonable cost. second, we want to have diverse horses of energy so that we are not dependent upon any one source. third, we want to have energy policy that does the least damage to the environment, does the least damage to the health of the citizenry. those are the three goals that we have out there. now, on tax expenditures, and other is a lot of talk about reducing tax expenditures. strong arguments have been made as to why those that relate to the oil and gas industry, at least in the drilling costs, ought to be maintained. i gather that those -- i gather that senator nickles view is that we ought to repeal section

199 for everybody, not just the oil and gas industry. >> when you were doing corporate reform, having a uniform corporate rate, not a lower rate for manufacturers, would make sense. that is what i argued when i was on the committee, and i haven't changed my position. >> one of the things that is complicated, is her discussion of energy tax expenditures. it is that we have some that were adopted prior to the budget act. the budget act of 1974, and we have others that have been adopted since the budget act. by and large, those that were adopted prior to the budget act, which relate to the oil and gas industry, are permanent parts of the tax code. those that have been adopted since the budget act are very limited in time in and most cases. they keep expiring. those that relate to renewable energy have expired and come back and we put them in place again, and then we let them

expire again. i would be interested in the panel's view as to whatever we do with these tax expenditures, would it make good sense, it seems to me it would make good sense, to put them all on an equal playing field in terms of their permanence. and whatever we decide make sense for the wind energy sector. if the production tax credit or some lesser version of the tax credit ought to be part of the textile, tax code, then we ought to put it into place. and we ought to leave it there for a while. just as the intangible drilling costs provisions relate to oil and gas production. they are a permanent part of the tax code. doctor jorgensen, did you have a thought on any of that? >> as i said in response to chairman baucus, i think we need to focus on the environmental issues that really count,

senator. those issues have to do with the utilization, not energy technology. there is something that has not been mentioned that i think we need to focus on. senator baucus alluded to this. in december 1998, a reading from a publication of the energy information administration, the cost of a barrel of oil in cushing, oklahoma, this is west texas intermediate, the price was $11.35. in april this year, which is the last year for which we have data, april of 2012, that number was $103.32. seven times greater. we have an energy crisis, we are

all familiar with that. everyone here has lived through it. with the price of june 2008, again, cushing, oklahoma, west texas intermediate, $138.88. what is the difference between this experience in her previous experience? these prices have not declined. in 1973, it was followed by price collapse. in 1979 and 1980, it was followed by a price collapse. something has changed in the petroleum markets. these prices are permanently higher. this is the basis for the incentives that are driving the market. you can talk all you like about tax incentives. and i'm not against treating these symmetrically with every other form of production. i'm talking about oil and natural gas. the point is, that once you do

treat them symmetrically, you have to reckon with the fact that we have seen a sea change in the world petroleum market. we have prices that are seven times the size they were as recently as 1998. that is the most relevant fact about incentives that we are here to discuss. >> may i respond? >> go ahead, sir. >> doctor jorgensen pick the lowest year history, almost, if anybody remembers that, 1988, is when our friends from venezuela was dumping willing to america, trying to put all the producers in high-cost producers in america out of business. the prices before that had been in the 20-dollar range, after that they responded and came back to that after that procedure.

the administration was changed in venezuela. that is how that happened. when they begin up there in early 2000, the price of oil was about $25 per bale. we have seen prices spiked at $147 for one day. and then they came back. right now, we are at about an 80-dollar price range, or close to that. we are about $15 under, which is considerably world cost. if you are in the midwest. prices go up and they go down. nicu, mr. hamm. sumac thank you. i'm having trouble getting this. the thing i can't figure out is

what the obvious, which is not being seen. you eliminate intangible drilling costs, actually decrease revenue to the federal government. here's why. you take away the capital for exploration. you thereby decrease the amount of revenues and the exploration in this country. if you have no change in exploration and no change in discoveries, the tax revenue of the federal government would be the same over 10 years as it is with intangible drilling costs. there is no difference what the government takes in. one is a delayed tax versus italy captured tax at the time of expensing. what i don't understand is why, when we are sending $400 billion a year out of this country, and we have the potential to have a stimulus, in this country of $400 billion a year, by having the money that would've been sent out, spent here, tax-free, not road to create the stimulus,

and energy independence for country, why wouldn't we do anything that we tend to do that? still within the parameters that doctor jorgensen sent out. i don't get it. we had the opportunity of a lifetime to reinvigorate the country in terms of natural gas, and propane and ethane. we are building new plants. conoco is going to do another one. they are employing 10,000 people in texas right now to build a big plan. it will put us at a major advantage over everybody in the world in terms of raw materials for everything that is made in this country. from plastics to chemicals -- you name it. we have an opportunity to expand our dominance in the world as manufacturers on the basis of what has happened in oil and gas exploration. when we talk so foolishly about short, little bitty things, not looking at the big picture, i

have trouble understanding that. there is no question that there will be no increase in revenue to the federal government by eliminating intangible drilling costs. no net revenue increased to the federal government, because you're going to shut down one third of the expiration. by the way, they just paid out $100 billion a year. industry pays on average 9% more against turning than any other industry in the country. we are talking about lessening that. we're currently, we are talking about stealing the one thing that can renew america's dominance in terms of productivity and in terms of manufacturing edge. what has happened in the oil and gas industry is giving us an opportunity to regain our mojo. we must be very careful in how we approach this.

amortization is something that my colleagues need to learn about. what it means in terms of of the accounting rule. under general accounting principles, we amortize expenses. what we have done with intangible drilling costs has said that we are not going to advertise amortize those. we are going to allow them to be written off just like we did with the hundred% right off that we gave last year. what has come about from that? what has come about from that is a tremendous increase in jobs, but more importantly, a dynamite opportunity for this country to get back to where it was 20 years ago. in terms of leaving the world and production, innovation and efficiency. we should be careful. i have one question for doctor jorgensen. if we have $400 billion in stimulus every year coming into this country, but was not

borrowed money and not directed by the federal government, but was in the market, what would be the net effect for economy? >> you'll be very surprised to hear this answer because i am going to agree with everything you said. this is not a debate about tax expenditures. that is second order. let's get the big picture in mind. we are not talking about big revenue here. these expenditures have been limited for years to the independents. that is what mr. hamm discussing his written testimony. i think we are all on the same page here. what we are not on the same page about is essentially this is doing for the energy sector. you know that when you evaluate a project for a client like

mr. hamm, if you ever had such an upstanding person is your client, i recently say that if you ignore the price of energy, if you can work the dynamism of our economy and the energy independence that is going to result from the new structure of oil prices in the world economy, you are fired. our market-based economy is working. it is working towards independent energy. it is working towards a more effective allocation of energy resources for the domestic sector, which you have emphasized in your question. >> let me just say, if the chairman will allow me, we had the opportunity to see oil prices go down if we become totally independent of outside resources. which gives us another boost. it gives us a boost in terms of our productive capacity.

>> thank you, senator menendez. >> thank you for your testimony, gentlemen. senator nickles, as we look at all of these different provisions and think about what is the right tax policy, i look at the big five oil companies and from my perspective, they are avoiding u.s. taxes by disguising what we would do as a foreign loyalty payment. having those countries charge them attacks. in doing so, it allows them to write off these foreign taxes as a tax credit of the united states, and in turn, shortchanges the american taxpayer and the american treasury. why should the american taxpayer be in the business of subsidizing foreign oil exploration? why shouldn't we close this enormous loophole as we have

seen in a majority of the senate bill, to coerce these giant oil companies to pay? >> senator, i could not disagree with you more. >> i am not surprised, but i want to hear your rationale. >> you are talking about dual capacity and the ability to be able see overseas taxes it in the tax not paid. i think if your proposal is successful, we wouldn't have international oil companies based in the united states. he would give such a tax advantage to bp, other international oil companies who wouldn't be facing this tax penalty. this double tax -- that would be the result of your proposal, in my opinion.

it wouldn't have to be headquartered. i'm speaking for myself, not for anybody that i work with. the tax policy has consequences. this would have tax consequences. it would prevent such a advantage -- it would put us at such a disadvantage. >> what you would not deny that in essence what is happening is that the same company of the united states would pay a royalty, and in essence, they are paying a royalty, the only thing they are disguising is that royalty is a tax. >> i would not agree with that characterization one iota. the treasury has worked in the irs has worked for years with companies to figure out the complicated -- and they are complicated, i will grant you that -- the complicated i'm

going to say allocations. you're talking about allegations of royalties and taxes and so forth. all kinds of fees. we have all kinds of fees as well. and to try to come up with a system that works. i think they have done that. the cocoa -- .. ..

the big five oil companies are not providing the capital that is fueling america's march to energy independence. i agree on that view. the reality is the marketplace has staked jaded that they will make more than enough money to continue to pursue their expiration, whether here or abroad. doesn't seem to maintain a $24 billion it collected money of taxpayers when i make a trillion dollars in profit. proceed through the next staked a. i don't think they will deter their march towards oil exploration if they lose this $24 billion of the next decade. >> one, i don't thinks its a subsidy. two, should be treated fairly. if you tax domicile companies, punitively compared to other international companies, other international come needs will

win in the same debating the competition is fierce all around the world and you'll have less jobs. within the united states in the u.s. headquartered companies will become smaller and the other non-us companies will become much bigger. and i think that would be a terrible result. >> hard to believe a trillion dollars is enough for you to pursue -- a come late to pursue their interests. one final question you seem to be from the testimony i read and someone can correct me if i'm mistaken, the one witness who is willing to defend the fact that the big five oil comp means received the domestic manufacturing tax deduction, i can see how some may consider oil refining to be manufacturing. but other than a hole in the ground come into oil drillers actually manufacture? >> well, one i don't defend 199. i think congress, when you're

rewriting the tax code, you should have a uniform corporate rate, not a lower rate for manufacturing is some come in a stew post. some manufactured, some service. but to single out viacom needs as they were going to have a lower manufacturing rate except for you i think it's absurd. congress should be picking winners are punitively picking losers as they were going to get a lower rate for everybody pay you. you are too big. that is bad tax policy. >> i agree. i'll close, mr. chairman garrett other than sometimes we do want to incentivize and manufacturing expert, i do understand how extracting oil from the ground as manufacturing has that would make everyone that went so well with water a water company that should be subject to getting the same deduction. i don't think it makes a type of tax policy relay, based thank

you for your answers. >> thank you on the senator. before he turned to senator biden, it's only considered. 199 was enacted as we all know to replace something called this his t.i. and the law to counter the advantage that it countries had. the european country was rebated. in fact, the subsidy for exports. so that country is next for subsidy. we took our a shame, taken to wto illegal apparently then came up with a 199 manufacturing incentive. very crude, but it is a very rough offset to deal with the ability of fast countries to get a subsidy on exports. add up surveys the question, to

which we should try to enact some shows that that advantage. senator biden. >> it's been a good hearing, mr. chairman and we've had a week of call purchase to test this is going to be to actually write a bill. let me start if i will for the last five years, i worked with two thoughtful conservatives here in the senate. senator gray and now senator coats and senator begich produce an actual tax reform bill. it is modeled after the 86 legislation weekly note a lot of the clutter, hold down the rate can make rate maquis maquis progressivity and has been scored by a joint committee on taxation because essentially generating revenue. one of the typeface parts of actually sitting down and senator gregg and i spent a week after week for almost two years dealing with these issues were

talking about here today. the energy question. and i came to this discussion saying, hiring a point we've heard this morning that natural gas is a huge strategic american advantage. people understand that rated the get-go. we ought to be talking about renewable since renewables target forget to get mention in hydropower and geothermal and other promising renewable sources. and yet at the same time we were actually able to write a bipartisan bill. in two of the principles that we've touched on today i think are going to be key as chairman baucus and senator hatch latest now and tax reform. one of them is that we cannot be double standard on tax breaks. we can't have a double standard on energy breaks. and today the oil and gas production site gets a permanent tax rate while renewable energy can the temporary tax break and

often does expire. so we have to get rid of the double standard. this echinacea is that we sort of touched on a little bit this morning is the idea that we have to get rid of everything. but when you think a bit of everything, it has an asterisk after it because then we say about to go forward as well. so you've given us thoughtful and valuable testimony. but what a level playing field on the energy side look like so we can for energy independence, but also noticeably from the double standard in this question and let's get rid of anything, but not put an asterisk by it and go down the road but they level playing field and senator

nickles,, q. and i have typed particularly about the effort i started the senator. >> a couple comments. one, i think you kind of doing tax breaks and he said renewables. there's a difference between data ability and subsidies. most of the renewables give subsidies when you're talking about 2 cents per kilowatt hour multiply. so there's a difference between a subsidy united action. and i think a lot of deductions make sense. tax credit to him. tax credits are basically a deduction off your taxes. so i would make that assessment. one is more of a subsidy than the other. basically normal operating procedure. you can go into greater detail, but there's lots of both throughout the tax code. i'm talking about throughout the

tax code. i would also say since you're talking about a broader theme, taxable income ones. there's lot of income not taxpayers of the tax code allows deductions come expenses. you have a business in the richer expenses, but in some cases they get tax credits in some cases you don't have to report the income. you are not taxed on some income taxes. so that we broaden the base and the unifying of the simpler is that taxes are not the credits. >> first of all, i wish you well finding that. i know everybody in the country wants a level playing field in every policy area we've never seen one. some little skeptical of our capacity to reach that. i think the harder question as you've been dealing with is what is the purpose of which are trying to accomplish is the nature of provision is part of

what senator nickles is getting at. these are not equal in the way they operate. i don't pretend i know that, but you are more sophisticated than i. an example of tax credit is extremely important in this industry acclaim. i don't have any doubt between a peer but i don't know is how important is in the future and how much you can justify what level because the goal was to buy down costs to government and industry going and that is happening. i cannot tell you i don't have the information on how we reached a sort of level. that is a very useful thing in the this country and our need to environment and everything else. i have no doubt about that. i don't deserves a permanent long-term guarantee that every kilowatt eric is subsidized. in fact condemning subsidizing energy can and should much in the long run is not the smartest policy. same applies to the ethanol tax credit.

by which you engage in double policy that subsidizes his supposed mandate and that would have a number of mandates and a number of state, the rps and not a legislative these comparative things, but whatever policies the federal or state level are in place. frankly it a moment all policies are under attack by various sources in states around there so i thought what the outcome will be. so i've only made the answer harder, but i don't honestly believe that the notion of whether it's permanent or in permanent is the answer. frankly i think all of these things need a radical intense review every five years anyway. >> dr. jorgenson, i know my time is that. >> with the chairman's indulgence, senator wyden, would like to commend you and your colleagues for your excellent work on tax reform. i think we all need to keep in mind that the tax reform act of

1986 was a result of another bipartisan effort. and i would like to commend to you the consideration of taxes on energy use, which is not part of what you just described. in order to have a truly level playing field, we need to recognize the environmental hidden costs associated with the combustion of fossil fuels. taxes based on energy use are going to favor renewables permanently. they are going to favor natural gas permanently. they are going to provide a fair tax on petroleum permanently and they are going to recognize the hidden costs associated with coal. we are talking about 1.5% of gdp for that kind of level playing field. >> good question on the double

standard. things have always been double standards. >> very briefly -- we read a great piece here at the congress department at one time when i would stop on by other companies -- countries have been for cost of production and that was it even as steel, cement, everything else could've gone forward, but not with oil and subsidies. just one short comment. you talk about credits and subsidies. let me tell you, to such cities as payment i must've got to the round window because nobody paid me. [laughter] >> thank you, mr. chairman. >> thank you. >> thank you, mr. chairman. thank you for holding this hearing and i want to welcome former colleague senator nickles

and congressman sharply served in the house of representatives and you had distinguished careers and contributed much to the issues they were discussing about energy and on tax policy. we are very fortunate to have the extraordinary panel with such broad expertise in the critical area. in fact, i was thinking the last family mart to energy bill within 2007 here in the finance committee when oil per barrel -- cost of oil per barrel was about to exceed dollars. and today it averages $86. last year was upwards of $95, which is the issue want to get to today with respect to tax reform. and to what degree do you believe that we should have been a tax credit for incentives for energy efficiency and conservation? because i have been detained that you can maximize, i income

investments in this country and certainly the part of the consumer safety has the ability and opportunity to make this investment in whether it's in their home, providing installation, new forms of technology. it certainly is proven to be very beneficial. consumers last year paid the most on energy in the history of our country. $650 billion. and so while this in the highest level of oil and natural gas production in 14 years, were also see in the consumer cost and the history of our country. i know that is true in maine. "the new york times" a few months ago did a front page story on a couple who had virtually very little income. $1200 a month at the home heating oil agenda was $3600 for this season. the company came in and volunteered to insulate their house and were able to improve

the efficiency by 46% with respect to their energy bill. the point is site that we need to provide a tax credit or on the other hand has the overall tax reform, which i hope we will come a long over due. how loaded the tax rates have to go to benefit consumers to make investments otherwise if they didn't benefit from tax credits? i've had tax credits for energy efficiency and fortune i got reduced to $500. it was in the stimulus plan, at 21500 at a 20% tax credit of the overall cost and was a huge bonanza for many people in maine the case we have the oldest housing stock in the country. and so, the food did make those investments because it was precisely that incentive.

and i think we should be encouraging that. i'd like to hear from you. if we don't have these tax credits, how ledoux tax credits have to go to accommodate this? we could write 80% tax credits for companies in production for oil and gas companies and yet only 20% essentially, you know, if any tax credits for individuals. senator nickles. >> you don't really want mansour, du? [laughter] i'm not a big fan of tax credits, but the difference with the one time he mentioned comparing companies to individuals. one is certainly a subsidy for individuals. you write the check for the individual you pay 20% of the cost. domestic government to pay 20% to end well. were allowing individuals to expense the cost of drilling a well. that is not a subsidy in my

opinion. but the good news is senator snowe i think help is on the way. the lower natural gas prices, merciless field in northeast is one of the most date fields in the world. it will grow. it will grow substantially. natural gas will have a competitive advantage in the united states. i believe harold hamm or maybe congressman sharp mention the fact natural gas is selling for about $12 to $20 a barrel or $2 per mci compared to europe, which is like five times as much from a six times as much, eight times as much. so we have a competitive advantage for industries now. natural gas be much, much cheaper. i know that if your homes in the northeast and main there are few oil, not natural gas, but my guess is conversions will be taking place and be a

significant savings that homeowners will enjoy for decades. >> we are very limited in name to run the pipeline for a million dollars a mile. we have to have incentives in that regard. there are areas in which they are making those decisions to do it, but obviously it's not pervasive. but the must attend state in the country on home heating oil. >> arabi are many, many efforts for low-income energy assistance over the years and wrestling with you on some of those issues on the budget committee and the want. i compliment you for your effort and represent patient. i do think the network expansion to the distribution lines is increasing the pipes throughout the connection somewhere where people can take advantage of this very bummed that plentiful, cheap resource in the united states. >> congressman sharp eared >> senator, i believe it's if we

have a tax credit sackful of all kinds of incentives, this is a good thing to do. but i don't think that's the best long-term strategy. for one, we need to help americans understand there would be radical shifts in price and each prepared a civic conversations and all others and pretend otherwise undercut them and that is not what she'd been doing, they suggest that it's often what happened. the second is if we look at these centers come to know better than i do think they're quite different impacts on different homeowners in consumers. depends where you are. did i buy my homeward upgraded my paid for these upgrades the rocket one think it's a taxpayer to pay for my upgrades? and then we get into the incentives and i think they will not expire for purchasing the vehicles that were huge from an

individual's point of view. i don't think they're justified in terms of helping the consumer. the only legitimate justification is the effort to try to bring you to ologies in the market or to bring an industry in the place. but to be frank about it, i prefer the general approach that dr. jorgensen has been, which helps us answer the broader question. >> senator, i think we have to recognize that efficiency is an engineering concept, a technical con that. and i think this committee ought to shift its focus to cost-effectiveness, making the best use of every taxpayer dollar. addressing your issue come the question raised about efficiency and conservation. the price system works. it produces massive energy conservation. oil used in this country has

plummeted over a period extended for decades. it's now 50% of what it was as recently as the 1970s all due to energy prices. prices work in the home field market as congressman sharp just reminded us i'm reading from a publication of the energy administration which it quoted earlier. i'm looking at you is henry hub natural gas price histories. my geography is not that great and it isn't very recent. i believe henry's in the state of oklahoma. that is an area where prices of natural gas were as high as $12.30 a thousand cubic feet as recently as 2008 in the midst of the oil price run-up and as

senator nickles reminded us, now $2.43. that is the figure for may 2012, the latest day care. we have to use a prices down. that is the whole idea of using a tax neutral approach in order to achieve our energy goals, just like other goals in the price system is working, senator. >> your time has expired. >> thank you, mr. chairman. >> thank you, mr. chairman. i just want to say to senator nicholas, they had a trade become a record from the house. it's great to see both of you. dr. jorgenson, if you two are half as good as it here for my colleagues, this is a great panel and regulated that you are today. i want to just follow them on what senator coppola said

earlier. there ceases to be optimistic. one of those is the ability to saudi arabia. we are and have been for some time to saudi arabia of coal. but now apparently the saudi arabia of natural gas. i understand we become a net exporter and i were not the top producer of oil in the world, think we might be number three or so. but we apparently have more chills going today. maybe the rest of the world combined, which is pretty amazing. picture this at committee that deals with safety and we have four brand-new power plants being built in this country for the first time in 25 years i encourage you to check knowledge and safety it provides. we adopted café legislation fuel efficiency for vehicles in 2007.

congressman sharp, that was sent to you at a lot of interest and we appreciate your help him out legislation. but we are ramping up to efficiency standards and the average is 36 miles per gallon by 2016 if i were 50-gallon a decade after that. our friends from ge i think are on the line for building a new solar energy, colorado that is going to be a good parody we are told by 2016 and we actually have the ability to use natural gas, not to supplant: the commissions, the utility plants, more environmentally friendly but also to supplant the diesel fuel and on the fire vehicles is all pretty encouraging stuff. we've seen across the country

windmill farms deployed, producing a lot of electricity. senator snowe and i have been working on an idea to try to send basic building of the east coast to catch the winning is a lot of that to does in the decade to come. one of our ideas is on the investment tax credit rather than just providing a tax credit to incentivize the building of windows i'm sure. what we suggest is a different kind of investment tax credit which is good for a limited period of time, a limited offer with a sickly sid the first three doesn't make a lot of generating off of her coast would be however when the firms are developed for three tests

may go at thursday. but the ideas just to getting started in show that we can do this and they cannot successfully. if a coach, congressman sharp, just respond to that idea. if we just rely on production tax credit, the investment tax credit is what is needed. as i said again, a limited time offer. whether you think? >> my only question, senator, so he going to pay for this? >> i think we have to recognize the fact budgetary climate like the world market has undergone a major chain and we need to take that into account when we're discussing tax policy in formulating tax policy in enacting tax policy. and so i think is the market

doing the job? is it sufficient to bring forward these resources you're talking about? at the fact is that is bringing forward enormous resources and oil and natural gas and renewables. there's many applications, mainly wind energy, which you and the senator have been focusing on, which are to independently of any sort of tax breaks and higher oil prices will make them do for a very, very long period of time. >> senator, i am a great admirer of all of your work on this issues. i'm not really prepared to say what you're asking because we know it is a lot higher cost to do a short but i'm sure i think they're serious cost-effectiveness question and i'm sure you're looking at is to just how far we have to go.

of course he would be taken into account you sound this is an industry you're only trying to get but i'm not sure how much we have to learn about offshore since so much is going on in europe but i suspect the question i think from time to time me to ask these things we see happening in china and denmark, we see happening great britain can be a benefit to us. they are not always competitive to us. we can let them subsidize and buy down the cost of type knowledge reasonably compact technologies earlier. i am not as quick to endorse everything has to be done in america as much as i love this country and believe we had to be the source of the technology. >> i was dead with respect to nuclear power, one of the reasons is because we have provided some financial assistance and encouragement through the federal government. they go back to something you

said, dr. jorgenson. i think he said this in a sea change in the price of oil and here in this country can reproduce 2% of the worlds oil. 2% of the worlds oil reserves that leaves about 20% on a daily basis to oil is consumed in the world. when you look ahead a look at china coming online, we bought 11 million, told my cars in mr. expected to sell maybe 14 million. maybe next year 16 million are in china i think leicester they caught up the cut of by some as are people listening out. but it implications for the consumption? would've implications for the price of oil? >> the point is that china and india in many countries, which have finally discovered the key to economic growth are going to be the source of growth of demand for a very long time to

come. that is what is behind the seachange occurred in worlds petroleum markets. we need to respond to that we will respond to it. we respond to have an energy and i use in hybrid when appropriate that we will respond as i said to senator snowe for energy conservation. that is except with the price system is going to do. it will also push us very strongly in the direction of the domestically produced feel. natural gas that is available now in large quantities due to the very highly skilled work done by mr. hamm and his colleagues. >> , the u.s. auto industry and others who sell cars, trucks and dance here look at the ramp up in fuel efficiency standards in the next 10, 15 years and i think they have a concern but

since we don't have very high attacks on federal tax estate tax is really on motor skills, their concern within the auto industry is that they will not be incentive for people in the price of oil will go down and they they won't be marked incentive for energy-efficient cars and keep in place a tax credits we have to incentivize some of those purchases. would your message be to the auto companies, chin up? >> ltd. span tax policy, bush's focus on that. my proposal that i described here for an environmental tax system would raise the taxes at the federal level on motor fuels by 39 cents per gallon at the pump. so we're talking about incentives to conserve. an offensive use efficient vehicles in achieving its goals, not just into the law.

>> over what period of time? >> well, this is an incentive that is permanent and we know it will be an implement elements or period of months or years? >> you know, we're not talking about big numbers here. thirty-nine cents per gallon is something that could be introduced in the code tomorrow. >> thanks so much. >> you probably don't want to introduce. >> not before november. >> dr. george ascend come you keep talking about the determined technology development and i understand it's a big huge driver and i agree the world demand has pushed up commodity prices significantly whether it's china, india, other developing countries. but the question comes down to price volatility.

essentially it is not so much the tax code is price volatility. if prices are volatile, though be volatile. look at coal is soft demand. the world is so complicated. there's so many different dynamics worldwide. i presume you say that price to say and do what it is about entrepreneurs and developers do what they can and develop whatever they can given the price signals they receive. >> i would like to go back to a point you said, senator. they need to have it diverse source and we do in this country. that doesn't mean it has to be the same diverse supply every year or every decade and exchanges in technology and supply and tax policy. so we need diversity.

that is something that considers low volatility. this country and mr. hand would be the first to tell you a competitive industry on the fossil fuels. we have taken tentative and street in the supply of renewable energy sources, solar and wind and therefore you should think of cj suggested in terms of relying on these very, very well structured markets. but they're not going to do the job is to come to the hidden cost of energy combustion over and over in this hearing. said nobody here said that. i haven't heard a single voice and support around the panel or around the senators here that are present. so i think we need markets work or that markets work, have to let to rules spell out what it

needs be. [inaudible] it's dr. jürgen since chernin externalities caused, primal costs associated with fossil fuel? >> cert may think the marketplace ought to work and it has worked. more supply brings down the price. >> at the environmental cost of fossil fuels. >> the environmental cost of fossil fuels as i see it in our business are minimal. i mean, we are truly in there with the capacity not distribute much of the land. you know, you only have small cost of production of these fossil fields as parties in environmental. >> thank you. >> i want to thank all four of you for being here today.

i want to compliment you, mr. -- the real question i had this should be at any of these tax expenditures or deductions in lieu of the fact that we might reduce corporate tax revenues the one that said i would take care of it. but in your industry special industry no question about it and there's a lot of risk involved. a lot of money involved. you go broke easier in this business than almost any business i know. i just want to compliment you for which he been able to accomplish on the guts to pick a

benefactor who would a pipe to you a an understand what we need to do. professor, i've enjoyed your remarks very much today. it's great to see you again. we appreciate value type to say, both of you and it's been a very interesting hearing from me. >> thank you, senator. i may say so, there's no free lunch. i'm thinking of the tremendous gas in eastern québec, but also very sick and impacts on schools, wastewater turkmen, clean water, housing, huge adverse impacts. there's very positive impacts, but there is huge adverse impacts on local communities. one person i just can't keep up with the developing eastern

montana. so i do think we'll have a role to play together to help each other in those divisions. let me ask this, is there anything else that nobody wants to savor his anybody else said anything so outrageous it is a response? either side of the table? >> i realize nobody else knew that. i had to read it. >> everybody knew it. [laughter] >> thanks, everybody. this is obviously very complex, very important subject and not the last time we will discuss it. thank you so much for taking the time. hearing adjourned. from that [inaudible conversations]

>> also on capitol hill today, attorney general eric holder faced questioning from senate judiciary committee about national security leaks in the fast and furious gun sting operation. we talked about holder's testimony at the capitol hill reporter. >> john bresnahan with it though, what did the burn from the attorney general's testimony? >> is a very difficult today. he told the committee that he had been interviewed as part of

the investigation into who leaked the information to "the new york times" on the u.s. cyberattacks on iran and about the hit list they have a u.s. drone attacks. it is sad is a very serious interview can team very serious republicans with the council and senator john mccain had a resolution calling for a special counsel and the old obama administration had appointed u.s. criticism with republicans and u.s. attorneys on whether or not they've investigated the justice department.

so it was a very -- the republicans were varied tasks. >> why does the attorney general continued to get questions about the so-called fast and furious program? >> well, it's hugely controversial issue. of course that is the program where u.s. law enforcement allow guns to go to mexican drug cartels. the justice department has staged 40 for a year about the response and the justice department to congress an extraordinary movement in acknowledging that they've not been completely used and now hold your face as they can tamp down house oversight on june 20 and today senator cornyn, john cornyn of texas to design over

fast and furious and he alone, dozens of republicans and senators met romney resigned and he offered to key speaker sean boehner to work out some compromise enough for deputy attorney general to meet wes speaker boehner or committee chairman gerald ice with the deals happening. i think there would be some government concessions made at the justice department. but right now they are continually talking about costs, which is their way of trying to to -- the white house is with pushing back on the republicans. we had these issues before, but

the stakes are very high. >> your store and politicos suggest that perhaps republican leaders do not want to keep the the content story. >> it is basically like the justice department to co-opt or read. they wanted an illegitimate way way. this congressional obligation to get at the justice department as they said drawing official formal letter that took place last year. so they feel they have the right to ask for it and turning now for a lot of information in the white house does not embrace on this material. but attorney general holder's

response was, well, a lot of the material leads to an ongoing terminal investigation so we can give it to republicans on the hill. so i think the house leadership would rather not go if they can avoid it. but they have to have cooperation. they will do it if they have to come if they feel they have to. even if it's not clear to get everyone over this. so i think they know their options are limited and they're being driven by the very serious issue. some of the things given to the drug cartels, very, very serious

matters that they feel very strongly that the justice department has not been forthcoming. justice is not done everything they can. i don't think they want a showdown in the middle of an election year. they become caught up in election-year politics with the white house. and so it's going to be a legitimate issue for republican. it is a serious investigation, a serious matter and the justice department has not done whatever they can, and we'll see where this goes. >> a senior congressional reporter for "politico." read reporting that "politico".com. thanks for joining us. >> things for having me.

>> mac there is no doubt we have a cancer close to the presidency that is growing. it is growing daily and compounding itself. that will be clear when some of the details basically because one would be in that mail. two. >> "washington post" columnist and brookings institution fellow, e.j. dionne with our

guest on the "washington journal." his latest book is "our divided political heart" about individualism and partisanship and american culture. this is 45 minute. >> host: e.j. dionne price for "washington journal" and is the author of "our divided political heart: the battle for the american idea in an age of discontent" thanks for coming in this morning. you start off by saying that the spirit of decline is one of the oldest american impulses. fear of decline. why is this kerry so much of my sad matter? >> is funny because i began with the client and it's not a decline at all. we have a lot less in us as a country and the fact that we have so often gone through these bouts of decline actually suggest they've are pretty high high opinion of ourselves because we recently think we are in a place in which we can decline. i hear the decline has really been the sort of underlying

theme of american politics for the last five to six years and i think the obama campaign, like the reagan and kennedy campaigns before is really a sense where you think back to obama slogan, one was the famous poster with hope underneath and then you change we can believe in logan. i was that the word believe this is important to support change because when we go through these decline periods, we quickly go from well, what is wrong with the economy or position the road to a spiritual crisis, which is by the obama camp pain had this crusade quality. and they still think we are going through this because sadly for the country, the economy still is that over 80% unemployment. and i think the same of posts that help give rise to obama, helped give rise to the tea party. one of the things that happens in a series of decline is that we think a lot about the question, who are we?

who are we as americans? what is in the to be american? we repair letter history and try to figure out from our past who we are. i urge you in the book that we can agree who we are because we can agree on who we've been. so went away in my book takes issue with the tea party's analysis of who we are at the beginning of the buckeye state thank you to to the tea party because one thing i agree is that it makes it a good beginning is a-ok,, who are we and what did the founders of the people who came after them tell us about what it means to be american? >> host: e.j. dionne writes in his book american summer frustrated politics politics ourselves that we have to be, were fearful than the position it difficult is that just if i am less confident in our history suggests we should be. our costs in this story pessimism i said that her? >> guest: the last question is really the thing. we are a hopeful people.

my favorite line on america, which i get never tired of her mr. churchill finally said americans always do the right thing after first exhausting all the other possibilities. there is a great french student of us was really struck by his capacity. the core argument of the vote and that is for our divide comes from is back from the beginning we have been born aid deep but healthy tension between her love of individualism and affection for community, love of liberty can the sense that liberty requires they can turn for the common good if we are going to stay a free people. in moments we tell one way or another and not sort of balance, but we were fast when we are in balance and that is not only a balance between individual community, but also a balance between the private marketing government and between private and public.

i go back and look at the founding institution and also figures by clayton hamilton in lincoln to those that government engagement and economic life in the nation didn't just start with the new deal with the progressives. it goes on way back to hamilton, clay and lincoln is that government could do a lot of things to make our economy stronger and build the country. clay talks about importance of investing in internal improvements are a much nicer term infrastructure. a collaborative infrastructure investments to talk about internal improvement. i think that we have often an argument act as if government is a new force in american life. and it is that we should look for, you know, continuation of the ballots, which is i think would help make us a great nation. postcode e.j. dionne writes there is that individuals in

creating an election 10 against the party of community. rather, both values animate the consciousness and consciousness of all americans. if you liked talking to talk on the numbers. republicans, fell into. democrats, 202-737-0001. independents, celebrate. we have the southend calls coming in. debbie from philadelphia on the democrat line your tie, debbie. >> caller: hi, good morning. who are we? well, i'm an african-american and i hear a lot about the founding fathers. why don't we ever alleged that the country was stolen, people were killed, robbed. he set up your own government. you always talk about your ancestry. well, black folks can't talk about how their ancestors came over and people always ignore that position. i would love to know, you know, we want to talk about who were we. that is who we were.

we were decent rappers and murderers we brought people over here they didn't want to be here. that's who we were. except you respond to that. >> thank you for that. and the book i talk a lot about race and slavery in our struggles to make ourselves a fair country. and if i may say, one of the reasons i want to engage in this conversation about american history is i think people on the progressive side of politics have not battled for history enough that had slavery written directly into the constitution. the founders made a whole series of compromises in creating a constitution and one of them was in effect to continue to permit slavery. but what happened as americans reflected on that history as they came to see that the promises of the declaration of independence, all men are

created equal, and i say all are created equal were diametrically opposed to slavery and the way we treated african-americans. so in the book i talk about lincoln and mark luther king. we went back to the founding documents inside, wait a minute, we are not keeping its promises. i have a commentary in martin luther king's great i have a dream speech. all the paragraphs of that speech or reflection on american history. he talks about the promise of america that was not cad and he said famously in that speech, the founders handed african-americans a promissory note that it comebacks and insufficient funds. and so, i think within our history with this promise that we were not living up to. i think what you have seen throughout our history is the study and of a more democratic

view and you see the steady advance of equality because i think those are inherent in the american promise. that did not come without a lot of struggling to talk about the struggle in how the history of reconstruction after the civil war was distorted for many, many years and ignore the fact that african-americans played a huge role in demanding the rights they got after reconstruction last for a while during jim crow and one back in the civil rights era. to african-americans are very much part of this broad story that i have to tell. i think it is good that the united states read its promises of promising equality. postcode the book is "our divided political heart." e.j. dionne is a senior fellow at the brookings institution. he also teaches at georgetown university and writes for the washing imposed that you can also hear him talking politics on it pr. here's a tweet from rick. do tea party people at any use?

>> guest: i struggle with that in the book because as human beings this fellow americans, have a tea party members belong to ptas, coastal lakes and do a lot of work at community on the ground. i'll be careful the way talk about people and groups. i do want prejudice against immigrants i disagree with political questions. but i do think with the tea party and people let them have embraced is a kind of radical individualism, which i think is quite different from the traditional american individualism. it's a radical individualism that were really on our own and take ourselves not only does government have no role, but they're very suspicious sometimes when people like me talk about the common good and if it's a use by socialists or collect it is trying to create a different kind of country. i think the real battle in our politics now is between a radical individual that really sees only liberty as the

american promise versus kmart temp or at american individualism, which absolutely sees liberty as part of the american promise, but also sees their quest for community is something we engage in from the beginning. postcode republic can print scottsdale, arizona. welcome. >> caller: i was going to say it just seems like when morale is low, everybody when they turn on the tv and see not only the national debt and everything, but just vocal community's lineup really bad debt and not been able to conquer the cost is always this thing where there's never enough funding for anything and they think people really get tired of that. i do not see why they can't balance the books better. the politicians are in