[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
THE GEOPOLITICAL POTENTIAL OF THE
U.S. ENERGY BOOM
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HEARING
BEFORE THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
MARCH 26, 2014
__________
Serial No. 113-153
__________
Printed for the use of the Committee on Foreign Affairs
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COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida ENI F.H. FALEOMAVAEGA, American
DANA ROHRABACHER, California Samoa
STEVE CHABOT, Ohio BRAD SHERMAN, California
JOE WILSON, South Carolina GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas ALBIO SIRES, New Jersey
TED POE, Texas GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina KAREN BASS, California
ADAM KINZINGER, Illinois WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas ALAN GRAYSON, Florida
PAUL COOK, California JUAN VARGAS, California
GEORGE HOLDING, North Carolina BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas JOSEPH P. KENNEDY III, Massachusetts
SCOTT PERRY, Pennsylvania AMI BERA, California
STEVE STOCKMAN, Texas ALAN S. LOWENTHAL, California
RON DeSANTIS, Florida GRACE MENG, New York
DOUG COLLINS, Georgia LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina TULSI GABBARD, Hawaii
TED S. YOHO, Florida JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
C O N T E N T S
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Page
WITNESSES
Admiral Dennis C. Blair, USN, Retired, member, Energy Security
Leadership Council, Securing America's Future Energy........... 6
Mr. Harold Hamm, chairman, Domestic Energy Producers Alliance.... 18
Ms. Elizabeth Rosenberg, senior fellow and director, Energy,
Environment and Security Program, Center for a New American
Security....................................................... 25
Michael Levi, Ph.D., David M. Rubenstein senior fellow and
director, Program on Energy Security and Climate Change,
Council on Foreign Relations................................... 33
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Admiral Dennis C. Blair, USN, Retired: Prepared statement........ 8
Mr. Harold Hamm: Prepared statement.............................. 20
Ms. Elizabeth Rosenberg: Prepared statement...................... 27
Michael Levi, Ph.D.: Prepared statement.......................... 35
APPENDIX
Hearing notice................................................... 60
Hearing minutes.................................................. 61
The Honorable Jeff Duncan, a Representative in Congress from the
State of South Carolina: Material submitted for the record..... 63
The Honorable Gerald E. Connolly, a Representative in Congress
from the Commonwealth of Virginia: Statement and material
submitted for the record....................................... 65
THE GEOPOLITICAL POTENTIAL OF THE
U.S. ENERGY BOOM
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WEDNESDAY, MARCH 26, 2014
House of Representatives,
Committee on Foreign Affairs,
Washington, DC.
The committee met, pursuant to notice, at 10:08 a.m., in
room 2172 Rayburn House Office Building, Hon. Edward Royce
(chairman of the committee) presiding.
Chairman Royce. We're going to call the hearing to order
here and ask for all the members to take their seats. This is
the Geopolitical Potential of the U.S. Energy Boom.
Simply put, increasing U.S. energy production would boost
our national security. It would also boost our economic
security. Reducing our reliance on energy imports from the OPEC
Cartel would make the United States less vulnerable to
political and security-related disruptions that we face from
time to time with respect to our energy supply. Increasing our
energy exports would advance our geopolitical interests
including by undermining the coercive leverage through energy
that the President of Russia and others have used.
Indeed, Russia's annexation of the Crimean Peninsula was
made easier by its energy grip over Ukraine. Russia's state-
controlled gas company, Gazprom, threatened to cut off supplies
to Ukraine earlier this month. This is something that Russia
has done in Eastern Europe in 2006 and in 2009. They turned off
the valves to Ukraine. Gazprom is now threatening to double the
price Ukraine pays for natural gas. Now, remember these aren't
market forces at work there. This is a monopoly that the
Russian Government has created, and this is the dependency that
we see in Eastern Europe. Now, this could obviously cripple
Ukraine's already weak economy which we're trying to help.
America's newly developing energy supplies could make a
difference zapping President Putin's strength while bolstering
Ukraine and many other European countries. Over the past 3
years just seven of the applications to export natural gas have
been approved by the Department of Energy, while 23 are still
pending. This is government at a glacial pace. But while the
United States recently became the world's largest producer of
natural gas, Russia is still the biggest exporter of gas. That
is because while Putin is freely selling oil and gas around the
world, we impose major impediments to exporting our energy. How
much of this is Russia's economy? Well, 70 percent of their
exports, 52 percent of what goes to pay for the budget in
Russia of the military and the government is from their natural
gas and oil exports. So, this is a lost opportunity.
I'm going to quote the chairman of the Joint Chiefs of
Staff, General Martin Dempsey. I think he's got this right when
he said earlier this month before our colleagues in the
Appropriations Committee. ``An energy independent and net
exporter of energy as a nation has the potential to change the
security environment around the world.'' He's not quite
grammatical but we agree with his premise. ``Notably in Europe
and in the Middle East. And so, as we look at our strategies
for the future, I think we've got to pay more and particular
attention to energy as an instrument of national power.''
Recent innovations in energy exploration mean that U.S.
production of natural gas is projected to rise 44 percent by
2040. This increased energy production has boosted
manufacturing creating thousands of American jobs. It has the
potential of creating thousands more, but instead of exporting
natural gas companies are forced to flare the glut created by
this bureaucracy. President Obama could move quickly to remove
the obstacles placed on American energy exports.
Since the President has chosen not to use his authority to
permit natural gas exports, Congress can do the job for him by
passing legislation to increase the number of countries that
would receive accelerated approval of natural gas exports. The
Domestic Prosperity and Global Freedom Act in the Energy and
Commerce Committee would extend expedited approval of natural
gas exports to all 159 World Trade Organization countries.
The President should also stop blocking the long-delayed
Keystone XL Pipeline which would create an estimated 20,000
jobs, direct jobs, and enhance our energy security and
partnership with Canada, one of our close allies, also one of
our most reliable allies. This is an opportunity not to be
missed, an opportunity to reduce our vulnerability to political
decisions and events in unfriendly and unstable countries. Yet,
Secretary Kerry is conducting yet another review further
delaying Keystone.
We should end our self-imposed sanctions on energy exports.
America leads the world with its dynamic and innovative energy
sector. Let's allow it to benefit the U.S. economy and our
security interests worldwide.
I will now turn to the ranking member for his statement,
Mr. Eliot Engel of New York.
Mr. Engel. Thank you very much, Mr. Chairman, for holding
this very timely hearing. This is a very important hearing.
Events in Ukraine over the past few weeks have brought
discussions about the future of American energy, and
specifically whether or not the United States should export
natural gas into the headlines and onto the opinion pages. The
Washington Post had such an article this morning.
Over the past decade, Russia has used its gas resources as
a weapon to settle political disputes and Ukraine has often
been on the receiving end of these attacks. Just days into the
current crisis, Gazprom announced that the prices it charged
Ukraine would go up 37 percent the following month, and in 2009
Russia completely cut off Ukraine's gas flows leaving millions
of people in the cold.
The significant increase in U.S. natural gas production in
recent years has generated new interest in U.S. exports. To
date, the Department of Energy has approved seven applications
to export U.S. liquified natural gas to countries in Europe,
Asia, and South America, and that's on top of other planned
exports to countries with which we have a free trade agreement.
So, just to be clear, American companies have been approved to
export natural gas.
When Secretary Kerry recently testified before the
committee he noted that approved LNG projects would eventually
produce 8.5 billion cubic feet of gas per day. That number is
even higher now with this week's approval of the Jordan Cove
plant in Oregon. Let's not forget it takes lots of time and
money to construct these complex multi-billion dollar
facilities.
The first LNG export facility at Sabine Pass, Louisiana is
expected to go on line next year. Exports from that plant could
go to a number of countries, including Ukraine, Romania,
Hungary, or other Eastern European countries provided they have
the necessary import infrastructure.
However, it's not clear what impact U.S. exports would have
on Europe's energy relationship with Russia. U.S. gas
production has already ended most gas imports into our country,
expanding the supply available for other countries, so Russia
will continue to be a major European energy supplier due to its
large reserves and proximity to its customers. By contrast,
U.S. natural gas must be chilled into a liquid and shipped
across the Atlantic, which obviously could be very costly.
A Rice University study found that higher U.S. gas prices
plus higher export costs could make shipments to both Europe
and Asia unprofitable. In other words, the impact of American
gas on European markets may be limited. As we weigh the pros
and cons of increased energy exports, we must also carefully
consider the impact on working people, small businesses here at
home, and environmental aspects, including those in my district
in New York.
A 2012 study by the U.S. Department of Energy concluded
that gas prices would rise by up to a third if the U.S.
exported 12 billion cubic feet per day, yet the total volume of
all export applications currently pending at the DOE is 36
billion cubic feet per day, three times as much. If that volume
of gas were exported then domestic gas prices could go much
higher, and that would almost surely have a very negative
impact on all of our constituents.
On a related issue, I'd be interested to hear from the
panel on what would happen to domestic gasoline prices if the
40-year-old ban on crude oil exports were lifted. As we examine
the future of American energy, we also need to consider the
environmental impacts of extracting shale gas and oil. This
process requires the injection of chemicals and other
substances to unlock gas or oil deposits. I believe that
companies should be required to disclose what they pump into
the ground just as they must tell us what they put in our food.
Using more natural gas in the United States to produce
electricity could displace dirtier coal, thus lowering
greenhouse gas emissions and the negative impact on our
climate. We could also bolster U.S. national security by using
natural gas as a transportation fuel, which helps reduce our
reliance on oil.
In fact, Representative Ros-Lehtinen and I introduced
bipartisan legislation last year, the Open Fuel Standard Act,
that requires half of all new vehicles to run on non-petroleum
fuels such as natural gas or electricity. This bill would give
consumers greater flexibility to choose more affordable fuel
sources.
So, I'm very interested in the prospect of us exporting
energy, but I think we have to weigh the pros and cons and come
up with a solution. It opens up great possibilities for us, and
that's why I am very interested in hearing from the panel, and
what the panel has to say. So, again, thank you, Mr. Chairman,
for holding this important hearing, and I look forward to the
testimony.
Chairman Royce. Thank you, Mr. Engel.
We are going to go 2 minutes with Mr. Steve Chabot of Ohio,
and then 2 minutes to Mr. Brad Sherman of California.
Mr. Chabot. Thank you very much. And, first, I'd like to
thank Chairman Royce for calling this timely hearing today. I
want to thank the panel of distinguished witnesses for taking
the time to join us. We're all looking forward to hearing your
testimony this morning.
The potential benefits afforded us by the recent U.S.
energy boom are really astounding. We are presented with an
opportunity to significantly strengthen our national security,
to improve our economy here at home, and increase the global
reliance on U.S. resources into the foreseeable future. And
this is particularly timely when we find ourselves in a
situation where we see the Russians, particularly Putin, acting
up as he is now.
While energy independence may not be realistic, energy
interdependence is, and it should absolutely be pursued. The
bottom line is the U.S. must seriously consider the
geopolitical merits of exporting greater quantities of U.S.
natural gas and oil, and we should be considering policies very
seriously that are preventing us from doing more of that right
now. If we did so, it might well undermine Russia's influence
over some of our European allies that are so dependent on
Russia for both their fuel, whether it be gas or whether it be
oil.
And, as I said before, when you consider what is happening
with respect to Crimea, Ukraine, potentially many other
countries in the region, we absolutely have to consider this.
So, I want to thank the chairman again for calling this very
timely hearing this morning. I yield back.
Chairman Royce. Mr. Sherman.
Mr. Sherman. Mr. Chairman, thank you for having these
hearings. Our Subcommittee on Terrorism and Trade has had
several hearings on this already, and we're having additional
hearings tomorrow. The hearings tomorrow will focus just on oil
as opposed to gas because oil and gas are extremely different
on this issue.
Petroleum is by far the cheapest fuel to transport across
water. Natural gas is by far the most expensive fuel to
transport across water. The United States is not in our
lifetime going to be a net exporter of oil, or even a net
exporter of energy, but we can be a net exporter of natural
gas, and we can consider the export of oil from Alaska and
import of oil onto our East Coast. This will have very little
effect on anything, except it will reduce transportation costs,
and it will raise the question of whether we can stop the
process and keep the Alaskan oil in a time of world emergency,
or disruption of the markets, whether we'll have both the legal
and physical infrastructure to make that change.
The question then is whether we export natural gas. Keep in
mind that in Germany they're paying triple, in Japan they're
paying quadruple for natural gas than what we are in the United
States. If we export, our natural gas prices will go up. That
will be here in the United States for natural gas, very
substantially. That will be good for the natural gas industry,
including jobs in the natural gas production and transportation
industries, but it means higher prices for consumers, it means
higher prices for manufacturers, it may take away a huge
advantage for manufacturers that cost us far more jobs than we
will pick up in the energy sector.
From the environmental standpoint, most environmentalists
will oppose anything that produces or moves any carbon fuel. On
the other hand, to the extent that the world burns more natural
gas, that may be a boom for the environment compared to the
chief alternative, which is coal, which produces twice as much
carbon and greenhouse gases, and even far more than that in the
terms of soot and pollution as compared with burning natural
gas. And you can argue that even fracking is not as bad for our
environment as is the burning of coal. I yield back.
Chairman Royce. Thank you, Mr. Sherman. We're going to have
a diverse group of energy specialists this morning. Let me
start with Admiral Dennis Blair. During his 34-year Navy
career, he served in the Atlantic and Pacific fleets, and
commanded the Kitty Hawk Battle Group. He was Commander-in-
Chief of the U.S. Pacific Command. He was also the Director of
National Intelligence from 2009 to 2010. He is currently a
member of the Energy Security Leadership Council, and
Commissioner on Geopolitics at Securing America's Future
Energy.
Mr. Harold Hamm is the chairman of the Domestic Energy
Producers Alliance. Mr. Hamm is also chief executive officer
and chairman of the board of Continental Resources,
Incorporated. He previously served as president/chief executive
officer and as a director of Continental Gas from 1967 until
2004.
From 2008 through 2013, Ms. Elizabeth Rosenberg served as a
Senior Advisor at the U.S. Department of Energy. She is
currently a Senior Fellow and Director of the Energy
Environment and Security Program at the Center for New American
Security.
Before joining the Council on Foreign Relations, Dr.
Michael Levi was a non-resident science fellow, and a science
and technology fellow in foreign policy studies at the
Brookings Institute.
Now, without objection the witnesses' full prepared
statements will be made part of the record. The members here of
the committee are going to have 5 calendar days to submit any
statements or any questions they might have of the witnesses,
and any extraneous material for the record.
And we'll ask Admiral Blair to go first. Please summarize
your remarks and then we'll go to questions. Admiral Blair.
STATEMENT OF ADMIRAL DENNIS C. BLAIR, USN, RETIRED, MEMBER,
ENERGY SECURITY LEADERSHIP COUNCIL, SECURING AMERICA'S FUTURE
ENERGY
Admiral Blair. I think, I agree this is a very timely and
important hearing. Energy has been a huge factor in national
security matters during my experience in it. We are now in an
era in which we have new possibilities due to increased
domestic production. And I urge the committee to think hard,
think long about how we can take advantage of this to bring
advantages to our national security.
I'm co-chairman of a Commission on Energy and Geopolitics.
It's a bipartisan group of high-ranking former U.S. military,
diplomatic, and national security officials. It's a project of
the nonpartisan, nonprofit organization, Securing America's
Future Energy, and we just published a report called ``Oil
Security 2025: U.S. National Security Policy in an Era of
Domestic Oil Abundance.'' And we make a series of
recommendations to take advantage of the booming U.S. oil
production to enhance American national security.
Our increased production has already supported our national
security objectives. The additional 3.5 million barrels per day
that we now produce in this country compared to what we
produced in 2005 has compensated for the virtually curtailed
oil production in Libya, and the slower increase in Iraq's
exports than was expected.
We've been able to maintain sanctions against Iran,
including sanctions against its oil exports. Back in 2005, we
were not able to pursue this policy because the market was too
tight.
So, increased American oil production has already been very
positive, but our study concluded that it will not be the cure
all that some pundits have prescribed or prophecized. As long
as we fuel 93 percent of our transportation sector with
petroleum, the security and resilience of the global oil market
will be a vital American national security concern. If supplies
are interrupted prices go up, and no matter how much we produce
at home or import from North America, our economy will suffer,
and may suffer badly.
The Middle East will continue to be a region of vital
interest. With an overall tight global oil market driven by
increasing world demand, the Middle East will remain the swing
producer. It will be the only region able to increase
production quickly, and economically to compensate in the
medium term for supply disruptions, whether natural or manmade.
And at the same time, OPEC will manipulate the production for
its own purposes, to keep prices high to support its own
foreign policy objectives, so the United States will continue
to be vitally concerned about this region, but we must do so in
a smart way.
Our study makes recommendations in four areas. First, we
recommend a series of global policy recommendations to make the
world oil market more secure, more resilient to supply
interruptions. As one of the largest consumers and producers of
oil, the United States can encourage better coordinated
international action to toughen oil production and transport
systems, to take swift and effective action to deal with
shortages.
For long-term improvement, we should share our mechanical
fracturing technology to increase total oil supplies. We should
help build more resilient and stable political conditions in
producing countries.
In the Middle East, we recommend insuring the security of
oil producing friendly countries, but with a diplomacy-centered
approach. The military support component should be reconfigured
in a flexible deployed posture with a demonstrated capability
to bring major forces forward when needed, is what is required.
The Middle East will continue to be a volatile and violent
place primarily because of domestic tensions within the
countries there. And over the long term, we need to support
peaceful evolutionary reform to develop more stable and
eventually more democratic societies and governments there.
China will account for almost half of the increased energy
demand over the 20 years, and the United States needs to
involve China in plans to deal with supply interruptions and
price spikes. We should help China with tight oil development
and include it in the International Maritime Security
operations needed to protect oil shipping. Of course, all these
actions depend on the Chinese exercising restraint in the
aggressive actions that it is taking now around its maritime
borders.
And, finally, and most importantly, the United States must
diversify the energy resources for its own transportation
sector. We need to shift a significant portion of our car,
truck, and airplane fuels away from petroleum primarily to
natural gas and electricity. This means government-supported
research and development, and other government policies that
while not picking commercial winners and losers, remove the
barriers to this shift away from oil for transportation.
Developing a strong forward-looking energy policy is one of
the most important things we can do for this country's national
security, and I urge this committee to take a strong role in
forging one. Thank you.
[The prepared statement of Admiral Blair follows:]
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Chairman Royce. Thank you, Admiral Blair. Mr. Hamm.
STATEMENT OF MR. HAROLD HAMM, CHAIRMAN, DOMESTIC ENERGY
PRODUCERS ALLIANCE
Mr. Hamm. Good morning, Chairman Royce, Ranking Member
Engel. I think the last time I saw the ranking member Engel was
on location with a hard hat on in North Dakota in the Bakken
oil field up there, and appreciate that. In addition to the
DEPA that I represent, also co-chair, the Council for Secure
America, where we had several of our friends of Israel that
toured the field up there, appreciate that.
Continental Resources is primarily an oil producer, but
we've certainly produced our fair share of gas, as well. The
American energy independence on the horizon 3 years ago. I've
been in a position to see that and actually DEPA put a stake in
the ground at that time in October 2011, and that we were going
to achieve American energy independence in this country by
2020. Quite a lot of skeptics at that time, but today we don't
see near as many.
This technology that's come about is tremendous. You know,
we hear a lot about fracking and all that, but really what's
gone on is the space-age technology that's brought the
horizontal well-bore in existence and the ability to go down
three miles, drill over three miles further, and contact so
much more rock of this type, rock that we couldn't produce
earlier. So, it's a tremendous thing that's happened. It's
unlocked a great deal of resources and it's brought about this
reality that we have today.
Today I see what's necessary to continue this American oil
and gas renaissance to achieve energy security for our country
and also the world. This includes utilizing American crude oil
as a diplomatic tool to reduce the unfair advantage in the
neighborhoods of rogue nations. And although LNG exports can't
happen quickly, and someone mentioned it couldn't be done
overnight, virtually we could help with oil exports that could
have an immediate impact to the world.
You know, during OPEC that was mentioned here, reactionary
Federal laws were passed in the 1970s. The Natural Gas Boiler
Act was one of those. It took a long time to get rid of that,
and brought on a lot of the problems that we have today. The
global energy industry has changed during all that time.
Elected officials have repealed or let expire nearly all of
those post-embargo regulations except those banning exports,
those crude oil exports. And we've had almost a virtual ban of
LNG. We're seeing a few permits come through, now it's up to
seven, but there's been like 25 that's been out there waiting
in the wings.
I think the debate really, whether we're going to see lower
prices to consumers or not, the real debate is about the
principles of free trade in the world. And if America is going
to be an energy leader, we're certainly going to have to act
like one and be able to export what's produced here.
Will prices of natural gas go up if we're exporting? That
is a good question, but I think the real answer to that is that
we're going to see a lot of stability in prices as we go
forward. We're not going to see the ups and down swings that
we've had with natural gas in the past. $2.50 is not good for
anybody, it's not good for supply, and $8 or $10 is not good
for the consumers, but we'll see a much broader market as we go
forward.
Someone mentioned jobs, heard about 10 million jobs in this
industry today. If we're allowed to go forward with exports,
I'm sure we're going to add about another 1 million jobs. We're
also going to add about 1 million or more barrels of production
per day in this country for sure, in addition to what we would
as we go forward.
You talk about jobs. Somebody said well, you know, the
refineries, you know, if we only refined here the product and
ship it out that the large jobs are there. But with the
refineries, it takes about as much to run a refinery if you run
at 75 percent capacity or 100 percent capacity. The jobs are
created downstream, that's where the jobs are.
So, I'll summarize and stop there. You know, you have my
testimony, and I'll be ready to answer questions. Thank you.
[The prepared statement of Mr. Hamm follows:]
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Chairman Royce. Thank you, Mr. Hamm. Ms. Rosenberg.
STATEMENT OF MS. ELIZABETH ROSENBERG, SENIOR FELLOW AND
DIRECTOR, ENERGY, ENVIRONMENT AND SECURITY PROGRAM, CENTER FOR
A NEW AMERICAN SECURITY
Ms. Rosenberg. Chairman Royce, Ranking Member Engel, and
distinguished members of the committee, thank you for the
opportunity to testify today on the Geopolitical Potential of
the U.S. Energy Boom. In my remarks, I'll discuss several
themes that are explored in much greater detail in my written
testimony, which I have submitted for the record.
Remarkable recent increases in U.S. energy production have
substantial economic and geopolitical benefits. Aside from
strengthening our economy, which is instrumental to our
nation's security, the domestic energy boom means that a larger
portion of global oil and natural gas supply comes from
reliable sources.
The broad innovation and economic gains associated with the
energy boom reduce U.S. indebtedness, including to countries
sometimes hostile to U.S. interests, and allow the United
States new capacity and flexibility to advance foreign policy
interests.
To fully realize the geopolitical potential of the U.S.
energy boom, however, national leaders must revise paradigms
and policies that restrict energy exports. We would not be wise
to hoard energy at home, and disengage from strategic
relationships with major global energy producers. That approach
will not make us safer.
We would have more scope to promote stable global markets,
U.S. prosperity, and our foreign policy interests with greater
energy production and a more nimble and permissive export
regime for liquified natural gas or LNG, and crude oil.
For this reason, national leaders should accelerate the
permitting of LNG export facilities and allow the export of
crude. U.S. crude exports are subject to near total restriction
currently. Lifting these restrictions would ease supply
bottlenecks and market dislocations, and signal drillers to
continue production growth. This would generate more revenue
and expand the share of global crude from a stable producer,
crude exports would raise some oil prices in some parts of the
United States to come in line with global benchmark pricing;
however, it's unlikely that this would increase retail gasoline
prices for consumers, and they might even drop marginally.
If the United States maintains current crude export
restrictions it will prevent U.S. oil production expansion.
This means foregoing an opportunity to shrink OPEC's market
share and its cartel pricing power. Foregoing crude exports
would also mean reduced U.S. policy leverage over Iran. If
international nuclear talks with Iran fail, U.S. policy leaders
may want to implement tough new sanctions to remove all Iran's
oil exports from the market.
Congressional proposals to this effect are credible if
sufficient affordable alternative oil supplies are available so
that the international community will participate in sanctions.
The United States should help insure that these alternatives
are available by encouraging its crude production and exports
instead of relying on OPEC to do so.
Future planned U.S. LNG exports represent an economic and
strategic benefit for the United States. They would bring
greater supplier diversity, more competitive pricing
arrangements, and less politicized contract terms for allies
and partners abroad. The United States is a stable producer and
would ship LNG along trade routes that involve few maritime
choke points and hot spots. U.S. LNG would represent an
important economic plank of the U.S. rebalance to Asia, and
would meaningfully contribute to the energy security of
America's alliance partners in Northeast Asia.
Additionally, LNG exports will directly and indirectly help
to diversify European gas markets away from their 30 percent
reliance on Russia. This, other technical assistance, and
diplomatic engagement to help Europe access its indigenous
shale gas and reform regional markets will have meaningful
impact in eroding Russian pricing power, and coercion on
Europe.
Refraining from selling LNG or crude abroad in order to
support domestic manufacturing or refining industries, or to
halt energy production growth would undermine U.S. foreign
relations and the scope of our leadership abroad. It would also
cause the United States to lose out economically to other
countries that promote greater production and export.
As the United States thinks about the energy and foreign
policy agenda that can best promote prosperity and our national
interest, it must prioritize responsible production of energy
and its unencumbered export.
Thank you for the opportunity to testify. I look forward to
answering your questions.
[The prepared statement of Ms. Rosenberg follows:]
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Chairman Royce. Thank you. Dr. Levi.
STATEMENT OF MICHAEL LEVI, PH.D., DAVID M. RUBENSTEIN SENIOR
FELLOW AND DIRECTOR, PROGRAM ON ENERGY SECURITY AND CLIMATE
CHANGE, COUNCIL ON FOREIGN RELATIONS
Mr. Levi. Chairman Royce, Ranking Member Engel, members of
the committee, thank you for inviting me to speak with you here
today. I'm a Senior Fellow for Energy and Environment at the
Council on Foreign Relations, and Director of CFR's program on
Energy Security and Climate Change.
Rising U.S. oil and gas production is delivering important
economic security and climate benefits even as it poses real
environmental challenges. I want to begin by discussing these
in the context of energy exports in Russia before touching on
some broader issues.
The United States should allow both oil and gas exports.
The basic geopolitical calculation is not fundamentally about
Russia. The United States has long promoted open markets as the
best guarantor of energy security. In the last 2 years, it has
effectively challenged Chinese restrictions on raw materials
exports at the World Trade Organization. If the United States
were to block exports or restrict them only to friends or NATO
allies, that would undermine its ability to challenge other
countries' restrictions, and to uphold a global open trading
system. Turning our back on our longstanding strategy would be
unwise.
Exports are, however, not without costs. While both oil and
gas exports would on balance be mildly beneficial to the U.S.
economy, and while oil exports would probably nudge gasoline
prices down, natural gas exports would raise the domestic
natural gas prices slightly, increasing home heating and
electricity bills. At a minimum, Congress should mitigate harm
to the most vulnerable by insuring that the Low-Income Home
Energy Assistance program is properly funded.
Energy exports would also promote greater domestic energy
development, and along with it local environmental risks. That
makes it all the more important for state authorities to
develop strict environmental rules and for the Federal
Government to impose minimum national standards, including for
disclosure, where practical.
I haven't said anything yet about Russia. Let me focus
first on natural gas. U.S. natural gas exports would, indeed,
hurt Russia. U.S. exports would prompt Russia to lower its
natural gas prices, reducing Russian revenues and harming the
state. The ultimate impact, though, would be limited by the
fact that relatively high-cost delivered U.S. gas exports can
push prices down too far, and because Russian revenues are
dominated by oil, not gas sales.
U.S. natural gas exports would do far less to reduce
European dependence on Russian natural gas. U.S. exports will
flow mainly to Asia because that is the most profitable
destination. Russia can largely maintain its market share in
Europe by under pricing U.S. exports. In addition, in a future
crisis Europe's ability to shift from Russian to U.S. supplies
will be limited by scarce terminal and pipeline capacity.
Expediting or eliminating the Department of Energy review
process wouldn't fundamentally change any of this analysis.
Commercially attractive projects have mostly been able to get
DOE approval. It is the commercial fundamentals and the time to
build facilities that is the main restraint on U.S. exports.
I haven't mentioned oil exports in the Russian context yet.
That's because oil exports are a fairly weak tool against
Russia. Europe can already buy oil from elsewhere if Russian
supplies are cut off. It doesn't need U.S. exports to do that.
Our own oil exports might also eventually reduce world oil
prices by a few dollars marginally hurting Russia, but not
dealing it a large blow.
I'd like to close with two broader observations about the
geopolitical potential of the energy boom. The first is that
the greatest security dividends will come from increased
production, not from increased exports per se. How different
would our conversations about how to confront Russia today be
if we were a natural gas importer, which is what essentially
every expert predicted 10 years ago?
On the oil front, the greatest geopolitical dividend is a
reduced risk of higher oil prices, and all the security
complications that entails. It's impossible to pin down the
precise impact of the U.S. boom on oil prices, but the odds of
higher prices have been reduced.
The second broad observation is that we create real risks
by overstating the benefits of the boom. The oil boom will not
make us energy independent in any meaningful way, and it's
essential that we continue to pursue efforts to cut our own oil
consumption in order to reduce our vulnerability to disruptions
in the world.
It's also essential that we carefully weigh the
environmental risks of oil and gas production in deciding what
areas to open to development. In fact, I would submit that
putting our industry on as firm and sustainable a regulatory
foundation as possible is essential to fully exploiting the
long-term geopolitical opportunities presented by the boom.
Members of the committee, thank you again for inviting me
to be here today. I look forward to answering any questions you
have.
[The prepared statement of Mr. Levi follows:]
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----------
Chairman Royce. Thank you, Dr. Levi.
My focus has been fundamentally on a particular set of
circumstances in Eastern Europe in which Russia does have a
monopoly, monopoly with some countries, near monopoly with
others. Poland, two-thirds of their gas is from Russia today.
What gets our attention, I think, on the committee was, I
don't know how many of the members here saw the story, but a
few years, actually last year, Russia was involved in its
machinations in Ukraine. They were able to turn off the valve,
or threaten to turn off the valve. And what the Poles did, and
what the Hungarians did was to sell 2 billion cubic yards of
gas, run it through their pipelines back into Ukraine in order
to keep Ukraine on life support. And watching what Russia has
done repeatedly in terms of turning off the valves, you know,
going to this larger explanation that Ms. Rosenberg and others
explained in terms of the competitive effect, or what happens
when you do have a monopoly. And that's what Russia has been
able to do with Gazprom, by having a state-run company, and
basically nationalizing this and controlling it, they've been
able to do the same thing that OPEC does in tandem with Russia
in terms of trying to set the oil price. They have been able to
set the price, and they've been able to do one thing further,
which is actually turn off the valves in winter when somebody
doesn't do their bidding, which has created enormous
consternation inside Ukraine, for example.
We would not be here today, we would not have had a
government fall in Kiev had it not been for the ability of
Russia to help create a crisis there. So, geopolitically, as
we're looking at Eastern Europe, my interest has been what
could we do in order to try to engineer a circumstance where
enough gas gets approval. It'll take a while, you know,
obviously for the facilities to be built, although there are
facilities in Spain, for example, that would feed into the
pipeline, but the futures market operates instantaneously. The
market responds quickly. The ruble, currencies fall quickly
when they hear about a national plan, and your ability to
control a monopoly is dissolved when there is an alternative.
So, this is the question for me, is how much of an advantage is
it for us in terms of our strategic interests and those of our
allies?
I note, by the way, that the Speaker of the House has a
letter from the Head of State of the Czech Republic, Slovakia,
Hungary, Poland, all asking for just such an initiative. For
the same reason that Ukraine has this dependency, they have
this dependency. So, their request is can you develop a
strategy where you can export into that market? That's what I'm
interested in today, and I would just ask Ms. Rosenberg, or Mr.
Levi, or anyone else. I know there's a little bit of difference
of opinion on this but, Ms. Rosenberg, what would be your take
on that?
Ms. Rosenberg. So, the point of the role of U.S. LNG is
helping to diversify European gas assets, gas supplies and its
ability to help Europe get out from under some of the influence
of Russia, LNG has a role to play, but as has been noted
already, the impact won't be immediate, and it won't be the
silver bullet here. So, it's true that sending a strong signal
from the United States----
Chairman Royce. Well, let me ask you this. Lithuania's sole
supply of natural gas comes from Russia. Clearly, this is one
of the reasons you see the Lithuanians toying with the idea of
an LNG facility. Now, pricing may not depend upon this, maybe
the monopoly doesn't drive price, but in Lithuania's case it
pays the highest price for gas in all of Europe. So, it sounds
like there's perhaps a more direct connection to that monopoly
than we'd like to assume. The Lithuanians certainly believe it,
so that's why I raise these points.
Ms. Rosenberg. Right. I would note that Lithuania will be
in the position to benefit from LNG, additional LNG supplies
available to its market, which will help diversify its gas
supply. That being the goal for reducing the pricing influence
of Russia.
Chairman Royce. Mr. Levi.
Mr. Levi. The answer to your question is going to depend on
the particular country. And we need to look at how each has
integrated or not integrated into the European energy space.
Let me just focus on a few pieces of this. Ukraine is
different from these other countries. In the case of Ukraine,
Russia is not threatening to raise prices from typical levels
to much higher ones, they're threatening to raise prices from
severely depressed levels, subsidized levels to the kind of
price that a country like the United States might offer. So, we
are hard-pressed to combat that. If we want to help make
Ukraine more resilient there, we need to provide assistance
that helps them transition from their heavy industry, which is
completely unprofitable unless they get subsidized Russian gas
to a more sustainable foundation. Our aid packages are
typically focused on getting through the current crisis.
Chairman Royce. All right, but--I take your point, although
they're talking about doubling the price of gas, but I take
your point.
The reality, though, is if you're in manufacturing, I used
to be in business, and you're going to have interrupted supply,
and you find out that in the winters your supplier, Russia, is
going to turn off the valve, that doesn't leave for a lot of
rationale for investment for overseas in rebooting your
economy. Mr. Hamm.
Mr. Hamm. Thanks, Chairman. You know, it's not about
Russian revenues, it's about heat, and that was your point. And
when you have the ability to turn off that heat, you know, we
can relate that pretty well with the winter we've had here this
past winter. So, you have to have alternatives. And if the
alternatives are there immediately, you have an impact, so
providing the alternatives to the LNG transport and other
things, you know, that could be that you'd have storage there,
and a few things like that, that could alleviate those
situations where they couldn't turn the heat on.
Chairman Royce. Thank you, Mr. Hamm. Mr. Engel.
Mr. Engel. Thank you, Mr. Chairman.
I, too, have the concerns that the chairman has. I am
intrigued by the possibility of exporting gas and oil to
counter Russia, to give Putin less of a monopoly, or less of a
start. And I think that by and large we would have to be crazy
not to consider it. I think it needs to be looked at and
considered, and I'm all for that from a geopolitical point of
view. I'm not saying we should rush to it, but we should do it.
And we should do it, I think look at this as soon as possible.
But the bottom line when I look at my constituents, and the
rest of us look at our constituents, people back home want to
know the bottom line, will prices of natural gas go up? What
will the impact be on gasoline prices? The average person is
more concerned about their own pocketbook, and that's a concern
of mine.
The whole fracking issue. Mr. Hamm, I'm very glad I went to
North Dakota, saw you there, and was frankly impressed by and
large. I still have questions, but impressed with what I see.
The average person in my district hears about fracking and
they go crazy because they think it's going to ultimately
contaminate their drinking water. They hear all kinds of horror
stories. So, I think those of us, we have to weigh the
overriding concerns and geopolitical concerns which are very
important, but we also have to care, obviously, about what our
constituents feel about the danger, potential danger of
fracking, or whether the prices of natural gas will go up,
prices of gasoline will go up. So, I'm going to give, let me
start with you, Mr. Hamm, the opportunity to talk a little bit
about what I've said.
Mr. Hamm. Thank you, Chairman Engel. You know, you saw
firsthand, you know, the psyche that goes into the fracking
process up there, and that's good. You know, there's a lot of
concern out there and a lot of situations. I think before you
debate all the benefits of price and all that, just take into
consideration what's really happened already with the tight oil
that's been on, particularly the Bakken. We've seen average
prices reduced by about 20 percent on diesel because of the
content of that quality premium crude up there. Also brought
down the price of gasoline. We've seen it lower this year than
before, so it's very helpful as we see the broaden market. And
it will also help this broadened market of gas, natural gas is
helping.
I mean, I used to talk about natural gas in terms of 55 Bcf
per day, now we're approaching 75. We're able to take care of
that market and do it very well because of the increased supply
we have approaching 200 years supply that many of us think is
there. So, overall, I think the price is going to be much more
stable, and can take care of these LNG exports.
Mr. Engel. Because there is, and I mentioned it, a 2012
Energy Department study that said natural gas prices could rise
by up to a third under a high export scenario of 12 billion
cubic feet per day, and the total volume of all export
applications before DOE is 36 billion cubic feet per day, or
three times higher than DOE's high scenario. So, I worry about
the effect of domestic prices if all the gas in the contracts
are exports.
Dr. Levi, let me ask you, you testified that the impact of
U.S. energy exports on U.S. relationships around the world is
being overstated. You mentioned that the infrastructure
constraints in Europe, for example, and higher LNG prices would
make it unlikely that U.S. gas would displace Russian gas.
Could you talk more about these market dynamics?
Mr. Levi. Absolutely. The reality is that in the European
market, Russian gas is less expensive than delivered U.S. gas.
Certainly, the domestic gas price here is much lower, but once
you liquify it, transport and regassify it, you end up with a
fairly high price.
Now, there are some consumers who will pay for diversity,
and will pay to spread their bets a bit, and that's why I would
not say that U.S. gas will displace no Russian gas. But for the
most part, these companies want to be competitive on a day-to-
day basis in the global economy, and are going to go to the
lowest price.
And the other thing to keep in mind is crisis dynamics. We
all saw over the last several months during this record cold
snap in the United States how infrastructure constraints in
this country made it difficult to bring our abundant natural
gas to parts of the country where it was in extraordinarily
high demand driving natural gas and electricity prices up.
Infrastructure constraints are real, and companies don't over-
bill massively just to respond to unusual events. It's no
different in Europe. And that would undermine Europe's ability
to absorb very large amounts of gas from a different source
during a crisis.
Mr. Engel. Thank you. Thank you, Mr. Chairman.
Admiral Blair. Mr. Chairman, could I just add one point to
the discussion? I get a little impatient about discussions of
the day-to-day price when you realize that by having a low day-
to-day price with a very vulnerable, rickety program, you are
subject to crises which we will then have to spend billions,
and tens of billions, and hundreds of billions of dollars on to
fix with military force or higher, or other forms of national
power. I've seen it in the Middle East where the price of oil
was not what we were paying at the pump, it was the price of
what we were paying plus the lives, the treasure of the country
that we were sending over to that part of the world in order to
keep stability and restore order there.
So, the idea that we just have to keep the lowest possible
price on a day-to-day basis and not think about some
consequences that could happen if we don't take prudent action
to be more resilient and more independent, is I think really
shortsighted. And we have to balance these long-term needs,
which we have paid in the past, which we will pay in the future
unless we take prudent action now in terms of diversity and
resilience.
Mr. Engel. Well, Admiral, I agree with you, but we have to
balance it because the average consumer out there, the average
constituent that all of us has cares a lot about what happens
in the Ukraine, as I do. But the bottom line for them is how
much are they paying out of their pocketbook, and that is
certainly a factor that those of us that make policy have to
consider because the people back home are concerned about
fracking, are concerned about the price of natural gas, and are
concerned about the price of gasoline.
So, while I believe that we need to look at our policy
because I don't like what Putin's done, I want to have a
counter balance to Putin. Our constituents, the first thing
that's important to them is the bottom line in terms of what
they pay. And every one of us that needs to be responsive to
our constituents really have to take that into strong account.
Admiral Blair. Yes. With respect, Mr. Engel, I think we're
undervaluing the American people a little bit here. I think
they understand that to make life better for their children,
not to have to send military forces out to handle situations
which could have been handled had we taken prudent domestic
action earlier is a smart investment. And with good leadership,
I think they will understand that, and that they will support
wise policy in that area.
Mr. Engel. Well, I hope so, but please understand that
everything is a balance, and those of us who run for office
have to weigh that balance.
Mr. Levi. Congressman, if I can briefly add. The main
investments in resilience in the current context need to be
made by our friends and allies in Europe to build extra
capacity so that they can be resilient in the face of a crisis.
Their under-investment leads to our having to come in and bail
them out.
Chairman Royce. We're going to go to Mr. Duncan of South
Carolina.
Mr. Duncan. Thank you, Mr. Chairman.
As I noted through my amendment that was accepted in the
Ukraine legislation we marked up in this committee yesterday, I
strongly support U.S. promotion of natural gas exports and
advances in energy extraction and exploration technologies.
I further believe that it's urgent that the administration
strive to expedite approval of LNG export terminals. The
approval of the Jordan Cove project in Oregon on Monday is a
good sign, but we've got more work to do.
I think blanket approval would have an equally important
psychological impact on the geopolitical environment especially
surrounding the Ukraine.
I point the committee to a Thursday, March 20th, Wall
Street Journal opinion called, ``A Gas Export Strategy,'' and
I'll provide a copy for the record, Mr. Chairman. But the
Russian economy and Mr. Putin's political cronies are highly
dependent on petrodollars. And I think it's important that we
send the right signal not only to Russia, but really to a lot
of folks around the globe.
I also want to point in that article it mentions that
European nations are currently dependent on Russia for 70
percent to 100 percent of their natural gas, and that Deputy
Chief of Missions for the Czech Republic told at a House
hearing this year that his country has found that even the
decline in U.S. gas imports in recent years has freed up more
gas for Europe, lowered prices, and thus weakened the Russian
negotiating position during contract renewal talks. I think
that's imperative, that we think about if it's weakened their
negotiating position, if it's weakened their income, and their
income stream to Putin's presidency.
So, I can't really talk about the energy and geopolitical
arena without talking about the benefits of the U.S. energy
boom with respect to why we need the Keystone Pipeline,
Keystone XL. I recently met with some Members of the Canadian
Parliament, and it's crystal clear to me that the President's
polarization and unexplainable delay on the transport of
Canadian crude oil to the U.S. refineries through Keystone has
hurt the geopolitical relationship with one of our most
important and biggest trading partners, and that's Canada.
I also want to mention for the sake of the discussion here
today that former Joint Chief Chairman Martin Dempsey said in a
House hearing just last week:
``An energy independent U.S. and a net exporter of
energy as a nation has the potential to change the
security environment around the world, notably in
Europe and in the Middle East. And so, as we look at
our strategies for the future, I think we've got to pay
more attention, and particular attention to energy as
an instrument of national power.''
I think that sums up my position. If we want to change the
geopolitical environment, the United States being energy
independent, and lessen our dependence on anything coming from
the Middle East changes the geopolitical environment with
regard to support for terrorism and other things that may come
out from the Middle East. So, I think that is a tremendous
summary of where we are.
So, I'd like to shift gears, Admiral Blair, and focus in
this hemisphere to the south, and that's with Venezuela,
because I think it's imperative that as we talk about energy
and political dynamics, that we think about that tremendous
exporter to the U.S. that Venezuela is. So, they have the
largest proven reserves of oil in the world, estimated in 2013
at 297 billion barrels. In 2011, Venezuela was the fourth
largest foreign supplier of crude oil and products to the U.S.
With the protests and violence that have resulted in the deaths
of more than a dozen Venezuelans at the hand of President
Maduro's regime, should the U.S. use its economic leverage and
halt our imports, or limit our imports of Venezuelan oil? And
as that revenue doesn't impact the people in Venezuelan as much
as it would impact the regime that's down there with President
Maduro.
So, if you could speak to two things. If you could speak to
Chairman Dempsey's remarks that I mentioned earlier about
American energy independence and its being an exporter, and its
impact on geopolitical dynamics. And then if you could speak to
Venezuela, I certainly would appreciate it. So, Admiral.
Admiral Blair. Sir, I certainly share General Dempsey's
contention that if the United States uses its new-found oil
abundance smartly it would be a real game changer.
I guess my feelings have solidified by watching the Middle
East. We did not send troops into the Middle East to take
possession of oil fields and to take over the oil, but we sent
them there in large numbers because of the oil-based importance
of that region to the world economy and, therefore, to the U.S.
economy. And the stability and security of that region was
important to us from a national security point of view.
Had we not been so dependent on the Middle East in that
sense, we would have treated the troubles there the way we
treated them in other parts of the world that are going through
turmoil, where there's suffering going on, where there may be a
combination of interests and opportunities, but this huge
investment, the military force there at the bottom was caused
by the oil importance of that region. So, I agree completely
that energy security for this country, more flexibility in
terms of our energy picture would make a huge difference, a
decisive difference in the position of the United States in the
world, so I think that's completely true.
On Venezuela, unfortunately, as you know better than I, the
oil market is pretty well an international global market. And
exactly where it comes from, and exactly where it goes to is
really not--really does not make that much difference. We are
not very dependent on Middle East oil, for example, but we are
dependent on oil, and that's what makes the difference. So, I
don't really think that--I haven't found that blocking
particular exports from particular countries really makes a big
difference in the whole thing.
As you know, Venezuela is doing a pretty good job of
running its oil industry into the ground on its own without any
help from anybody else. And the dissatisfaction within
Venezuela is caused by that in terms of the standard of living,
the corruption and so on. It's doing a pretty good job of
discrediting Maduro's administration as it had the Chavez
administration before he died. And they're going to have a hard
time holding on to power. So, I think that we've got a lot of
important internal forces in Venezuela that are working for us,
and if we could do a few things to help those along, I think
that would be just fine. But I think the Venezuelan people are
going to take care of this corrupt, and autocratic, and
misguided government that they've had to endure for a while
themselves.
Mr. Duncan. Well, I appreciate that. I'm out of time, Mr.
Chairman. I will remind the committee there is no national
security without energy security. With that, I yield back.
Chairman Royce. We go to Mr. Brad Sherman of California.
Mr. Sherman. Thank you.
I misspoke a little earlier, our subcommittee hearings on
the export of oil are next week, not tomorrow.
I don't think we should be fantasizing about the United
States being a net exporter of oil. That's just not going to
happen. Yes, it would dramatically change the world, so would
the invention of coal fusion, but that's not around the corner
either.
And the wars that we have fought in the Middle East have
been about oil used chiefly for vehicles, not natural gas which
competes with coal, which while dirty is at least abundant. And
I don't think a country has fought a war just to meet its
carbon targets, as much as every country would like to brag to
the world that it's creating less greenhouse gases.
What is the--and I don't know who to address question to
so, Dr. Levi, you'll answer it unless somebody knows more. What
does it cost per Mcf to liquify natural gas, move it 1,000
miles over water, and regassify it? And does the price go up
much if you're moving it 10,000 miles instead of 1,000 miles?
Is there a major cost to the ocean transport, or is the key
cost liquification and regassification? Ms. Rosenberg.
Ms. Rosenberg. Sure. Perhaps $6 to $8 for the liquefaction,
the transportation, the regassification. Of course, as you
mentioned, the price depends somewhat on how far you're
transporting it. And Europe being----
Mr. Sherman. So, you could make quite a profit if it wasn't
for the Federal Government and buying gas for $3.35 per Mcf and
spending $6 to $8 to transport it and selling it in Japan where
it sells for 16 bucks.
Ms. Rosenberg. That's the reason why many----
Mr. Sherman. That's why we're here.
Ms. Rosenberg. Yes, and why there's an expectation that, in
fact, much U.S. LNG will be exported primarily to that market,
the East Asian----
Mr. Sherman. Okay. So, we have a circumstance where
American manufacturers are paying less than a quarter of what
Japanese manufacturers are paying. And if we allowed this
export, we would still have an advantage because American
manufacturers wouldn't have to pay for liquification, et
cetera. But instead of having a four times advantage, we'd have
a say two times advantage.
Has anybody done a study as to how many manufacturing jobs
we would lose if we lost that tremendous advantage to our
manufacturers for the price of natural gas? Dr. Levi?
Mr. Levi. It's difficult to pin down. I did some basic
calculations a year or two ago that suggest that the impact on
U.S. manufacturing would be roughly neutral, and on overall
jobs would be beneficial. The reason it's neutral for overall
manufacturing is because exports affect manufacturing in two
ways. First, they raise the price of natural gas, but they also
spur our demand for manufactured products, particularly steel
and cement that are heavily used in the natural gas industry.
About 30 percent of the cost of a well is----
Mr. Sherman. So, the non-energy industry would lose jobs,
but the energy industry would pick up jobs, and some of those
jobs would be classified as manufacturing jobs because the
energy industry isn't just the people who lay the pipeline,
it's the people who make the steel for the pipeline.
Now, I'd point out that one way to possibly deal with this
would be to impose some tax on our exports of natural gas. I
would point out that the U.S. Constitution has a provision
designed to prevent that, and I don't know if--I'm going to ask
others unless the panel has any loopholes in there? Any
proposals to talks of the export of natural gas that would get
through the Constitutional provision?
I can ask Constitutional experts, Dr. Levi, unless you have
an answer?
Mr. Levi. I share your policy inclination, but the
provision is being upheld in the face of a variety of attempted
loopholes over the last decades.
Mr. Sherman. My old bros in the tax law industry have
always found a loophole to prevent a tax, and I'm sure that
that same energy can be used to impose one.
In 2012, the Department of Energy found that domestic
natural gas prices would rise by about a third. Do you tend to
agree with that outcome? And what does that do for my dream of
having a natural gas-powered vehicle fleet in the United States
instead of petroleum, which would be a game changer in
geopolitics? Mr. Hamm.
Mr. Hamm. Yes. Well, I think that number is quite high. You
look at what happened this winter, we had a tremendous draw,
the increased demand was way high, but we didn't see natural
gas prices go up a third. We saw it increase moderately, so I
don't believe those numbers. Nobody in the industry believes
those numbers.
I'd like to comment, too, on the fantasy of exports from
the----
Mr. Sherman. I'm sorry, I've got limited time, and
commenting on my fantasies is something that will have to be
reserved for others.
Mr. Hamm. We're exporting currently 4 million barrels a
day.
Chairman Royce. Mr. Perry of Pennsylvania.
Mr. Perry. Thanks, Mr. Chairman. Mr. Hamm, if you want to
comment on the export, please go ahead.
Mr. Hamm. I appreciate that. A lot of people don't
understand the extent of the exports that we're doing today. We
are exporting. We are exporting refined products to the tune of
4 million barrels a day according to current IEA numbers. So,
if anybody doesn't think we're exporting, read the numbers, 4
million barrels. And we're exporting the very things that are
important to the consumers, diesel, gasoline, propane. That's
what we're exporting today, 4 million barrels a day, so that's
going on.
One other example I'd like to point out, the Hawaiian
example. That's been--the product that they use there is being
delivered by South Korea; yet, due to the ban we can't send
them oil from America. We can't send oil to supply that demand,
so it's being supplied by foreign oil. So that's just another
fairly good example.
Mr. Perry. Thank you. Dr. Levi, regarding disclosure and
fracking, because you mentioned it a couple of times in your
testimony, just exactly from your opinion what is it that the
folks that are doing hydraulic fracturing aren't disclosing?
Mr. Levi. There aren't consistent rules to require
disclosure of all the contents of fracking fluids. Now, let me
be clear, I am not personally worried that injection of
fracking fluids is contaminating water. My recommendations are
driven by a desire to increase public confidence in the
process.
Mr. Perry. I don't know that there's a lack of public
confidence, in my opinion. I mean, I think there's a certain
constituency, but I think your words are powerful, so I think
it's important that you realize when you say certain things
they have an effect. And even though there might not be
regulatory efforts to your standard at a Federal level or to
your desire, something as simple as an OSHA-required MSDS,
Material Safety Data Sheet, requires that everybody disclose
every single thing on every job site, including everything
that's put into the ground. So, when people say nothing is
disclosed, to me that is a gross--you're not decrying the facts
as they really are. And if you want to comment, go ahead. I'm
not here to impugn you, but I want to make the record clear.
Mr. Levi. No, and I want to make the record clear, as well.
I did not intend to say that there is no disclosure. I think we
could do better.
Mr. Perry. Well, we can always do better at everything, I
imagine, but that's important. So, when you talked about--I
think you also talked about you would advocate for increased
production. So, would you be advocating for more drilling
permitting on Federal lands in the United States?
Mr. Levi. I think you need to look on a case-by-case basis.
I think if we're looking at the shale boom right now, the
opportunity is primarily on private lands. That's not mainly
because of Federal policy, that's because of the geology. So, I
don't know that that is the place to focus our energies.
I think we would do better if we wanted to focus energies
on making sure that infrastructure can be built. We heard about
flaring, for example.
Mr. Perry. Right.
Mr. Levi. Gas not being used. That's primarily not because
of a lack of exports, it's because people don't have the right
regulatory infrastructure in which to build pipelines to bring
that gas to domestic markets. So, those are the places I would
focus first.
Mr. Perry. Okay. So, based on that, I mean, I understand
the geology. We've got to go where the source is, but it seems
to me that wherever it is, whether it's Federal or private
lands, our strategy ought to be whatever is economically viable
and supports what's good for America. That's what we ought to
be doing. And regarding the pipeline then, are you saying
you're supportive of the Keystone XL Pipeline, concluding that
or starting with construction of that and finishing it?
Mr. Levi. I think that the benefits of approving the
Keystone XL Pipeline would exceed the costs. There are costs,
but if I were to provide advice, it would be that we approve
the pipeline and start focusing on things that actually matter
for Americans.
(Simultaneous speech.)
Mr. Perry [continuing]. My time, but I'm fascinated that
you think the benefits would exceed the costs. But the folks
that are willing to invest, obviously, think that the benefits
far outweigh the cost from every single measure. But, anyhow,
I'm not looking for an answer, I just find that fascinating.
Admiral Blair, just because your organization and you look
at it holistically, what would be good for America from a
geopolitical perspective in energy? Should we be drilling in
ANWR?
Admiral Blair. We are not going to either drill or conserve
our way out of our current dependency. What we really need to
do is get off oil in the transportation sector. That's the
single--that's where I'd put my first emphasis.
Mr. Perry. Okay, so what about a second emphasis? Because
we're not going to get off oil by the flip of a switch, so in
the meantime what are we doing?
Admiral Blair. Right. I think that we should be drilling
more under safe and rigid environmental constructions, and from
my--and I believe that that should be done in Alaska, as in
other places.
Mr. Perry. Thank you, Mr. Chairman.
Chairman Royce. So, we go to Mr. Sires of New Jersey.
Mr. Sires. Thank you, Mr. Chairman, and thank you for the
panel being here today.
You know, this fellow, Putin, I think while we sleep he
plots. And I think he's been plotting this for a long time,
taking over. And I think he saw what Saudi Arabia means to oil,
he figured that by assuming the gas in Russia he could do the
same thing. But I want to bring it closer to home, because we
have a--I know we're focused on the Ukraine, and what's going
on, but I want to bring it closer to home.
We have a situation in Venezuela. You have Maduro who is
constantly using the oil, and basically bending other leaders
in the Caribbean and in Central and South America, their arms
in terms of what they can say and can do. And we have a
situation now where the OAS I think is afraid to speak because
of all the members who are dependent on Maduro's oil.
What would be wrong for us to become an exporter of fuel to
the Western Hemisphere and play a role, and take away some of
this influence of some of these leaders? Can you talk a little
bit about that?
Admiral Blair. I can address part of that, Congressman
Sires. As Mr. Hamm said, we do export distilled products and a
lot of that does go to Latin America. But the question is--and
as you know, the main recipient of cheap Venezuelan oil is
Cuba.
Mr. Sires. Also, Dominican Republic and some of the other
islands, you know, and some of the other----
Admiral Blair. Right. But I don't think we want to get into
a price war for who can give away the cheapest oil to Latin
American countries with Venezuela. That's a losing game in the
long run.
I think in the long view, increasingly the Venezuelan
people, and certainly a lot of others in Latin America
recognize the Venezuelan Government for what it is, and they
turn to other forms of government. And I don't mind mentioning
that along, but I think we ought to recognize that the long-
term trends are in favor of those Latin American countries who
realize that stronger democracies, better rights, more open
economies are going to win. And that's playing in our favor in
the long run.
Mr. Sires. I also think long term, Venezuela is starting to
realize that giving away the oil is not in their best interest,
and I think their attitude is changing. So, if there attitude
is changing and we--and there's a void there, I mean, North
America is going to be flush with oil. You've got Mexico, you
have us, you have Canada. I don't know, I just think we could
be a bigger player in some of these areas.
And can you talk about the winners and losers of exporting
oil, because I know that the National Economic Research
Association conducted a study of the impact on the U.S. economy
of exporting fuel. Can you talk a little bit about the winners
and losers?
Ms. Rosenberg. Congressman, can I make a point on your
former question on Latin America?
Mr. Sires. Sure.
Ms. Rosenberg. I think, actually, that we would do well to
learn a lesson from the conversation we're having about Europe
and helping Europe to get out from under Russian influence,
energy influence. So, when we talk about exporting energy to
Europe, we also talk about the impact of exporting energy
technology. That's something we can do for Latin American
countries, as well, exporting energy technology and know how,
technical assistance to help establish or improve some of the
legal taxation, regulatory regimes that can help them to better
access their own domestic energy resources to improve markets
pricing in that region which can help them to also diversify
their supply base and rely less on certain supplies that they
receive from Venezuela.
Mr. Sires. I agree with you. I mean, it gets some of these
countries away from somebody's, you know--they got them under
their thumb. They can't move.
Mr. Levi. Congressman, on the exports question, producers
would benefit, refiners would pay more for their oil supplies.
Those are the main constituencies affected. There would be
smaller consequences for the overall economy, positive
consequences that are relatively small, and small consequences
for consumers, slightly lower gasoline prices, but not much
lower gasoline prices.
Mr. Sires. My time is up. Thank you very much, Mr.
Chairman.
Chairman Royce. Thank you, Mr. Sires. We're now going to go
to Mr. Yoho.
Mr. Yoho. Thank you, Mr. Chairman. Appreciate it, and I
appreciate all the panel being here.
Admiral Blair, now this is for everybody, and this is kind
of a rhetorical question, but the number one charge for the
Federal Government is national security, and I think we're all
in agreement with that. And as Congressman Duncan said, we
can't have national security if we don't have energy security,
and that goes with food security and several other things.
You were talking about--do you feel energy independence or
security is possible, Admiral Blair, in this country, the
United States of America?
Admiral Blair. I think energy security is possible,
Congressman, not energy independence. And security means that
the system that we depend on, a combination of what we make
ourselves, and imports is resilient enough and we have enough
repair capacity that we can handle most of the interruption
that would occur. And I think we can build that if we can get
this amount of petroleum down that we use in the transportation
sector from 93 percent, which it is right now, down to say 50
percent, 40 percent.
Mr. Yoho. Right.
Admiral Blair. Then we have energy security. It's not
independence, and I think that's kind of a phony----
Mr. Yoho. Well, I think we get tied up on energy
independence versus security, and I think security is the more
important issue. And I agree with you 100 percent, and it's
imperative, wouldn't you agree, that we are secure in the fact
that--I lived through the 1970s oil embargo. Dr. Levi, were you
around then?
Mr. Levi. Depends which one you're asking about.
Mr. Yoho. The one where the ships weren't coming in and I
had to wait in line for hours to get 10 gallons of gas that we
could buy on odd or even days depending on the last number of
our license plate. And I never want to be there again. And I
think every policy we do as a Federal Government should be to
make America stronger because if we don't do that, who's going
to do that? Nobody else is going to look out for America. So
everything we do, and I think the energy sector is the number
one driver, it supports so many things. I've got a real strong
ag background. The price of diesel goes up, the price of every
product you buy goes up immediately. And to be secure, we have
to have a secure, steady supply, whether it's from our allies
like Canada or Mexico. And it's just imperative that we work
out that security agreement.
And, Mr. Hamm, in your opinion do you see it possible that
the U.S. could be a net exporter of energy?
Mr. Hamm. Yes, we are today. I mean, we get right down to
it.
Mr. Yoho. I was glad to see you clarify that because I
agree, we can, and I think we should be. Because I think that,
again, it makes America stronger.
Our manufacturing sector, if our policies aren't for the
betterment of America, these manufacturers with the increased
prices are going to go overseas. You know, we're already
fighting regulations, rules, mandates, the Affordable Care Act.
So many of these companies are running overseas because they
can't afford to do business here, and the assault on coal in
this area is just unconscionable that a government would do
that. So, again, every policy we do should be to make America
stronger.
With the net export do you project the cost and the price
in America to go up? And it sounds like across the board it was
pretty much no, or not nearly what we're saying, hearing from
the experts.
Mr. Hamm. That's correct.
Mr. Yoho. Dr. Levi. Is it Levy or Levi? Levi. We've got a
county in our district called Levy County, so excuse me.
Mr. Levi. I'll have to visit it.
Mr. Yoho. And it's a great county, it's a big agricultural
county.
You were saying that strict economic rules would increase
the cost to the average consumer, especially the very one most
vulnerable. You were talking about the LIHEAP program and how
it's important that we keep that in there.
Mr. Levi. Right.
Mr. Yoho. It's kind of a subsidy that we keep there, but
yet with our strict environmental rules does that not increase
the cost of the energy?
Mr. Levi. It does increase the cost of energy. Let me give
you some figures to then give you a broader context. The
International Energy Agency did a study a couple of years ago
where it outlined 22 golden rules for gas to put on sound
footing, and estimated that it would cost an extra 7 percent in
capital costs for each well to comply with those. When I talked
to senior executives from one of the top oil services company
and said is that realistic, 7 percent, they said no, it's much
lower. So, that's important to keep in mind.
It's also important to keep in mind that if there is a
public backlash against development and people say you can't
drill no matter how you do it, the prices will go up far more.
Mr. Yoho. But I think we need that balance between national
security and cost, as the Admiral brought up. I don't think we
need to worry so much about the cost because you can't put the
cost against national security. So, I think we--our policies
that we move forward, we can't be strong, and we can't export
gas if we don't put in the infrastructures today.
Mr. Hamm. Could I comment on that?
Mr. Yoho. Mr. Chairman, I'm about out of time. Can he
comment?
Chairman Royce. We'll let Mr. Hamm comment, and then we'll
go to Gerry Connolly of Virginia.
Mr. Hamm. Right now we have a very strong state system for
regulations. We don't need an overlying Federal system. We have
a 2,000 foot pipeline right now that's held up, that's
federally controlled, federally controlled lands in North
Dakota that's held up a pipeline system up there for over 10
months. We have all the rest of it built, so that's what we get
up against.
Mr. Yoho. I agree. Thank you for your comment.
Chairman Royce. Gerry Connolly of Virginia.
Mr. Connolly. Thank you, Mr. Chairman. And let me just say
to my friend, Mr. Yoho, Mr. Levi and I both read about that `73
in history books, and delighted to be with somebody who
actually lived through it.
Mr. Hamm, let me just, given your last comment. I mean,
basically, another way of interpreting what you just said was
the states can handle fracking regulation on their own and we
don't need no stinking Federal Government to get in there and
regulate for us. The fact of the matter is there is wide
variety of regulation in fracking that's anything but uniform.
We go from some states that have fairly strict controls,
California, to some other states that have wild west controls,
I don't know, like maybe Pennsylvania. Your view is that's a
system that's working just fine in protecting consumers and
communities, and doesn't need any help from the Federal
Government whatsoever. Is that right?
Mr. Hamm. That's correct. That system has done a very fine
job in Oklahoma. We've got over 100 years, and fracked hundreds
of thousands of wells, zero pollution to fresh water.
Pennsylvania has been to Oklahoma. They've gone through all of
our regs there. They've got a very good system, and it's
working fine there.
Mr. Connolly. Okay. Good to have it on the record.
Mr. Levi, you were asked about the Keystone Pipeline. Is
there any evidence at all that the Keystone Pipeline will help
us in terms of our domestic security? Admiral Blair doesn't
like the term energy independence, and I take his point, but
for the sake of shorthand in achieving energy independence, my
impression is all of that oil has been signed up for five long-
term contracts going to Port Arthur, Texas for a reason, not
for consumption here, but for export. Correct me if I'm wrong.
Mr. Levi. I don't think that the Keystone XL Pipeline would
substantially increase American national security for the
reasons that Admiral Blair talked about in a broader context.
We live in a global oil market.
Mr. Connolly. I'm asking a different question.
Mr. Levi. About exports.
Mr. Connolly. Is there any evidence any of it would go for
domestic consumption? And if so, how?
Mr. Levi. Well, I'm confident that at least some of it
would go for domestic consumption. The intention, as I
understand it, is that it would be refined in the United States
and some of the refined products would be shipped abroad where
there's a bigger market, and others of them would be sold
domestically.
Mr. Connolly. Have you looked at the long-term contracts
signed by the owners of the Keystone Pipeline?
Mr. Levi. I have not.
Mr. Connolly. Every single one--there are five long-term
contracts, which is a little unusual for a pipeline because
generally they kind of participate in the spot market. But all
five contracts are long-term contracts, and all five are with
companies that specialize in export. And the reason you go to
Port Arthur as opposed to throughout the Middle West all the
way down to Port Arthur presumably, is because you're near the
ocean where there are big ships that can carry product. I mean,
why would I pipe oil or product to Port Arthur, Texas in order
to refine it so that consumers in the middle of Nebraska can
benefit from it?
Mr. Levi. We have sophisticated refineries in Texas, and
when you have refineries in place, multi-billion dollar
refineries that are tuned to a particular quality and type of
oil, you don't take them apart and put them somewhere else.
Mr. Connolly. Uh-huh. Are you aware of the fact that the
documents filed by the company that would own the Keystone
Pipeline, the Canadian company, actually admit explicitly that
if the pipeline were to be built, the price of oil and other
related products in the Midwest would probably increase?
Mr. Levi. Yes, and I think that's a correct judgment.
That's part of the goal. It's important to distinguish between
oil and refined product. I do not believe they have said that
the price of refined products would increase. The price of
refined products is set by a global price, not the price of----
Mr. Connolly. Yes, but one of the reasons is because
there's a bit of a--or there has been at the time of the filing
of those papers, bit of a glut in the Midwest markets, in part
because there wasn't this terminal all the way down in Port
Arthur, but okay.
Admiral Blair, is--do you think that there's--with respect
to--the title of this hearing is Geopolitical Potential. Do we
have a geopolitical potential in light of the Russian invasion,
and occupation, and annexation of Crimea? Do we have a
potential in Western Europe and former Eastern Europe to have
our countries, and former Republics of the Soviet Union, to
actually provide product, especially natural gas, as a
substitute for Russia? And do you think that's a realistic
thing to promise any time soon given logistics, and
infrastructure, and so forth?
Admiral Blair. Representative Connolly, what I've learned
about the natural gas business is it's sort of a three-
dimensional chess game. And, in fact, we've already improved
the energy security of Europe by our domestic natural gas. In
that same Port Arthur area, there are a bunch of liquid natural
gas facilities built for importing natural gas from Qatar
because when those were started building 7, 8 years ago we
thought we would need it. Those plants are completely idle now.
That gas went to Rotterdam, liquified there, brought the price
down from the artificially oil-based price that Gazprom had
been charging. And that has, in fact, improved the lives of
Western European consumers. It's not a global market like oil,
but it does have these global interactions.
I think the--so, I think diversity of liquid natural gas
supply is important for Western and Eastern European security
from Russia. I think, though, that it's not the only factor,
that the interconnection of pipelines and LNG terminals is
necessary in order for Europeans to be able to switch from
Russian gas to LNG. And this is something that they have to do.
And I think they would pay a premium for it. It would be
duplicative.
As you remember, since we both sat in oil lines together,
there was a----
Mr. Connolly. You're mixing me up with Ted Yoho.
Admiral Blair. But as you remember, this Russian gas to
Europe controversy has been going on since early 1980s, and
Europe has this approach avoidance with Russia. I think Crimean
incidents have demonstrated the avoidance side pretty
conclusively, and the Europeans need to build themselves a more
flexible natural gas structure which then Qatar, Australia, and
American liquified natural gas could feed so that they wouldn't
get the lights switched off, so that they wouldn't get the
price jacked up. And I think that that ought to be a joint
venture that we work on together.
Mr. Connolly. Mr. Chairman, my time is up, but I commend
that last thought to you, as you kind of played a potential
trip to the region. I think that's really a very important
point. In the long run, Europe itself has to look at
infrastructure that would allow for alternative supplies.
Chairman Royce. To reach that market. And you're right, Mr.
Connolly. I think that's one of the things that Lithuania or
the Baltic states are looking at in terms of this floating
platform which is underway in terms of the building of this.
I better turn to Mr. Tom Marino of Pennsylvania. He's been
very patient.
Mr. Marino. Thank you, Chairman. I apologize, I've been
juggling the schedule like everyone has this morning.
Let me get right to the point. As a prosecutor, I'm going
to ask direct questions, I would like direct answers. Dr. Levi,
what is in fracking that has not been transparent to the
public, particularly in the State of Pennsylvania where I come
from?
Mr. Levi. I can't give you a state-by-state take, but in
general the public does not always know what is in the fluids
being used in the particular fractal.
Mr. Marino. But in Pennsylvania, and correct me if I'm
wrong, that has to be listed, and they have access to that
information. Is that----
Mr. Levi. They have access to that information. I'm not
sure exactly when. But you know the Pennsylvania rules better
than I do.
Mr. Marino. Right. And my good friend from California,
Pennsylvania, the EPA has stated that Pennsylvania is one of
the best states in the Union when it comes to protecting the
interest of people as far as their health in fracking, and the
process by which it is being monitored, so we just give--offer
the country an opportunity to come to Pennsylvania and see how
we do it, if that's what you're going to have to do.
I don't want to see the Federal Government--Federal
Government, we've seen what the Federal Government has done
over the past 4 years. It's put us $18 trillion into debt, so
the less Federal Government in my life the better, but we do
need to make sure that standards are followed like they are in
Pennsylvania.
So, you know, I hear from people that do not like fracking,
do not like gas, they'll say to me did you--there's a program
that shows where you turn the spigot on and you put a match to
it and poof. Well, you know, 45 years ago when I was at my
uncle's cabin in Cascade, Pennsylvania, that was kind of neat
when he turned the spigot on and snapped the light on and poof,
there it was. That's methane. Okay? That happens, nothing new.
As far as energy independence, is there such a thing, and
can we achieve it? And anyone who wants to address this,
please.
Admiral Blair. I would say, Mr. Marino, that back to these
oil embargos that we talked about, back in the '60s and '70s
Norway and the U.K. were in theory energy independent. They
produced more than they consumed, and they sent it over. When
the prices went up because of the OPEC embargo, Norwegians and
Brits paid four times as much for gas as they had the year
before.
Mr. Marino. I guess we need to put a meaning on energy
independent, don't we?
Admiral Blair. Security is the right word.
Mr. Marino. Security.
Admiral Blair. Security is the right word.
Mr. Marino. I like that.
Admiral Blair. And I think that's what we're really looking
for. And then security means that don't get jacked around by
other countries, or groups of countries in pursuing our own
interests. And we can jack around countries that are
misbehaving for their purposes.
Mr. Marino. Great point. As I said, I live in the middle of
it. I'm out in the country. I like seeing the bear and the deer
grazing on my property. I get my water from a well out of the
ground. I have children, and how dare someone who opposes gas
drilling say that I would jeopardize my children's health. I
know this process. I've been on more rigs, I've done more
readings, I've reviewed more studies, I've talked to more
scientists.
In fact, in one of the areas in my district in Pennsylvania
there is a big deal about it's polluting the water. Well,
finally the EPA came and said there is no scientific evidence
whatsoever that fracking is polluting the water. And if it
does, and attempts to cause harm in the environment I'm going
to be the first guy there in line saying it's got to stop and
we have to fix this.
Let's talk about the price for a moment. I'm concerned
about the price of gas, natural gas going overseas for this
reason, and this reason alone. I don't want to see the American
people, I don't want to see the people in Pennsylvania have to
pay a higher price for their gas that is their gas because they
can sell it for a better price overseas. I don't have a problem
with it being sold overseas at whatever price they can get, but
I think the people in Pennsylvania, and the people in this
country deserve a fair price on the natural gas. Care to talk
about that?
Mr. Hamm. If you don't mind, I'd like to address that.
Mr. Marino. Please.
Mr. Hamm. I can assure you that with the Marcellus
production being so tremendous, the people of Pennsylvania will
never have to pay more for their natural gas due to LNG
exports.
Mr. Marino. That's just what I want to hear.
Mr. Hamm. I have one more comment. You know, the Bakken on
ramp on Keystone that's projected for the Keystone XL Pipeline
would add 300,000 barrels, none of which is contracted for
exports.
Mr. Marino. Good segue, because I want to finish with
saying, let's talk a moment not about if it's going to decrease
the price of oil, or the consumption. Let's talk about this
administration who talks a good job about creating jobs, but
could create 20,000 jobs instantly if they signed--if the
President signed to have the Keystone XL Pipeline go into
effect, and then an additional several hundred thousand jobs
over the next few years. And let's talk about, you know, there
was an issue about refining. Yes, I know a little bit about oil
refining, too. There are different plants that refine for
different reasons and come up with different byproducts that
could be sold in this country cheaper. So, if for nothing else,
how about creating jobs? And I see that my time has expired,
and I must yield back. Thank you.
Mr. Connolly. Mr. Chairman.
Chairman Royce. Yes, over here, Mr. Connolly.
Mr. Connolly. Mr. Chairman, the Washington Post did an
extensive analysis of job creation related to the Keystone
Pipeline, and they found no such figures as suggested by my
friend from Pennsylvania. So, I would ask with unanimous
consent that the Washington Post analysis be entered into the
record.
Mr. Marino. If my friend would yield for a moment?
Mr. Connolly. I have to--I'm going to--this is a special
request for the chairman.
Chairman Royce. Let me yield first to the gentleman.
Mr. Marino. And I can come up with ten articles which show
the jobs that will be created on this. Now, you know, there's a
back and forth on this, and we know there's a back and forth on
this, but there's no downside to this. There's no downside
whatsoever to executing this XL pipeline.
Mr. Connolly. Mr. Chairman.
Chairman Royce. I'm going to return, I'm going to award
time to the gentleman. I'm going to recognize the gentleman
from Virginia.
Mr. Connolly. Yes. Thank you, Mr. Chairman. I would just
say to my friend from Pennsylvania, that's not the point. The
point is he cited some figures about job creation that are
directly disputed by the Washington Post analysis which was
fairly thorough. And he's more than welcome to enter something
into the record that would dispute it, but I'd like the
Washington Post analysis in the record because it's a
considerable variance from the assertions made by my friend
from Pennsylvania.
Chairman Royce. Let me opine on this for one moment, if the
gentleman will. Let me respond to the gentleman from Virginia
that both of you would be allowed to submit for the record your
facts and figures, whether they be from an article in the
Washington Post, or whether they be from some studies that have
been put together by those who have--support the pipeline.
Mr. Connolly. I thank the chair.
Chairman Royce. And I would also just like to thank our
witnesses for the efforts they put into their statements. There
is considerable information within those statements themselves.
Ms. Rosenberg and gentlemen, it's impressive what you've put
together laying out your arguments. I think we've had a dynamic
discussion here because of our witnesses about the geopolitics
of energy.
I do think it's logical. I see the point that one of the
things that keeps Russia afloat as a nation is the exports of
their gas and oil; 70 percent of their trade is exports. So,
clearly, in their calculus, exporting the oil is key to their
influence. They're wielding a tremendous amount of influence as
a consequence of it.
And, clearly, we do have a situation here where for a
number of reasons the administration is blocking exports. I
mean, the pipeline would be one example, but another example
would be the LNG, and the question of whether we're going to
use that strategically with respect to the situation in Eastern
Europe.
Now, I guess for me one of the vexing things about this is
that when you have a glut in your market of gas, you end up
seeing that gas flared. And if there's an environmental
consequence, it's flaring of gas. Certainly, in Africa we
worked to address that issue, flaring of gas across Africa back
when I used to chair that subcommittee, and that's being
addressed. So, we do have a glut, we do have flaring of gas
here in the United States. It would seem to me logically if we
could export that gas in order to help break the monopoly
pricing situation, that would be good.
Energy innovations, you know, this is the hard thing to
keep up with, the constant change in this industry of energy
innovations. They are making the United States more
competitive. We're seeing that. We're also seeing companies
from around the world moving to the United States because we
have lower cost manufacturing here. Mr. Connolly, this is just
one point I would make.
If we see the Keystone Pipeline, a pipeline built not here
to where we basically have a hand in the outcome, and where
it's proximate to our markets, but instead to Vancouver where
it is shipped to our economic competitors overseas in Asia.
Right now, our principal competitor there has an energy price
that's 30 percent higher than our's. It's one of the reasons
why our manufacturing is still competitive despite the labor
differential.
So, it does seem logical to me that we would want to make
certain at the end of the day that that energy is refined in
refineries which are cleaner burning here, cleaning burning
than the ones that are in Asia, and in which that product
instead of being unleashed in a market with a higher energy
price is proximate to, you know, the Southeast United States,
and to manufacturing facilities there, because we're going to
continue to be in that economic conundrum where we're competing
with Asia, principally a country in Asia which right now is
disadvantaged. I don't want to see us mishandle a situation and
have our economic competitor end up with a lower cost of energy
than we have here in the United States as a consequence of us
treating Canada in a way that, frankly, our ally is taking very
personally at the moment. So, let's create the jobs here. We
need to build on our domestic strengths. We need to use them,
also, as an asset for national security.
And, again, I thank the witnesses, and I thank the members
of this panel. We're adjourned.
[Whereupon, at 11:53 a.m., the committee was adjourned.]
A P P E N D I X
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Material Submitted for the Record
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Material submitted for the record by the Honorable Gerald E. Connolly,
a Representative in Congress from the Commonwealth of Virginia
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