[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                  RISING OIL PRICES AND DEPENDENCE ON
                  HOSTILE REGIMES: THE URGENT CASE FOR
                              CANADIAN OIL

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         THE WESTERN HEMISPHERE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 31, 2011

                               __________

                           Serial No. 112-24

                               __________

        Printed for the use of the Committee on Foreign Affairs


 Available via the World Wide Web: http://www.foreignaffairs.house.gov/

                                 ______


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                      COMMITTEE ON FOREIGN AFFAIRS

                 ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey     HOWARD L. BERMAN, California
DAN BURTON, Indiana                  GARY L. ACKERMAN, New York
ELTON GALLEGLY, California           ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
DONALD A. MANZULLO, Illinois         DONALD M. PAYNE, New Jersey
EDWARD R. ROYCE, California          BRAD SHERMAN, California
STEVE CHABOT, Ohio                   ELIOT L. ENGEL, New York
RON PAUL, Texas                      GREGORY W. MEEKS, New York
MIKE PENCE, Indiana                  RUSS CARNAHAN, Missouri
JOE WILSON, South Carolina           ALBIO SIRES, New Jersey
CONNIE MACK, Florida                 GERALD E. CONNOLLY, Virginia
JEFF FORTENBERRY, Nebraska           THEODORE E. DEUTCH, Florida
MICHAEL T. McCAUL, Texas             DENNIS CARDOZA, California
TED POE, Texas                       BEN CHANDLER, Kentucky
GUS M. BILIRAKIS, Florida            BRIAN HIGGINS, New York
JEAN SCHMIDT, Ohio                   ALLYSON SCHWARTZ, Pennsylvania
BILL JOHNSON, Ohio                   CHRISTOPHER S. MURPHY, Connecticut
DAVID RIVERA, Florida                FREDERICA WILSON, Florida
MIKE KELLY, Pennsylvania             KAREN BASS, California
TIM GRIFFIN, Arkansas                WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
VACANT
                   Yleem D.S. Poblete, Staff Director
             Richard J. Kessler, Democratic Staff Director
                                 ------                                

                 Subcommittee on the Western Hemisphere

                     CONNIE MACK, Florida, Chairman
MICHAEL T. McCAUL, Texas             ELIOT L. ENGEL, New York
JEAN SCHMIDT, Ohio                   ALBIO SIRES, New Jersey
DAVID RIVERA, Florida                ENI F.H. FALEOMAVAEGA, American 
CHRISTOPHER H. SMITH, New Jersey         Samoa
ELTON GALLEGLY, California           DONALD M. PAYNE, New Jersey



                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable David L. Goldwyn, president, Goldwyn Global 
  Strategies, LLC (former U.S. Department of State coordinator 
  and special envoy for International Energy Affairs)............     8
Mr. Lucian Pugliaresi, president, Energy Policy Research 
  Foundation, Inc. (former National Security Council member).....    18
Paul Sullivan, Ph.D., professor of economics, National Defense 
  University, adjunct professor of security studies and of 
  science, technology, and international affairs, Georgetown 
  University.....................................................    25
Mr. Jeremy Symons, senior vice president, Conservation and 
  Education, National Wildlife Federation........................    57

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable David L. Goldwyn: Prepared statement...............    11
Mr. Lucian Pugliaresi: Prepared statement........................    20
Paul Sullivan, Ph.D.: Prepared statement.........................    27
Mr. Jeremy Symons: Prepared statement............................    60

                                APPENDIX

Hearing notice...................................................    84
Hearing minutes..................................................    85
The Honorable Connie Mack, a Representative in Congress from the 
  State of Florida, and chairman, Subcommittee on the Western 
  Hemisphere:
  Prepared statement.............................................    87
  Statement from the Council of the Americas.....................    89
The Honorable Eliot L. Engel, a Representative in Congress from 
  the State of New York:
  Letter from mayors to the Honorable Hillary Clinton dated March 
    24, 2011.....................................................    92
  Letter from LiUNA! to the Honorable Hillary Clinton dated 
    October 22, 2010.............................................    95
Written responses from Mr. Lucian Pugliaresi to questions 
  submitted for the record by the Honorable Connie Mack..........    97


 RISING OIL PRICES AND DEPENDENCE ON HOSTILE REGIMES: THE URGENT CASE 
                            FOR CANADIAN OIL

                              ----------                              


                        THURSDAY, MARCH 31, 2011

                  House of Representatives,
            Subcommittee on the Western Hemisphere,
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2 o'clock p.m., 
in room 2172 Rayburn House Office Building, Hon. Connie Mack 
(chairman of the subcommittee) presiding.
    Mr. Mack. I would just like to start by thanking everyone 
for being here and thanking our witnesses and the members for 
their patience as we try to work through votes that occurred at 
the same time as the starting of this hearing. Again, I want to 
thank the witnesses for being here today.
    After recognizing myself for 5 minutes, myself and the 
ranking member each for opening statements, I will recognize 
members of the subcommittee for 2 minutes each for their 
statements. We will then proceed directly to hear testimony 
from our distinguished witnesses.
    The full text of their written testimony will be inserted 
into the record.
    Without objections, members may have 5 days to submit 
statements and questions for the record.
    After we hear from our witnesses individual members will be 
recognized for 5 minutes each to question our witnesses.
    I now recognize myself for 5 minutes. Again, I want to 
thank everyone for their patience and thank the witnesses for 
being here.
    In light of the recent events in Egypt, Tunisia, and Libya, 
the political unrest throughout Northern Africa and the Middle 
East has caused significant instability in world oil markets. 
In the last month, the price of oil has risen to $105.00 per 
barrel, a 29-month high, which led President Obama to consider 
tapping into U.S. oil reserves.
    I was pleased to hear the President say yesterday in a 
speech at Georgetown, and I quote:

        ``Importing oil will remain an important part of our 
        energy portfolio for quite some time, until we have 
        gotten alternative energy strategies fully in force. 
        And when it comes to the oil we import from other 
        nations, obviously we have got to look at neighbors 
        like Canada and Mexico that are stable and steady and 
        reliable sources.''

    I share similar concerns with President Obama and I am 
pleased that yesterday he announced his administration's intent 
to increase domestic natural gas and oil production and to 
reduce America's dependence on foreign oil.
    I agree that it is imperative that the U.S. reduce its 
imports of foreign oil over time. However, the Obama 
administration has failed to act. We need to immediately 
concentrate on replacing foreign oil from thugocrats like Hugo 
Chavez in Venezuela with reliable, stable allies like Canada. 
Doing so will ease U.S. energy concerns and provide economic 
stability while U.S. oil companies make greater use of their 
Federal leases both onshore and offshore to help increase 
domestic oil production.
    What President Obama and his administration have failed to 
do is increase American security. By approving the Presidential 
Permit for the Keystone XL pipeline this administration could 
create tens of thousands of jobs to help boost the ailing 
economy, and secure an additional 500,000 barrels of oil per 
day into U.S. refineries in Oklahoma and Texas.
    Delays in this approval process have cost the United States 
valuable jobs at a crucial time. For example, companies like 
MasTec in my home state of Florida have the potential to bring 
home economic benefits from the construction of the Keystone XL 
pipeline.
    In recent weeks I have criticized the administration for 
their lack of policy not only in the Western Hemisphere but on 
a global scale. Instead of shoring-up important national 
security and energy resources from a close ally, our nation 
continues to rely on the likes of Hugo Chavez for approximately 
10 percent of our oil and the price we pay is reliant on the 
actions of unreliable and corrupt dictators such as Libya's 
Qaddafi.
    Furthermore, this oil dependency holds the State Department 
hostage when they should be calling out the Chavez regime for 
its vast human rights violations and support of terrorism.
    The approval of the Keystone XL pipeline to transport 
Canadian oil to our southern refineries would add supply to the 
global markets while allowing our refineries to operate at full 
capacity. Further, U.S. energy companies will benefit by 
linking into the pipeline allowing the U.S. to increase its 
production of domestic oil, provide direct access for U.S. 
energy companies to Gulf refineries, and reduce congestion in 
Cushing, Oklahoma.
    The result of the pipeline would increase productivity, but 
most importantly for me, it would force Hugo Chavez to realize 
that the United States is not beholden to fully funding his 
regime indefinitely. It must be made clear to leaders such as 
Hugo Chavez, who utilize state-owned oil companies to violate 
U.S. sanctions on Iran, that there are consequences for their 
actions.
    While the influx of jobs and the arguments for increased 
energy security and national security speak for themselves, the 
environmental concerns of extracting and refining oil from the 
Canadian oil sands are fueling a well coordinated effort to 
politicize this vital progress.
    Let me make a few points toward this end.
    The Canadians have sovereign rights to the development of 
their oil sands, and any attempt by U.S. politicians and 
interest groups to impact their ability to extract this oil is 
like Canadians trying to control when and where we extract our 
resources, and I might add, such efforts are a waste of U.S. 
time and taxpayer money. This oil will be extracted and sent to 
Asia if it is not allowed to support our southern refineries.
    Lifecycle green house gas emissions related to the 
extraction and refining of the Canadian crude oil are less and 
better regulated than the emissions related to the oil imported 
from Venezuela, Saudi Arabia, Nigeria and Mexico, the United 
States' top suppliers outside of Canada.
    While breaking the U.S. dependence on oil is critical, and 
an area where we should enhance our current partnerships with 
Canada and Brazil, a stable economy with energy and national 
security is imperative to allow the necessary research and 
development of green technology to propel the U.S. forward.
    Securing the Keystone XL pipeline will provide us with that 
luxury and must not incur additional delays.
    I would like to recognize Mr. Sires for 5 minutes for an 
opening statement.
    Mr. Sires. Thank you, Mr. Chairman. Thank you for holding 
this hearing today and thank the witnesses for your patience. I 
was here earlier and we had a vote.
    We are in the midst of an energy crisis. We have a 
situation in the Middle East that really quite frightens me as 
we head into our venture in Libya. We have a situation where 
the price of oil, the price of gas is increasing in the United 
States. We have a situation where we can remedy some of this 
with this Keystone XL pipeline.
    I was concerned, I must admit, at first about the 
environmental impact but, quite frankly, I am confident that 
this is something that is good for Canada and it is good for 
the United States. I think we are going to create in the 
process something like 118,000 jobs and bring in something like 
$20 billion into our economy. We certainly cannot pass that up.
    Furthermore, I think that we can stop our dependency on 
foreign oil. Canada has been a friend. Canada will continue to 
be a friend and we will continue to work with Canada so I am 
looking forward to hear from you and I am looking forward to 
this project when it eventually gets done so we can reduce our 
reliance on foreign oil. Thank you very much for being here.
    Thank you, Chairman, for holding this hearing.
    Mr. Mack. Thank you, Mr. Sires.
    I would like to recognize Ms. Schmidt for 2 minutes for an 
opening statement.
    Ms. Schmidt. Thank you, Mr. Chairman. I could not agree 
more with both of your statements. As we look to the Middle 
East and the instability that continues to grow in the region 
and the fact that so much of our reliance on foreign oil comes 
from that part of the world, we really have to look to another 
part of the world for that oil.
    As we all know, over 50 percent of what we use in this 
country today comes from a foreign source. Of that, when you 
look at the total pie of the foreign source, right now we are 
receiving about 23 percent from Canada. We need to grow that 
portion of the pie. It makes absolutely no sense to delay this 
Keystone pipeline, for a national security reason as well as an 
economic reason.
    From a national security reason, it is because our friends 
are Canadians. It is always good to do business with friends. 
The second is, as we see a spike in gasoline prices at the 
pump, my fear is with more consumption in the summer that is 
only going to continue to grow, it is only going to weaken our 
economy, so getting the opportunity out there for another good 
supply of oil for our citizens in the United States makes 
sense.
    I urge that we allow this to occur, get the permitting done 
quickly. Let us build the pipeline and let us move not just 
Canada forward, but the United States as well.
    I yield back the balance of my time.
    Mr. Mack. Thank you very much.
    I would now like to recognize Mr. Payne for 2 minutes for 
an opening statement.
    Mr. Payne. Thank you very much. Thank you, Mr. Chairman, 
for calling this very important hearing dealing with 
TransCanada and its pipeline. As we know, this is an issue that 
has two very clear sides; proponents of the Canadian oil, 
Keystone pipeline including Canadian agencies and petroleum 
industrial stakeholders to energy security, economic benefits 
such as job creations.
    We have heard about that here not only in Canada but in the 
United States. Some contend that Keystone project secures 
growing Canadian oil supplies for the U.S. market, which would 
help offset imports from less dependable foreign sources. They 
claim that the oil output cannot flow into the United States 
infrastructure; it may get exported to Asia.
    Of course, those opposed to the pipeline, primarily 
environmental groups, object to the project principally on the 
grounds that it support dirty Canada oil sand development and 
that it would pose an environmental risk to ground water and 
that it promotes continued U.S. dependence on fossil fuels. We 
have certainly two sides. I would like to hear both sides of 
the argument and hopefully we can come up with what is in the 
best interest of the majority.
    Thank you. I will yield back.
    Mr. Mack. Thank you, Mr. Payne.
    I would now like to recognize for 2 minutes Mr. Rivera for 
opening statements.
    Mr. Rivera. Thank you very much, Mr. Chairman. Thank you to 
the witnesses for testifying before our committee today. Today 
the average price per gallon in Florida, my home state, stands 
at $3.61 a gallon. The ramifications are felt across the 
economy when you take into account the hidden costs associated 
with such a surge in fuel cost, especially when you consider it 
was $2.80 just 1 year ago.
    Consumers see the affects of rising fuel costs in their 
daily lives from the increased price of transportation, the 
increased cost of moving goods from producers to store fronts 
and to market, the increased cost of utilities, the increased 
cost of literally feeding their families and so on.
    My constituents are being squeezed by these increased costs 
and the administration does not seem to have a coherent plan to 
expand supplies and help ease price pressures. With additional 
supplies, the tight market conditions that have put pressure on 
our constituents are going to persist.
    To address our current situation we need to increase 
capacity and explore for new domestic sources of oil and 
natural gas.
    Since the Deepwater Horizon accident, production in the 
outer continental shelf has fallen by 270,000 barrels per day. 
Furthermore, the Energy Information Administration expects Gulf 
of Mexico production to fall by 250,000 barrels per day each 
year over the next 2 years.
    I also understand that EIA has lowered their annual energy 
outlook because of, from their own report, ``Expected delays in 
near-term projects in part as a result of the drilling 
moratorium.'' Canada is America's No. 1 supplier of petroleum.
    In January of this year we imported over 2,100 barrels of 
oil a day from our neighbors to the north. Our Canadian friends 
are capable of providing us with much more petroleum resources 
but we currently lack the sufficient infrastructure to bring 
them to refineries for processing and eventually to market. I 
look forward to your testimony on this critical issue.
    Thank you, Mr. Chairman.
    Mr. Mack. Thank you, Mr. Rivera.
    Now I would like to recognize the ranking member, Mr. 
Engel, who had some votes at another committee.
    We appreciate you being here and you are recognized for 5 
minutes.
    Mr. Engel. Thank you. Thank you very much, Mr. Chairman. I 
appreciate your holding this for me. Thank you for calling this 
very timely hearing. Thank you also to our distinguished panel 
of witnesses. I look forward to hearing your testimony and I 
have no doubt that our question and answer session will be 
lively.
    At this point it is not my intention to launch into a 
fierce monologue in support or opposing the Keystone XL 
project. On the contrary, I am certain there are some very 
sound and reasonable arguments in support of this project. 
However, I am equally sure there are cogent and convincing 
arguments opposed to Keystone XL. This is perfectly normal for 
such a large undertaking with significant ramifications.
    We are speaking here about energy dependence, international 
commerce, jobs, and more. We are talking about oil, hostile 
regimes, foreign relations, and geopolitics. We are discussing 
greenhouse gases, groundwater pollution, and pipeline safety. 
We must consider all of these factors, not just some.
    I have to confess my mind is not made up on this matter. On 
the one hand, I have no problem with energy imports from 
Canada. Canada is already our country's largest foreign source 
of energy including oil, natural gas, and electricity. However, 
I think that before this project can go forward some serious 
environmental safety and economic questions must be addressed.
    As the ranking member of this subcommittee I believe we 
must elicit views from both sides, not only to inform and 
educate myself, but to aid my colleagues in the same endeavor. 
It has been nearly 1 year since the disastrous oil spill 
occurred in the Gulf of Mexico and we still have much further 
to go to recover from that catastrophe.
    Of course, what happened in the Gulf is not what is being 
proposed here. However, there are a few key lessons we must 
draw. Most importantly, we must ensure that the regulatory 
failure which contributed to the crisis in the Gulf does not 
reoccur on the Keystone XL review process.
    We witnessed a tragic event of such massive consequences 
last April that we must ensure we are taking every reasonable 
safety precaution and examine this proposal from all angles to 
prevent a similar disaster in a different part of our country.
    As the co-chair of the House Oil and National Security 
Caucus I have long believed that our dependence on oil is 
quickly ascending to unacceptable levels. It may perhaps 
already be there. As I look at the Keystone XL pipeline I 
wonder whether this pipeline actually increases our dependence 
in the long run.
    Yet, I strongly agree with Chairman Mack that Hugo Chavez 
is a menace to the region. Any solution or strategy that 
lessens our dependence on Venezuelan oil, or even our dealings 
with that regime, is certainly an idea with merit and worthy of 
consideration as this project is.
    I would like to voice one word of caution, though. I have 
heard it said that the State Department is the only thing 
holding up the Keystone XL pipeline and if they would only get 
out of the way, this project would move forward. Sometimes in 
our excitement about a specific idea or exuberance for one 
approach or another it is easy to overlook the serious legal 
obligations which we in Congress impose on our government 
agencies.
    The State Department is in the process of reviewing the 
permit and drafting an environmental impact statement for the 
Keystone XL pipeline under the National Environmental Policy 
Act. This is important work with legal and procedural 
requirements which cannot be swept aside because one industry 
or another wants to move ahead in great haste.
    I do not believe the State Department is acting in a 
obstructionist manner. States should not and must not simply 
act as a rubber stamp pressuring the State Department to unduly 
hasten its decision-making process in the face of such far-
reaching consequences is not appropriate.
    By no means do I mean to suggest a decision in opposition 
to the project is pre-ordained or even the right decision to 
make. However, as we see the potential benefits of greater 
energy inputs and additional pressure on Chavez, we also know 
that there are environmental pipeline safety and groundwater 
concerns.
    I look forward to hearing from our witnesses about all of 
these points. I think that we need to look at energy policy. I 
think we need a balanced energy policy. I do not think we can 
automatically just say no to everything and then at the same 
time complain about importing oil.
    I do think this is interesting. I, again, have expressed 
some of my concerns about it and I look forward to hearing all 
of our witnesses today. I thank the chairman for calling this 
hearing and, again, I thank the witnesses for their presence 
here today.
    Mr. Mack. Thank you, Mr. Engel.
    I would now like to introduce our witnesses.
    Oh, I am sorry. Sorry, Mr. Poe.
    I would like to recognize Mr. Poe for 2 minutes for an 
opening statement.
    Mr. Poe. Thank you, Mr. Chairman. Thank you for allowing me 
to participate in this hearing. It seems delay, delay, delay is 
the administration's energy plan. The Keystone XL project, 
which the President has had on his desk for over 2 years, is 
long overdue.
    Two weeks ago I wrote a letter with other Members of 
Congress to the administration to approve the Keystone XL 
permit immediately. It will bring 700,000 barrels per day from 
stable Canada to the United States. Canada could be a reliable 
source of oil for years to come. Canada's 175 billion barrels 
of oil reserve is second only to Saudi Arabia. I would rather 
import oil from Canada than from the unstable Middle East.
    The pipeline which would start in Alberta, Canada, would 
end up in my gulf coast district where thousands of my 
constituents already work in the energy industry. I probably 
represent more refineries than any other member of the United 
States Congress.
    Gas prices are hitting $4 a gallon. Oil prices have hit 
$100 a barrel for the first time since October 2008. For every 
penny the gasoline price increases the cost to consumers is an 
additional $4 billion a day. By just signing a piece of paper 
to grant Keystone XL its permit the President could inject 
thousands of new jobs in our economy.
    The President's delays of signing off on this permit is, in 
my opinion, because the State Department, the EPA, and out-of-
towners are stonewalling the project. The EPA has environmental 
concerns and attacking a pipeline on these grounds is absurd in 
this case. Experts agree the pipelines are the most cost 
effective and most environmentally sound way to transport oil 
and natural gas.
    We need to get oil to the refinery someway. We can import 
it through a safe reliable pipeline or we can use tankers from 
the Middle East. This should be an easy decision; reduce our 
reliance on oil from the Middle East, and increase our reliance 
from an ally, create thousands of jobs. The administration 
needs to approve the XL permit today. It is time to start 
laying pipe.
    Thank you, Mr. Chairman.
    Mr. Mack. Thank you, Mr. Poe.
    Now I would like to introduce our witnesses.
    First, the Honorable David Goldwyn. Mr. Goldwyn has served 
as the coordinator and special envoy for International Energy 
Affairs at the U.S. Department of State. Prior to serving as 
special envoy, Mr. Goldwyn was counselor to the Secretary of 
Energy.
    Currently Mr. Goldwyn is the president and founder of 
Goldwyn Global Strategies, LLC.
    Second, Mr. Pugliaresi has worked as a consultant on a wide 
range of domestic and international petroleum issues. Prior to 
being a consultant he served in the National Security Council, 
Department of State, Energy Interior, as well as the 
Environmental Protection Agency.
    Currently he is the president of the Energy Policy Research 
Foundation, a nonprofit organization that studies energy 
economics.
    Third, Dr. Paul Sullivan is a professor of economics at the 
National Defense University and an adjunct professor of 
security studies and of science, technology and international 
affairs at Georgetown University, where he teaches classes on 
global energy and security. Mr. Sullivan has written on the 
economics of war and peace, the political economy of oil and 
gas and energy security.
    Finally, Mr. Jeremy Symons is the senior vice president of 
the National Wildlife Federation's Conservation, Education, and 
Advocacy Programs. Mr. Symons leads a staff located at a 
network of National Wildlife Federation offices from 
Washington, DC, to Anchorage, Alaska.
    Thank you all for being here.
    Mr. Goldwyn, you are now recognize for 5 minutes for your 
testimony.

STATEMENT OF THE HONORABLE DAVID L. GOLDWYN, PRESIDENT, GOLDWYN 
    GLOBAL STRATEGIES, LLC (FORMER U.S. DEPARTMENT OF STATE 
COORDINATOR AND SPECIAL ENVOY FOR INTERNATIONAL ENERGY AFFAIRS)

    Mr. Goldwyn. Thank you, Mr. Chairman. It is an honor to 
speak to the committee and to be on this distinguished panel to 
talk about the importance of Canadian oil for U.S. and global 
energy security.
    You have my lengthy statement for the record so I think I 
will just speak to you really about the issues.
    We heard the President say yesterday we live in tumultuous 
times and energy security is important. We heard the 
recognition from him and from each of you today that oil is and 
will remain a strategic commodity for our economy for decades 
to come.
    We have taken some, I think, visionary steps led by the 
President on the demand side on fuel efficiency, on advanced 
fuels, on critical research and development which in time will 
take us to a world where we are less dependent on oil. But we 
are not in that world today and we won't be for the next couple 
of decades.
    Even with increased production from the Bakken and from 
other areas and revived production in the Gulf of Mexico, we 
will be importing 8 million barrels a day.
    The question is from where? Into this context comes the 
question of is it appropriate for the United States to permit 
this pipeline, Keystone XL, to the United States in light of 
the environmental impacts that it may have as required by the 
Congress for the United States to examine.
    So let me take a step now and answer that question. I 
believe the answer is that after considering those impacts 
indeed it is very much in the United States' national interest 
to permit this pipeline but the environmental considerations 
are important and I think there is hope to be had there.
    In terms of supply security, we have reason to be 
concerned. The world is going to consume a lot more energy. 
Mexican production has declined and while they are trying to 
revive it, it will be awhile. Venezuelan production has 
declined because of their own policies.
    There is uncertainty in the Middle East. Even optimistic 
projections for the call on OPEC in 2035 for 52 percent of our 
oil supply assume that there will be increased production in 
Venezuela, in Libya, in Iran. These are precarious assumptions 
at best. We do need to worry about whether there will be 
adequate investment in the world for oil supply. That leads us 
to Canada.
    Canada not only is our number one supplier, 22 percent of 
oil right now, our number one trading partner, they have the 
largest reserves outside of OPEC in the world and are right 
next door.
    So as we look at the question of whether permitting this 
pipeline is in our national security, I think we look at five 
considerations. First, permitting Keystone XL will enhance 
supply security somewhere between 590,000 and up to 900,000 
barrels a day with compression if it is needed. It is close by, 
a very short distance.
    Oil delivered by pipeline is not subject to either weather 
problems in the Gulf of Mexico, which can happen, or problems 
in sea lanes which my colleague, Paul Sullivan, I am sure will 
talk about. It can provide oil to the midwest and to the Gulf 
Coast. It is also an on-ramp for the Bakken. As we look at 
increasing domestic oil production, having a pipeline, or 
having access to route that oil to the Gulf Coast, is going to 
be critically important.
    Second, Keystone XL can provide infrastructure security. It 
makes a difference when oil comes by pipe. The chance of a 
political disruption or interruption in Canada is pretty small, 
I think, these days. Infrastructure itself, diversity of 
terminals, diversity of ways we get oil in, diversity of places 
we refine it is why we are so secure.
    Japan worries about whether it can get oil into the 
country. We have many refining centers, many import centers but 
a pipeline is part of that security. Having redundant 
pipelines, excess pipelines, or even pipelines which may not be 
full now but may be in a little while, is critically important.
    Third, the money which we pay to Canadian suppliers is much 
more likely to be recycled and spent in the United States than 
in any other country that we would trade with because they are 
our number one trading partner. Employment impacts: I don't 
know what the numbers are exactly. There are many studies. It 
is intuitively obvious that a large infrastructural project 
largely sourced in this country will provide jobs. And there is 
the enhancement to national security because it does matter 
where the rent goes. It does matter where the money we pay for 
oil goes. We don't often get a chance to pick where our oil 
rents go, but in this case we do and we get to choose Canada.
    The environmental impacts are important. As Representative 
Engel noted, we are required--the United States is required 
under NEPA to consider them. But there has been tremendous 
study and we have learned a lot from the pipeline process. In 
fact, the pipeline is safer because of the comments that we 
have received in the process, that the U.S. Department of State 
has received.
    In fact, Canada has made transparent and accelerated its 
own plans to deal with the water and air and other impacts of 
the pipeline. These are things that Canada is doing at the 
national level and at the provincial level and also at the 
commercial level, but there is no doubt that the diplomacy that 
has been attended to this and the comments to the pipeline have 
helped accelerate that process and make it clear.
    Last, I would just say these are serious issues and they 
are held by people of good will on all sides. The process that 
we have gone through has worked. I think the State Department 
is being as deliberate as it can to make sure that when it 
comes to a conclusion it is beyond reproach.
    In that process we have learned a lot about how to manage 
the environment and manage security. I think the national 
interests are clear. The last study that we have gotten from 
the Department of Energy shows that the environmental impacts 
will take place whether or not this pipeline is permitted.
    Canada will produce the oil. It will ship the oil. It will 
be refined some place. I thank you for your attention to this 
issue and look forward to your questions.
    [The prepared statement of Mr. Goldwyn follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Mack. Thank you very much.
    Next Mr. Pugliaresi is recognized for 5 minutes.

 STATEMENT OF MR. LUCIAN PUGLIARESI, PRESIDENT, ENERGY POLICY 
  RESEARCH FOUNDATION, INC. (FORMER NATIONAL SECURITY COUNCIL 
                            MEMBER)

    Mr. Pugliaresi. Chairman Mack, Ranking Member Engel, thank 
you so much for this opportunity to give testimony on this 
very, very important issue. I will just summarize my remarks 
not to be repetitive to----
    Mr. Mack. Can you push the button on the mic there?
    Mr. Pugliaresi. It is on.
    Mr. Mack. Okay. Pull it a little closer.
    Mr. Pugliaresi. Maybe what I can do is sort of add a little 
bit to Mr. Goldwyn's comments here so we are not too 
repetitive.
    I think, first, it is absolutely important to understand 
that this is North American energy. To the extent that we 
expand Canadian oil production into the United States, it is 
nearly the same as expanding it within the United States. These 
two markets are so integrated, with a very long history of safe 
transportation of Canadian crude into the United States going 
back to the 1950s.
    Since the 1960s, oil sands has been a growing proportion of 
that production in shipment into the United States. In fact, 
Enbridge itself, one of TransCanada's competitors, moves 70 
percent of the crude oil production of the United States from 
Canada already.
    Another aspect of this issue that is very important to 
understand is that the American refining sector is facing a 
very extensive competitive environment worldwide and it deepens 
upon matching the crude types in the world to the complexity of 
its operations. It is the blended bitumen from Canada, the 
heavier crudes, for which American refining is most efficient.
    To the extent that more Canadian crude can flow into the 
United States market, that, as David said, we can make our 
transportation of crude supply more efficient, we can improve 
the production potential for our own producers, particularly in 
the Bakken. But we can also make sure that our domestic 
refining sector is a much more sound competitive basis going 
forward.
    This is very, very important because the loss of Venezuelan 
and Canadian crude production over time has squeezed the 
differential between light and heavy crudes and made our 
domestic refining sector less competitive. This will change 
those terms.
    Now, another issue is we wanted to look at what is the 
potential over time, so we asked Turner Mason and Company, a 
very respected petroleum and refining consultant from out of 
Dallas, to look at our numbers as well and they gave their 
perspective on the issue.
    According to Turner Mason, they expect total Canadian crude 
production will increase by 400,000 barrels a day in the next 5 
years and almost 1.1 million barrels a day in the next 10 
years. But more importantly Turner Mason's assessment of 
economically recoverable unconventional oil shows that Canada 
can now exceed the reserves of Saudi Arabia. It is crucial that 
we take the steps to encourage the Canadians to develop this 
resource. It is good for Canada and it is good for us.
    What I want to do is just take a moment to give you what I 
think is the most important point. In world oil markets prices 
are determined not only what is happening now, but also 
expectations that buyers and sellers have about future 
production, including future American energy policy.
    We are often told that quickly moving forward on Keystone, 
opening up Alaska, permitting drilling in the Arctic, expending 
oil and gas leases on new properties in the United States, and 
even deepwater drilling in the Gulf of Mexico plays too far in 
the future to have any affect on prices now. But this is just 
off the case.
    Putting aside that we say this every time there is a 
crisis, if we open up more North American resources for 
development, we may very well shift long-run expectations on 
domestic supply and receive the benefits of lower prices even 
before this production comes to market. This what happened in 
'73/'74 and 1979.
    We did not lose that much oil from the Arab oil embargo. It 
was expectations on future growth came way down that prices 
went up in the current period. We want to reverse that. We want 
to change expectations abut what we are going to do in terms of 
our policy and future production.
    I want to leave you with a statistic worth thinking about. 
If we can alter the long-term price of crude oil by $20 a 
barrel over any base-case period, say $80 instead of $100, the 
present value savings in our import bill alone is $1 trillion. 
For the national economy it is probably twice that.
    This means the jobs, the return on capital, corporate and 
personal income taxes, government revenue for bonus bids, 
royalties all grow substantially. It is a no-brainer for us.
    With that, I will conclude my testimony.
    [The prepared statement of Mr. Pugliaresi follows:]

    
    
    
    
    
    
    
    
    
    
    Mr. Mack. Thank you very much.
    Mr. Sullivan, you are recognized for 5 minutes.

  STATEMENT OF PAUL SULLIVAN, PH.D., PROFESSOR OF ECONOMICS, 
  NATIONAL DEFENSE UNIVERSITY, ADJUNCT PROFESSOR OF SECURITY 
STUDIES AND OF SCIENCE, TECHNOLOGY, AND INTERNATIONAL AFFAIRS, 
                     GEORGETOWN UNIVERSITY

    Mr. Sullivan. Thank you, Chairman Mack, Ranking Member 
Engel, and members of the subcommittee for giving me the 
opportunity to testify today on this issue.
    I also need to make the usual caveat that these are my 
opinions alone and do not represent those of the National 
Defense University, Georgetown, or any other organization I may 
be associated with.
    It is indeed an honor to be part of this important 
discussion about Canadian oil. The most important energy 
security challenge we face in this country is oil and, most 
particularly, imported oil which represents most of our needs.
    Oil represents 37 percent of all of our energy use. Two-
thirds of the oil is used for transportation and two-thirds of 
that is used for gasoline. Ninety-one percent of our transport 
is based on oil. Importantly, when it comes to transportation 
our military is almost entirely vulnerable to oil markets.
    We are facing increasing instability in the Middle East and 
North Africa, an area where over 70 percent of proved reserves 
of conventional oil are known to be. We saw the splitting of 
Sudan into two countries. Sudan is an oil producer. We saw the 
revolution in Tunisia which rocked the region and spurred on 
other uprisings and revolutions.
    Tunisia is not a large energy producer but its revolution 
has made a huge difference to the stability in the region. We 
have seen a revolution in Egypt where the important energy 
transport nodes of the Suez Canal and the Sumed pipeline are 
found.
    Again, Egypt is a net oil importer but it is the most 
important country in the region with regard to cultural change 
and political impetus. We are now seeing a bloody revolution 
and civil war in Libya, a country that used to export 1.5 
million barrels a day. Its exports have been cut drastically.
    Now, Algeria could be next in line. They export 1.8 million 
barrels a day. Bahrain is not a large oil exporter or producer, 
but has become a focal point for rebellion via the Sunni-Shia 
split. He is in the most important region for oil production 
and export in the world. Iran is clearly behind many of the 
troubles in Bahrain.
    Most of the populations above the major Saudi oil fields 
including the Ghawar field, which is the size of Pennsylvania, 
300 meters deep, are Shia. Iran is likely stirring up trouble 
in that part of Saudi Arabia. Saudi Arabia is the world's 
biggest exporter of oil and has the largest conventional 
reserves of oil accounting for 25 percent.
    Iran could be facing instability. It exports 2.5 million 
barrels a day. Syria is becoming more violent by the day and it 
is connected in with the issues in Lebanon, the peace process, 
and Iran. Yemen could be one of the most complicated places 
right across from Somalia.
    On the coast, to the southwest and the west of Yemen there 
is the Bab-Al Mandab where 4 million barrels a day goes through 
and 10 percent of the world container traffic transits. Yemen 
could split into multiple failed states and this could happen 
sooner than we can think.
    Iraq exports about 1.7 million barrels a day but 95 percent 
of its exports go through two geographically tiny, but 
strategically gigantic, facilities, the Al Basra Oil Terminal, 
and the Khawr Al Amaya Oil Terminal right near it. Syria, 
Yemen, and Iraq all have Sunni-Shia tensions.
    Then we have the Ab Qaiq facility in Saudi Arabia where six 
to seven million barrels a day goes through for sweetening and 
processing. Al-Qaeda got in the first fence in 2006.
    Well over one-fourth of all the oil exported in a single 
day comes out of the Middle East and North Africa and this is 
an area of increasing turmoil. Importantly, almost all of the 
excess capacity in the entire world is found in the GCC and 80 
percent of that is in Saudi Arabia.
    Under certain scenarios, we could be looking at $200 to 
$300 a barrel of oil if all goes south. Hopefully that won't 
happen.
    Our number one source of imported oil is quiet, stable, 
safe, and friendly Canada. It is our closest military 
cooperation. Our largest and closest trade relations are with 
the Canadians. Our most important energy trading relations are 
also with the Canadians. They have over 175 billion barrels of 
reserves.
    We are also facing peak oil at the same time and need to go 
to unconventional oil. Fifty-two percent of the unconventional 
oil not owned by nationalized oil companies can be found in 
Canada.
    It would be great if we could quickly lightweight our 
transport vehicles, make the drive trains and other parts of 
the engines, etc., for efficiency. Focus much more on flexible 
fuel options is a good idea for our policy option to consider. 
Or more toward electric plug-in cars, more hybrids, CNG and so 
forth, but that could take a very long time.
    We need energy security now and for the medium term to help 
us as a nation move beyond oil within the next 50 years or so 
and go toward these alternatives that we have all been 
discussing.
    Mr. Mack, you mentioned that, and this is the bridge we 
need. This is the security we need. Thank you very much.
    [The prepared statement of Mr. Sullivan follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Mack. Thank you, Mr. Sullivan.
    Mr. Symons is recognized for 5 minutes.

    STATEMENT OF MR. JEREMY SYMONS, SENIOR VICE PRESIDENT, 
    CONSERVATION AND EDUCATION, NATIONAL WILDLIFE FEDERATION

    Mr. Symons. Chairman Mack, Ranking Member Engel, members of 
the subcommittee, thanks for having me here today. I have to 
say, Mr. Chairman, I am feeling a little outnumbered. I was 
hoping I might see 30 minutes for equal time but, alas, I will 
proceed.
    My name is Jeremy Symons. I am with National Wildlife 
Federation. I am Senior Vice President for Conservation and 
Education. National Wildlife Federation is a nonpartisan, 
nonprofit organization with 4 million members and supporters 
and 47 state affiliates across the nation.
    Events in North America and the Middle East, as you have 
already heard, and rising gas prices once again underscore our 
dangerous addiction to oil and the high price we pay due to the 
instability of global oil markets. America needs energy 
security, so the question is what is the best way of getting 
there.
    As much as we may wish otherwise, there are no quick fixes 
by switching suppliers of our oil imports from one country to 
another and turning to extreme oil such as Canadian tar sands. 
There is only one way out. We need to get serious about the 
innovation and our transportation and fuel sectors that will 
create jobs here at home and provide Americans a healthier, 
cleaner, and more secure energy future.
    One myth that I often hear is that Canada will find a 
responsible way to mind tar sands. Years of experience have 
proven otherwise. I have been there. I have seen the damage. I 
have listened to courageous people who have suffered as they 
have stood up to big oil and the oil companies up in Alberta.
    Alberta tar sands operations are the most destructive 
source of oil on the planet. It can take five barrels of clean 
water and four tons of sand to squeeze out just one barrel of 
tar sludge. This tar sludge is so thick and heavy it must be 
diluted and pressurized to transport it through pipelines to 
refineries.
    Last year I flew over the tar sands operations and I 
brought some of the pictures here today and they are up on the 
monitors here today that I took. As you can see what was what 
forest wilderness has been turned into barren strip mine waste 
land and lakes full of toxic waste that stretch as far as the 
eye can see, mine after mine after mine. The scale was shocking 
and difficult to imagine.
    You can see here if you go to the next slide one of the 
movers, the sand movers. If you go to the next slide it takes 
you back to the original image. You can't even see those movers 
in there but they are out there from this distance. They are 
just tiny dots, tiny pixels to give a sense of the scale.
    You can also see of the toxic waste lakes in this picture 
that are created. If you go to the next slide, you can see the 
goo here and the toxic sludge that kills thousands of birds 
that fly north from the United States as they migrate each 
year. Then the final slide you can see the advanced technology 
that people like to talk about that protect wildlife. That is a 
scarecrow. That is what they use.
    Air pollution from tar sands production also causes three 
times more carbon emissions than conventional oil, escalating 
greenhouse gas emissions when we should be moving in the other 
direction.
    In Alberta I met with First Nation communities and listened 
as they told the heartbreaking story of how cancer rates have 
increased as the tar sands operations have expanded.
    One elder told me that they pull their kids indoors 
whenever the air gets too noxious.
    Large volumes of toxic waste leaks into the Athabasca River 
every year contaminating the water supply and fish.
    So this is what you expected me to say. You might not have 
known the extent of the damage but you knew there was an 
environmental price. The question really comes down to is it 
worth it. Is it a price that we have to pay?
    I have to say, though, we are living in--we are really 
seeing Canadian oil as some sort of mirage for our energy 
security. The idea that expanding Canadian tar sands production 
provides energy security is really just an illusion. Let us 
look at what has happened in the past month since outbreak of 
violence in Libya. The price of Canadian oil has increased by 
$20 a barrel.
    That is actually twice as much as the jump in the increase 
in global oil prices. Twice as much as what we have seen in 
Saudi Arabia. Nobody likes getting oil from the Middle East, 
but why is getting oil from Canada better when the oil 
companies who control it will take advantage of a crisis 
anytime there is one anywhere in the world to increase oil 
prices, and speculators will make us pay at the pump.
    This isn't about Canada. This is about being loyal.
    Every hour Americans are now spending $2 million more for 
Canadian oil than we did 1 month ago. Where is the economic 
security in that? Oil produced from Canadian tar sands is some 
of the most expensive oil to produce in the world. As we drive 
up global oil prices, countries that don't like us will profit 
whether we buy their oil directly or not. Where is the energy 
security in that?
    We currently have surplus pipeline capacity to carry all 
the oil Canada can provide to America's midwest. So why do oil 
companies want to rush to build the Keystone pipeline? Because 
they want to access the deep water ports down in Texas so they 
can export the oil that we are bringing in.
    We are actually exporting twice as much for fine oil 
products than we were just 5 years ago. Chairman Valero just 
said that the future of Iraq refining in the U.S. is in 
exports. Why do we want to move oil that is coming in from the 
midwest down to Texas so it can be exported to China or other 
places and want to call that energy security?
    Those refineries in Texas, by the way, are owned by 
Venezuela and by Saudi Arabia.
    The only certain impacts to the Keystone XL pipeline are 
that it will help oil companies manipulate gas prices in the 
midwest and that it puts to risk the Ogallala Aquifer in 
Nebraska which provides irrigation for much of America's bread 
basket and drinking water for over 2 million people.
    In seeking the Canadian permit, TransCanada actually said 
to the Canadians, they said that they will increase gas prices 
by $4 billion a year on the U.S. That was the purpose, $4 
billion for oil we are already getting and not another drop.
    I know that I am running out of time, Mr. Chairman, so let 
me just say that there has also been a huge spill last year in 
the Kalazmazoo River in Michigan where we saw 800,000 gallons 
from a tar sands pipeline because tar sands are corrosive and 
we have not updated our pipeline regulations for tar sands as 
need to be before we build a new pipeline so we really 
appreciate that the State Department is taking a proper look at 
the safety of these pipelines and the environmental impacts 
before they rush forward. Thank you very much.
    [The prepared statement of Mr. Symons follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Mack. Thank you very much.
    Again, I want to thank all of you for your opening 
statements and your testimony. We will now go into questions. I 
recognize myself for 5 minutes.
    Mr. Mack. Mr. Pugliaresi, could you talk a little bit about 
how buying or having this oil from Canada will reduce the 
leverage over hostile regimes like Venezuela and Libya? I think 
you mentioned that in your statement and I like to, if you 
would for the committee, talk about that.
    Mr. Pugliaresi. The price of oil is determined on the world 
market. It is a highly fungible product. However, some oils are 
better matched to certain refinery configurations than others 
and the United States has a very complex structure of refining. 
That means that we can take advantage of the relatively lower 
price of heavy crude oils.
    This gives the Venezuelans a slightly greater leverage when 
they market the crude oil. People will bid it up because they 
will want to use it in the more complex refineries. As we add 
more heavy crude oil to the market, we will probably continue 
to import Venezuelan oil, but the leverage will decline 
dramatically because now refiners have alternative suppliers. 
They have the Canadian oil, blended bitumen.
    Mr. Mack. Mr. Sullivan, would you like to respond to that 
as well because I think you might have an interesting insight 
on that as well.
    Mr. Sullivan. Well, actually, yes. I think the comment that 
the refineries in Texas are owned by the Venezuelans and the 
Saudis does not recognize that Exxon, Chevron, Shell, and 
others have refineries down there as well, if I may comment on 
that.
    Also, if you have 175 billion barrels of oil in a friendly 
state right beside you, that will keep certain other countries 
in check if they want to cut back on their production for 
whatever reason. Canada is not a member of OPEC. It could be a 
counter to OPEC's power in many ways.
    Also, Venezuelan oil, you mentioned that many times, Mr. 
Mack. If you take a look at the unconventional resources proven 
in the world, there are two major producers potentially in the 
short run and medium run, Venezuela and Canada. If we turn to 
our friends, the Canadians, we put the Venezuelans in partial 
check but not full check because we would still probably need 
to import some, which means that we would probably need to 
produce more internally.
    I have proposed in the past, and I will propose here, a 
phase-in, phase-out process for offshore oil and onshore 
unconventional, as well over the next 25 to 50 years. We have a 
pile of reserves out there and yet we leave ourselves 
vulnerable to the world markets. I know it is a fungible 
commodity and the price is actually defined sometimes by things 
that happen in places halfway across the world. Still, the more 
we have available close by, the more power we are going to have 
in this situation.
    Mr. Symons. Mr. Chairman, can I add something----
    Mr. Mack. Yes.
    Mr. Symons [continuing]. On the refining issue. Shell is 
down there but the refining expansion that Shell is doing is 
being paid for by Saudi Aramco, the Saudi national oil company. 
The need to get heavy crude down to Texas because Venezuelan 
crude is going away, that is so we can get it down to the Citgo 
refineries owned by Venezuela. There is no----
    Mr. Mack. Let me ask you this. Do you think, though--would 
you rather be in business with Hugo Chavez or with the 
Canadians?
    Mr. Symons. Well, if it was a choice to be in business with 
the Canadians, I would take the Canadians, but the oil----
    Mr. Mack. Well, it is a choice.
    Mr. Symons. The oil companies are the same.
    Mr. Mack. It is a choice and this is precisely why we are 
having this hearing. I would suggest to you--I don't know if 
you followed some of Hugo Chavez' actions and statements but 
his support for terrorist organizations, support for narco 
traffickers, destruction of human rights, confiscating of 
industries, rigging elections, destroying democracy and freedom 
in his own country and exporting that around the world.
    I don't know how--look, I understand the place you are 
coming from. You don't want the oil. You don't want any of it 
because of the environmental concerns with it, but we have a 
choice to make and if we continue to buy from Hugo Chavez, we 
continue to support a dictator that is intent on destroying our 
way of life and why wouldn't we want to support our friends in 
Canada who are allies and friends.
    They are going to sell this oil anyway. As I think you 
heard earlier, it is a heavy crude, the same type of heavy 
crude that comes from Venezuela. There is not very many places 
around the world that can take that heavy crude. If we stop 
buying it, it will have a significant impact on Hugo Chavez.
    Mr. Symons. It is not that we don't want oil. It is that we 
don't want to make a 50-year bet like a $12 billion pipeline 
that is putting our kids' future in the hands of oil companies 
for another 50 years. That is the problem. If you want to 
keep----
    Mr. Mack. Don't you agree, though--I mean, we are not going 
to be able to flip the switch tomorrow and stop so this is part 
of a long-term plan.
    If I could, I wanted to move on real quick. Can someone 
quickly--actually, I see my time has expired so I will come 
back to this in a minute.
    Next I would like to recognize Mr. Engel for 5 minutes.
    Mr. Engel. Thank you very much, Mr. Chairman. Let me ask 
first an environmental question to a gentleman who our 
supporters of it. I am told that the Keystone XL pipeline would 
cross over one of the largest fresh water reserves in the 
world, that being the Ogallala, I hope I pronounced that right, 
aquifer which is mostly in Nebraska but which spans eight 
states providing drinking water for 2 million people and 
supports $20 billion in agriculture.
    Current Republican Senator and former Secretary of 
Agriculture Mike Yohannes has said, ``There could not be a 
worse route in the entire State of Nebraska'' for the proposed 
pipeline. Then he said, ``There maybe couldn't be a worse route 
in the entire country.'' That is a quote.
    My question is, is it wise, particularly after the havoc 
which occurred in the Gulf last year, to build a pipeline in 
such close proximity to this key source of fresh water, 
particularly as its builders have requested safety-related 
waivers regarding the materials with which the pipeline would 
be built?
    Are these waiver requests prudent or irresponsible given 
that the proposed pipeline would track through a seismic zone 
that produced a 4.3 magnitude earthquake as recently as 2002? I 
suppose Mr. Symons would agree with everything I have read. I 
would like you gentlemen to refute it if you can.
    Mr. Goldwyn.
    Mr. Goldwyn. If I could comment on that briefly. It is true 
that the pipeline crosses the Ogallala for 250 miles. I think 
there are already something like 21,000 miles of pipeline which 
already cross the Ogallala and 3,000 miles of those are also 
hazardous materials pipelines so this is not new to Nebraska.
    I think one of the benefits that has come out of the NEPA 
process is that TransCanada has changed the specifications on 
the pipeline so it will be some of the highest specifications 
of any pipeline crossing the United States in any place.
    The other thing I think is worth noting is that gas 
pipelines in a sense are different than oil pipelines in terms 
of both their tendency to leak and also the damage that they 
can incur. I think the Federal authorities have looked at this 
very carefully and Nebraska has faced this question many times 
before so it doesn't seem to be unique and the safety issue 
seems to have been very fully addressed by our PIMSA authority 
in the Department of Transportation.
    Mr. Mack. Yes, Dr. Sullivan.
    Mr. Sullivan. Well, just briefly to add what David said. 
The farmers in the areas have also been pouring pesticides and 
herbicides and fertilizer into that aquifer for years. Does 
that mean we should stop farming in Nebraska? There are certain 
tradeoffs that we have to make.
    One of the most important tradeoffs is, yes, environmental 
issues are important. About the waivers, I am not so sure about 
that. I have mixed feelings on that one. We need to protect the 
environment but we also need to protect the economy and our 
energy security. These are very difficult tradeoffs--extremely 
difficult tradeoffs.
    Mr. Engel. Let me ask you this, Dr. Sullivan. I would like 
you to talk about the distinction between energy independence 
and oil independence and I will tell you why. I often hear 
calls for energy independence to reduce our reliance on our 
adversaries in the Middle East and elsewhere. I hear 
pronouncements about the need for more solar, wind, clean coal, 
and nuclear power.
    It seems to me that no amount of new electrical power will 
make us anymore independent. The U.S. already gets nearly 100 
percent of our electricity from our domestically produced coal, 
natural gas, nuclear, hydroelectric, wind, and solar. Do you 
agree that the problem is not energy independence, it is oil 
dependence?
    Before you answer that, I want to tell you why. It seems to 
me that the reason we are not all independent is because of our 
transportation sector. Virtually every car, truck, bus, train, 
ship, and plane manufactured and sold in the U.S. runs on oil.
    The transportation sector is by far the biggest reason why 
we send $600 billion per year to hostile nations in the Middle 
East and to Venezuela. I believe we need a game-changing way to 
alter this dynamic and I believe that we need to break oil's 
monopoly over our transportation sector. I would like you to 
comment on that.
    Let me just finally add I have introduced before, and will 
introduce again, the Open Fuel Standard Act, an open fuel 
standard ensuring that every car sold in America is flex-fuel 
capable. Flex fuel enables cars to run on any blend of gasoline 
and alcohol such as ethanol and methanol. I believe this is the 
cheapest and the most effective way to break oil's monopoly 
over our transportation sector.
    I urge my colleagues to take a close look at this 
legislation in the weeks and months ahead. I know I have read a 
lot but I wanted your comments on what I have said.
    Mr. Sullivan. I would certainly agree with your idea about 
flexible fuels. I think that is a very important thing that 
fits in with my earlier statement, and actually with my written 
statement.
    What we need is a bridge to change in that direction. We 
can't change it that quickly without serious disruptions in the 
economy and the overall energy situation. Yes, it is oil 
security. That is the key here.
    We have enough coal. We certainly have enough natural gas 
considering the unconventional gas that is now being discovered 
day by day. Uranium is another issue. Actually about 10 percent 
of the lights coming into this room right now probably come 
from ex-Soviet missiles. We import a lot of uranium so maybe 
there is an issue there but we certainly have the capacity here 
to produce that.
    Also, rare earths, an issue I am sure you are all 
interested in, is also a major part of our energy security 
situation. We need rare earths for refining oil but also for 
the new technologies that you are talking about.
    We can move forward with new types of cars. There are 
thousands of technologies out there, but there are also simple 
answers to that, including light weighting cars and making them 
out of carbon fiber and actually a safer car. F1 racers are 
made out of carbon fiber.
    There are also ways of making more efficient drive trains. 
CNG? We have that natural gas certainly. That is an 
alternative. Clearly these things can be part of our energy 
future and our energy security future but they are going to 
take time. They are going to take a lot of time.
    Mr. Mack. Thank you, Mr. Sullivan.
    I now would like to recognize for 5 minutes Mr. Rivera from 
Miami.
    Mr. Rivera. Thank you, Mr. Chair. Thank all of you for 
being here today. I want to focus in a little bit on this issue 
of the Keystone pipeline because from everything that I have 
read, everything I have seen and from a lot of what I have 
heard, this seems to me to be a no-brainer.
    From what I have seen here this would increase the supply 
of safe, secure, reliable oil from Canada, our friendly 
neighbor. I think we would all agree on that point. Spur $15 to 
$20 billion in new private sector investment in the United 
States economy. Create somewhere between 15,000 and 20,000 
high-quality jobs during the pipeline's construction phase.
    Generate $6.5 billion in new personal income for U.S. 
workers and their families. Stimulate more than $585 million in 
new state and local taxes in states along the pipeline route. 
$5.2 billion in property taxes over the lifespan of the 
pipeline. From $100 million to $600 million in economic impact 
to the Gulf Coast and the midwest.
    Now, we have seen particularly the economic strain that has 
gone in the Gulf Coast, particularly recently. The economic 
strain on our entire nation is undergoing. The situation with 
job creation in this country and infrastructure and personal 
income, unemployment.
    I wonder why is it that anyone would try to hesitate or 
place obstacles or in any way try to impede this pipeline which 
would immediately help increase the domestic oil supply which 
is a key goal announced by President Obama just recently. What 
am I missing in terms of why this administration or others 
would try to impede development.
    I will go with Mr. Goldwyn, Mr. Pugliaresi.
    Mr. Goldwyn. Thank you, Congressman. First, I think it's 
important to note that the Congress requires that for a cross-
border pipeline that the Department of State assess the 
environmental impacts of that, open it for public comment, take 
those comments, evaluate them, and then issue a final 
environmental impact statement.
    This is the process which the Congress has required and 
that is what the State Department is going through right now. 
Subsequent to that assessment they make a national interest 
determination about whether considering environmental and other 
concerns whether this has been done appropriately. They went 
through this process with the Alberta Clipper pipeline and 
others and it is always the subject of controversy. It is 
always the subject of litigation.
    The Department is being, I think, extremely careful to make 
sure that everyone has an opportunity to be heard and that new 
issues that were raised in the environmental impact process are 
fairly considered and now described and disclosed to the public 
so they have an opportunity to comment.
    It is not obstruction. It is an abundance of caution. I 
would say we have learned important things in the draft EIS 
process. One was that there were comments on ways to improve 
the safety of the pipeline. Those comments were taken and the 
design of the pipeline was changed.
    The other is that the Department of Energy commissioned a 
study because they believed that these environmental impacts of 
the pipeline would not take place if we didn't permit this 
pipeline so, therefore, we would be at fault. It would be our 
responsibility that if we would only not permit this pipeline, 
then perhaps these emissions would not take place. They 
commissioned an extremely thorough study by ENSYS.
    What the result of that study came to is that the 
environmental impacts of oil sands production will take place 
whether or not we permit this pipeline. While it is intuitively 
obvious, it has now been validated. That is because Canada will 
produce this oil whether we take it by pipeline or not. It will 
move by rail. It will move by truck.
    Mr. Rivera. Mr. Goldwyn, I only have 1 minute left of my 
time and I want to respect the time for my colleagues on the 
dias.
    Mr. Pugliaresi, would you like to weigh in as well?
    Mr. Pugliaresi. I think we often present ourselves with a 
false choice. We think if we would just have electric cars, we 
wouldn't need this Canadian oil. But there is no study that 
suggest we will not be importing oil. At the margin we can 
address the true energy security problem with concentration of 
low-cost reserves in unstable parts of the world.
    To the extent we can proliferate supplies outside those 
unstable places like Canada, we get direct benefits. Other 
producers will be unable to extract high rents from us because 
there will be more supply and the world will be less subject to 
volatility. We need to proliferate supplies from safe parts of 
the world and this is a great strategy to do it.
    Finally, I would like to say is that although we saw those 
pictures of the open mining, Canadians are moving to an in situ 
process which is much less disturbing of the surface of the 
earth.
    Mr. Rivera. Thank you.
    Mr. Chairman, I would suspect we should be expediting this 
process rather than putting any impediments but I yield back.
    Mr. Mack. Thank you.
    Now I would like to recognize Mr. Sires for 5 minutes for 
questions.
    Mr. Sires. Thank you, Mr. Chairman.
    Mr. Symons, I would assume that you don't believe that 
Canada has enough environmental regulation to minimize the 
environmental impact of tar sands extraction.
    Mr. Symons. That is true. Alberta has basically teamed up 
with the oil industry and is not listening to the communities 
in the area in enforcing environmental regulations. They are 
not reclaiming this land. It is hard to reclaim, frankly, a 
forest when you tear it up. You can't pull apart an ecosystem 
and put it back together.
    Mr. Sires. My concern is that if we don't move in, China is 
going to move in.
    Mr. Symons. Yes.
    Mr. Sires. If we don't move into the Western Hemisphere, 
China moves in.
    Mr. Symons. Right.
    Mr. Sires. I keep saying to people when I was in Columbia 
and the president of one of the most prestigious universities 
said to me that the second most studied language in Columbia 
today is Mandarin.
    Mr. Symons. Right.
    Mr. Sires. So, you know, sometimes we have to make a 
difficult decision.
    Mr. Symons. Sure. I understand that. This idea that Canada 
is sort of holding a gun to our head and saying, ``If you don't 
take our pipeline, we'll take it somewhere else'' is another 
one of the myths that the oil industry is perpetuating here.
    We already have more than enough pipeline to take all the 
oil Canada can produce into the U.S., according to Canadian 
petroleum industry, and according to the Department of Energy 
all the way through 2025. We have the pipeline to bring it 
here. It's coming to the midwest and keeping gas prices down in 
the midwest. They want to get it to a port where they can 
export it.
    Mr. Sires. But it is not so much the pipeline. It is the 
extraction of this that you are concerned about.
    Mr. Symons. Well, it is actually the pipeline because, 
unfortunately, the pipelines that were improved like the 
Alberta Clipper recently led to this huge spill in the 
Kalamazoo River that still has the river closed, that led to a 
lot of health problems and the pipeline rules have not been 
updated because this particular type of tar sands oil is 
corrosive and our pipeline laws----
    Mr. Sires. I just heard Mr. Goldwyn say there are 45 that 
go through Nevada? I am sorry. Who said that? Somebody said 
that before?
    I am sorry. I can't hear you.
    Mr. Goldwyn. Yes, there are 3,000 miles of hazardous waste 
pipeline but overall there is something like 21,000 miles of 
pipeline crossing Nebraska all together and 3,000 of those are 
hazardous waste. There you go. You can see it is a pretty dense 
web there.
    But there are also precautions to take with this particular 
pipeline to be able to isolate it. There are things underneath 
the surface and it is of a higher tensile strength than any 
pipeline, or as good as any pipeline built in the U.S.
    Mr. Sires. And I have a question regarding the refineries 
that Venezuela owns and that Saudi owns. Of the oil refined in 
those refineries, how much is consumed domestically?
    Mr. Pugliaresi. Well, we do export some product. A lot of 
product is exported to Canada but that's largely logistics. In 
other words, we actually----
    Mr. Sires. I am talking about the refineries down in Texas.
    Mr. Pugliaresi. The refineries in the Gulf Coast I think 
last year we exported almost 500,000 barrels a day of 
distillate.
    Mr. Sires. What percentage is that?
    Mr. Pugliaresi. It is a very small percentage.
    Mr. Symons. We export from the Gulf Coast more oil than we 
import from Canada.
    Mr. Sires. That is not my question. My question is of the 
oil refined how much of that is consumed domestically and how 
much of that is exported?
    Mr. Pugliaresi. We are consuming well over 90 percent of 
the oil that we process in this country. Keep in mind the scare 
resource is not the refiners. The scare resource is the crude 
oil. That is the product we want to maximize production of.
    Mr. Sires. And there are not many places that Venezuelan 
oil can be refined. Is that my understanding?
    Mr. Pugliaresi. That is right. That is right.
    Mr. Sires. Because of the type of oil that it is.
    Mr. Pugliaresi. Exactly.
    Mr. Sires. Is this oil from Canada the same type of oil as 
Venezuela?
    Mr. Pugliaresi. It has similar characteristics.
    Mr. Sires. There are not that many refineries around that 
can refine this oil.
    Mr. Pugliaresi. Of course, people can build such 
refineries.
    Mr. Sires. Yes, but that would take years.
    Mr. Pugliaresi. It is finding new supplies of oil that is 
hard. Absolutely.
    Mr. Symons. But it won't displace. I mean, the purpose of 
this oil is to fill the capacity that has already been vacated 
by Venezuela and other producers and to fill new capacity that 
is being built by Saudi Arabia and others. Valero is the 
company that has bought into this pipeline.
    It was their CEO that said that week that they are moving 
to exports from those Texas refineries. That is the future. It 
is a massive growth that is happening there. It is hard to 
believe because we import so much crude but oil companies are 
global companies and they are just focused on profits. It 
doesn't matter where the oil is. It is their oil, not our oil.
    Mr. Sires. But if we refine it here and we consume it here.
    Mr. Symons. Yes.
    Mr. Sires. You are saying we are not going to be doing 
that. You are saying we will refine it here and export it.
    Mr. Symons. Absolutely. We will get a good portion of that 
oil because we will pay through the nose for it like we are now 
paying $2 million more than we did.
    Mr. Goldwyn. We have over 8 million barrels a day of 
refining capacity in the Gulf Coast going to about 9.3. We 
export a small fraction of that. Most of that is refined 
product which goes to the Gulf Coast and southeastern United 
States. That is where the gasoline comes from. We have some of 
the most highly efficient refineries in the world. Canadian oil 
is actually, because it is so heavily discounted, some of the 
cheapest oil.
    If you back out Venezuelan crude, they go shopping around 
the world for other places but they are going to pay that 
transportation cost. The bottom line is the net back to 
Venezuela is smaller and the reliability of Canadian oil will 
enable Gulf Coast refiners to source that oil with Canada and 
those are the shipper commitments that are underlying the 
financing of the pipeline to begin with.
    Mr. Pugliaresi. We have to keep our eye on the ball here. 
The real issue is expanding crude oil production. The refiners 
are important in terms of efficiency of operations, but in 
terms of energy security what we need is more production from 
the United States and more from Canada. We will get a lot of 
value out of that.
    Mr. Sires. Thank you very much.
    Mr. Mack. Thank you.
    Mr. Payne, you are recognized for 5 minutes for questions.
    Mr. Payne. Thank you very much.
    The whole question of consumption of fuel is something that 
has been on the table for a long time. Let me just ask, Mr. 
Symons, 25 mayors addressed a letter to Secretary Clinton last 
week expressing their grave concern about the prospects of 
expanded imports of tar sand oil from canada.
    The mayors indicate fears over increasing dependence on 
high-carbon fuel for decades to come at a time when local 
governments are working hard to decrease dependence on oil. The 
mayors believe that expansion of high-carbon projects such as 
the proposed Keystone tar sands pipeline will undermine the 
work being done in the local communities across the country to 
fight climate change and reduce our dependence on oil.
    Would you comment on how this pipeline would affect such 
efforts in your opinion and will the small communities be 
hampered in their efforts to build clean energy economies?
    Mr. Symons. Well, thank you for the question. First of all, 
everybody has to do everything they can to reduce emissions and 
deal with the important threat of climate change. Mayors have 
been leading the way and should, regardless of what happens, 
continue to lead the way.
    But buying into a 50-year pipeline for oil that is three 
times the greenhouse gas emissions of conventional oil makes a 
mockery of the efforts that we all are pursuing to reduce our 
own emissions, pursue clean energy here at home. Canada agreed 
internationally and signed an agreement to reduce their 
greenhouse gas emissions and they have completely ignored.
    Not only will their emissions go up but Canada is 
undermining the value of global cooperation through technology 
and other pieces on addressing the important threat of climate 
threat, protecting our environment for our kids' future.
    Mr. Payne. That leads me to my second question as you 
mention that. Most people recognize that tar sand oil 
production puts more greenhouse gases into the atmosphere than 
the extraction of conventional oil. Some contend, however, that 
the environmental impact of the means of producing Canadian oil 
is a Canadian issue.
    Others say that the global warming recognizes no boundaries 
and if we are going to use oil, which is produced through a 
method which generates excessive carbon dioxide, we are 
responsible as the Canadians. With that argument do you agree 
and why?
    Mr. Symons. I think you can apply a common sense test here 
in raising your own kids. Right? I mean, if your kid said, 
``Well, yeah. I participate in this but someone else actually 
is the one that did it. I encouraged them to do it,'' we 
wouldn't say, ``Oh, that's okay then.'' We are part of this, 
too, and we have a say in this.
    You get back to the fact that this pipeline is about 
profits. It is about raising gas prices in the midwest by 10 to 
20 cents a gallon, particularly on midwest farmers. The 
National Farmers Union is stepping forward raising concerns 
about the pipeline safety. It is not just environmentalists 
that are interested in what happens to a water supply.
    I am sure they will take exception to the fact we should 
build this pipeline just because farmers are out there farming. 
We need to look at the common sense test of whether or not this 
is a project that we should permit and say is in the national 
interest because once that happens, once the State Department 
issues that permit, then foreign energy companies come in and 
bully landowners with the threat of eminent domain.
    In fact, TransCanada has documented stories and press 
reports throughout the country threatening landowners and 
otherwise bullying them on this. It is an important decision. 
The government has a responsibility to get it right.
    Mr. Payne. We do hear this question of energy. We use 
nuclear and we say that it is safe today and, of course, Japan 
goes up. I asked the question a couple of weeks ago at a 
conference out of the country, ``What are you going to do about 
spent fuel?'' ``Don't worry about it. Not a problem. Got it 
contained.'' Look at Japan.
    We look at our good friends in Canada, and they are our 
greatest allies. However, I guess making a buck is making a 
buck. If the price of oil goes up coming from Saudi Arabia and 
Bahrain is up in flames and Libya, they say, ``Hey, might as 
well jack up the price and stick it to our American friends 
because, hey, that's business.''
    You know, you have a fiduciary responsibility to your 
stockholders. You know, with friends like that, who needs 
enemies? I just think that this whole picture has to be looked 
at a little bit more carefully. Water is being destroyed. I 
don't have the answer. That is for sure.
    One thing we have to talk about is conservation. We don't 
talk about the sacrifice. Everybody has--my time has expired, 
but especially down in Florida, the air conditioners are up 
very high in the summer. I mean, we have to learn how we are 
going to consume energy. With that, I will yield back.
    Mr. Mack. Thank you, Mr. Payne. I invite you to come spend 
the month of August in Florida. If you would like, I will turn 
the air conditioning off and see how that goes.
    If you all wouldn't mine, I think we have another round of 
questions. We appreciate your patience.
    Mr. Goldwyn, I want to get to this issue a little bit about 
some of the environmental concerns. A couple times you have 
mentioned how because of input of this pipeline, how it has 
evolved in that the strength of this pipeline, I don't know if 
you would say is kind of leading the way or equal to the 
strongest or how you would say it but it is hard to believe 
that with all of the attention that has been put on this 
pipeline and the concerns that the environmentalists continue 
to have that somehow this pipeline is going to be built in such 
a way that it is going to have a negative impact on the 
environment.
    Mr. Goldwyn. Thank you, Mr. Chairman. In the process of 
permitting the pipeline the questions come up how much pressure 
will the pipeline hold and what will the materials be that it 
is made of. Comments came in that suggested that if you lowered 
the pressure, then the kind of steel that the pipeline is being 
built with would be safer.
    It would be less subject to pressure or disruption. They 
took those comments. I think there are two issues. One is the 
quality of the steel, which I think has now been required to be 
at the highest level. The second is the pressure with which the 
pipeline will be operated. I think the lowering of the pressure 
is what has added to the safety.
    Then you have our own responsibility in the United States, 
the Department of Transportation, to monitor and inspect. As we 
have learned in other places, our responsibility doesn't stop 
when the pipeline gets built. You have to watch it and so we 
will have that responsibility also. I think the extensive 
comment on this has significantly improved the design of the 
pipeline. It is among the best that we have crossing--would it 
be permitted that we have crossing the U.S.
    Mr. Pugliaresi. Yes, Mr. Chairman. First, the pipeline 
owners have no desire to have that pipeline fail, I assure you. 
They have very, very detailed specifications on the sand 
content and the material content. They will not accept crude 
that does not meet those specifications. There is a long 
history of monitoring this quite closely.
    Mr. Mack. Thank you. Then, if I could, we will start with 
you, Mr. Goldwyn. I want to get back to this issue because what 
bothers me about this discussion is somehow we are led to 
believe that it's not safe and I don't think that is the case. 
And that because of the environmental issues in Canada, we 
shouldn't bring that oil here into the United States and that 
somehow Chavez would benefit from that oil coming to the United 
States because of his refineries.
    Maybe you could talk a little bit about that. Isn't this 
really a win for America and our security, both economic and 
national security, and not having to continue to prop up a 
thugocrat like Hugo Chavez?
    Mr. Goldwyn. I think on many levels, Mr. Chairman, the 
permitting of this pipeline dramatically enhances U.S. national 
and energy security. There is just no question about source of 
supply that close and the ability to displace oil from other 
places through a direct pipeline dramatically enhances our 
energy security. It is a global market but having the oil 
delivered makes a big difference.
    We do have a responsibility as consumers and under the law 
to assess whether our decision to permit the pipeline will 
cause adverse environmental consequences, so careful study has 
been done on that. This is really, I think, the key point.
    These emissions, however you consider them, will take place 
whether we permit this pipeline or not, so it is not a question 
that if we don't permit it, you are not going to have these 
consequences in Canada. I think that was an important question 
and that has been determined by the Department of Energy's 
ENSYS study. But Canadians also do care about these issues.
    It is not just Americans. In my testimony I detail things, 
at the national and the provincial and also the commercial 
level, that are taking place and the level of regulation has 
stepped up. ERCB is a great regulator. They have a lot of 
people that feel they are good at what they do. They are on 
this and I think it is worth perhaps having those things in the 
record to understand that Canada is taking this seriously and 
not just because we care.
    Mr. Mack. But do you think that--this is foreign affairs, 
Western Hemisphere. This should be pretty simple to answer, but 
do you think that it is in our best interest to buy this oil, 
this heavy crude, from Hugo Chavez or from Canada?
    Mr. Goldwyn. We have a choice where the rents go and I 
think if we have a choice to pay the rents to Canada where they 
will be recycled and traded with the government that is our 
close ally and partner, that is the place to put it.
    Mr. Mack. Thank you.
    I would now like to recognize Mr. Engel for 5 minutes for 
questions.
    Mr. Engel. Thank you, Mr. Mack. That was a loaded question.
    Two things before I ask the questions. First of all, I want 
to thank you for putting up my amendment before marking it up 
when I wasn't here. Secondly, I just wanted to comment given 
your pedigree, that today is the first day of baseball season 
and here we are sitting at this hearing so something is wrong 
with that. I don't know.
    Anyway, gentlemen, will any of this oil go to the 
northeast? Find its way to the northeast?
    Mr. Pugliaresi. Well, what we want to do is have this oil 
moved through the system as efficiently as possible. This oil 
itself may not move to the northeast but it could displace the 
movement of other supplies to make greater access to northeast 
refiners. I don't think that is really that important an issue. 
The real important issue is how do we improve the whole 
distribution of feedstock throughout the American economy.
    Mr. Symons. The real question there is where is the oil 
coming from. You are actually hearing, if you listen closely, 
people are kind of having it both ways, ``Oh, we are going to 
get more oil from Canada,'' as in Canada is going to produce 
more oil. The fact is they are not. This oil is going to come 
from the pipelines where it is already going into the midwest, 
much closer, of course, to the northeast. It is going to go all 
the way down to Texas.
    Then it has to work its way back up. Why would oil 
companies spend $12 billion to build a pipeline to take it 
further away to take it back up? Well, they are going to be 
able to charge more because once they get it out of the midwest 
to a deep water port, they can send it anywhere and charge 
higher prices.
    Those higher prices are what are going to fill the coffers 
of Chavez at the end of the day because Canadian oil is one of 
the most expensive oils in the world to produce. If we bet on 
it for 50 years, we are betting on high oil prices and that is 
going to make Chavez rich.
    Mr. Goldwyn. Can I respond to your question? I have the 
statistics, actually on the exports. I was digging for them. I 
think the more relevant question is whether the products come 
to the northeast because the oil goes to the refining centers 
and those we know refine something like 8.1 million barrels a 
day.
    Net exports of petroleum products in 2009, which are the 
figures that I have, were about 400,000 barrels a day. The oil 
comes to this huge refining center. They make gasoline and 
other products and those products go to the southeast. Some of 
those product pipelines go north.
    The question of whether or not the actual gasoline that is 
made at a Gulf Coast refinery goes there has more to do with 
how much New Jersey is refining and providing and how much 
demand there is in New York. But the idea is that more product 
lowers gasoline prices for the country as a whole. Having our--
they are the cheapest refineries, the most efficient 
refineries.
    While Canadian oil is among the most expensive to produce, 
it is among the cheapest for refiners to acquire. Way cheaper 
than light sweet crudes from Saudi Arabia importing from 
Nigeria. If they don't refine that product either from 
Venezuela or from Canada, they are going to buy higher grades 
from other places so we are going to refine it. We are just 
going to pay more.
    Mr. Engel. Mr. Goldwyn, let me ask you something in 
relation to a comment you made before. You said that 
TransCanada has changed the specifications for the pipeline and 
has made it safer and made it better. I am happy, obviously, 
about that. What does this say about the safety of existing 
pipelines from Canada, because obviously this route is going to 
be different. Should we worry about the existing pipelines? Do 
those need to be changed?
    Mr. Goldwyn. Well, the determination of what specifications 
need to be in the pipeline has to go with how big the pipe is, 
how much pressure it is, and where it is transiting. 
Essentially TransCanada was asked to raise the standards of the 
pipeline to an extent that the entire pipeline is treated as if 
all of it were in highly environmentally sensitive areas. It is 
sort of above standard but they agreed to do that.
    I don't know a lot about the specifications for existing 
pipelines, but I think should we pay attention to the 
Department of Transportation's capacity and resources to 
inspect and monitor the pipeline system? Absolutely. Like 
building regulatory capacity every place else. It is something 
that Congress should support.
    Mr. Engel. Thank you. Let me mention one of Mr. Mack's 
favorite people, Hugo Chavez. You mentioned him before, Mr. 
Symons. Chavez is a bad guy and we need to do everything we can 
to put pressure on Chavez and to reduce his oil revenues. 
Supporters of the Keystone XL pipeline contend that the oil it 
would carry would help push Venezuelan oil--I think you said 
that--from refineries in the Gulf Coast to the U.S. and that 
the Venezuelan oil would have nowhere else to be refined.
    Can someone comment on whether you think construction of 
the Keystone Pipeline will actually push out Venezuelan oil? If 
Venezuelan oil would be displaced by oil from the Keystone 
pipeline, how much would actually be displaced and how fast 
would this happen? And are new refineries being built outside 
of the United States which could handle heavy Venezuelan crude?
    Mr. Symons. Why would Chavez choose Canadian oil over his 
own oil if he didn't have other options? The point is the 
reason that TransCanada says it wants to go to the Gulf Coast 
is because they are increasing refining capacity because Saudi 
Arabia is expanding refining capacity. And because there has 
already been a decline that needs to be filled in Chavez' 
refineries. It is not about forcing them to do anything. It is 
about filling the backlog.
    Mr. Engel. Dr. Sullivan, I know you had your hand up.
    Mr. Sullivan. Yes. That would go back to Mr. Sires' 
question about China. China is actually building refineries to 
use Venezuelan oil and China is building 17 large super tankers 
to bring that oil through the Panama Canal which China is, part 
of, widening and deepening.
    So things are changing in the east as we are talking about 
the west. China is also looking at a pipeline going from 
Alberta tar sands to the west coast of Canada to export the tar 
sands oil to China. There is a direct competition going on 
here.
    Mr. Engel. Let me ask you this and I will make this my last 
question because I know I am really over here, involving China. 
Robert Jones, who was a TransCanada executive in charge of the 
Keystone project, said during a conference call on Tuesday that 
the fate of the Keystone expansion will have, and I quote him, 
``no impact on oil sands production'' because he contends that 
the U.S. blocks the flow of more oil sand south.
    It will just go overseas to one of the pipelines proposed 
to bring oil to China and other Asian markets. Is this a 
statement of concern? How would increased exports of Canadian 
oil to China affect our country? Does China have the refining 
capacity to receive the heavy Canadian bitumen? And are they 
building additional refining?
    Let me add: What is the marginal additional cost per barrel 
of shipping oil to China versus sending it by pipeline to the 
U.S.? What price per barrel does oil have to reach for exports 
of Canadian tar sand oil to China to make financial sense? It 
is all about China.
    Dr. Sullivan.
    Mr. Sullivan. If we could take a look at the transport 
charges, which brings up an important thing here also for us. 
If oil is being shipped by tanker it has to go through the 
market-based pricing of oil tankers which has been all over the 
map in the last 5 years. At the height of the price of oil and 
demand for oil in the world in 2008, third quarter, it was 
$90,000 a day to rent one of these super tankers.
    Now it is down to about $25,000 a day. It is very unstable. 
The price of sending oil along a pipeline will be regulated by 
the Canadian regulators and our FERC, essentially locking it in 
for a while. Yes, the Chinese are building capacity to use this 
sort of oil. They need this kind of oil. They need oil from all 
over the world. They are growing at 7 to 9 percent.
    Hu Jintao, when asked by our previous President George Bush 
what kept him up at night, his answer was 25 million jobs. They 
have to create 25 million jobs every single year. Now the 
question goes to, and this is rather complicated, do we want 
them to have the 25 million jobs? I think the answer is 
probably in the main part yes because we don't want instability 
in China and what that could bring to us.
    Mr. Engel. Mr. Symons had his hand up.
    Mr. Symons. Thank you. Let me just say the idea of the 
Canadian western route to get to China, the Canadian people are 
rejecting it because of the results. They know what is in the 
results of this report by Pipeline Safety Trust and others that 
Alberta pipeline spills are 16 times as common as spills down 
here because harsh sands oil is not like conventional crude and 
it is much more dangerous to transport by pipeline.
    Think about the question you are asking before we all stand 
up and sing the Canadian national anthem. Canada is threatening 
and blackmailing us with that. Canadian oil companies are 
holding a gun to our head. Think about that before we make a 
50-year bet that Canada is going to be our friend with oil.
    Mr. Pugliaresi. I think there is a more basic point that we 
shouldn't lose track of. We have a long experience with the 
Canadians. We have been importing oil from Canada for a long 
time. We export products to Canada.
    If we deny this pipeline, we change all expectations on 
that relationship. The market, the buyers and sellers, the 
whole political establishment, expects a relationship with the 
U.S. and Canada to continue the way it has in the past because 
it is good for both sides.
    One of the big benefits of approving this pipeline is that 
the existing relationship is now reaffirmed, that it is going 
to continue. Canada can safely produce more oil and that the 
American market will continue to be open to them. That is a 
central point that we shouldn't lose track of.
    Mr. Mack. Thank you very much. I want to thank the panel 
for your testimony today. I thought it was a very good 
conversation. Even though you might have felt outnumbered, you 
held your own. I don't agree, as you can imagine.
    I think when it comes to our national security and economic 
security, the simple question of should we be buying this heavy 
crude from Venezuela or should we be buying it from Canada, the 
answer is self evident. It doesn't take scholars to come up 
with the right answer.
    Thank you all for being here and the meeting is now 
adjourned.
    [Whereupon, at 4:38 p.m., the subcommittee was adjourned.]
                                     

                                     

                            A P P E N D I X

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     Material Submitted for the Hearing RecordNotice deg.



                               Minutes deg.

                               
                               
                               
                               
                               Mack statement deg.
                               __________

                               
                               
                               
                               
                               Council of the Americas deg.
                               __________
   Material submitted for the record by the Honorable Connie Mack, a 
  Representative in Congress from the State of Florida, and chairman, 
                 Subcommittee on the Western Hemisphere







                               Engel FTR deg.__

 Material submitted for the record by the Honorable Eliot L. Engel, a 
         Representative in Congress from the State of New York











                               Mack QFRs deg._

                               
                               
                               
                               
                                 
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