[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




 
    OVERSIGHT HEARING ON THE U.S.-MEXICO TRANSBOUNDARY HYDROCARBON 
AGREEMENT AND STEPS NEEDED FOR IMPLEMENTATION; AND LEGISLATIVE HEARING 
   ON H.R. 1613, OUTER CONTINENTAL SHELF TRANSBOUNDARY HYDROCARBON 
                     AGREEMENTS AUTHORIZATION ACT

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

                   OVERSIGHT AND LEGISLATIVE HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                        Thursday, April 25, 2013

                               __________

                           Serial No. 113-13

                               __________

       Printed for the use of the Committee on Natural Resources



         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov
      


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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
            EDWARD J. MARKEY, MA, Ranking Democratic Member

Don Young, AK                        Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F. H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Tom McClintock, CA                   Jim Costa, CA
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Cynthia M. Lummis, WY                    CNMI
Dan Benishek, MI                     Niki Tsongas, MA
Jeff Duncan, SC                      Pedro R. Pierluisi, PR
Scott R. Tipton, CO                  Colleen W. Hanabusa, HI
Paul A. Gosar, AZ                    Tony Cardenas, CA
Raul R. Labrador, ID                 Steven A. Horsford, NV
Steve Southerland, II, FL            Jared Huffman, CA
Bill Flores, TX                      Raul Ruiz, CA
Jon Runyan, NJ                       Carol Shea-Porter, NH
Mark E. Amodei, NV                   Alan S. Lowenthal, CA
Markwayne Mullin, OK                 Joe Garcia, FL
Chris Stewart, UT                    Matt Cartwright, PA
Steve Daines, MT
Kevin Cramer, ND
Doug LaMalfa, CA
Vacancy

                       Todd Young, Chief of Staff
                Lisa Pittman, Chief Legislative Counsel
               Jeffrey Duncan, Democratic Staff Director
                David Watkins, Democratic Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                       DOUG LAMBORN, CO, Chairman
                RUSH HOLT, NJ, Ranking Democratic Member

Louie Gohmert, TX                    Steven A. Horsford, NV
Rob Bishop, UT                       Matt Cartwright, PA
Rob Wittman, VA                      Jim Costa, CA
Paul C. Broun, GA                    Niki Tsongas, MA
John Fleming, LA                     Jared Huffman, CA
Glenn Thompson, PA                   Alan S. Lowenthal, CA
Cynthia M. Lummis, WY                Peter A. DeFazio, OR
Dan Benishek, MI                     Tony Cardenas, CA
Jeff Duncan, SC                      Raul M. Grijalva, AZ
Paul A. Gosar, AZ                    Colleen W. Hanabusa, HI
Bill Flores, TX                      Joe Garcia, FL
Mark E. Amodei, NV                   Vacancy
Steve Daines, MT                     Vacancy
Kevin Cramer, ND                     Edward J. Markey, MA, ex officio
Doc Hastings, WA, ex officio


                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, April 25, 2013.........................     1

Statement of Members:
    Duncan, Hon. Jeff, a Representative in Congress from the 
      State of South Carolina....................................     6
        Prepared statement of....................................     7
        Chart submitted for the record...........................     9
    Holt, Hon. Rush, a Representative in Congress from the State 
      of New Jersey..............................................     3
        Prepared statement of....................................     5
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Beaudreau, Hon. Tommy P., Acting Assistant Secretary for Land 
      and Minerals Management, U.S. Department of the Interior...     9
        Prepared statement of....................................    11
        Response to questions submitted for the record...........    13
    Groves, Steven, Bernard and Barbara Lomas Senior Research 
      Fellow, Margaret Thatcher Center for Freedom, The Heritage 
      Foundation.................................................    39
        Prepared statement of....................................    41
    Manuel, Athan, Director, Lands Protection Program, Sierra 
      Club.......................................................    48
        Prepared statement of....................................    49
    Milito, Erik, Group Director, Upstream and Industry 
      Operations, American Petroleum Institute...................    28
        Prepared statement of....................................    29
    Pascual, Ambassador Carlos, Special Envoy and Coordinator for 
      International Energy Affairs, Bureau of Energy Resources, 
      U.S. Department of State...................................    14
        Prepared statement of....................................    15
        Response to questions submitted for the record...........    17
    Simmons, Daniel R., Director of Regulatory and State Affairs, 
      Institute for Energy Research..............................    30
        Prepared statement of....................................    32

                                     



   OVERSIGHT HEARING ON THE ``U.S.-MEXICO TRANSBOUNDARY HYDROCARBON 
   AGREEMENT AND STEPS NEEDED FOR IMPLEMENTATION''; AND LEGISLATIVE 
     HEARING ON H.R. 1613, ``OUTER CONTINENTAL SHELF TRANSBOUNDARY 
               HYDROCARBON AGREEMENTS AUTHORIZATION ACT''

                              ----------                              


                        Thursday, April 25, 2013

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to notice, at 10:04 a.m., in 
Room 1324, Longworth House Office Building, Hon. Doug Lamborn 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Lamborn, Wittman, Thompson, 
Duncan, Daines; Holt, Horsford, Costa, Grijalva, and Garcia.
    Mr. Lamborn. The Committee will come to order. The Chairman 
notes the presence of a quorum, which, under Committee Rule 
3(e), is two members. The Subcommittee on Energy and Mineral 
Resources is meeting today to hear testimony on an oversight 
and legislative hearing on, ``U.S.-Mexico Transboundary 
Hydrocarbon Agreement and Steps Needed for Implementation.''
    We also have a legislative hearing on H.R. 1613, 
Representative Duncan of South Carolina and Hastings of 
Washington, and Salmon of Arizona, ``Outer Continental Shelf 
Transboundary Hydrocarbon Agreements Authorization Act.''
    Under Committee Rule 4(f), opening statements are limited 
to the Chairman and Ranking Member of the Subcommittee. 
However, I ask unanimous consent to recognize the author of 
H.R. 1613, Mr. Duncan of South Carolina, for 5 minutes to give 
an opening statement.
    [No response.]
    Mr. Lamborn. Hearing no objections, so ordered.
    I also ask unanimous consent to include any other Members' 
opening statements in the hearing record, if submitted to the 
Clerk by close of business today.
    [No response.]
    Mr. Lamborn. Hearing no objection, so ordered. I now 
recognize myself for 5 minutes.

    STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Mr. Lamborn. I would like to thank everyone for attending 
our hearing today. The Subcommittee is meeting to provide 
oversight on issues surrounding the U.S.-Mexico maritime 
boundary and the development of shared hydrocarbon reservoirs 
in the Gulf of Mexico. We are also conducting a legislative 
hearing to discuss the gentleman from South Carolina, Mr. 
Duncan's bill, H.R. 1613, which enacts the U.S.-Mexico 
Transboundary Hydrocarbon Agreement, and provides greater 
guidance on how those agreements should be enacted in the 
future.
    The current absence of legal certainty around hydrocarbon 
reservoirs that may overlie our maritime boundary with Mexico 
in the Gulf has prevented the Administration from leasing, and 
U.S. companies from exploring and developing these energy 
opportunities to bring more energy to market. In addition, due 
to the lack of an agreement with Mexico, there is currently a 
moratorium on exploration and development for 1.4 miles on 
either side of an area of the boundary known as the Western 
Gap.
    As you are aware, under the Obama Administration roughly 85 
percent of our Nation's Outer Continental Shelf is closed to 
exploration and development, at significant cost to our 
Nation's energy and economic security. This Committee has long 
supported opening far more substantial acreage to exploration, 
yet the Administration has dragged its feet. This acreage along 
our maritime boundary with Mexico seems to be one area where we 
can agree that exploration and development can and will happen, 
pending the approval of an agreement that clearly delineates 
how any hydrocarbon resources that straddle our two Nations' 
borders should be developed fairly and safely.
    In 2012, after many years of discussion, then-Secretary of 
State Hillary Clinton and her Mexican counterpart signed an 
agreement on how to explore, develop, and share revenue from 
transboundary hydrocarbons, lifting the ongoing moratorium in 
the Gap area, and the de facto moratorium along the boundary. 
This Agreement, if implemented correctly, is a rare opportunity 
to expand U.S. energy production, create new American jobs, and 
grow our economy by opening new areas to oil and natural 
resources development.
    I am deeply disappointed that it has taken the 
Administration more than a year since the Agreement was signed 
to finally transmit to Congress something for us to consider. 
The full Committee Chairman and I have both been supportive of 
enacting this Agreement, and we have been patient in waiting 
for the Administration to send language up to the Hill.
    Although we were harshly criticized by the then-Secretary 
for not acting, we were and remain committed to acting on this 
issue. This is made clear by the fact that it was less than 5 
weeks ago when the Administration finally submitted some 
information to Congress. And here we are, taking action today.
    We must approach this hearing remembering that approval of 
this Agreement sets an important precedent for other similar 
transboundary hydrocarbon agreements that we may arrive at with 
other nations. It is important that we get it right, so that we 
may, along with our ally, Mexico, set an example on how 
together we may foster the shared goal of developing our 
Nation's Outer Continental Shelf for economic prosperity and 
energy security.
    [The prepared statement of Mr. Lamborn follows:]

          Statement of The Honorable Doug Lamborn, Chairman, 
              Subcommittee on Energy and Mineral Resources

    I'd like to thank everyone for attending our hearing today. The 
Subcommittee is meeting to provide oversight on issues surrounding the 
U.S.-Mexico maritime boundary and the development of shared hydrocarbon 
reservoirs in the Gulf of Mexico. We are also conducting a legislative 
hearing to discuss the gentleman from South Carolina, Mr. Duncan's 
bill, H.R. 1613, which enacts the U.S.-Mexico Transboundary Hydrocarbon 
Agreement and provides greater guidance on how these agreements shall 
be enacted in the future.
    The current absence of legal certainty around hydrocarbon 
reservoirs that may overlie our maritime boundary with Mexico in the 
Gulf has prevented the Administration from leasing and U.S. companies 
from exploring and developing these energy opportunities to bring more 
energy to market. In addition, due to the lack of an Agreement with 
Mexico, there is currently a moratorium on exploration and development 
for 1.4 miles on either side of an area of the boundary known as the 
`western gap'.
    As you are aware, under the Obama Administration, roughly 85% of 
our nation's Outer Continental Shelf is closed to exploration and 
development, at significant cost to our nation's energy and economic 
security. This Committee has long supported opening far more 
substantial acreage to exploration, yet the Administration has dragged 
its feet. This acreage along our maritime boundary with Mexico seems to 
be one area where we can agree that exploration and development can and 
will happen--pending the approval of an agreement that clearly 
delineates how any hydrocarbon resources that straddle our two nation's 
borders should be developed fairly and safely.
    In 2012, after many years of discussion, then-Secretary of State 
Clinton and her Mexican counterpart signed an Agreement on how to 
explore, develop and share revenue from transboundary hydrocarbons, 
lifting the ongoing moratorium in the Gap area and the defacto 
moratorium along the boundary. This Agreement, if implemented 
correctly, is a rare opportunity to expand U.S. energy production, 
create new American jobs, and grow our economy by opening new areas to 
oil and natural resources development.
    I am deeply disappointed that it has taken that Administration more 
than a year since the agreement was signed to finally transmit to 
Congress something for us to consider. The Full Committee Chairman and 
I have both been supportive of enacting this agreement and we have been 
patient in waiting for the Administration to send language up to the 
Hill. Although we were attacked by the Secretary for not acting, we 
were and remain committed to acting on this issue. This is made clear 
by the fact that it was less than 5 weeks ago when the Administration 
finally submitted information to Congress, and here we are acting 
today.
    We must approach this hearing remembering that approval of this 
Agreement sets an important precedent for other similar transboundary 
hydrocarbon agreements that we may arrive at with other nations. It is 
important that we get it right so that we may, along with our ally 
Mexico, set an example on how together we may foster the shared goal of 
developing our nation's outer continental shelf for economic prosperity 
and energy security.
                                 ______
                                 
    Mr. Lamborn. I would now like to recognize the gentleman 
from New Jersey.

 STATEMENT OF THE HON. RUSH HOLT, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF NEW JERSEY

    Dr. Holt. I thank the Chair. I want to begin by saying 
welcome to the witnesses. And I think it is a good thing that 
the Majority is seeking to move legislation that would allow 
the Department to go forward with implementing the Agreement 
with Mexico that was brokered more than a year ago. We may have 
some specific concerns with details in the legislation, but I 
look forward to working with the Majority to address this bill 
and the issues of this bill as it moves through the process. We 
should seek to give the Department of the Interior the 
authority needed and requested to move forward to implement the 
Agreement.
    However, I think it is important to put this bill in the 
larger context, and to speak about what we are not doing. Last 
Saturday was the third anniversary of the BP Deepwater Horizon 
disaster. The BP spill, one of the worst environmental 
disasters in American history, it cost 11 lives and more than 4 
million barrels of oil spilled into the Gulf, costing the 
livelihood of residents of the Gulf to the tune of many 
billions of dollars. And what have we done in this Committee to 
respond to that disaster and to ensure that nothing like it 
ever happens again in the Gulf waters, which we will be talking 
about today? Nothing.
    Last Congress wasted countless hours investigating the 
editing of the Administration's 30-Day Safety Report, which 
recommended a temporary moratorium on the drilling, but we 
failed to enact a single piece of legislative reform out of 
this Committee to improve the safety of offshore drilling.
    My friend, our Chair, the gentleman from Colorado, talks 
about his impatience with what he calls the inaction by the 
Administration. I would like to point out that we, Congress, 
this Committee, have not raised the civil penalties that could 
be levied by the Interior Department against oil companies that 
violate the law. To put the absurdity of the current level of 
fines in perspective, the most that BP could be fined by 
Interior for its spill, the worst spill we have ever seen, is 
$21 million. That is for a company that made $12 billion last 
year. That hardly counts as even a slap on the wrist.
    We have not raised the liability cap from $75 million to 
ensure that oil companies are held accountable and that 
taxpayers are not stuck with the bill for cleaning up spills. 
That is why this week I will be reintroducing the Big Oil 
Bailout Prevention Act, legislation that would remove the cap 
on oil spill liability and protect taxpayers from being stuck 
with the bill.
    We have not provided a steady and direct funding stream for 
the Interior Department and other offshore drilling regulators 
to ensure that there is an effective cop on the beat.
    We have not codified the important drilling safety reforms 
that the Interior Department has put in place to ensure that 
they won't be undone by a subsequent Administration.
    We have not even brought in the chief executive officers of 
the largest oil companies to tell Congress and the American 
people what they have done to make offshore drilling safe, to 
tell us what lessons they have learned. The heads of these 
companies should appear before this Committee to answer 
questions that most Americans have. But under this leadership, 
the leadership of this Committee, if you are a top oil company 
executive, evidently CEO stands for Consistently Evading 
Oversight.
    The only response Congress has taken to the BP oil spill 
has been to pass the RESTORE Act to ensure that 80 percent of 
the Clean Water Act fines and penalties will be sent to the 
Gulf Coast. That is certainly valuable for Gulf Coast 
communities, I support that, but it is not nearly enough.
    The entity formed out of the BP Spill Commission recently 
released another report card. So I want to make the point this 
is not just this Member of Congress speaking here. The report 
card assessed or assigned a grade to us and it gave Congress a 
D+, barely passing. That is something we should be ashamed of. 
And our response should be far more comprehensive than this 
bill.
    Representative Markey and I will be reintroducing 
legislation to implement the reforms that were recommended by 
the independent BP Commission, and it is well past time that 
Congress act on that. We owe it to the families, we owe it to 
the workers, we owe it to the taxpayers and everyone in this 
country. I thank the Chair.
    [The prepared statement of Dr. Holt follows:]

         Statement of The Honorable Rush Holt, Ranking Member, 
              Subcommittee on Energy and Mineral Resources

    Thank you.
    Mr. Chairman, I want to begin by saying that I think it is a good 
thing that the Majority is seeking to move legislation that would allow 
the Department to move forward with implementing the agreement with 
Mexico that was brokered more than a year ago. We may have some 
specific concerns with pieces of this legislation that I would look 
forward to working with the Majority to address as this bill moves 
through the process but we should seek to give the Interior Department 
the authority they have requested from the Congress to move forward on 
implementing this agreement.
    However, I think it is important to put this bill in a larger 
context. Last Saturday was the third anniversary of the BP Deepwater 
Horizon disaster. The BP spill was one of the worst environmental 
disasters in American history. Eleven people lost their lives. More 
than 4 million barrels of oil spilled into the gulf. The cost to the 
livelihoods of the residents of the Gulf was in the tens of billions of 
dollars.
    Yet, what have we done in this Committee to respond to that 
disaster and ensure nothing like it ever happens again? We have not 
enacted a single legislative reform out of this Committee to improve 
the safety of offshore drilling.
    We have not raised the civil penalties that can be levied by the 
Interior Department against oil companies that violate the law so that 
they are a meaningful financial deterrent. To put the absurdity of the 
current level of fines in perspective, the most that BP could be fined 
by DOI for its spill--the worst spill we have ever seen--is $21 
million. That is for a company that made $12 billion last year. That 
isn't even a slap on the wrist for an oil giant like BP.
    We have not raised the liability cap from $75 million to ensure 
that oil companies are held accountable and taxpayers are not stuck 
with the bill for cleaning up spills.
    We have not provided a steady and direct funding stream for the 
Interior Department and other offshore drilling regulators to ensure 
that they have the resources they need to be an effective cop on the 
beat.
    We have not codified the important drilling safety reforms that the 
Interior Department has put in place to ensure that they can't simply 
be undone by future Administrations.
    And we have not even brought in the Chief Executive Officers of the 
largest oil companies to tell the Congress and the American people what 
they have done to make offshore drilling safer; to tell us what lessons 
they have learned. The heads of these companies should appear before 
this Committee to answer questions for the American people. But under 
this Republican Congress, if you're a top oil company executive, CEO 
stands for Consistently Evading Oversight.
    The only response the Congress has taken to the BP spill has been 
to pass the RESTORE Act and ensure that 80 percent of the clean water 
act fines and penalties will be sent to the Gulf Coast. That is 
extremely important for the communities of the Gulf Coast but it is not 
nearly enough.
    The entity formed out of the BP Spill Commission recently released 
another report card to assess the response to the spill. It gave 
Congress a D-plus. That is something we should be ashamed of. And our 
response should be far more comprehensive than this bill.
    Representative Markey and I will shortly be reintroducing 
legislation to implement the reforms that were recommended by the 
independent BP Commission. It is well past time that this Congress 
takes action on that legislation. We owe it to the families and the 
workers and the economy of the Gulf.
    I yield back the balance of my time.
                                 ______
                                 
    Mr. Lamborn. I would like to now recognize the gentleman 
from South Carolina for 5 minutes.

STATEMENT OF THE HON. JEFF DUNCAN, A REPRESENTATIVE IN CONGRESS 
                FROM THE STATE OF SOUTH CAROLINA

    Mr. Duncan. Thank you, Mr. Chairman, and thank you for 
holding this hearing today on H.R. 1613, the Outer Continental 
Shelf Transboundary Hydrocarbon Agreements Authorization Act. I 
introduced this bill with my colleagues, Chairman Doc Hastings 
of the Natural Resources Committee, and Chairman Matt Salmon of 
the Foreign Affairs Subcommittee on the Western Hemisphere, and 
I thank them for their leadership and teamwork as we move this 
Agreement forward.
    In fact, Chairman Salmon recently held a hearing where the 
Transboundary Agreement was discussed at length.
    Congress should pass this implementing language for the 
U.S.-Mexico Transboundary Hydrocarbons Agreement to expand 
energy production in the Gulf, strengthen our partnership with 
our ally, Mexico, and provide the framework for similar future 
agreements with other neighbors in the Western Hemisphere, 
while also protecting United States sovereignty.
    At a time when we continue to face national security 
threats to our homeland, including potentially hostile and 
growing Iranian presence in Latin America, strengthening 
relations with countries in our hemisphere through expanded 
energy productions is a lifeline.
    H.R. 1613 also provides certainty to offshore operators 
that only U.S. inspectors will be able to issue stop-work 
orders. It will protect American companies from legal conflicts 
which force them to choose between either breaking the law or 
disclosing confidential information to their detriment. The 
Obama Administration's Dodd-Frank Law contains exactly this 
risk, in requiring that resource extraction companies disclose 
payments to foreign countries, regardless of whether this 
conflicts with the U.S.-Mexico Hydrocarbons Agreement and 
Mexican law. We must ensure U.S. companies are protected and 
not prevented from developing these important energy resources.
    Because of the benefits of an all-American energy 
production, this aspect of the bill is critical. Energy 
production is a segue to job creation. We have seen the boom in 
energy jobs because of expanded production in places like North 
Dakota. In fact, Mr. Chairman, I would like to say that when 
you get off an airplane in North Dakota, they give you a job 
whether you need one or not.
    When you drive down Route 90 in Louisiana from Lafayette 
down to New Iberia, on down to Houma, and on down to Thibodaux 
toward the coast, you see business after business after 
business that is there to support the offshore industry. We are 
not just talking about the offshore drilling activity, we are 
talking everything that supports that.
    That is the kind of business, when we expand production in 
Federal waters to use our natural resources, we create 
thousands of jobs on land, both in the industry and also in the 
support industries. And when we talk about industry, those guys 
go eat at local restaurants, they contribute to the United Way 
and their Chamber of Commerce, and they go to church and they 
tithe. It is a tremendous trickle-down economy.
    When Americans are free to produce all-American energy, 
everyone benefits. The Transboundary Agreement would further 
lead to job creation and energy independence. That is why, for 
a country that believes in all-American energy production, the 
status quo just isn't acceptable.
    I have a message from South Carolina. Our energy costs are 
too high. Our home and business electricity costs are rising. 
Our way of life is at stake, and the end result of stonewalling 
energy production creates an even greater risk. It is the true 
hockey stick in energy environment.
    And, Mr. Chairman, I would like to submit for the record 
the U.S. Energy Information Administration Annual Energy Review 
of 2011. And it shows that from 1970 to 2010, that the energy 
expenditures per capita truly goes up in a dramatic hockey 
stick graph.
    And I am going to submit that for the record.
    Mr. Lamborn. If there is no objection, so ordered.
    [NOTE: The chart submitted for the record by Mr. Duncan can 
be found at the end of his prepared statement.]
    Mr. Duncan. Thank you. While energy consumption per capita 
has fallen nearly 10 percent since 1980, Americans are paying 
well over twice as much per capita on energy costs as they were 
that same year. Furthermore, when we prohibit Americans from 
producing energy, we also strangle the ingenuity that defines 
them. Free to dream and innovate, Americans will always find a 
better, safer way of extracting, producing, and using our 
natural resources to fuel the American Dream. Because the Outer 
Continental Shelf Transboundary Hydrocarbon Agreements 
Authorization Act will open a currently off-limits area of the 
Gulf of Mexico, we will take a real step forward to increase 
production and provide relief from rising energy costs.
    It has been 13 years since the 2000 Treaty on the 
Continental Shelf identified hydrocarbon reservoirs in the 
Western Gap that should be developed. While we are finally 
making progress on this front, this effort does not end here. 
We will continue to create a true all-of-the-above free-market 
energy strategy.
    As a final note, our founders granted us the authority 
under Article 4, Section 3, Clause 2 of the United States 
Constitution to make all needful rules and regulations 
respecting the territory or other property belonging to the 
United States. As long as the Federal Government owns these 
resources, we have an obligation to free them for use by the 
Americans.
    I look forward to the testimony today in working with all 
of Congress to provide implementation language of this 
Transboundary Agreement. And with that, Mr. Chairman, I will 
yield back.
    [The prepared statement of Mr. Duncan follows:]

       Statement of The Honorable Jeff Duncan, a Representative 
              in Congress from the State of South Carolina

    Mr. Chairman, thank you for holding this hearing today on H.R. 
1613, the Outer Continental Shelf Transboundary Hydrocarbon Agreements 
Authorization Act. I introduced this bill with my colleagues Chairman 
Doc Hastings of the Natural Resources Committee and Chairman Matt 
Salmon of the Foreign Affairs Subcommittee on the Western Hemisphere, 
and I thank them for their leadership and teamwork as we move this 
agreement forward.
    Congress should pass this implementing language for the U.S.-Mexico 
Transboundary Hydrocarbons Agreement to expand energy production in the 
Gulf, strengthen our partnership with our ally Mexico, and provide the 
framework for similar future agreements with other neighbors in the 
Western Hemisphere while also protecting U.S. sovereignty. At a time 
when we continue to face national security threats to our homeland, 
including a potentially hostile and growing Iranian presence in Latin 
America, strengthening relations with countries in our hemisphere 
through expanded energy production is a lifeline.
    H.R. 1613 also provides certainty to offshore operators that only 
U.S. inspectors will be able to issue stop work orders. It will protect 
American companies from legal conflicts which force them to choose 
between either breaking the law or disclosing confidential information 
to their detriment. The Obama Administration's Dodd-Frank law contains 
exactly this risk, in requiring that resource extraction companies 
disclose payments to foreign countries regardless of whether this 
conflicts with the U.S. Mexican Hydrocarbons Agreement and Mexican law. 
We must ensure U.S companies are protected and not prevented from 
developing these important energy resources. Because of the benefits of 
all-American energy production, this aspect of the bill is critical.
    Energy production is a segue to job creation.
    We've seen the boom in energy jobs because of expanded production 
in North Dakota. When you get off a plane there, they give you a job 
whether you need it or not.
    When you drive down route 90 in Louisiana, from Lafayette to New 
Iberia and on down towards the coast, you see business after business 
there to support their offshore industry. When we expand production in 
federal waters to utilize our national resources, we create thousands 
of jobs on land, both in the industry and to support it. If we were 
allowed to open up South Carolina's coast the way Louisiana and North 
Dakota are open for business, we could create the same effect there. 
But the oil companies aren't the only ones that would benefit. Because 
when oil companies, large or small, make a profit, the quality of life 
for everyone improves, through created jobs, lower energy costs, by-
products, investments in more energy production, and countless other 
ways.
    That's the irony of individuals pursuing their own way of life, as 
they see fit, in a free market. When Americans are free to produce all-
American energy as individuals, everyone benefits.
    And that's why, for a country that believes in all-American energy 
production, the status quo just isn't acceptable. I have a message from 
South Carolina: our fuel costs are too high, our home and business 
electricity costs are rising, and our way of life is at stake. The end 
result of the risk-averse mindset stonewalling energy production 
creates an even greater risk. It is the true hockey stick in the energy 
and environment debate. While energy consumption per capita has fallen 
nearly ten percent since 1980, Americans are paying well over twice as 
much per capita on energy costs as they were that same year. 
Furthermore, when we prohibit Americans from producing energy, we also 
strangle the ingenuity that defines them. Freed to dream and innovate, 
Americans will always find better, safer ways of extracting, producing, 
and using our natural resources to fuel the American Dream.
    Because the Outer Continental Shelf Transboundary Hydrocarbon 
Agreements Authorization Act will open a currently off-limits area of 
the Gulf of Mexico, we will take a real step forward to increase 
production and provide relief from rising energy costs. It has been 
thirteen years since the 2000 Treaty on the Continental Shelf 
identified hydrocarbon reservoirs in the Western Gap that should be 
developed. While we are finally making progress on this front, this 
effort does not end here. We will continue creating a true, all-of-the-
above, free market energy strategy.
    As a final note, our founders granted us authority under Article 
IV, Section 3, Clause 2 of the Constitution to ``make all needful rules 
and regulations respecting the territory or other property belonging to 
the United States''. As long as the federal government owns these 
resources, we have an obligation to free them for use by Americans.
    We have sworn to defend this Constitution. Our founding principles 
outlined in it--which protect the rights of individuals--are still the 
foundation for our government formed by the consent of the governed, 
and for our way of life. America will remain the land of the free for 
as long as the right to life, liberty, and the pursuit of happiness 
remains our declaration.

[GRAPHIC] [TIFF OMITTED] T0979.010

    Mr. Lamborn. Thank you. We will now hear from our first 
panel of witnesses. I would like to invite forward our two 
witnesses, The Honorable Tommy Beaudreau, Acting Assistant 
Secretary for Land and Minerals Management of the U.S. 
Department of the Interior, and Ambassador Carlos Pascual, 
Special Envoy and Coordinator for International Energy Affairs 
for the U.S. Department of State.
    Like all of our witnesses, your written testimony will 
appear in full in the hearing record, so I ask that you keep 
your oral statements to 5 minutes, as outlined in our 
invitation letter to you.
    Our microphones are not automatic, so you have to press the 
button when you begin speaking. The yellow light comes on after 
4 minutes, and the red light at 5 minutes.
    Thank you for being here. Mr. Beaudreau, you may begin.

    STATEMENT OF HON. TOMMY P. BEAUDREAU, ACTING ASSISTANT 
SECRETARY FOR LAND AND MINERALS MANAGEMENT, U.S. DEPARTMENT OF 
                          THE INTERIOR

    Mr. Beaudreau. Thank you, Chairman Lamborn, Ranking Member 
Holt, and members of the Subcommittee. I am pleased to appear 
before you today to discuss legislation to implement the 
Agreement between the United States of America and the United 
Mexican States concerning Transboundary Hydrocarbon Reservoirs 
in the Gulf of Mexico.
    I am Tommy Beaudreau, Acting Assistant Secretary for Land 
and Minerals Management at the Department of the Interior, and 
also Director of the Bureau of Ocean Energy Management, BOEM, 
which oversees oil and gas-related resource evaluation, 
environmental reviews, and leasing in Federal waters offshore 
the United States. I am very pleased to appear before the 
Subcommittee this morning, alongside Ambassador Pascual, who is 
one of the United States' foremost diplomats concerned with our 
relationship with Mexico, as well as global energy issues.
    I would like to begin my testimony today by briefly 
highlighting a few of the central points about the benefits to 
the United States and to U.S. industry that implementation of 
the U.S.-Mexico Transboundary Reservoir Agreement offers.
    Offshore oil and gas development in the Gulf of Mexico has 
been and will remain one of the cornerstones of the United 
States' energy portfolio. The offshore oil and gas industry 
continues to invest tremendous amounts of capital and technical 
know-how into exploring and developing oil and gas resources in 
the Gulf. This includes spurring the innovations necessary to 
safely and responsibly develop emerging world-class prospects 
in deep and ultra-deep water.
    During BOEM's last three offshore oil and gas lease sales 
in the Gulf of Mexico, held in a period of less than 12 months, 
industry has invested approximately $3 billion in leases, the 
bulk of which were directed toward promising emerging prospects 
in the deep water. Despite industry's general enthusiasm for 
exploration and development in the deep-water Gulf of Mexico, 
leasing in the vicinity of the U.S.-Mexico maritime boundary 
has been muted.
    Areas in U.S. waters within 1.4 miles of the maritime 
boundary currently are under moratorium and cannot be leased. 
More broadly, the entire Western Gap boundary region is 
currently subject to legal uncertainty about how potential 
transboundary reservoirs would be handled. And, therefore, in 
my view, industry has been reluctant to move forward 
confidently with exploration in that area.
    For example, there are currently 379 unleased blocks in the 
western and central Gulf near the U.S.-Mexico maritime 
boundary, and only 14 blocks that have been leased. I hope that 
the Transboundary Agreement can be brought into effect soon, so 
that, among other things, it can be factored into industry's 
consideration of our next Western Gulf lease sale, which we 
announced just yesterday will be held in August.
    Implementation of the Transboundary Reservoir Agreement 
would provide this much-needed legal certainty to the region, 
and is in alignment with our goals to promote safe and 
responsible development of the Nation's offshore oil and gas 
resources. The Agreement also is, I believe, strongly supported 
by industry. It is a pragmatic agreement designed to encourage 
voluntary, commercial solutions between companies operating on 
the U.S. side of the maritime boundary and their counterpart, 
PEMEX, on the Mexican side. We worked with U.S. industry during 
the negotiation of the Agreement, to ensure that the Agreement 
not only provide the legal certainty necessary to justify 
investment in this region, but also would be commercially 
workable.
    The central principle of the Agreement is to encourage 
voluntary unitization agreements between U.S. side companies 
and PEMEX to equitably allocate production from any reservoir 
straddling the maritime boundary. Unitization is a very 
familiar concept that is routinely applied by companies working 
in the U.S. Gulf of Mexico. Ultimately, if no voluntary 
unitization agreement can be reached, the company would be able 
to move forward with development unilaterally.
    Finally, the Transboundary Reservoir Agreement represents 
an important step in promoting safe and responsible development 
in a technically challenging operating environment on both 
sides of the boundary. Under the heightened standards that 
followed from Deepwater Horizon, U.S. industry is working more 
safely and responsibly than ever before. The Agreement would 
not change the laws or regulations that industry works under in 
the U.S. Gulf of Mexico, but does provide further opportunity 
for cooperation between the United States, Mexico, and the 
offshore industry to promote high standards for safety and 
environmental protection.
    I appreciate very much H.R. 1613, the bill introduced last 
week by this Committee to implement the Transboundary 
Agreement. I also appreciate the strong vocal and bipartisan 
support for implementing the Agreement that I have heard from 
the Subcommittee. Thank you, and I will be happy to answer your 
questions.
    [The prepared statement of Mr. Beaudreau follows:]

    Statement of The Honorable Tommy P. Beaudreau, Acting Assistant 
 Secretary, Land and Minerals Management, United States Department of 
                              the Interior

    Chairman Lamborn, Ranking Member Holt, and members of the 
Subcommittee, I am pleased to appear before you today to discuss 
legislation to implement the Agreement between the United States of 
America and the United Mexican States Concerning Transboundary 
Hydrocarbon Reservoirs in the Gulf of Mexico.

Background
    On February 20, 2012, the United States and Mexico signed an 
Agreement concerning the development of oil and gas reservoirs that 
cross the international maritime boundary between the two countries in 
the Gulf of Mexico (excluding submerged lands under Texas 
jurisdiction). This Agreement would establish a framework for the 
cooperative exploration and development of these hydrocarbon resources. 
The Mexican Senate overwhelmingly approved the Agreement in April 2012. 
The Congress likewise should pass implementing legislation approving 
the Agreement and providing the necessary authority to bring it into 
force. The administration has proposed such legislation, and this 
proposed legislation has been shared with the Subcommittee.
    The Agreement would allow, for the first time, leaseholders on the 
U.S. side of the maritime boundary to cooperate with the Mexican 
national oil company, Petroleos Mexicanos (PEMEX), in the joint 
exploration and development of hydrocarbon resources. This agreement 
will make nearly 1.5 million acres of the Outer Continental Shelf, 
currently subject to a moratorium under the Western Gap Treaty, 
immediately available for leasing and also make the entire 
transboundary region, which is currently subject to legal uncertainty 
in the absence of an agreement, more attractive to U.S.-qualified 
operators. For example, the Department of the Interior's Bureau of 
Ocean Energy Management estimates that transboundary area currently 
under moratorium contains as much as 172 million barrels of oil and 304 
billion cubic feet of natural gas.

Benefits of Implementing the Agreement
    The Agreement provides a legal framework for cooperative offshore 
oil and gas development along the maritime boundary, sets clear 
guidelines and provides legal certainty for those operations, supports 
the President's goal of ensuring domestic energy security and 
demonstrates our shared duty to exercise responsible stewardship of the 
natural resources in the Gulf of Mexico. It is built on a commitment to 
the safe, efficient, environmentally sound, and equitable development 
of transboundary reservoirs. The Agreement also offers the potential 
for generating additional revenue for the United States and Gulf States 
from the lease blocks located along the delimited U.S.-Mexico maritime 
boundary in the Gulf of Mexico.
    The Mexican market has long been closed to participation by U.S. 
companies, but a 2008 energy reform law in Mexico opened a window for 
joint hydrocarbon exploration and development with foreign entities as 
long as it would take place pursuant to an international agreement on 
transboundary reservoirs. The Agreement would take advantage of that 
opening. It would also end the moratorium on development along the 
boundary in the Western Gap and provide U.S.-qualified leaseholders 
with legal certainty regarding the development of transboundary 
reservoirs along the entire boundary so as to encourage investment. The 
Agreement would remove legal and structural barriers that currently 
impede exploration and development along our maritime boundary with 
Mexico. A significant portion of the U.S. maritime boundary with 
Mexico--the full length of the boundary in the Western Gap--is subject 
to a moratorium on drilling and exploration pursuant to the Western Gap 
Treaty. Upon entry into force the Agreement would lift the moratorium 
and open up this area--nearly ten percent of the U.S. portion of the 
Gap--to hydrocarbon development. Finally, having the Agreement in place 
will mitigate the safety and environmental risks that would result from 
unilateral exploration and development along the boundary.

Implementing Legislation
    The implementing legislation would provide the necessary domestic 
legal authority to implement certain key terms of the Agreement, 
including:
          To authorize the Secretary of the Interior to approve 
        unitization agreements and other arrangements necessary for the 
        management of the transboundary reservoirs and geologic 
        structures subject to the Agreement;
          To make available, in certain narrow circumstances 
        necessary for the functioning of the Agreement, information 
        related to the exploration, development, and production of a 
        transboundary reservoir that may be considered confidential, 
        privileged, or proprietary under law; and
          To participate in those dispute resolution processes.
    One of the fundamental components of the Agreement would allow 
leaseholders on the U.S. side of the boundary and Pemex to explore and 
develop jointly as a ``unit'' a transboundary reservoir or geologic 
structure, as leaseholders frequently do on the U.S. side of the 
boundary. The Agreement is designed to provide incentives for PEMEX and 
U.S.-qualified operators to enter into voluntary unitization agreements 
governing the development of transboundary reservoirs. Unitization--
where two or more leaseholders manage the exploration and development 
of a resource as a unit through a single operator--promotes the 
rational, efficient production of a resource, reduces waste, and 
minimizes the number of wells that must be drilled. Existing leases are 
not covered by the Agreement; however, existing lessees may voluntarily 
opt-in to the framework if they so choose.
    In cases where a unitization agreement is not initially reached 
between a U.S.-qualified operator and Pemex, the Agreement provides a 
process to determine whether the reservoir in question is, in fact, a 
transboundary reservoir that should come under the Agreement, and a 
carefully-calibrated process to determine the allocation of the 
resource between the two countries and provide the U.S. operator and 
Pemex another opportunity to form a unitization agreement. If they 
cannot reach an agreement, the Agreement would ultimately allow for 
unilateral production by each side, up to the amount of hydrocarbons 
that exist on its side of the boundary. In other words, in these 
circumstances U.S.-qualified operators and PEMEX would individually 
develop the resources on each side of the border while protecting each 
nation's interests, resources and sovereignty. We anticipate, however, 
that the same economic incentives that currently drive voluntary 
unitization in the U.S. Outer Continental Shelf will similarly drive 
voluntary unitization under the Agreement, and that this mechanism will 
be rarely if ever used.
    The Agreement encourages the United States and Mexico to promote 
common safety and environmental standards. However, the U.S. is under 
no obligation to alter its existing environmental laws or standards. 
Mexico's standards will apply to operations under Mexican jurisdiction 
and U.S. standards will apply to operations under U.S. jurisdiction.
    The Agreement would also establish a system of joint inspections, 
which would allow U.S. safety personnel to inspect PEMEX facilities 
involved in a transboundary operation. Again, however, each 
jurisdiction retains its authority and responsibility to regulate 
activity on its side of the boundary. The DOI's Bureau of Safety and 
Environmental Enforcement and the United States Coast Guard already 
maintain a strong working relationship with the Mexican offshore 
regulatory authority, the Comision Nacional Hidrocarburos (CNH), and 
this Agreement promotes further cooperation between the U.S. and Mexico 
with respect to drilling safety and oil spill response standards and 
practices.

H.R. 1613
    H.R. 1613, The Outer Continental Shelf Transboundary Hydrocarbon 
Agreements Authorization Act, was introduced late last week. We 
appreciate the opportunity to provide the following preliminary views 
at this time.
    Generally, the bill would amend the Outer Continental Shelf Lands 
Act to provide Congressional approval of the underlying Agreement 
(Title II); enact implementing legislation authorizing the Secretary of 
the Interior to take actions necessary to implement the terms of the 
Agreement; and give the Secretary the authority to implement the terms 
of any future transboundary hydrocarbon agreement and establish a 
process for the approval of such agreements.
    We support the goal of this legislation to grant the Secretary of 
the Interior general authority to implement the Agreement and to 
provide Congressional approval of the Agreement. The Administration 
welcomes the opportunity to work with Congress to approve this 
important agreement.

Conclusion
    In sum, the Agreement provides a much needed mechanism to 
facilitate the responsible and efficient exploration and development of 
hydrocarbon resources along the U.S. Mexico maritime boundary and 
provides new opportunities for U.S. companies. The Agreement provides 
incentives for PEMEX and U.S.-qualified operators to enter into 
voluntary commercial agreements to unitize transboundary reservoirs and 
does not change the application of existing laws or alter existing 
standards. Once the Agreement is in force, both the Bureau of Ocean 
Energy Management and the Bureau of Safety and Environmental 
Enforcement will assume their respective regulatory responsibilities to 
implement the Agreement as authorized.
    Mr. Chairman, we look forward to working with the subcommittee to 
enact legislation implementing this important Agreement with our 
Mexican partners in Gulf of Mexico energy development.
                                 ______
                                 

 Response to Questions Submitted for the Record by Tommy P. Beaudreau, 
    Acting Assistant Secretary, Land and Minerals Management, U.S. 
                       Department of the Interior

Questions from Representative Jeff Duncan:

1.  Will there be any regulatory changes to U.S. leaseholders as a 
        result of the approval of this agreement?
    Response: The Agreement does not change the application of existing 
U.S. laws or alter existing environmental, safety, or conservation 
regulations governing the activities of U.S. lessees. Further, leases 
in existence at the time the Agreement enters into force would be 
unaffected by the provisions of the Agreement. (Holders of such leases 
may, however, voluntarily decide to avail themselves of the contractual 
options provided for in the agreement once it enters into force.) It 
will be necessary to promulgate regulations to put into operation the 
new authority granted by the implementing legislation and to implement 
U.S. obligations under the Agreement. For example, current statutory 
authority and regulations do not permit the Secretary to approve 
activities that involve operations outside U.S. jurisdiction. 
Consequently, current regulations, such as those governing unitization, 
will need to be updated in order to allow the Department to approve 
activities that take place within the jurisdiction of Mexico.

2.  How does the Administration currently plan to address inequities 
        between U.S. laws (i.e., Dodd Frank) and their potential 
        conflict with Mexican laws?
    Response: Mexico's laws and regulations will apply to operations 
under Mexican jurisdiction; U.S. laws and regulations will apply to 
operations under U.S. jurisdiction. However, the Agreement encourages 
both jurisdictions to adopt--only if they each judge it appropriate--
common safety and environmental standards and requirements for 
activities carried out under the Agreement. The U.S. is under no 
obligation to alter its existing laws or regulations. We anticipate 
that the collaborative review and consideration of laws, regulations, 
and standards may help to promote the independence, and increase the 
capacity, of Mexico's nascent regulator, the National Hydrocarbons 
Commission.

3.  Do you foresee any obstacles to adjudicating disagreements through 
        the joint commission?
    Response: We do not foresee any obstacles to implementing the 
dispute resolution provisions of the Agreement. The Joint Commission 
would assist in resolving disputes under the Agreement. The Joint 
Commission must be established no later than 90 days after the 
Agreement enters into force. Each Government must appoint one 
representative and one alternate to the Joint Commission. Under the 
terms of the Agreement, the Joint Commission is responsible for 
examining ``any dispute or other matter referred to it by either 
Executive Agency relating to the interpretation and implementation of 
the Agreement, or any unforeseen issues arising under the Agreement''. 
In the event the Joint Commission cannot resolve a dispute, the dispute 
could be referred to: (1) an expert for binding arbitration on matters 
involving the existence of a transboundary reservoir, the allocation of 
production, and the reallocation of production; and (2) the governments 
for consultation, non-binding mediation, or arbitration (which will not 
be binding) for matters involving the interpretation and implementation 
of the Agreement.
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony.
    Ambassador Pascual, you may begin.

   STATEMENT OF AMBASSADOR CARLOS PASCUAL, SPECIAL ENVOY AND 
 COORDINATOR FOR INTERNATIONAL ENERGY AFFAIRS, U.S. DEPARTMENT 
                            OF STATE

    Mr. Pascual. Thank you very much, Chairman Lamborn, Ranking 
Member Holt, other members of the Subcommittee on Energy and 
Mineral Resources. I appreciate the opportunity to appear 
before you today, together with my colleague, Assistant 
Secretary Tommy Beaudreau. It is a great honor.
    I know that each and every member of the Committee is 
concerned about our Nation's energy security. I can assure you 
that Secretary Kerry and the Department of State share that 
concern. The legislation this Committee has introduced could 
provide an important vehicle to accelerate safe and effective 
development of hydrocarbon resources that cross the U.S.-Mexico 
maritime boundary.
    The Administration supports the swift passage of 
legislation to allow for the implementation of the 
Transboundary Agreement signed by Mexico and the United States 
in February 2012. As indicated earlier, Mexico ratified the 
Agreement in April 2012. With passage of the authorizing 
legislation you have introduced, the United States and Mexico 
can move immediately to seek private investment in conjunction 
with Mexico's national petroleum company, PEMEX, to develop 
resources that would strengthen North America's potential role 
as a hub for energy security.
    Let me stress the importance the State Department assigns 
to fostering a stable energy partnership with Mexico. Our 
energy trading relationship with Mexico is essential to 
stability in American energy markets. It is essential to 
assuring adequate supplies to sustain American economic growth. 
Mexico has huge reserves, 10.2 billion barrels in proven 
resources, but its production fell by 23 percent from 2004 to 
2011.
    Still, a more positive future for Mexican production is 
very much within reach. Mexican President Enrique Pena Nieto 
has made energy reform a priority. His party has agreed to 
submit legislation for comprehensive energy reform, once the 
landmark telecommunications reform has been passed. With the 
passage of the reform, Mexico could attract international 
investment to develop its hydrocarbon resources and reverse the 
decline in oil production. The implementation of the 
Transboundary Agreement could provide a down payment on those 
prospects for investment.
    Most fundamentally, the Agreement would enable meaningful 
energy sector collaboration between the United States and 
Mexico. With congressional approval, we anticipate that this 
collaboration would provide U.S. operators with the ability to 
demonstrate the benefits of their participation in the Mexican 
energy market.
    The reasons are simple. The Agreement, as you so clearly 
stated at the outset, Mr. Chairman, will provide legal 
certainty companies need to invest. That legal certainty would 
establish incentives to develop resources in U.S. territory, 
but were too close to the boundary to have been considered 
previously. In approving each transboundary contract, the 
United States would ensure that safety provisions comply with 
appropriate safety requirements. This is a business-friendly 
arrangement. It will potentially increase revenues and energy 
security with strong safety and environmental payoffs.
    Specifically on H.R. 1613, let me underscore that the 
Administration welcomes the Outer Continental Shelf 
Transboundary Hydrocarbon Agreements Authorization Act that was 
introduced late last week. It is a promising step forward to 
implement the U.S.-Mexico Transboundary Agreement. We support 
the goal of this legislation to grant the Secretary of the 
Interior general authority to implement the agreement and to 
provide congressional approval of the agreement. We look 
forward to working further with the Department of the Interior 
and the Committee on some of the specific provisions of the 
bill, as well as to secure expeditious approval of this 
legislation.
    In conclusion, we are encouraged by the accelerating pace 
of movement on finalizing this Agreement. As many House 
Members, and as has been stated indeed today, it is a win-win 
for the United States and Mexico. I appreciate the time you are 
devoting to this issue, and hope that we addressed your request 
for information on the potential benefits for both the United 
States and Mexico. I look forward to answering your questions.
    [The prepared statement of Mr. Pascual follows:]

        Statement of Special Envoy, Ambassador Carlos Pascual, 
          Bureau of Energy Resources, U.S. Department of State

    Chairman Lamborn, Ranking Member Holt, and other Members of the 
Subcommittee on Energy and Mineral Resources. I appreciate the 
opportunity to appear before you today.
    I know that each and every Member of this Committee is concerned 
about our nation`s energy security, and I can assure you that Secretary 
Kerry and the Department of State share that concern. For that reason, 
I am happy to be here today to discuss the Transboundary Agreement 
between Mexico and the United States. The Administration supports the 
swift passage of legislation to allow for the implementation of the 
Transboundary Agreement signed by Mexico and the United States on 
February 20, 2012. We look forward to working with you on the 
legislation introduced last week to accelerate the safe and effective 
development of hydrocarbon resources that cross the maritime border 
between Mexico and the United States.
    Let me begin by stressing the importance that the State Department 
assigns to fostering a stable energy partnership with Mexico. Our 
energy trading relationship with Mexico is an important component of 
North American energy security as evidenced by the fact that Mexico is 
our third largest supplier of imported crude oil and the largest export 
market for U.S. refined petroleum products. It is also a growing market 
for U.S. natural gas exports. The Transboundary Agreement, by 
establishing greater legal clarity for the development of reserves that 
traverse the U.S.-Mexico border, would bring significant benefits to 
the United States and Mexico.
    The United States and Canada have experienced an increase in energy 
production as a result of private investment, entrepreneurial 
ingenuity, technological innovation and strong commodity prices. U.S. 
oil production has increased by about 35% in the past five years. In 
contrast, Mexico has 10.2 billion barrels in proven reserves, but its 
production fell by 23 percent from 2004 to 2011, and projections 
forecast Mexican production will continue to decline in the short-term. 
This significant trend is often attributed to the maturation of major 
fields and the challenges for the national oil company, Petroleos 
Mexicanos (PEMEX), to maintain the necessary levels of investment in 
the sector. Mexican President Pena Nieto has made energy reform a 
priority, and if it is successful, Mexico could attract international 
investment and expertise to develop its hydrocarbon resources and 
reverse the decline in oil production. The Transboundary Agreement 
could be a down payment on the promise of more fundamental reform. 
Private investors would have a framework to develop cooperatively 
resources crossing the U.S. maritime border with Mexico. Such 
commercial engagement could capture resources that are currently not 
being developed because of legal uncertainty, and demonstrate that 
private investment produces resources and revenues that benefit the 
Mexican people and economy.
    Despite the challenges facing Mexico in the near term, the exciting 
story here is that North American energy production as a whole could 
boost our respective national and global energy security. In North 
America, our energy resources give us the prospect to assure our energy 
supply. Just as important, North American resources will contribute to 
global market supplies, help balance global markets, and help promote 
the kind of stability in global energy markets that we need to support 
our domestic economic growth. Such opportunities, including the 
Transboundary Agreement between the United States and Mexico could 
support increased Mexican and North American production capacity and 
could be critical to world supplies and economic growth.

Background
    The Transboundary Agreement between the United States and Mexico 
addresses the development of oil and gas reservoirs that cross the 
international maritime boundary between our two countries in the Gulf 
of Mexico (excluding submerged lands under Texas jurisdiction). The 
Mexican Senate overwhelmingly approved the Agreement in April 2012. The 
Administration has proposed legislative language that would provide the 
Secretary of the Interior the necessary authority to implement the 
Agreement, and this proposed language has been shared with the 
Subcommittee.

Role of the Agreement
    The Transboundary Agreement is an important step in our national 
efforts to better secure our energy future and at the same time promote 
a stronger and long-term cooperative relationship with Mexico in 
meeting each country's energy security goals. We believe the agreement 
would help facilitate the safe and responsible management of offshore 
petroleum reservoirs that straddle our maritime boundary and strengthen 
overall our bilateral relations.
    The Agreement would enable meaningful energy sector collaboration 
between the U.S. and Mexico (and in particular between U.S. operators 
and PEMEX). We anticipate that this collaboration under the Agreement 
would provide U.S. operators with the ability to demonstrate the 
benefits of their participation in the Mexican energy market, 
potentially leading to deeper and more meaningful collaboration over 
time.
    This Agreement will make nearly 1.5 million acres of the Outer 
Continental Shelf more attractive to U.S. operators by unlocking areas 
for exploration and development along our maritime boundary within U.S. 
jurisdiction. The Agreement would eliminate the moratorium on drilling 
along the boundary in the Western Gap, and provide legal certainty 
needed for investment in the boundary region outside of the Western 
Gap. It would allow American companies to enter into agreements--
unitization agreements--with PEMEX for the joint exploration and 
development of resources in specific areas. The development of a 
reservoir as a single deposit generally reduces the amount of drilling. 
Activities under unitization agreements would be required to comply 
with appropriate safety standards. As a package, these arrangements 
will potentially increase revenues and provide greater energy security, 
while mitigating safety and environmental risks that could result from 
unilateral development by each country along the boundary.
    We are pleased that the Agreement would advance safety and 
environmental protection in the Gulf and provide significant safety and 
environmental benefits that would not occur without it. First, it 
provides for a system of joint inspections for all activity that takes 
place under the Agreement. Though Mexican law would apply to operations 
under Mexican jurisdiction and U.S. law would apply to operations under 
U.S. jurisdiction, each side would have the ability to work with the 
other to ensure that all activity that takes place under the 
Agreement--wherever it occurs--meets all applicable laws and standards. 
In addition, under the Agreement our two countries would continue to 
work together to ensure that their respective standards and 
requirements are compatible where appropriate for the safe, effective, 
and environmentally responsible implementation of the Agreement.
    In all aspects, the Transboundary Agreement offers the United 
States and Mexico significant benefits. It would, for the first time, 
establish a framework that would facilitate the development of 
hydrocarbon reservoirs that cross our maritime boundary with Mexico. 
This is a business friendly arrangement with strong safety and 
environmental payoffs.

H.R. 1613
    We welcome H.R. 1613, The Outer Continental Shelf Transboundary 
Hydrocarbon Agreements Authorization Act that was introduced late last 
week. It is a promising step forward to implement the U.S.-Mexico 
Transboundary Agreement. We support the goal of this legislation to 
grant the Secretary of the Interior general authority to implement the 
Agreement and to provide Congressional approval of the Agreement. We 
look forward to working with the Department of the Interior and the 
Committee on this important piece of legislation for expeditious 
approval.

Conclusion
    In conclusion, we are encouraged by the accelerating pace of 
interest and movement on implementing this agreement. It is one that 
provides a much needed mechanism to facilitate the responsible and 
efficient exploration and development of hydrocarbon resources along 
the U.S.-Mexico maritime boundary. As many House Members have stated, 
it is a ``win-win'' for the United States and Mexico and also a winner 
for North American energy security because it fosters stronger 
relationships in the development of our shared energy resources.
    I appreciate the time you and your staff are devoting to this issue 
and hope that we addressed to your satisfaction your requests for 
information on the many potential benefits for both the United States 
and Mexico, should the Agreement be brought into force.
    Thank you again for this opportunity to testify before this 
Subcommittee and I would be pleased to answer any questions the 
subcommittee might have.
                                 ______
                                 

           Response to Questions Submitted for the Record by 
                       Ambassador Carlos Pascual

Question 1: Will there be any regulatory changes to U.S. leaseholders 
        as a result of the approval of this agreement?
    Answer: Approval of this Agreement would not change the application 
of existing standards. That is, Mexico's standards will apply to 
operations under Mexican jurisdiction and U.S. standards will apply to 
operations under U.S. jurisdiction. The Agreement has an Article that 
specifically addresses ``Safety and Environmental Protection.'' Under 
this Article, the Governments shall adopt, where appropriate, common 
safety and environmental standards and shall strive to ensure that 
their respective standards and requirements are compatible where 
necessary for the safe, effective, and environmentally responsible 
implementation of the Agreement. In addition, the U.S. government 
exercises significant control over the terms of production and 
applicable controls through the approval of the agreements governing 
the unit. Before any unitization request will be approved, the Unit 
Agreement will specify provisions to address safety, environmental and 
other issues to the satisfaction of the U.S. (and Mexico). This is the 
way to ensure that operations within the unitized area meet robust 
standards. Existing leases are not covered by the Agreement; however, 
existing lessees may voluntarily opt-in to the framework if they so 
choose.

Question 2: How does the Administration currently plan to address the 
        inequities between U.S. laws (i.e. Dodd Frank) and their 
        potential conflict with Mexican laws?
    Answer: Nothing in the terms of the U.S.-Mexico Transboundary 
Agreement conflicts with the provisions of Dodd-Frank Section 1504, and 
data confidentiality protection in the Transboundary Agreement is not 
affected by Dodd-Frank section 1504. The Mexico Agreement does not 
touch on the issue of financial reporting or otherwise impact the 
reporting required by the SEC's rule implementing Section 1504. The 
Administration would favor a bill focused exclusively on the language 
necessary to implement the U.S.-Mexico Agreement, and which does not 
create a reporting exception under Section 1504 that differs from 
requirements in the rest to the world.

Question 3: Do you foresee any obstacles to adjudicating disagreements 
        through the joint commission?
    Answer: With the Agreement's channels of dispute resolution we do 
not foresee obstacles to adjudicating disagreements through the joint 
commission. There are two channels of dispute resolution in the 
Agreement--one for technical issues for which there must be an outcome 
for the agreement to work, and one for all others. A third party expert 
appointed by the governments would resolve disputes over technical 
issues. In order to access this dispute resolution channel, each side 
must have invested in a prospective reservoir by drilling a well on its 
side of the maritime boundary.
    Resolution of all other disputes is conducted through mediation or 
arbitration. The arbitration mechanism has yet to be established, and 
cannot be established unless both the U.S. and Mexico agrees. During 
negotiations, the U.S. advised Mexico that it would not agree to a 
binding arbitration mechanism for such disputes. Indeed, both countries 
recognize that such a mechanism would not be viable and would interfere 
with the economic incentives of operators built into the agreement. 
Though the agreement does not explicitly state that arbitration would 
be non-binding, this understanding is clear in the text of the 
Agreement. In particular, Article 14 paragraph 7 of the Agreement notes 
that the product of any arbitration would be a ``recommendation,'' not 
a decision, and if an agency-level determination on how to implement 
the recommendation could not be reached, it would be referred to 
political consultation.
                                 ______
                                 
    Mr. Lamborn. OK. Thank you both for being here and for your 
testimony. We are now going to begin Members' questions for the 
witnesses. I would like to begin by asking Assistant Secretary 
Beaudreau.
    As you know, this Committee has wanted this legislation for 
more than a year. I want to circle back to a hearing that we 
had here in Committee last year on this very issue. At that 
time, then-Secretary Salazar had called on this Committee to 
act on legislation to implement the Transboundary Agreement, 
even though the Administration had not yet sent any language to 
us on how they wanted us to go forward.
    And at the end of a hearing last May, almost a year ago, 
Chairman Hastings asked you about this in a hearing, and we are 
going to watch a short clip, just to refresh everyone's memory 
of about a minute or so. Please begin the clip.
    [Video shown.]
    Mr. Lamborn. OK. And thanks for showing that. You said that 
a year ago, next month a year ago. I am just concerned on why 
it took so long to get the language to us. We got it just 5 
weeks ago or so. And yet, during this time, the then-Secretary 
Salazar was harshly criticizing us and, by extension, Congress 
for just sitting around, doing nothing, when it was the 
Administration that had failed, until 5 weeks ago, to give us 
the guidance that we needed to implement the language. And you 
were going to ``send that shortly,'' according to the clip we 
just heard. And yet here it is, almost a year later.
    Now, we are doing our job. But we don't appreciate harsh 
criticism that has no basis in fact. And so I would like to get 
your response to that.
    Mr. Beaudreau. Yes. Thank you, and I appreciate the 
question and the playback from the testimony. That was a true 
statement last year, when I testified that Secretary Salazar 
was extremely anxious to get moving on legislation to implement 
the agreement. That was true then, it was true throughout his 
tenure.
    He was not only perhaps impatient with Congress, he was 
impatient with us, as well, in terms of getting proposed 
legislation finalized, through review, and to Congress for 
consideration. Believe me, he is and always was during his 
tenure, extremely interested in bringing this agreement to life 
for all the reasons we have talked about, and all the potential 
benefits to the United States, to industry, and to Mexico, as 
well.
    And so, I think the time it took to get the legislation is 
a reflection of the care and the legal scrutiny, frankly, that 
went into crafting the proposed legislation that we submitted 
to this Committee. We wanted to have, as we did then, a boiled-
down piece of proposed legislation that could be easily 
implemented and a vehicle could be found for. That took some 
time. It took some time to work through the Interior 
Department, it took some time to work through the State 
Department, it took some time to work through the 
Administration.
    I am extremely pleased that we are where we are now, which 
is actually the most important thing, which is to get the 
Agreement implemented.
    Mr. Lamborn. OK. Well, we do need to have a good working 
relationship. And I think you were doing your job. I just am 
still astounded that the Secretary would say those kinds of 
harsh things about us, when we didn't even have the language to 
go by that they knew we wanted, and that we needed as the 
starting point. And once we got that language, we have acted. 
Here we are, just weeks after getting the language. We are 
having an oversight hearing on the issue, we are having a 
legislative hearing on a very good piece of proposed 
legislation.
    So, I do have trust in our regulatory agencies, and we need 
to be able to stand on that trust. I know the Ranking Member 
was saying a few minutes ago that Congress needs to micro-
manage every aspect and codify into law every detail of 
offshore drilling, when I realize it is a fast-moving, 
technologically advanced area in our economy and we don't want 
to set into concrete things that may have to change 12 months 
later.
    So, we have to be able to rely on the regulatory agencies 
to do their oversight job. And so I trust that you can do that. 
I am not going to criticize your performance on that, as the 
Ranking Member was, because I think you can do a good job. But 
we do have to have the timely working together in order to make 
that happen.
    OK. Thank you for that answer. I would now like to 
recognize Representative Horsford for 5 minutes.
    Mr. Horsford. Thank you very much, Mr. Chairman. I would 
note that the Administration did send similar language to what 
we are considering today to Congress on the Transboundary 
Agreement last December, and that the Senate sought to pass 
that legislation at the end of the last Congress, based on that 
request. So, I think we are here now, and that is probably the 
most important thing.
    It is kind of interesting. On my flight back from the 
district, Mr. Chairman, Secretary Salazar was on my flight. And 
I had an opportunity to see him flying through Denver. And I 
said what a difference a day makes. I guess since he is not the 
Secretary, I don't think he would have been flying Frontier 
before.
    [Laughter.]
    Mr. Horsford. But we miss his leadership and wish the best 
to the new Secretary and to those of you who are here.
    Let me ask my question specifically to this panel. In April 
of this year, the Oil Spill Commission action reported that 
many improvements by both the government and the oil industry 
have been made since the BP Deepwater Horizon oil spill 3 years 
ago. But the same report also states that these risks will 
continue to increase as drilling moves into deeper water with 
harsher, less-familiar conditions, and delays in taking the 
necessary precautions threaten new disasters.
    Can you address this assertion and explain what steps the 
oil industry has taken to address these challenges of drilling 
safety?
    Mr. Beaudreau. One of the key aspects of, and one of the 
key benefits, I believe, of the Transboundary Reservoir 
Agreement is to allow us to continue our relationship with 
Mexico's regulators, CNH, which oversees PEMEX, to work 
together to continue implementing heightened standards, both 
regulatory standards and practices by industry, and essentially 
help support CNH and PEMEX in implementing those heightened 
standards with respect to, as you described, these challenging 
areas in deep water.
    Let me give some examples of that. The Agreement 
specifically provides for continued work between the United 
States and Mexico on a common set of drilling practices and 
standards to be used on both sides of the border. If there is 
an accident in the vicinity of the transboundary area, that 
accident is not going to respect the shores of the authorizing 
nation. It is truly, as Secretary Salazar frequently said, 
``one pond.''
    And so, it is in our interest to support CNH and support 
PEMEX in raising standards. One example of that is following 
Deepwater Horizon we implemented requirements that every deep 
water operation be capable of providing access to systems to 
cap a well, the same type of technology that had to be 
engineered and brought to bear on the fly during the oil spill. 
CNH, PEMEX, are working with a U.S. company to bring that same 
capability to Mexican operations on their side of the maritime 
boundary, as well.
    Mr. Pascual. Congressman, if I could add just briefly to 
that, I was the U.S. Ambassador in Mexico at the time when the 
National Committee of Hydrocarbons was essentially formed. The 
Department of the Interior was very fast in there to begin a 
relationship with them to share best practices to increase 
their capabilities.
    The importance of that investment is only going to become 
more important in the future. If Mexico does move forward with 
its energy reform, it will create an environment that will 
attract more investment, more possibilities for development. 
The strong kind of communication and cooperation that is being 
developed with the Department of the Interior is extremely 
important to actually create the kind of best practices and 
professional and technical cooperation that is necessary for 
future safeguards.
    I would only finally add that in the kind of contracts and 
agreements that are envisaged under this Agreement, each of 
those contracts would have to have safety provisions, and it 
would give us an opportunity to review and approve those safety 
provisions to ensure that they meet appropriate safety 
requirements.
    So, I think that this agreement can't fix everything, but 
it is done in a way that is very sensible and sound and is very 
attuned to safety requirements.
    Mr. Garcia. Mr. Chairman? If I might, I have to go to 
another hearing, I just wanted to say something real quick for 
the record.
    Mr. Lamborn. If there is no objection, you may have a few 
seconds.
    Mr. Garcia. Thank you, Mr. Chairman. I obviously think that 
we should move forward on this legislation. I wanted to say 
hello to my good friend, Ambassador Pascual. We have worked 
together for years.
    And I would also point out to the Chairman that I can 
understand the Department of the Interior trying to be very 
careful when they present anything to this Committee, because 
we tend to bat things out here for a while. So I can understand 
you wanting to perfect the document before you got it to us, so 
I appreciate your being careful with it.
    Thank you, Mr. Chairman, I yield back the balance of time.
    Mr. Lamborn. OK, thank you. Now I would like to recognize 
Representative Duncan.
    Mr. Duncan. Thank you, Mr. Chairman. And, first off, I want 
to thank you for pointing out some of the frustrations we had 
with Secretary Salazar blaming Congress for its inaction, but 
yet failing, as an agency, to provide us the implementation 
language. And so, I think this is the right step.
    I want to note that the Obama Administration has decided to 
enact this Agreement with Mexico as a congressional executive 
agreement, rather than a treaty, which requires a simple 
majority in both Houses of Congress, rather than a two-thirds 
majority in the Senate. This agreement has the same status 
under international law as Mexico's ratification.
    And I am glad to see us moving forward with implementation 
language, instead of the way it was attempted in the 112th 
Congress, where the Obama Administration attempted to insert a 
single paragraph in a last-minute non-germane Senate bill back 
in December of 2012. That was the wrong way to do it. This is 
the right way to do it. And I applaud both sides for showing 
some interest in moving the implementation forward.
    I serve on the Natural Resources Committee, but I also 
serve on the Homeland Security Committee and I serve on the 
Foreign Affairs Committee, which all have interest in this 
legislation and interest in the Transboundary Agreement.
    In Secretary Beaudreau's comments, he said that, ``The 
DOI's Bureau of Safety and Environmental Enforcement and the 
United States Coast Guard already maintain a strong working 
relationship with the Mexican offshore regulatory authority.'' 
I don't speak Spanish, but the Commission on National 
Hydrocarbons is what it stands for, I am assuming ``and this 
Agreement promotes further cooperation between the U.S. and 
Mexico with respect to drilling safety and oil spill response 
standards and practices.'' So we already have an agreement in 
place where our Coast Guard is doing some inspections, and it 
seems to be working where there are current overlaps.
    So I am going to ask Secretary Beaudreau, if you will just 
highlight some of the concerns the other side may have about 
safety in relation to your comments in page three of your 
testimony.
    Mr. Beaudreau. Thank you, Congressman. Again, what the 
Agreement does is provide further opportunity for engagement 
between U.S. regulators, Mexican regulators, U.S.-qualified 
companies, and PEMEX around technical issues related to safety 
and environmental performance. Extremely important issues.
    The Agreement does not change in any way the safety or 
regulatory regime applicable to U.S. operators. Frankly, what 
it provides for is reinforcement of the engagement that is 
already occurring to help support CNH and help support PEMEX as 
they raise their game moving into these areas.
    And so, again, it provides for mechanisms as described by 
the Ambassador and by me to have an opportunity to review what 
the safety and environmental protections would be in the 
context of any operation under one of these unitization 
agreements. It also provides an opportunity, which we currently 
don't have formally, for joint inspections of operations on the 
Mexican side of the maritime boundary.
    Mr. Duncan. Yes. I appreciate that. Ambassador, would you 
like to chime in on that?
    Mr. Pascual. I think one of the things that we just have to 
consistently underscore is that the combination of adding 
greater security about the safety provisions, addressing the 
legal certainty, as you and the Chairman provided early on, 
together begin to give us the potential for this strip in the 
transboundary area to address one of the most fundamental 
concerns about production and exploration that has existed in 
the past. And you have stated that very well.
    And when we look at taking away that uncertainty on the 
legal side, while at the same time providing a mechanism that 
allows us to ensure that any provisions forward meet our safety 
requirements, and if we are doing this in a way where we are 
responding to private-sector proposals and contracts, we have a 
mechanism that is, I think, one of those win-wins all around, 
not just between governments, but between government and the 
private sector.
    And so, I just wanted to express my appreciation for your 
willingness to move the legislation forward at this point of 
time to underscore that it is the kind of collaboration between 
public sector and private sector that could produce real 
benefits and wins, both on commercial development, as well as 
honoring our commitments to safety and environmental quality.
    Mr. Duncan. Thank you, Mr. Chairman.
    Mr. Lamborn. Thank you. Representative Grijalva.
    Mr. Grijalva. Thank you, Mr. Chairman. Gentlemen, earlier 
this month the entity that was formed out of the independent BP 
Oil Spill Commission issued a report on, ``The Progress on 
Responding to the Spill: Three Years Later.'' The report 
found--well, gave Congress a D+ in response, and found that 
Congress did nothing about the many other critical issues the 
Commission identified to improve safety and environmental 
protection beyond the RESTORE Act, which was to have civil and 
administrative penalties directed toward restoration issues on 
the coast.
    The report found that Congress had not acted on any of the 
recommendations made to ensure there are adequate resources for 
offshore drilling, drilling regulators, and to respond to any 
spill. Ranking Member and other House Democrats introduced 
legislation on the last Congress to implement the Commission's 
recommendations.
    Secretary, Ambassador, do you agree with the Commission's 
recommendations that Congress should take action to provide 
additional direct funding to offshore regulators as we move 
into this part of the legislation to authorize the 
transboundary?
    Mr. Beaudreau. The Administration has, ever since the 
spill, has supported a number of legislative initiatives with 
respect to improving safety and oversight offshore. A couple of 
those were mentioned by Ranking Member Holt, including raising 
liability limit and codifying many of the reforms that we have 
implemented, administratively.
    One of the central lessons coming out of Deepwater Horizon 
was that the Minerals Management Service, MMS, was woefully 
under-resourced. I actually think Congress has taken a number 
of very positive steps in that regard. BSEE, in particular, has 
received a substantial influx of resources, which they are 
putting to good use.
    Mr. Grijalva. Ambassador, any comment on that?
    Mr. Pascual. It would probably be inappropriate for me to 
comment on U.S. domestic legislation. So I will pass on the 
opportunity.
    Mr. Grijalva. Thank you. Mr. Beaudreau, Secretary, this 
legislation includes a rather curious provision that would 
exempt oil companies operating in the area under discussion 
from the extraction reporting requirements of Section 13(g) of 
the Securities Exchange Act. The Dodd-Frank Act mandated a rule 
under that law to require disclosure of certain payments to 
foreign nations. Do you believe that exception from the 
requirement is necessary or good?
    Mr. Beaudreau. We received the proposed bill late last 
week. I think there are a number of positive aspects to it, 
including implementation language that is very similar to what 
the Administration has proposed. There are also a number of 
provisions, including that one, that I look forward to engaging 
with this Committee on to better understand the intention 
behind the proposal, and work with the Committee on that 
language.
    And so, I don't have a view at this point. I am looking 
forward, however, to engaging on those issues.
    Mr. Grijalva. Thank you. Again, Mr. Secretary, the Interior 
Department has said the delays in offshore oil and gas 
permitting in the Gulf of Mexico from the sequester could 
affect more than 500 exploration plans and development 
documents that are anticipated for review this year. You think 
the sequester would slow energy development offshore, and 
potentially making offshore drilling less safe and longer 
delays in the area that we are talking about right now?
    Mr. Beaudreau. I am concerned about the potential impacts 
of sequester. I will say that none of the budget constraints 
will affect our approach on safety and on applying the 
heightened standards.
    I am concerned, however, that the budgetary constraints 
imposed by sequester may affect timelines. We have been 
extremely successful, in my view, on not only requiring 
compliance with heightened standards----
    Mr. Grijalva. OK.
    Mr. Beaudreau [continuing]. But making our process more 
efficient. I am concerned that there may be some back----
    Mr. Grijalva. Given that timeline response, Secretary, and 
the budget concerns that you mention, will your agency have the 
resources to inspect PEMEX operations in this transboundary 
zone the way that has been required up to this point?
    Mr. Beaudreau. Yes. We----
    Mr. Grijalva. Are we talking about delays again?
    Mr. Beaudreau. We intend to fully implement the agreement 
and to apply our resources as they are available at that time 
in order to implement the agreement. We are always concerned 
about resources, but safety is our highest priority. And so, if 
we have----
    Mr. Grijalva. It is the highest priority. Do you anticipate 
delays because it is the highest priority and that must be 
given the focus, and there are fewer resources than you had 
prior to that?
    Mr. Beaudreau. It is hard to say without a specific 
operation in front of us. But safety is the highest priority. 
If delay is a consequence, so be it.
    Mr. Lamborn. OK, thank you. And I would like to----
    Mr. Duncan. Mr. Chairman, the gentleman mentioned a report 
at the beginning of his statement. Could he repeat who issued 
that report, the gentleman from Arizona?
    Mr. Grijalva. The entity of the committee of the 
Commission, and we would be glad to provide that information to 
you.
    Mr. Duncan. Could we get a copy of that for----
    Mr. Grijalva. Be glad to.
    Mr. Lamborn. Thank you. Thank you. OK, Representative 
Thompson.
    Mr. Thompson. Chairman, thank you. Assistant Secretary, 
Ambassador, welcome. Thank you for your service. and thank you 
for being here today to talk about something I think that is 
important. As we look forward, we are talking about this piece 
of legislation, which would codify basically a collaborative 
approach. It provides certainty, I think, involving the public-
private sectors. And so it has got all the right elements, it 
seems, in place.
    And a lot of it, as you reflected in your testimonies, was 
about encouraging Mexican production of hydrocarbon resources. 
I personally see that as a good thing. My perception is that as 
we do that, and that progresses, I look at North America as a 
whole in terms of energy production. That is good for security 
for all of us. It is good for the economies. And I have to 
assume it is good for jobs on both sides of the international 
border.
    And so, Mr. Ambassador, I was kind of curious. It may or 
may not be an unintended consequence of this, of what we are 
talking about today, but I wanted to get your opinion, given 
the fact you have been Ambassador to Mexico. Thank you for your 
current role within the State Department, specifically on 
energy. I think that is important.
    Has the State Department, I have to assume you have, but 
you get in trouble when you assume in this town, examined how 
this might deter motivations for illegal immigration to the 
United States as greater opportunities, all those things we 
talked about, security, stronger economy, and jobs, do the 
citizens of Mexico benefit in whatever big way or small way 
from this? Has the State Department examined that? It seems 
like it could be a consequence.
    Mr. Pascual. I am sorry, Congressman. I missed the key 
word, ``examined.'' What, specifically?
    Mr. Thompson. I am sorry. The motivation to come here 
illegally. And, obviously, on the other side of the Capitol, in 
particular, illegal immigration is a huge discussion right now.
    And we have to look at ways, reasons why folks choose to 
put their life at risk and go through breaking our laws and 
coming here. And one of the things it seems to be that I 
believe is they come here in search of greater opportunity. 
Will this grow greater opportunity for our Mexican neighbors 
that could reduce, perhaps in some small way, part of the 
illegal immigration that we experience every day?
    Mr. Pascual. Congressman, thank you. I think that what you 
point at is a very important and central question, and the 
discussions that arise on the debate about migration, and it 
has to do with economic growth and job opportunity. And I think 
there is no doubt that the Mexican political leadership has 
consistently looked at the importance of creating greater job 
opportunities internally within their country, and stimulating 
economic growth.
    The energy sector is one of those areas where growth is 
certainly a potential. If one looks at a map of the Gulf of 
Mexico, one will see on the U.S. side of the border a 
consistent pattern of development and virtually a blank on the 
Mexican side on the Gulf of Mexico, and that has essentially 
been because of the provisions that exist currently right now 
that do not effectively track private investment.
    On other parts of the border, the land border between 
Mexico and the United States, there is huge potential that 
exists, particularly with the development of shale gas and 
unconventional gas, where essentially the Eagle Ford shale play 
extends into the Mexican side of the border. The Mexican 
leadership is aware of that, and it is one of the reasons why 
they have come to recognize that they need to consider what 
kind of legislation they need to put in place in order to 
attract private investment.
    Mr. Thompson. Can you----
    Mr. Pascual. Specifically on this question of the 
Transboundary Agreement, one of the issues that they raised 
with me from the very first discussions we had about it in 
September of 2009 was the importance of creating an environment 
where both Mexico and the United States can understand the 
legal foundation for cooperation with one another, something 
which previously has not existed between our two countries in 
the energy sector. And in that sense, it is quite a landmark 
movement.
    Mr. Thompson. Now, and I am familiar that the State 
Department has been involved in the export of hydrofracking 
technology, I had the pleasure of having a State Department-
sponsored forum in Washington. They brought them by bus up to 
my congressional district in Lycoming County to visit some of 
our Marcellus shale. Briefly, is that effort still continuing 
to push out that state-of-the-art technology, in terms of 
hydrofracking, to other countries?
    Mr. Pascual. Sir, indeed. What we have consistently tried 
to do is to share best practices with other countries around 
the world. We have learned a lot in the United States about our 
experience on everything from dealing with gas issues, water 
issues, hydraulic fracking fluids, how to monitor seismic 
activity, how to maintain baseline data, how to do this in a 
way that consults with local communities and balances their 
interest and the private sector interests at the same time.
    And so, we continue programs that have brought 
representatives from, to name a few, Poland, Ukraine, Jordan, 
China, Colombia, Chile, to the United States, where we have had 
an opportunity to share both our government experience at a 
Federal level, at a State level, and with private companies, 
the kind of best practices that have been used so that if 
others decide to go ahead with the development of their----
    Mr. Lamborn. Mr. Ambassador, I am going to have to ask you 
to----
    Mr. Pascual [continuing]. They can do it in the best way.
    Mr. Thompson. Thank you. Thank you, Mr. Chairman.
    Mr. Lamborn. Thank you. Representative Wittman.
    Dr. Wittman. Thank you, Mr. Chairman. I want to thank the 
witnesses for joining us today. I appreciate the efforts that 
you are putting forth to get our energy policy on track, 
especially as it relates to the Outer Continental Shelf. And I 
know the Transboundary Agreement is critical for that.
    One of the things that I am concerned about, though, is 
looking at not just the Transboundary Agreement, but also the 
development or expansion and opening areas in the Atlantic. As 
you know, the Virginia Lease 220 has a significant amount of 
potential energy to be developed there, about 130 billion 
barrels of oil, and 1.14 trillion cubic feet of natural gas. So 
it is significant. There is agreement across Virginia, across 
our congressional delegation and within the State, to make sure 
that this happens.
    The Virginia lease sale was part of the Department's 5-year 
plan from 2007 through 2012. However, on May 27th the President 
and Secretary Salazar canceled the Virginia scheduled lease 
sale. And I am just wondering why the Administration continues 
to oppose efforts to move forward with an oil and gas lease 
sale off of Virginia?
    I think we have understood what happened with the accident 
down there in the Gulf, and currently no lease sale could take 
place off of Virginia until 2017. So in canceling this lease 
sale, the Administration has cited safety concerns. And, as I 
said, if it is truly safety concerns, I think we have certainly 
learned from the accident in the Gulf and can apply those 
lessons learned to any permits that would be issued there in 
Lease 220.
    So, I just wanted to know why should it take nearly a 
decade, if we are going to wait until 2017, why should it take 
over a decade for us to learn the lessons from the Gulf, many 
of which have already been pointed out to us in the issuance of 
a permit or going forward with putting Lease 220 into the 
Department of the Interior's plan? And I just want to know, 
bottom line, what is the cause for delay on allowing Virginia 
to go forward?
    As I said, the State is in full agreement with this. We 
want to do it. Our legislature, our entire congressional 
delegation. So we are awaiting the opportunity to be able to do 
that. And, as you know, for Virginia and for the East Coast, 
this means jobs, it means energy independence, and especially 
with the potential opportunities there for natural gas and oil.
    And, by the way, I do know there is a provision in there to 
say that the exploration can begin. But, as you know, there is 
not going to be a company that is going to invest in going out 
there and doing seismic studies and the significant money that 
it takes to do that without the opportunity to say that they 
could apply to actually develop those resources.
    Mr. Beaudreau. The Administration under our 5-year plan has 
a very specific strategy with respect to the Mid- and South 
Atlantic, and that does involve acquiring modern geologic 
information through seismic study. I am actually quite 
confident that we will be able to acquire that information.
    I am also confident that, as we collect, again, modern 
seismic information about the resource potential along the 
Atlantic, that we will have a substantial basis to make 
informed decisions about potential leasing in the future in 
that area.
    With respect to this Sale 220 area, as I think you are 
aware, that triangle area presented substantial concern and 
conflicts with the Defense Department. And I believe they made 
a submission to us that essentially redacted out over 80 
percent of that area as posing significant concerns for their 
operations. The military is obviously extremely important to 
our national defense, as well as the economy of the Tidewater 
Area in Virginia.
    Dr. Wittman. Yes.
    Mr. Beaudreau. We are taking the time to engage with DOD 
and others to get it right as we consider future leasing on the 
East Coast.
    Dr. Wittman. Well, and before my time expires, let me ask 
you. How do you believe that the seismic information is going 
to be gathered? Do you believe that there is going to be an 
energy company out there that is going to invest in gathering 
that seismic data without the possibility of actually 
developing the energy there? Is it the Department of the 
Interior that is going to pursue getting that data? Tell me how 
that data is going to be collected.
    Mr. Beaudreau. I have actually engaged very specifically, 
both with the G&G contracting industry through the IAGC and 
individuals companies, as well as with individual oil and gas 
companies who are interested in that area. Given the potential 
here, and the seriousness with which we are moving forward with 
this strategy, I am actually quite confident that seismic 
studies, assuming our EIS process completes and those studies 
are able to go forward in a responsible way, I am actually 
quite confident that industry will be interested in doing so.
    Dr. Wittman. Well, I hope your confidence is the reality. 
The conversations I have had with energy companies have been 
the opposite. They are a little reticent to say that they are 
going to make those kinds of investments without knowing with 
any certainty that they will be able to develop. Because, as 
you know, there is nothing in the plan that said that would 
ever develop, only the opportunity to say in 2017 that the 
Department of the Interior would consider at that particular 
point leasing those areas in Lease 220 going forward. So, I 
hope that your optimism is realistic.
    Thanks again, Mr. Chairman. I yield back.
    Mr. Lamborn. OK. And I want to thank the witnesses for 
appearing today, and for your testimony. Members of the 
Committee may have additional questions for the record, and I 
would ask that you respond to those in writing if you are given 
those questions.
    I would like to now invite the second panel to come 
forward: Mr. Erik Milito, Group Director, Upstream and Industry 
Operations for the American Petroleum Institute; Mr. Daniel 
Simmons, Director of Regulatory and State Affairs for the 
Institute of Energy Research; Mr. Steven Groves; and Mr. Athan 
Manuel, Director of Lands Protection Program for the Sierra 
Club.
    Like all our witnesses, your written testimony will appear 
in full in the hearing record, so I ask that you keep your oral 
statements to 5 minutes, as outlined in our invitation letter 
to you.
    Our microphones are not automatic, so you have to press the 
button to begin. After 4 minutes the yellow light comes on. 
After 5 minutes the red light comes on.
    We thank you for being here. And we will start with Mr. 
Milito. Thank you for your testimony.

STATEMENT OF ERIK MILITO, GROUP DIRECTOR, UPSTREAM AND INDUSTRY 
            OPERATIONS, AMERICAN PETROLEUM INSTITUTE

    Mr. Milito. Thank you, Chairman. Good morning, Chairman 
Lamborn, Ranking Member Holt, and members of the Committee. I 
am Erik Milito, Upstream Director at the American Petroleum 
Institute. API has more than 500 member companies which 
represent all sectors of America's oil and natural gas 
industry. Our industry supports 9.2 million American jobs, and 
7.7 percent of the U.S. economy. The industry also provides 
most of the energy we need to power our economy and way of 
life, and delivers more than $85 million a day in revenue to 
the Federal Government.
    Our Nation can and should be producing more of the oil and 
natural gas Americans need here at home. This would strengthen 
our energy security, and help put downward pressure on prices, 
while also providing many thousands of new jobs for Americans 
and billions of dollars in additional revenue for our 
government.
    According to Energy Information Administration statistics, 
we produced a little more than 5 million barrels of oil a day 
in 2009, and we are now projected to produce 8 million barrels 
a day by the end of 2014. But we can and should do more.
    The Transboundary Hydrocarbon Agreement with Mexico is 
important, as it could help create additional resource 
opportunities for U.S. oil and natural gas companies in the 
Gulf of Mexico and, in turn, create more jobs and enhance our 
energy security. The Agreement establishes a cooperative 
process for managing oil and gas reservoirs along the boundary 
region in the Gulf of Mexico, and encourages cooperative 
agreements between U.S. independent oil companies, and Mexico's 
state-owned company, PEMEX, to jointly develop energy resources 
along boundary areas in the Gulf of Mexico.
    Importantly, this Agreement will provided legal certainty 
to U.S. companies, which will encourage them to invest in new 
energy development, creating jobs and spurring economic growth. 
The importance of this Agreement is magnified by the fact that 
the Administration has chosen a status quo approach to offshore 
oil and natural gas development that restricts oil and gas 
development to the Gulf of Mexico and Alaska, and leaves more 
than 85 percent of OCS areas off limits.
    We continue to hear about an all-of-the-above energy 
approach, and the Administration's own projections show that 
oil and natural gas will supply most of the Nation's energy for 
decades to come. Yet we continue to see proposals to increase 
taxes on the industry, decisions to reduce opportunities for 
leasing and resource development, processes that string out 
permitting decisions, and continued regulatory uncertainty.
    Implementing legislation authorizing this important 
Agreement should be approved as quickly as possible. And House 
Bill 1613 takes that pivotal step. Swift implementation of the 
Transboundary Hydrocarbon Agreement is important to providing 
regulatory certainty, will allow companies to make investments 
in these boundary areas with the knowledge that there is a 
framework in place to allow for orderly extraction of these 
resources.
    Given that industry investments in the offshore are largely 
limited to the Gulf of Mexico, this will serve to enhance our 
Nation's energy security and long-term economic growth, and 
highlight the importance of national leadership in promoting a 
positive, forward-looking energy policy.
    In addition, this legislation would also exempt any related 
oil and gas developmental activities from resource extraction 
reporting requirements of Section 13(q) of the Exchange Act. 
Section 13(q) requires SEC-listed companies to report payments 
to foreign governments, sub-national governments, and the 
Federal Government, on a project-by-project basis. Instead of 
including common sense exemptions for public disclosure and 
conflicts of law, the SEC pushed through the most costly rule 
in the Commission's nearly 80-year history. API continues to 
litigate Section 13(q) with the SEC, and believes the rule 
should be vacated to avoid competitive disadvantage of U.S. 
companies around the world.
    I would like to also add that the industry fully supports 
transparency and disclosure, and the EITI efforts that we are 
currently involved with, and that a reasonable 1504 rule would 
be modeled--it would follow along those types of lines, rather 
than what we now have as the final rule.
    I would like to thank again the Chairman and the Committee, 
and I look forward to your questions. Thank you.
    [The prepared statement of Mr. Milito follows:]

               Statement of Erik Milito, Group Director, 
                 Upstream and Industry Operations, API

    Good morning Chairman Lamborn, Ranking Member Holt, and members of 
the committee. I am Erik Milito, Upstream Director at the American 
Petroleum Institute.
    API has more than 500 member companies, which represent all sectors 
of America's oil and natural gas industry. Our industry supports 9.2 
million American jobs and 7.7 percent of the U.S. economy. The industry 
also provides most of the energy we need to power our economy and way 
of life and delivers more than $85 million a day in revenue to the 
federal government.
    Our nation can and should be producing more of the oil and natural 
gas Americans need here at home. This would strengthen our energy 
security and help put downward pressure on prices while also providing 
many thousands of new jobs for Americans and billions of dollars in 
additional revenue for our government. According to Energy Information 
Administration statistics, we produced a little more than 5 million 
barrels of oil a day in 2009 and are projected to produce 8 million 
barrels a day by the end of 2014. But we can and should do more.
    The Transboundary Hydrocarbon Agreement with Mexico is important as 
it could help create additional resource opportunities for U.S. oil and 
natural gas companies in the Gulf of Mexico and in turn create more 
jobs and enhance our energy security. The agreement establishes a 
cooperative process for managing oil and gas reservoirs along the 
boundary region in the Gulf of Mexico and encourages cooperative 
agreements between U.S. independent oil companies (IOCs) and Mexico's 
state-owned oil company (Pemex) to jointly develop energy resources 
along boundary areas in the Gulf of Mexico. Importantly, this agreement 
will provide legal certainty to U.S. companies, which will encourage 
them to invest in new energy development, creating jobs and spurring 
economic growth.
    The importance of this agreement is magnified by the fact that the 
administration has chosen a status quo approach to offshore oil and 
natural gas development that restricts oil and gas development to the 
Gulf of Mexico and Alaska and leaves more than 85 percent of OCS areas 
off limits. We continue to hear about an ``all-of-the above'' energy 
approach and the administration's projections show that oil and natural 
gas will supply most of the nation's energy for decades to come. Yet we 
continue to see proposals to increase taxes on the industry, decisions 
to reduce opportunities for leasing and resource development, processes 
that string out permitting decisions, and continued regulatory 
uncertainty.
    Implementing legislation authorizing this important agreement 
should be approved as quickly as possible, and H.R. 1613 takes that 
pivotal step. Swift implementation of the Transboundary Hydrocarbon 
Agreement is important to providing regulatory certainty and will allow 
companies to make investments in these boundary areas with the 
knowledge that there is a framework in place to allow for orderly 
extraction of these resources. Given that industry investments in the 
offshore are largely limited to the Gulf of Mexico, this will serve to 
enhance our nation's energy security and long-term economic growth and 
highlight the importance of national leadership in promoting a 
positive, forward-looking energy policy.
    In addition, this legislation would also exempt any related oil and 
gas developmental activities from resource extraction reporting 
requirements of section 13(q) of the Exchange Act. Section 13(q) 
requires SEC-listed companies to report payments to foreign 
governments, subnational governments, and the Federal Government on a 
project-by-project basis.
    Instead of including common senses exemptions for public disclosure 
and conflicts of law, the SEC pushed through the most costly rule in 
the Commission's nearly 80 year history. API continues to litigate 
section 13(q) with the SEC and believes the rule should be vacated to 
avoid a competitive disadvantage of U.S. companies around the world.
    Thank you again to the Chairman and the Committee and I look 
forward to your questions.
                                 ______
                                 
    Mr. Lamborn. Thank you, Mr. Milito.
    Mr. Simmons, go ahead and proceed with your five minutes.

  STATEMENT OF DANIEL R. SIMMONS, DIRECTOR OF REGULATORY AND 
          STATE AFFAIRS, INSTITUTE FOR ENERGY RESEARCH

    Mr. Simmons. Mr. Chairman, Ranking Member Holt, and members 
of the Subcommittee, thank you for the opportunity to talk 
today about the Transboundary Hydrocarbon Agreement.
    First of all, some context. The United States and Mexico 
are energy-rich countries. Total recoverable oil in North 
America exceeds 1.7 trillion barrels. To put that in 
perspective, at the U.S. current rate of use, that is enough 
oil for 242 years. Total recoverable natural gas is 
approximately 4.2 quadrillion cubic feet, enough for 176 years 
at the U.S.'s current rate of use, and North America has nearly 
500 billion short-tons of coal, enough coal for nearly 500 
years at our current rate of use.
    North America is not limited by our energy resources. 
Instead, we are limited by access to these vast energy 
resources. Trade between the United States and Mexico, 
especially in energy, not only makes our Nation stronger, but 
it raises our combined economic welfare. In 2011, Mexico was 
the second-largest source of oil exports to the United States 
behind only Canada, and Mexico was the largest recipient of 
U.S. gasoline exports.
    Mexico's heavy oil production is falling. But hopefully, 
the Transboundary Hydrocarbon Agreement will help turn around 
Mexico's oil production. The Transboundary Agreement could lead 
to oil and natural gas production on 1.5 million acres in the 
Gulf of Mexico that was previously off limits, due to border 
issues. This production alone will not lead to a revolution in 
hydrocarbon production in the United States or Mexico. But more 
important than the oil and natural gas resources along the 
border is the potential for greater cooperation between the 
U.S. and Mexico.
    Mexico has long been a leading oil producer, but oil 
production in Mexico is falling. This is not, again, from a 
lack of resources. Mexico has an estimated 10.5 billion barrels 
of proven oil reserves. But that amount could double when 
unconventional and deep water resources become proven reserves. 
The United States is the leader in accessing unconventional and 
deep water resources, as seen by huge new oil discoveries in 
places like offshore Brazil, that were made using technologies 
developed in the U.S. Working together, we can increase 
Mexico's oil production to reverse their oil production 
decline.
    This is especially true if U.S. hydraulic fracturing 
technologies are used to access Mexico's shale, oil, and gas 
resources. For example, one of America's most prolific shale 
fields, the Eagle Ford, extends into Mexico. But all of the 
activity is on the U.S. side of the border.
    The Obama Administration finalized negotiations on the 
Transboundary Hydrocarbon Agreement last year. Hopefully 
Congress will now be able to act to finalize this Agreement.
    But one important note. While the Transboundary Hydrocarbon 
Agreement is a good agreement that will aid both the U.S. and 
Mexico, one potential problem is the conflict between Article 
20 in the Agreement and the SEC's rule 13(q) regarding 
disclosure for resource extraction payments. A possible 
conflict between rule 13(q) and Article 20 of the Transboundary 
Agreement at the very least creates some uncertainty about 
compliance with both Mexican and American disclosure laws. This 
uncertainty and potential disclosure conflict could place 
foreign state-owned oil companies who are not regulated by the 
SEC at a competitive advantage to companies which operate in 
the United States and are regulated by the SEC.
    Also much of the transboundary area in the Gulf is deep 
water, and would require multi-billion-dollar investments to 
produce these hydrocarbon resources. Any additional uncertainty 
makes these large investments harder and helps to impede 
additional exploration and production. Therefore, the authors 
of H.R. 1613 are to be commended for recognizing this 
uncertainty and taking the proper steps to isolate this unique 
agreement from the uncertainty surrounding rule 13(q).
    There is much more that can be done to benefit our 
continent, which happens to sit on the largest sources of 
hydrocarbons in the world. Affordable, reliable, and secure 
energy is our common bond, and the U.S. and Mexico can both 
benefit from its development. Positive movement on the 
Transboundary Hydrocarbon Agreement will help other energy 
projects move forward to the benefit of our people.
    Thank you for your time, and I will gladly answer any 
questions.
    [The prepared statement of Mr. Simmons follows:]

   Statement of Daniel R. Simmons, The Institute for Energy Research

    The Institute for Energy Research (IER) is a non-profit 
organization that conducts intensive research and analysis on the 
functions, operations, and government regulation of global energy 
markets. IER articulates free market positions that respect private 
property rights and promote efficient outcomes for energy consumers and 
producers. IER staff and scholars educate policymakers and the general 
public on the economic and environmental benefits of free market 
energy. The organization was founded in 1989 as a public foundation 
under Section 501(c)(3) of the Internal Revenue Code. Funding for the 
institute comes from tax-deductible contributions of individuals, 
foundations, and corporations.

Introduction
    Discussion of the Transboundary Agreement requires some background 
on the relative energy positions of the countries of North America, and 
therefore, I will include today a discussion of the situation we find 
ourselves in. It is in fact a great situation, if government policies 
adjust to allow the benefits to flow. The United States and Mexico are 
energy rich countries, especially when the combined oil, natural gas, 
and coal endowments are considered together. There is no reason why 
North America's energy resources cannot meet the needs of our nations 
for generations to come, except government policies. That is why the 
Committee's focus on ensuring the Transboundary Agreement works to 
benefit all of our citizens is welcome.
    Total recoverable oil in North America exceeds 1.7 trillion 
barrels. The total recoverable North American natural gas is 
approximately 4.2 quadrillion (4,244 trillion) cubic feet and North 
America has over 497 billion short tons of recoverable coal. For 
comparison's sake, the U.S. uses roughly 7 billion barrels of oil, 24 
trillion cubic feet and 1 billion short tons of coal annually. North 
America is not limited by energy resources, but instead by access to 
these vast energy resources. Trade between the United States and Mexico 
only makes our nations stronger and raises our combined economic 
welfare.
    Mexico is America's third largest trading partner \1\ and has been 
one of the largest sources of oil exports to the United States.\2\ 
Mexico is the largest recipient of U.S. gasoline exports \3\ and the 
second largest recipient of our natural gas exports.\4\
---------------------------------------------------------------------------
    \1\ U.S. Census, Top Trading Partners--Total Trade, Exports, 
Imports, http://www.census.gov/foreign-trade/statistics/highlights/
toppartners.html.
    \2\ Energy Information Administration, U.S. Total Crude Oil and 
Products Imports, http://www.eia.gov/dnav/pet/
pet_move_impcus_a2_nus_ep00_im0_mbblpd_a.htm.
    \3\ Energy Information Administration, Finished Motor Gasoline 
Exports by Destination, http://www.eia.gov/dnav/pet/
pet_move_expc_a_epm0f_eex_mbbl_a.htm.
    \4\ Energy Information Administration, U.S. Natural Gas Exports by 
Country, http://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm; Energy 
Information Administration, U.S. Natural Gas Imports by Country, http:/
/www.eia.gov/dnav/ng/ng_move_impc_s1_a.htm.
---------------------------------------------------------------------------
    The energy trade between the United States and Mexico is growing, 
especially for America's finished petroleum and natural gas exports. 
Mexico's heavy oil production is falling, but that means more spare 
refining capacity on the Gulf Coast if Canadian oil sands can be 
transported to the Gulf Coast.
    The energy and economic welfare of the United States and Mexico are 
intertwined by our shared geography, geology, and peoples. The 
Transboundary Hydrocarbon Agreement will help to tie our countries 
together and grow our economies. North America does not lack energy 
resources, but what we do lack, at times, is the necessary political 
will that could lead to greater economic growth and prosperity.

North American Energy Inventory
    North America has vast energy resources and more discoveries 
continue to be made. The United States alone has the world's largest 
combined oil, natural gas, and coal resources,\5\ and both Canada and 
Mexico have large oil and natural gas resources. To better understand 
the North America's energy potential, The Institute for Energy Research 
compiled the North American Energy Inventory \6\ in which we catalogued 
the known oil, coal, and natural gas resources in Canada, the United 
States, and Mexico using government reports. In the report we found 
that:
---------------------------------------------------------------------------
    \5\ Gene Whitney et. al., U.S. Fossil Fuel Resources: Terminology, 
Reporting, and Summary, Congressional Research Service, Nov. 30, 2010, 
http://epw.senate.gov/public/
index.cfm?FuseAction=Files.view&FileStore_id=04212e22-c1b3-41f2-b0ba-
0da5eaead952.
    \6\ Institute for Energy Research, North American Energy Inventory, 
Dec. 2011, http://www.energyforamerica.org/wp-content/uploads/2012/06/
Energy-InventoryFINAL.pdf.
---------------------------------------------------------------------------
          North America is blessed with enough energy supplies 
        to promote and sustain economic growth for many generations. 
        The government's own reports detail this, and Congress was 
        advised of our energy wealth when the Congressional Research 
        Service of the Library of Congress released a report showing 
        that the United States' combined recoverable oil, natural gas, 
        and coal endowment is the largest on Earth.
          The amount of oil that is technically recoverable in 
        the United States is more than 1.4 trillion barrels, with the 
        largest deposits located offshore, in portions of Alaska, and 
        in shale in the Rocky Mountain West. When combined with 
        resources from Canada and Mexico, total recoverable oil in 
        North America exceeds 1.7 trillion barrels.
          That is more than the world has used since the first 
        oil well was drilled over 150 years ago in Titusville, 
        Pennsylvania. To put this in context, Saudi Arabia has about 
        260 billion barrels of oil in proved reserves. For comparative 
        purposes, the technically recoverable oil in North America 
        could fuel the present needs in the United States of about 
        seven billion barrels per year for around 250 years.
          Moreover, it is important to note that that 
        ``reserves'' estimates are constantly in flux. For example, in 
        1980, the U.S. had oil reserves of roughly 30 billion barrels. 
        Yet from 1980 through 2010, we produced over 77 billion barrels 
        of oil. In other words, over the last 30 years, we produced 
        over 150 percent of our proved reserves and still had over 20 
        billion barrels of oil reserves.
          Restrictions in the form of federal bans and leasing 
        combined with declining offerings of lease acreage mean only 
        about 2.2 percent of America's offshore acreage is currently 
        leased for production.
          Proved reserves of natural gas in the United States 
        and throughout North America are enormous, and the total amount 
        of recoverable natural gas is even more impressive. The EIA 
        estimates that the United States has 304.6 trillion cubic feet 
        of proved reserves of natural gas.\7\ The total amount of 
        natural gas that is recoverable in North America is 
        approximately 4.2 quadrillion (4,244 trillion) cubic feet.
---------------------------------------------------------------------------
    \7\ Energy Information Administration, Natural Gas Reserves Summary 
as of Dec. 31, http://www.eia.gov/dnav/ng/
ng_enr_sum_a_EPG0_R11_BCF_a.htm.
---------------------------------------------------------------------------
          Given that U.S. consumption is currently [as of 
        December 2011] about 24 trillion cubic feet per year, there is 
        enough natural gas in North America to last the United States 
        for over 175 years at current rates of consumption.
          Total supplies of natural gas in North America dwarf 
        those of other countries. The United States, Canada, and Mexico 
        have more technically recoverable natural gas resources than 
        the combined total proved natural gas reserves found in Russia, 
        Iran, Qatar, Saudi Arabia, and Turkmenistan.
          With respect to total recoverable resources, however, 
        North America's combined coal supplies are even more 
        staggering. The United States, Canada, and Mexico have over 497 
        billion short tons of recoverable coal, or nearly three times 
        as much as Russia, which has the world's second largest 
        reserves. North America's recoverable coal resources are bigger 
        than the five largest non-North American countries' reserves 
        combined (Russia, China, Australia, India, Ukraine).
          North American recoverable coal could provide enough 
        electricity for the United States for about 500 years at 
        current levels of consumption.
          While the United States and North America contain 
        enormous energy wealth, U.S. policies have increasingly made 
        exploration, development, production and consumption of that 
        energy more difficult.
          Therefore, a scarcity of good policies, not a 
        scarcity of energy, is responsible for U.S. energy insecurity.
U.S. Oil and Natural Gas Production Trends
    The federal estate contains vast energy resources, but the federal 
government allows energy production on a very small percentage of 
taxpayer-owned federal lands. The Interior Department has leased just 2 
percent of federal offshore areas and less than 6 percent of federal 
onshore lands for oil and gas development.\8\ This is particularly 
important because, while the entire U.S. including Alaska and Hawaii is 
2.271 billion acres, the government owns mineral access to 2.4 billion 
acres because of the Outer Continental Shelf.
---------------------------------------------------------------------------
    \8\ See Bureau of Ocean Energy Management, Regulation and 
Enforcement, Offshore Energy and Minerals Management, http://
www.boemre.gov/offshore/. According to the administration's website, 
the outer continental shelf is 1.76 billion acres (http://
www.boemre.gov/ld/PDFs/GreenBook-LeasingDocument.pdf page 1) and only 
38 million acres are leased (Department of Interior, Oil and Gas Lease 
Utilization--Onshore and Offshore, http://www.doi.gov/news/
pressreleases/loader.cfm?csModule=security/getfile&pageid=239255 page 
4). That is a mere 2.16% of the entire Outer Continental Shelf. 
According to the Department of Interior, 38 million acres of onshore 
lands are leased for oil and natural gas production. See Table 3 in 
Department of Interior, Oil and Gas Lease Utilization--Onshore and 
Offshore, http://www.doi.gov/news/pressreleases/
loader.cfm?csModule=security/getfile&pageid=239255. According to the 
Congressional Research Service, the federal government owns just over 
650 million acres of land. See Appendix A. Congressional Research 
Service, Major Federal Land Management Agencies: Management of Our 
Nation's Lands and Resources, May 15, 1995, http://www.ncseonline.org/
nle/crsreports/natural/nrgen-3.cfm. The federal government also 
controls an additional 58 million acres of federal mineral estate below 
privately owned surface estate. See Bureau of Land Management, Split 
Estate, http://www.blm.gov/pgdata/etc/medialib/blm/wo/MINERALS_REALTY
_AND_RESOURCE_PROTECTION_/bmps.Par.98100.File.dat/
SplitEstate08finalWeb.pdf.
---------------------------------------------------------------------------
    Despite a large endowment of oil and natural gas resources on 
federal lands, which include offshore resources, oil and natural gas 
production is declining on federal lands in the United States. 
According to a recent report from the Congressional Research Service, 
from 2007 through 2012, oil production fell 4 percent and natural gas 
production fell 33 percent on federal lands.\9\
---------------------------------------------------------------------------
    \9\ Marc Humphries, U.S. Crude Oil and Natural Gas Production in 
Federal and Non-Federal Areas, Feb. 28, 2013, http://
www.instituteforenergyresearch.org/wp-content/uploads/2013/03/CRS-
report-on-oil-and-nat-gas-on-federal-lands.pdf.
---------------------------------------------------------------------------
    The falling production on federal lands is in stark contrast to the 
dramatically increasing production on private and state lands. Over the 
same time period, oil production grew by 35 percent and natural gas 
production grew by 40 percent.

[GRAPHIC] [TIFF OMITTED] T0979.001


    The historic increase in oil and gas production from non-
federal lands is the reason President Obama could say in his State of 
the Union address, ``We produce more oil at home than we have in 15 
years.'' We produce more natural gas than ever before--and nearly 
everyone's energy bill is lower because of it.''
    The President is right, but the federal government has had nothing 
to do with that success. The reason that oil and natural gas is 
increasing on private and state lands while falling on federal lands is 
because of a major difference in policies. The states understand that 
it is possible to protect the environment and produce oil and natural 
gas, while red tape on federal lands continues to increase.
    Consider one example of the time required to get a permit to drill 
on federal land versus some energy producing states. It takes an 
average of 228 days for the Bureau of Land Management to process a 
permit to drill, up from 154 days in 2005,\10\ but only 27 days for 
Colorado,\11\ 14 days for Ohio,\12\ and 10 days in North Dakota. It 
should come as no surprise why oil and natural gas production is 
rapidly increasing even while energy production on federal lands is 
declining. The federal government has vast energy resources, but the 
federal government's current energy plans result in limiting energy 
production on federal lands.
---------------------------------------------------------------------------
    \10\ Bureau of Land Management, Average Application for Permit to 
Drill (APD) Approval Timeframes: FY2005-FY2012, http://www.blm.gov/wo/
st/en/prog/energy/oil_and_gas/statistics/apd_
chart.html.
    \11\ Dave Neslin to Colorado Oil and Gas Conservation Commission, 
Apr. 25, 2011, http://cogcc.state.co.us/announcements/
CommissionLtr4_25_11.pdf.
    \12\ Ohio Division of Oil and Gas Resources Management, 2011 Ohio 
Oil and Gas Summary, http://ohiodnr.com/portals/11/publications/pdf/
oilgas11.pdf.

[GRAPHIC] [TIFF OMITTED] T0979.002


    The federal government's land use policies have reduced oil and 
natural gas production on federal lands because federal regulations 
make it much more difficult to work on federal lands. Instead of 
following the example of the states, the federal government continues 
to slow down energy production.
    Some argue that the reason oil and natural production is increasing 
on federal lands is because shale resources are located on private 
lands.\13\ There are a few problems with this argument. First, it 
overlooks that the fact that it is more expensive to produce oil and 
natural gas from unconventional resources like shale. Because it is 
less expensive to produce oil and natural gas from conventional 
resources, undoubtedly conventional oil production would be occurring 
in the Pacific, the Atlantic, parts of the Gulf of Mexico, offshore 
Alaska, in ANWR, in the National Petroleum Reserve-Alaska if the 
federal government had allowed access to these conventional resources.
---------------------------------------------------------------------------
    \13\ See e.g. The Checks and Balances Project, Senators get it 
wrong on oil & gas production at Jewell nomination hearing; Industry is 
following the oil to nonfederal lands, Mar. 8, 2013, http://
checksandbalancesproject.org/2013/03/08/senators-get-it-wrong-on-oil-
gas-production-at-jewell-nomination-hearing-industry-is-following-the-
oil-to-nonfederal-lands/.
---------------------------------------------------------------------------
    Second, oil and natural gas producers go to where there is access 
to the resources. With the federal government restricting access, oil 
production is increasingly occurring on private and state lands where 
access is permitted and delays allow investment dollars to be spent. 
This is why the shale revolution is occurring in the North Dakota, 
Texas, Arkansas, Louisiana, and Pennsylvania--and not on federal lands 
or in states like California. The Monterrey shale in California is 
larger than the Bakken and the Eagle Ford combined, but production is 
occurring elsewhere.
    Third, with 982 billion barrels of recoverable oil shale, if R&D is 
successful, what matters is a path to commercial production because 
there is no guarantee the federal government will permit commercial 
leasing if R&D does indeed go well. Companies will not be willing to 
invest the hundreds of millions and billions of dollars necessary to 
make production economical if they are not able to reap the rewards 
from production. The government's approach is akin to inviting 
pharmaceutical companies to invent new drugs without a patenting 
system. Few believe companies would invest if there was no potential 
for a reward after all one's risk.
    This example of potential resources in the United States shows that 
the regulatory environment is critical to exploration, and oil 
production increases can occur if people have access to resources. We 
know it can happen because it is happening.

[GRAPHIC] [TIFF OMITTED] T0979.003


Mexican Oil and Natural Gas Production Trends
    In Mexico, oil and natural gas production is controlled by 
Petroleos Mexicanos or Pemex--the state-owned oil company. According to 
the Energy Information Administration, over the past 5 years, oil 
production in Mexico has fallen by 17 percent,\14\ while natural gas 
production has increased by 5 percent.\15\
---------------------------------------------------------------------------
    \14\ Energy Information Administration, International Energy 
Statistics: Petroleum, http://www.eia.gov/cfapps/ipdbproject/
iedindex3.cfm?tid=5&pid=57&aid=1&cid=regions&syid=1980&eyid=2011&unit=TB
PD.
    \15\ Energy Information Administration, International Energy 
Statistics: Natural Gas, http://www.eia.gov/cfapps/ipdbproject/
iedindex3.cfm?tid=3&pid=26&aid=1&cid=regions&syid=1980&eyid=2011&unit=BC
F.
---------------------------------------------------------------------------
    According to Mexican Finance Minister Luis Videgaray, there is no 
plan to privatize Pemex, but the company's performance shows that it 
``cannot do everything itself.'' \16\ Videgaray continued, explaining 
``private participation--particularly in those fields where there is 
opportunity because of nature and geology but where Pemex clearly 
doesn't have either the capital or the expertise.'' \17\
---------------------------------------------------------------------------
    \16\ Mary Antastasia O'Grady, O'Grady: Will Mexico Welcome 
Wildcatters?, Wall Street Journal, Feb. 24, 2013, http://
professional.wsj.com/article/SB1000142412788732450320457832019117496
7104.html?mod=WSJ_Opinion_BelowLEFTSecond&mg=reno64-wsj%5C.
    \17\ Id.
---------------------------------------------------------------------------
    One example of where there is great potential, but where Pemex does 
not have expertise is in shale plays. The Eagle Ford shale extends into 
Mexico, but all of the production is on the U.S. side of the border.

[GRAPHIC] [TIFF OMITTED] T0979.004


    In a way, Mexico has privatized their refining sector. Mexico 
exports crude oil to the United States and imports gasoline and refined 
products from Gulf coast refineries. Mexican oil imports to the United 
States peaked in 2006 and have since decreased by 30 percent.\18\ 
Despite the decrease in Mexican oil imports to the U.S., American 
gasoline exports have dramatically increased in recent years. From 2007 
through 2011, U.S. gasoline exports to Mexico have more than 
tripled.\19\
---------------------------------------------------------------------------
    \18\ Energy Information Administration, U.S. Imports by Country of 
Origin, http://www.eia.gov/dnav/pet/
pet_move_impcus_a2_nus_ep00_im0_mbblpd_a.htm.
    \19\ Energy Information Administration, Finished Motor Gasoline 
Exports by Destination, http://www.eia.gov/dnav/pet/
pet_move_expc_a_epm0f_eex_mbbl_a.htm.
---------------------------------------------------------------------------
    Despite the rise in Mexico's natural gas production, Mexico is a 
net natural gas importer.\20\ U.S. natural gas exports by pipeline have 
increased by 86 percent from 2010-2012.\21\
---------------------------------------------------------------------------
    \20\ See Mary Antastasia O'Grady, O'Grady: Will Mexico Welcome 
Wildcatters?, Wall Street Journal, Feb. 24, 2013, http://
professional.wsj.com/article/SB1000142412788732450320457832
0191174967104.html?mod=WSJ_Opinion_BelowLEFTSecond&mg=reno64-wsj%5C.
    \21\ Energy Information Administration, U.S. Natural Gas Exports by 
Country, http://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm.

[GRAPHIC] [TIFF OMITTED] T0979.005


The Transboundary Hydrocarbons Agreement
    The Gulf of Mexico is one of the most prolific hydrocarbon-
producing areas for both the United States and Mexico. Oil production, 
especially in deepwater on the U.S. side of the border, has moved 
closer to the U.S.-Mexico maritime border in recent years. Until last 
year, however, there was no agreement on how to divide resources 
between the United States and Mexico for resources that straddle the 
border.
    The Transboundary Hydrocarbon Agreement comes after decades of 
indecision between Mexico and the United States. This decision allows 
oil and natural gas production on 1.5 million acres in the Gulf of 
Mexico that was previously off-limits because of border issues.
    The Transboundary Hydrocarbon Agreement itself will not lead to a 
revolution in hydrocarbon production for the United States and Mexico. 
This is not to say that the hydrocarbon resources are not important--
they are. But more important than the oil and natural gas resources 
along the border is greater cooperation between the United States and 
Mexico and American companies and PEMEX.
    Mexico has long been a leading oil producer, but as explained 
above, oil production in Mexico is falling. This is not from a lack of 
resources. Mexico has an estimated 10.5 billion barrels of proven oil 
reserves, but that amount could double when unconventional and 
deepwater resources become proven reserves.\22\ And if the private 
sector is allowed to become more involved in Mexico, their resources 
could expand greatly, as our own have. The Transboundary Hydrocarbon 
Agreement is important for the production of some of these deepwater 
resources.
---------------------------------------------------------------------------
    \22\ Minority Staff Report, United States Senate Committee on 
Foreign Relations, Oil, Mexico, and the Transboundary Agreement, Dec. 
21, 2012, http://www.foreign.senate.gov/publications/download/oil-
mexico-and-the-transboundary-agreement.
---------------------------------------------------------------------------
    Not only can the Transboundary Hydrocarbon Agreement lead to 
greater production in the Gulf of Mexico, it will foster greater 
cooperation between Mexico and American companies. This is critical 
because the United States is the leader in accessing unconventional and 
deepwater resources. Working together, we can increase Mexico's oil 
production and reverse their oil production decline. This is especially 
true if U.S. hydraulic fracturing technologies are used to access 
Mexico's shale oil and gas resources. For example, one of America's 
most prolific shale fields, the Eagle Ford, extends into Mexico, but 
all of the activity is on the U.S. side of the border. This is similar 
to areas throughout the U.S. where production is skyrocketing on 
private and state lands but remaining dormant on federal government 
lands.
    After the Obama administration did the important work of 
negotiating the Transboundary Hydrocarbon Agreement, they took over a 
year to decide whether the agreement was a treaty or an Executive 
Agreement. The United States needs secure energy supplies from its 
neighbors and allies. It should not take over a year for the 
administration to decide whether an agreement is a treaty or an 
executive agreement, and therefore it is good that the Committee is 
providing oversight and direction consistent with its enumerated powers 
under the Constitution.

Concerns about a Potential Conflict Between the Transboundary 
        Hydrocarbon Agreement and Section 1504 of Dodd-Frank
    While the Transboundary Hydrocarbon Agreement is a good agreement 
that will aid both the United States and Mexico, one potential problem 
is a conflict between Article 20 of the agreement and the Security and 
Exchange Commission's Rule 13q-1 regarding Resource Extraction 
Payments.
    Article 20 states:
        To the extent consistent with their national laws, the Parties 
        shall maintain confidential, and obligate their Licensees to 
        maintain confidential, all Confidential Data and other 
        information obtained from the other Party or its Licensees in 
        accordance with this Agreement.
    Together with Rule 13q-1, requiring ``resource extraction issuers'' 
to disclose payments made to foreign governments, Article 20 can create 
an impossible situation for American companies operating on 
transboundary hydrocarbon resources. For example, Mexican 
confidentiality requirements may forbid the disclosure of the very 
information that Rule 13q-1 requires American companies \23\ to 
disclose. This would lead to a situation where companies regulated by 
the SEC have, at very least, uncertainty about compliance with both 
Mexican and American disclosure laws. This uncertainty and potential 
disclosure conflict would place foreign state-owned oil companies, who 
are not regulated by the SEC, at a competitive advantage to the 
companies which operate in the United States are regulated by the SEC.
---------------------------------------------------------------------------
    \23\ I'm using the term ``American companies'' as shorthand for 
companies regulated by the SEC.
---------------------------------------------------------------------------
    Because much of the transboundary area is deepwater, it would 
require multi-billion dollar investments to produce the hydrocarbon 
resources. Any legal uncertainty brought about by disclosure law could 
easily dissuade American companies from undertaking what is already an 
expensive decision, in turn reducing opportunities for new jobs for 
Americans.
    Rule 13q-1 also creates a different type of competitive 
disadvantage for American companies operating in in the Gulf of Mexico 
Transboundary area. The rule would allow foreign state-owned oil 
companies with a competitive advantage to consider business-sensitive 
information about American companies' operations. If Mexico were to 
allow foreign-owned companies to extract oil along the deepwater 
transboundary area, there could very well be competition between U.S. 
private companies and foreign-state owned companies. Even though the 
deepwater technology was developed in the U.S. deepwater, the U.S. 
companies would be at a disadvantage. This is like playing poker but 
being required to show your cards to your fellow card-players.
    Therefore, the authors of H.R. 1613 are to be commended for 
recognizing this and taking proper steps to isolate this unique 
agreement from the uncertainties surrounding 13q.

Conclusion
    North America is an energy rich continent. Our energy issues are 
not issues of a lack of supply, but a lack of access to energy 
resources. The Transboundary Hydrocarbon Agreement is one way the 
federal government should be moving forward to grant more access to 
taxpayer-owned energy resources. The agreement is a good agreement and 
should expeditiously move forward, but it should not have taken more 
than a year for the Administration to submit Transboundary Hydrocarbon 
Agreement to Congress.
    Affordable, reliable energy is critical for the welfare of all 
Americans and Mexicans. Hopefully our countries will work better 
together in the future to enhance our energy security and our economic 
welfare as well.
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony.
    Mr. Groves.

 STATEMENT OF STEVEN GROVES, SENIOR RESEARCH FELLOW, HERITAGE 
                           FOUNDATION

    Mr. Groves. Thank you, Mr. Chairman, for inviting me to 
testify this morning regarding the U.S.-Mexico Transboundary 
Hydrocarbon Agreement and H.R. 1613, the authorizing 
legislation that was introduced on April 18th by Congressman 
Duncan. My name is Steven Groves, and I am a Senior Research 
Fellow at the Heritage Foundation.
    The Transboundary Agreement is the latest treaty between 
the United States and Mexico regarding the Gulf. Between 1970 
and 2000 the U.S. and Mexico completed a series of treaties 
delimiting their maritime and continental shelf boundaries. The 
Transboundary Agreement builds on those treaties, and 
represents an effort to preempt disputes regarding the 
development of hydrocarbon deposits that straddle the 
international maritime boundary.
    Congress must closely examine the Agreement to determine 
whether it will advance our national interests and will do so 
without compromising American sovereignty. Congress is 
obligated to assess the terms of the Agreement and approve it 
only if its benefits outweigh its costs, hopefully by a 
significant margin. The terms of the Transboundary Agreement, 
if they are interpreted and implemented as currently 
understood, would benefit the United States.
    Although congressional approval of the agreement is 
unlikely to result in a meaningful increase in U.S. oil 
production in the near term, there are broader interests that 
may be advanced through the agreement, such as boosting U.S.-
Mexico relations on energy issues and facilitating working 
partnerships between U.S. companies and PEMEX.
    There is hope within the petroleum industry that the 
Agreement could lead to needed reforms in Mexico's energy 
governance. And while the development of transboundary 
reservoirs may be some time in coming, the Agreement is 
designed to provide the necessary certainty to U.S. companies 
that desire to lease blocks that abut the international 
boundary in the western and central planning areas.
    Now, in contrast to other international agreements such as 
the United Nations Convention on the Law of the Sea, the 
Agreement strikes the necessary balance between the U.S. 
interest in establishing a framework for the development of 
hydrocarbon resources, and preserving freedom of action by the 
United States and its companies.
    Unlike the Law of the Sea Treaty, the Agreement does not 
expose the United States to frivolous international lawsuits, 
nor does the agreement require the United States to transfer 
hydrocarbon royalties to an international organization for 
redistribution to the developing world. The Agreement is 
designed to promote, rather than compel, cooperation between 
the United States and Mexico, and to foster collaboration 
between U.S. oil companies and PEMEX. And the difference 
between promotion and compulsion is a key element that 
differentiates the Agreement from the Law of the Sea Treaty.
    For example, under Article 7 of the Agreement, if a U.S. 
company is unable to successfully negotiate a unitization 
agreement with PEMEX, it may still be authorized to develop a 
transboundary reservoir, subject to determination regarding the 
equitable allocation of production for the reservoir.
    Moreover, unlike the Law of the Sea Treaty, the Agreement 
does not create dispute resolution mechanisms that possess 
broad jurisdiction and enforcement authority. Rather, disputes 
under the Agreement are referred to a two-person joint 
commission composed of a U.S. and Mexican representative 
appointed by the parties. In limited instances, disputes that 
cannot be resolved by the joint commission are referred to a 
special expert.
    The Agreement's dispute resolution procedures are designed 
to stimulate, rather than stymie, the development of 
transboundary reservoirs. For example, in the event that there 
is a dispute regarding the existence of a transboundary 
reservoir, both countries must provide the joint commission 
with well data to support a claim that the reservoir, in fact, 
extends across the delimitation line. In other words, neither 
the U.S. nor Mexico may make an unsubstantiated unilateral 
claim that a transboundary reservoir exists in an effort to 
hinder the other country's development activities.
    In conclusion, the Transboundary Agreement advances U.S. 
national interests by promoting cooperation between the 
relevant governmental and private-sector entities, by avoiding 
the pitfalls of the Law of the Sea Treaty, by providing 
certainty to U.S. companies, and by doing so without 
compromising American sovereignty.
    Again, I appreciate the opportunity to provide my views on 
this issue this morning, and I look forward to any questions 
you may have.
    [The prepared statement of Mr. Groves follows:]

 Statement of Steven Groves, Bernard and Barbara Lomas Senior Research 
 Fellow, Margaret Thatcher Center for Freedom, The Heritage Foundation

    Mr. Chairman and members of the Committee:
    Thank you for inviting me to testify before you today regarding the 
Agreement between the United States of America and the United Mexican 
States Concerning Transboundary Hydrocarbon Reservoirs in the Gulf of 
Mexico (the ``Transboundary Agreement'') and H.R. 1613, the legislation 
that has been introduced to implement the Agreement.
    Developing hydrocarbon resources in the Gulf of Mexico along the 
international boundary with Mexico, including along the boundary within 
the ``Western Gap'' area on the extended continental shelf, is in the 
national interest of the United States. A successful implementation of 
the Transboundary Agreement advances that interest, and does so without 
entangling the United States in a deeply-flawed international 
convention adopted more than 30 years ago--the United Nations 
Convention on the Law of the Sea (UNCLOS).
    Proponents of U.S. ratification of UNCLOS claim that unless the 
United States joins the convention, it will be unable to develop the 
hydrocarbon resources in the Western Gap, including presumably any 
transboundary reservoirs. They claim that international recognition of 
the U.S. extended continental shelf (ECS), which is the continental 
shelf that extends beyond 200 nautical miles from the coast, is 
absolutely conditional upon U.S. accession.
    However, that claim lacks basis in fact or law. The United States 
regularly demarcates the limits of its continental shelf and declares 
the extent of its maritime boundaries with presidential proclamations, 
acts of Congress, and bilateral treaties with neighboring countries. As 
a result of bilateral treaties between the United States and Mexico, 
the Department of the Interior's Bureau of Ocean Energy Management 
(BOEM) currently leases areas of the U.S. ECS in the Western Gap to 
American and foreign oil and gas companies for exploration and 
development. Indeed, BOEM has leased an area that sits directly on the 
international boundary within the Western Gap to Eni Petroleum, an 
Italian multinational oil and gas company.
    The United States should take every action necessary--including the 
implementation of the Transboundary Agreement--to develop its 
hydrocarbon resources located on its ECS in the Gulf of Mexico. The 
United States can accomplish this end while acting as a sovereign 
nation rather than by joining UNCLOS and seeking the approval of the 
Commission on the Limits of the Continental Shelf (CLCS), an 
international committee of geologists and hydrographers located at U.N. 
headquarters in New York City.

The U.S. Extended Continental Shelf
    Since 2003, in an effort to define the outer limit of the U.S. 
continental shelf, the United States has collected bathymetric and 
seismic mapping data on the outer margins of its continental shelf in 
the Arctic Ocean, Gulf of Alaska, Gulf of Mexico, and Bering Sea; along 
the Atlantic and Pacific Coasts; and off the Northern Mariana Islands, 
Kingman Reef, Palmyra Atoll, Guam, and Hawaii. The U.S. Extended 
Continental Shelf Task Force, an interagency project, is conducting 
this data collection.\1\ To date, the ECS Task Force has identified six 
areas that ``likely'' contain submerged continental shelf and qualify 
as ECS and nine areas that ``possibly'' qualify. One area that likely 
contains ECS is the Western Gap, designated in Map 1 (below) as area 
#14.
---------------------------------------------------------------------------
    \1\ U.S. Department of Commerce, National Oceanic and Atmospheric 
Administration, National Ocean Service, ``Extended Continental Shelf 
Project,'' revised August 25, 2011, http://continentalshelf.gov 
(accessed April 17, 2012).

[GRAPHIC] [TIFF OMITTED] T0979.006


    The value of the hydrocarbon deposits lying beneath the 
entirety of the U.S. ECS is difficult to estimate, but it is likely 
substantial. According to the ECS Task Force, ``Given the size of the 
U.S. continental shelf, the resources we might find there may be worth 
many billions if not trillions of dollars.'' \2\
---------------------------------------------------------------------------
    \2\ U.S. Department of Commerce, National Oceanic and Atmospheric 
Administration, National Ocean Service, ``About the Extended 
Continental Shelf Project,'' http://continentalshelf.gov/about.html 
(accessed April 17, 2012).
---------------------------------------------------------------------------
``International Recognition'' of the U.S. ECS
    Historical experience has repeatedly debunked the notion that 
achieving ``international recognition'' of U.S. maritime boundary and 
continental shelf claims requires UNCLOS membership. The United States 
has had no difficulty whatsoever in achieving recognition of such 
claims in the past. Since 1945, U.S. Presidents have issued 
proclamations and Congress has enacted laws on U.S. maritime claims and 
boundaries. None of these have been challenged by any nation, any group 
of nations, or the ``international community'' as a whole.
    Proponents of UNCLOS offer no evidence that any foreign nation has 
not recognized or will not recognize the unilateral proclamations made 
by the United States. Yet the same proponents contend that the United 
States cannot hope to gain recognition of its ECS or assert 
jurisdiction and control over it unless and until it joins the 
convention. Law of the sea experts such as Ted McDorman at the 
University of Victoria disagree with that position:
        It can be asked whether a non-party to the LOS Convention can 
        legally exercise jurisdiction over its adjacent continental 
        margin beyond 200 nautical miles or whether this entitlement is 
        only available to parties to the LOS Convention. The answer is 
        that there appears to exist sufficient state practice . . . to 
        support the view that, as a matter of customary international 
        law, states can legally exercise jurisdiction over the 
        continental margin beyond 200 nautical miles irrespective of 
        the State's status as a LOS Convention ratifier.\3\
---------------------------------------------------------------------------
    \3\ Ted L. McDorman, ``The Entry into Force of the 1982 LOS 
Convention and the Article 76 Outer Continental Shelf Regime,'' The 
International Journal of Marine and Coastal Law, Vol. 10, No. 2 (1995), 
p. 167 (emphasis added). McDorman cites evidence of actual state 
practice under the 1958 Convention on the Continental Shelf and UNCLOS 
Article 76 to support his conclusion.
---------------------------------------------------------------------------
    No evidence suggests that membership in UNCLOS is necessary, much 
less essential, either to gain international recognition of the U.S.'s 
ECS boundaries or to claim, legally and legitimately, jurisdiction and 
control over its ECS resources. It is telling that proponents of U.S. 
accession to UNCLOS do not claim that international recognition of the 
U.S. territorial sea, contiguous zone, or exclusive economic zone (EEZ) 
is contingent upon U.S. accession to the convention, yet they assert 
that accession is the sine qua non for international recognition of the 
U.S. ECS.\4\
---------------------------------------------------------------------------
    \4\ Besides the United States, other UNCLOS non-parties, including 
Cambodia, Colombia, El Salvador, Syria, Turkey, the United Arab 
Emirates, and Venezuela, delimit their maritime boundaries (e.g., 12 nm 
territorial sea, 24 nm contiguous zone, and/or 200 nm EEZ) in 
conformity with the convention without objection from other nations. 
See U.S. Department of Defense, Under Secretary of Defense for Policy, 
Maritime Claims Reference Manual, June 23, 2005, http://
www.jag.navy.mil/organization/code_10_mcrm.htm (accessed April 17, 
2012).
---------------------------------------------------------------------------
    There is no magic ritual for achieving international recognition of 
maritime and continental shelf boundaries. Foreign nations recognize 
and respect U.S. maritime claims and boundaries, and vice versa, as 
long as those claims and boundaries conform to widely accepted 
international law, including the various provisions of customary 
international law that are reflected in UNCLOS.
    Like its other maritime claims, the United States will demarcate 
the limits of its ECS in a manner that conforms to international law. 
In November 1987, a U.S. government interagency group issued a policy 
statement declaring its intent to delimit the U.S. ECS in conformity 
with Article 76 of UNCLOS, which provides a formula for measuring the 
extent of a coastal state's ECS. The pertinent part of the policy 
statement reads:
        [T]he Interagency Group on Ocean Policy and Law of the Sea has 
        determined that the proper definition and means of delimitation 
        in international law are reflected in Article 76 of [UNCLOS]. 
        The United States has exercised and shall continue to exercise 
        jurisdiction over its continental shelf in accordance with and 
        to the full extent permitted by international law as reflected 
        in Article 76, paragraphs (1), (2) and (3). At such time in the 
        future that it is determined desirable to delimit the outer 
        limit of the continental shelf of the United States beyond two 
        hundred nautical miles . . . such delimitation shall be carried 
        out in accordance with paragraphs (4), (5), (6) and (7).\5\
---------------------------------------------------------------------------
    \5\ ``United States Policy Governing the Continental Shelf of the 
United States of America,'' November 17, 1987, reprinted in J. Ashley 
Roach and Robert W. Smith, U.S. Responses to Excessive Maritime Claims, 
2nd ed. (The Hague: Martinus Nijhoff Publishers, 1996), pp. 201-202 
(emphasis added).
---------------------------------------------------------------------------
    Despite the claims of UNCLOS proponents, the United States can 
successfully pursue its national interests regarding its ECS--
particularly hydrocarbon exploitation--without first gaining universal 
international recognition of its outer limits. While such recognition 
may be a worthy achievement, it is of no consequence to U.S. national 
interests whether the 195 nations of the world affirmatively recognize 
America's jurisdiction over its ECS in the Gulf of Mexico.

U.S. ECS in the Gulf of Mexico
    International cooperation on the delimitation of maritime 
boundaries is necessary in resource-rich areas such as the Gulf of 
Mexico. Since the 1970s, the United States and Mexico have negotiated a 
series of bilateral treaties to delimit their maritime and continental 
shelf boundaries, including areas of their abutting ECS in the Western 
Gap:
          In November 1970, the U.S. and Mexico signed a treaty 
        to maintain the Rio Grande and Colorado River as the agreed 
        international boundary between the two nations. As part of the 
        treaty, the two nations demarcated their maritime boundaries in 
        the Gulf of Mexico and the Pacific Ocean out to 12 nm.\6\ The 
        treaty entered into force on April 18, 1972.
---------------------------------------------------------------------------
    \6\ ``Treaty to Resolve Pending Boundary Differences and Maintain 
the Rio Grande and Colorado River as the International Boundary,'' 
November 23, 1970, http://faolex.fao.org/docs/pdf/bi-51757.pdf 
(accessed April 17, 2012).
---------------------------------------------------------------------------
          In May 1978, building on the 1970 treaty, the two 
        nations signed a treaty delimiting their maritime boundaries in 
        the Gulf and in the Pacific out to 200 nm.\7\ The treaty 
        demarcated boundary lines in the Gulf where their respective 
        200 nm EEZ abutted, leaving a ``doughnut hole'' of 
        approximately 5,092 square nm (the Western Gap) where their 200 
        nm boundary lines did not meet. A second doughnut hole was 
        created in the eastern Gulf where the EEZs of the U.S., Mexico, 
        and Cuba fail to intersect (the ``Eastern Gap''). The treaty 
        entered into force on November 13, 1997.
---------------------------------------------------------------------------
    \7\ ``Treaty on Maritime Boundaries Between the United Mexican 
States and the United States of America,'' May 4, 1978, http://
www.boem.gov/uploadedFiles/BOEM/Regulations/Treaties/1978_0504-Treaty-
MaritimeBoundariesMexicoandUS.pdf (accessed April 17, 2012).
---------------------------------------------------------------------------
          In June 2000, the U.S. and Mexico signed a treaty 
        dividing the area of ECS within the Western Gap. Of the 5,092 
        square nm of ECS in the Western Gap, 1,913 (38 percent) went to 
        the United States and 3,179 (62 percent) went to Mexico.\8\ The 
        treaty established a drilling moratorium over a narrow strip 
        along the international boundary within the Western Gap due to 
        the possibility that transboundary hydrocarbon reservoirs are 
        located along the boundary. The treaty entered into force on 
        January 17, 2001.
---------------------------------------------------------------------------
    \8\ ``Treaty Between the Government of the United States of America 
and the Government of the United Mexican States on the Delimitation of 
the Continental Shelf in the Western Gulf of Mexico Beyond 200 Nautical 
Miles,'' June 9, 2000, http://www.boem.gov/uploadedFiles/BOEM/
Regulations/Treaties/2000_0609-Treaty-OCSinWGOMbeyond200nm.pdf 
(accessed April 17, 2012), and news release, ``MMS Lauds U.S. and 
Mexico Continental Shelf Boundary Treaty Agreement,'' U.S. Department 
of the Interior, Minerals Management Service, June 13, 2000, http://
www.gomr.boemre.gov/homepg/whatsnew/newsreal/2000/000713.html (accessed 
April 17, 2012).
---------------------------------------------------------------------------
    Collectively, these treaties between the United States and Mexico, 
particularly the June 2000 ECS delimitation treaty, demarcated an area 
of U.S. ECS--the 1,913 square nm of submerged continental shelf in the 
northern portion of the Western Gap. There is no evidence that any 
nation, any group of nations, or the international community as a whole 
does not or will not recognize the ECS in the northern portion of the 
Western Gap as subject to the jurisdiction and control of the United 
States.

[GRAPHIC] [TIFF OMITTED] T0979.007


    Yet UNCLOS proponents commonly claim that U.S. companies will 
lack the ``certainty'' they require to develop the hydrocarbon 
resources located on the ECS unless the United States accedes to UNCLOS 
and receives the approval of the Commission on the Limits of the 
Continental Shelf (CLCS). For example, in 2007, former Deputy Secretary 
of State John Negroponte stated, ``In the absence of such international 
recognition and legal certainty, U.S. companies are unlikely to secure 
the necessary financing and insurance to exploit energy resources on 
the extended shelf.'' Another prominent advocate of U.S. accession has 
argued that U.S. failure to join the convention ``could result in a 
loss of thousands of square kilometers of resource-rich . . . 
continental shelf.'' \9\
---------------------------------------------------------------------------
    \9\ John Norton Moore, written testimony, in hearings, The U.N. 
Convention on the Law of the Sea (Treaty Doc. 103-39), Committee on 
Foreign Relations, U.S. Senate, 108th Cong., 2nd Sess., October 14, 
2003, p. 56, http://www.foreign.senate.gov/download/?id=564DC8D7-F536-
4CCB-B0CE-3FD8A1C7CC6C (accessed April 17, 2012).
---------------------------------------------------------------------------
    Reality tells a different story. The ECS area on the U.S. portion 
of the Western Gap has been available for development since August 
2001. Specifically, BOEM offered the northern portion of the Western 
Gap for lease almost immediately after the 2000 U.S.-Mexico ECS 
delimitation treaty was ratified. That treaty entered into force on 
January 17, 2001. Seven months later, on August 22, BOEM offered the 
area of U.S. ECS in the Western Gap in Lease Sale 180. In that lease 
sale, three U.S. companies (Texaco, Hess, and Burlington Resources 
Offshore) and one foreign company (Brazil's Petrobras) submitted 
successful bids totaling more than $2 million for seven lease blocks in 
the Western Gap.\10\
---------------------------------------------------------------------------
    \10\ U.S. Department of the Interior, Bureau of Ocean Energy 
Management, Regulation and Enforcement, ``Western Gulf of Mexico Lease 
Sale 180 Information,'' updated August 30, 2010, http://
www.gomr.boemre.gov/homepg/lsesale/180/wgom180.html (accessed April 17, 
2012).
---------------------------------------------------------------------------
U.S. Leasing Activity in the Western Gap
    BOEM has offered the ECS blocks in the Western Gap in more than 20 
lease sales between August 2001 (Lease Sale 180) and March 2013 (Lease 
Sale 227). In connection with those sales, seven U.S. companies 
(Burlington, Chevron, Devon Energy, Hess, Mariner Energy, NARCA 
Corporation, and Texaco) submitted bids to lease blocks in the Western 
Gap. Five foreign companies--BP, Eni Petroleum (Italy), Maersk Oil 
(Denmark), Petrobras, and Total (France)--also bid on Western Gap ECS 
blocks during those sales. BOEM collected more than $50 million in 
bonus bids in connection with lease sales on those blocks.
    Of the approximate 320 blocks located in whole or in part on the 
Western Gap ECS, 67 (approximately 20 percent) are currently held under 
active leases by nine U.S. and foreign oil exploration companies.\11\
---------------------------------------------------------------------------
    \11\ U.S. Department of the Interior, Bureau of Ocean Energy 
Management, ``Lease Sale Information,'' http://www.boem.gov/Oil-and-
Gas-Energy-Program/Leasing/Regional-Leasing/Gulf-of-Mexico-Region/GOMR-
Historical-Lease-Sale-Information.aspx (accessed April 17, 2012).
---------------------------------------------------------------------------
    The successful delimitation and subsequent leasing of areas in the 
Western Gap demonstrate that the United States does not need to achieve 
universal international recognition of its ECS. The United States 
identified and demarcated areas of ECS in the Western Gap in 
cooperation with the only other relevant nation, Mexico, and that area 
was subsequently offered for development to U.S. and foreign oil and 
gas companies. All of this was achieved without U.S. accession to 
UNCLOS or CLCS approval.
    Even though approximately 20 percent of the U.S. ECS that has been 
made available for lease by BOEM is currently under an active lease, 
the U.S. oil and gas industry has supported and will likely continue to 
support U.S. accession to UNCLOS in order to achieve even greater 
``certainty.'' \12\ That is their prerogative, of course, and achieving 
a maximum amount of certainty is a legitimate and desirable goal for a 
capital-intensive commercial enterprise. However, the successful 
delimitation of the ECS in the Western Gap would appear to have 
provided the certainty necessary for several major U.S. and foreign oil 
companies to contemplate the development hydrocarbon resources on the 
Gulf ECS, including along the international boundary in the Western 
Gap.
---------------------------------------------------------------------------
    \12\ Paul Kelly, statement, in hearings, The U.N. Convention on the 
Law of the Sea (Treaty Doc. 103-39), pp. 113-116.

[GRAPHIC] [TIFF OMITTED] T0979.008


    The United States is unlikely to accede to UNCLOS in the near 
term, or perhaps ever. However, this does not mean that the United 
States should not take every action necessary--including implementation 
of the Transboundary Agreement--to secure oil and gas resources on its 
ECS in the Gulf of Mexico. The United States can accomplish this end 
while acting as a sovereign nation, continuing the tradition of 
American Presidents in proclaiming the nation's maritime and resource 
rights, and without acceding to a deeply flawed treaty or seeking the 
approval of an international commission of experts housed at the United 
Nations.
    --Steven Groves is the Bernard and Barbara Lomas Senior Research 
Fellow in the Margaret Thatcher Center for Freedom, a division of the 
Kathryn and Shelby Cullom Davis Institute for International Studies, at 
The Heritage Foundation.
    The Heritage Foundation is a public policy, research, and 
educational organization recognized as exempt under section 501(c)(3) 
of the Internal Revenue Code. It is privately supported and receives no 
funds from any government at any level, nor does it perform any 
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                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony.
    Mr. Manuel.

             STATEMENT OF ATHAN MANUEL, DIRECTOR, 
             LANDS PROTECTION PROGRAM, SIERRA CLUB

    Mr. Manuel. Thank you, Mr. Chairman, and good morning. And 
good morning to all the members of the Committee. My name is 
Athan Manuel, I work with the Sierra Club as our Director of 
Lands Protection. And I think most folks know Sierra Club as 
the Nation's largest grass roots environmental organization 
with over 2 million members and supporters around the country 
in every congressional district, and I appreciate the 
opportunity to testify this morning on H.R. 1613 and the U.S.-
Mexico Transboundary Hydrocarbon Agreement.
    Again, as most of you know, the Sierra Club has always been 
a strong champion of protecting America's special places and 
protecting our planet. But also we have been strong champions 
of worker safety. And we saw those two issues intersect 3 years 
ago last week in the explosion and the spill from the Deepwater 
Horizon that killed 11 workers and caused the largest oil spill 
in U.S. history. So in that context, I think we see H.R. 1613 
as kind of a mixed bag.
    We are generally supportive of the changes that have been 
made to the oversight of offshore drilling in the wake of the 
spill that happened 3 years ago, but we do not support any 
expansion of new offshore oil and gas drilling anywhere, in 
part in terms of having a cleaner energy policy, but also, if 
we are serious about fighting climate change, we think one of 
the issues that the U.S. needs to struggle with and triumph 
over is we need to keep the oil and gas and coal that is in the 
ground now in the ground, if we are serious about fighting 
climate change.
    As I mentioned, the inspections part of the bill we like, 
we are generally supportive of what the Obama Administration 
and the Department of the Interior and BOEM and BSEE have done, 
in terms of increasing inspections of our offshore rigs. We 
would like to see more money allocated for more inspections.
    If you look at the way the U.S. inspects our rigs compared 
to other countries that have a lot of offshore drilling, in 
Norway there is one inspector for every 1.3 rigs. In Britain, 
the rate is almost 1 to 1. But here in the U.S., the ratio is 
still now 1 to 29. So we would love to see more money allocated 
to allow our Federal agencies to do more inspections of 
existing rigs, but also, obviously, the rigs that will be put 
in place as a result of the Transboundary Agreement.
    As Mr. Holt and others have mentioned earlier in this 
hearing, we do support an increase in BSEE's jurisdiction to 
increase civil penalties for companies that break U.S. laws 
whether, again, they are operating in areas that are currently 
opened or the areas that will be opened up by the Transboundary 
Agreement. We are also supportive of increasing the liability 
cap, which again, hasn't been updated since the Exxon Valdez 
oil spill happened, and should be increased in light of what we 
have seen with the Deepwater Horizon, where we see now spills 
from rigs, not just spills from tankers.
    And finally, one of the provisions that we hope will not be 
neglected is that the Fish and Wildlife Service and the 
National Marine Fisheries Service will be consulted before 
drilling commences in these areas that are opened up by the 
Transboundary Agreement. But bottom line for us, obviously, the 
issue comes down to how do we get our energy. The Sierra Club 
thinks it is time for us to start getting off of oil and gas 
and, therefore, don't support new drilling in any areas off the 
Outer Continental Shelf or special places in Alaska or the 
Arctic Refuge.
    We think that all companies right now are doing very well. 
Quarterly profits have come out this week and you see Conoco 
and ExxonMobil are doing very, very well. The U.S. is producing 
more oil than they have in years and years. The amount of rigs 
have tripled since the Obama Administration has come in office, 
so this energy industry is doing very, very well, without 
opening up new areas to drilling and to open them up to the 
possibility of the spills and pollution that could damage 
coastal economies.
    And I think the coastal economies sector of this debate is 
often overlooked. But our coastlines, whether you are talking 
about Florida's coast or North Carolina's coast or New Jersey's 
coast or California's coast, or South Carolina's coast, 
generates billions of dollars a year and supports hundreds of 
thousands of jobs. And we don't think those jobs and those kind 
of ecosystems should be at risk from new oil and gas drilling.
    And just to kind of wrap up, obviously, from the Club's 
perspective, we are much more supportive of domestic energy 
policies that are focused on renewables and energy efficiency. 
Those jobs can't be moved from the United States. They help us 
create jobs domestically, and they help us fight climate 
change. So we think that is the way our Nation should pursue an 
energy policy, moving forward.
    Again, I appreciate the opportunity to testify this 
morning. We do like the inspection regime here, and having U.S. 
laws be applied to these new areas, but we are not supportive 
of expanding new drilling into new areas. But thanks for the 
time, and I appreciate the opportunity.
    [The prepared statement of Mr. Manuel follows:]

                 Statement of Athan Manuel, Director, 
                 Lands Protection Program, Sierra Club

    Mr. Chairman and members of the Committee, good morning. My name is 
Athan Manuel, and I am the Director of Lands Protection for the Sierra 
Club. I am here representing more than 2.1 million Sierra Club members 
and supporters who belong to more than 65 chapters and 450 groups 
nationwide. We are the largest environmental grassroots organization in 
the country. I am very appreciative of the opportunity to testify this 
morning regarding H.R. 1613, the ``U.S.-Mexico Transboundary 
Hydrocarbon Agreement and Steps Needed for Implementation.''
    The Sierra Club has always been a strong champion of protecting our 
special places and enjoying and exploring our planet, but we are 
equally concerned with issues of worker safety. We saw those two issues 
intersect 3 years ago last week when the explosion of the Deepwater 
Horizon off shore rig killed 11 workers and caused the largest oil 
spill in United States history.
    We see H.R. 1613 and the U.S. Mexico Transboundary Hyrdrocarbon 
agreement as a mixed bag. We support the idea of increased inspection 
of rigs operating in U.S. waters. However, we do not support the 
expansion of drilling into new areas.
    We certainly agree with one of the goals of H.R. 1613, to promote 
domestic job creation, but think the best way to do that is by 
promoting domestic clean and renewable energy and energy efficiency.

I. Inspections
    One goal of the Transboundary Hydrocarbon Agreement is to hold 
joint inspections of off shore drilling regulations.
    The Sierra Club supports the reforms and regulations put in place 
by the Obama Administration, the Department of the Interior, the Bureau 
of Safety and Environmental Enforcement, and the Bureau of Ocean Energy 
Management in the wake of the BP Deepwater Horizon spill. Regulations 
that require operators to demonstrate that they are prepared to deal 
with the potential for a blowout and worst-case discharge, and 
mandating that permit applications for drilling projects must meet new 
standards for well-design, casing, and cementing, and be independently 
certified by a professional engineer per BOEM's Drilling Safety Rule.
    We also support the guidance requiring a corporate compliance 
statement and review of subsea blowout containment resources for deep-
water drilling. We hope all these standards will be applied to the 
nearly 1.5 million acres of the U.S. Outer Continental Shelf that could 
be leased as part of the Transboundary Agreement.
    However, while these reforms have strengthened BSEE's inspection 
and oversight capabilities, funding levels remain far below what would 
be needed for frequent and thorough inspections. Low inspection rates 
not only undermine regulatory compliance by reducing the odds that 
violations will be observed, but also limit real-time monitoring of 
operations by inspectors. The explosion at the West, Texas fertilizer 
plant, which as last expected by OSHA in 1985, is one recent and vivid 
example. The best way to avoid another Deepwater Horizon spill is to 
increase monitoring and inspections, whether in areas currently open 
for drilling or the areas to be opened by the Transboundary Agreement.
    Despite these tough new regulations, the U.S. lags behind the rest 
of the developed world when it comes to inspectors available and 
trained to inspect the oil and gas rigs off our coasts. The number of 
inspectors per offshore oil rig in other developed countries is as 
follows:
    In the U.K., the inspector to rig ratio is 1: 2.78
    In Norway, the inspector to rig ratio is 1:1.05
    In the U.S., the inspector to rig ratio is 1: 29 \1\
---------------------------------------------------------------------------
    \1\ ``A review of the U.K. Safety Case Approach & Norway's Offshore 
Regulations'' conducted by LCDR Marc Montemerlo, 2012.
---------------------------------------------------------------------------
    We urge Congress to increase funding for BSEE's inspection program, 
and thus increase the inspection rate of our off shore rigs. Doing so 
would make these rigs safer and create jobs. The Sierra Club would 
support such an amendment to H.R. 1613.

II. Civil Penalties Need to be Increased
    The Sierra Club also feels that BSEE's civil penalties are too 
small to ensure compliance and deter risk taking by the oil and gas 
industry. The penalty for violating regulations is only $40,000 per 
day, per incident. Considering that the daily operating costs of a 
drilling rig can range up to $1 million, a $40,000 a day fine is not an 
adequate disincentive.
    We feel that raising the maximum fine BSEE can assess for civil 
penalties to a level comparable with operational costs is warranted, 
and should be added to H.R. 1613 and applied to the area opened for 
drilling in the Transboundary Agreement.

III. Applying the Final Drilling Safety Rule
    The regulations in the Final Drilling Safety represent positive 
reforms that are an improvement from the pre-Deepwater Horizon 
statutes. However, we feel that some improvement is needed, and that 
these improvements should be amended to H.R. 1613.
    Improved maintenance and training are both positive reforms that 
can reduce chances of equipment failure and operator error and thus 
increase safety. Yet of all the provisions in the Final Drilling Safety 
Rule, training and maintenance regulations are the most dependent on 
the robustness of BSEE's oversight and inspection capabilities. 
Maintenance is an ongoing concern that necessitates being frequently 
checked and inspected and training is only valuable if it translates 
into appropriate actions, which also requires continuous oversight to 
ensure.
    The Final Drilling Safety Rule requires drilling wells to be 
equipped with two independent barriers to flow. If correctly installed, 
these barriers could in fact protect against blowouts. However, the 
requirements for two barriers to flow can easily be undermined by 
operator error. This problem is illustrated by the Deepwater Horizon 
disaster, where a cement job, a common barrier to flow, was compromised 
by numerous operator errors. With limited funds for inspection and 
oversight, and perverse economics that incentivize project speed over 
safety, it is likely that not all barriers will be properly installed.
    The Sierra Club hopes that the Fish and Wildlife Service and the 
National Marine Fisheries Service will be consulted before drilling 
activity begins in the areas opened by the Transboundary Agreement to 
review the potential impacts to endangered species.

IV. No New Drilling
    The government's most recent Five-Year Plan allows access to more 
than seventy-five percent of the estimated undiscovered, technically 
recoverable oil and gas resources on the U.S. Outer Continental Shelf, 
including in fragile ecosystems like the Arctic. \2\ That is clearly 
enough to keep the industry busy given that the oil and gas industry is 
sitting on a large number of inactive leases in federal waters, proving 
H.R. 1613 to be unnecessary.
---------------------------------------------------------------------------
    \2\ U.S. Department of the Interior. ``Secretary Salazar announces 
2012-2017 offshore oil and gas development program.'' 8 Nov. 2011. 
http://www.doi.gov/news/pressreleases/Secretary-Salazar-Announces-2012-
2017-Offshore-Oil-and-Gas-Development-Program.cfm.
---------------------------------------------------------------------------
    According to a March 2011, U.S. Department of the Interior report, 
oil and gas companies hold more than 4,000 leases for which exploration 
or development plans have not been submitted or approved. \3\
---------------------------------------------------------------------------
    \3\ U.S. Department of the Interior. ``Oil and gas lease 
utilization--onshore and offshore.'' Mar. 2011.
---------------------------------------------------------------------------
V. Domestic Energy Jobs: Clean energy versus oil and gas drilling
    The Sierra Club strongly feels that the best place to create 
domestic energy jobs is by focusing on renewable energy and energy 
efficiency. The renewable energy industry is providing clean, 
affordable, and reliable electricity across the United States. To 
support this industry, good green jobs are being created and they're 
overwhelmingly based here in the U.S. The sectors that heave 
demonstrated the most dramatic job growth are the wind, solar, and 
energy efficiency. In fact, every dollar invested in clean energy 
creates three times as many jobs as every dollar invested in oil and 
gas. \4\
---------------------------------------------------------------------------
    \4\ http://www.peri.umass.edu/fileadmin/pdf/
other_publication_types/green_economics/economic_benefits/
economic_benefits.PDF.
---------------------------------------------------------------------------
Wind Industry:
    The security of federal tax incentives such as the Production Tax 
Credit (PTC) has brought wind manufacturing facilities to the United 
States, creating jobs and fostering economic development across the 
country. Today, the wind industry employs 80,700 Americans and there 
are over 400 facilities, in 43 states, which create parts for wind 
turbines. \5\ These jobs are directly associated with wind energy 
project planning, siting, development, construction, manufacturing and 
supply chain, and operations. Of the 80,700 jobs at the end of 2012, 
approximately 25,500 were in the manufacturing sector. Texas led the 
nation in wind jobs with over 10,000 employed in the wind industry 
followed by California, Iowa, Illinois, and Kansas.
---------------------------------------------------------------------------
    \5\ http://www.awea.org/suite/upload/
AWEA_USWindIndustryAnnualMarketReport2012_ExecutiveSummary.pdf.
---------------------------------------------------------------------------
    The wind industry estimates that if the PTC remains in place, they 
will create 54,000 additional American jobs in the next four years, 
including 46,000 manufacturing jobs. This rate of growth would keep the 
industry on track to support 500,000 jobs by 2030. \6\
---------------------------------------------------------------------------
    \6\ http://www.awea.org/newsroom/pressreleases/Navigant_study.cfm.
---------------------------------------------------------------------------
Solar Industry:
    For the third consecutive year, the U.S. solar industry continued 
its growth in 2012 and created jobs at a faster rate than the overall 
economy. As of September 2012, the solar industry employed 119,016 
solar workers, a 13.2% growth in the solar workforce from revised 
figures for 2011. Of the nearly 14,000 jobs created in 2012, 86% of 
them are new jobs, rather than existing positions that have added solar 
responsibilities. \7\
---------------------------------------------------------------------------
    \7\ http://thesolarfoundation.org/sites/thesolarfoundation.org/
files/NSJC%202012%20Factsheet%20FINAL.pdf.
---------------------------------------------------------------------------
    The solar industry's growth is especially impressive given that the 
12-month growth rate for the entire U.S. economy was only about 2.3%, 
which suggests that 1 out of every 230 new jobs in the U.S. economy was 
created in the solar industry this past year. During the same period, 
the fossil fuel electric generation industry shed 3,857 jobs, a decline 
of 3.77%.

Energy Efficiency:
    The effects of energy efficiency job growth are powerful and multi-
faceted. Earlier this year, the Alliance Commission on National Energy 
Efficiency Policy (ACNEEP) unveiled its policy recommendations that 
were based on the bold yet achievable goal of doubling U.S. energy 
productivity.
    An independent analysis of this proposal by the Rhodium Group found 
that doubling our nation's energy productivity by 2030 could: \8\
---------------------------------------------------------------------------
    \8\ http://www.ase.org/resources/energy-2030-impact-modeling.
---------------------------------------------------------------------------
          Cut average household energy costs by more than 
        $1,000 a year;
          Save American businesses $169 billion annually;
          Reduce government agency spending by $13 billion a 
        year;
          Create 1.3 million jobs and increase GDP by up to 2%;
          Decrease energy imports by more than $100 billion 
        annually; and,
          Reduce CO2 emissions by 33 percent below 
        2005 levels.
    Conversely, the Deepwater Horizon spill dramatically demonstrated 
how drilling can hurt coastal economies, cost rather than create jobs, 
AND reduce receipts to state and local governments and businesses. 
Pollution and spills from off shore drilling will damage booming and 
economically vital coastal tourism economies. According to the World 
Tourism & Travel Council, tourism in America employs over 14.7 million 
people, 10 percent of the American workforce, and accounts for 8.8 
percent of the national GDP, bringing in $1.3 trillion. This makes 
America's coastal recreation and tourism industry the second largest 
employer in the nation. Our coast serves over 180 million Americans who 
make more than 2 billion trips to these areas every year. American 
tourism is a trillion dollar industry, and of that coastal communities 
alone contribute over $700 billion annually to our economy. Oil spills 
and pollution from rigs, whether they occur in the central and western 
Gulf, or in the areas opened by the Transboundary Hydrocarbon 
Agreement, are not compatible with our nation's tourism and recreation 
economies, our oceans and waters, or our coastlines.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you, all of you, for 
testifying today. We will now begin a round of Member 
questions. And I will begin. And first I would like to ask a 
question of Mr. Milito.
    Last year, the American Petroleum Institute submitted 
comments to the Security and Exchange Commission regarding 
implementation issues with Section 1504 of Dodd-Frank, which 
requires energy companies to disclose payments made to foreign 
countries. Specifically, API cited that there are currently 
four countries which prohibit disclosure of such payments. 
These are Angola, Cameroon, China, and Qatar.
    This forces companies to essentially choose between 
violating foreign laws or shutting down substantial operations 
in foreign countries. The Agreement under consideration today 
has outlined several areas where confidentiality is required by 
lease holders.
    Should Mexico choose to prohibit the disclosure of payments 
made to their government, can you tell me what would happen to 
one of your U.S. member companies who seeks to develop a 
transboundary hydrocarbon reservoir with Mexico, and could they 
potentially be prevented from developing this resource as a 
result of this stringent Dodd-Frank regulation, Section 1504?
    Mr. Milito. Thank you, Mr. Chairman. That is an excellent 
question. And I would say absolutely. The way that we see this 
1504 legislation applying, and the rule that has been created, 
it would put companies in that specific dilemma.
    And I think you highlighted a very important point, that 
the parties to this agreement, this Transboundary Agreement, 
and the resulting agreement itself, put a significant emphasis 
on a confidentiality of information. And the reason why that is 
so important is it allows U.S. companies to be able to move 
forward on a competitive level.
    So you have the competition issue, but then you also have 
the issue that could arise where a country like Mexico could 
prohibit the disclosure and our companies are committed to 
following U.S. laws, and it could put them in a situation that 
prevents them from developing the resources. So this is 
precisely the type of situation that we were complaining about 
in our comments, and that we are trying to overturn through our 
litigation. So I appreciate the question, and I would agree 
with that concern.
    Mr. Lamborn. Well, thank you for that answer. And I am 
concerned about Dodd-Frank. It has a lot of regulations yet to 
be written. Obamacare has 1,700 more regulations to be written. 
But Dodd-Frank, which has been in force longer, still has many, 
many regulations to be written. And those that are written, 
such as this one, I will give a charitable interpretation and 
say it was an unintended consequence, not an intended 
consequence. But this puts companies in a real dilemma. These 
are American companies. And so I am really concerned about 
Section 1504.
    As a follow-up to that, does the language in H.R. 1613 help 
to provide certainty when it comes to this potential conflict 
between confidentiality and required disclosure?
    Mr. Milito. Yes, it does. It provides a full exemption and 
would allow companies to move forward with those investments.
    And the thing I would like to add is the Department of the 
Interior does collect this information and they report it. And 
so we see the money that the United States is getting from oil 
and gas distribution. So that money is coming in, that is being 
disclosed.
    And the other thing I would also add is that the industry 
fully supports transparency and payments to governments, and we 
are fully participating in the extractive industry's 
transparency initiative, which allows both companies and 
countries to participate, so that there is a bit of a back-and-
forth, and you could actually see if the countries are being 
honest. That is a good model to follow, because you are not 
requiring project-by-project disclosures, which puts everything 
out there and creates that competitive disadvantage.
    So, this provision in House Bill 1613 would provide the 
solution to that problem that we see with 1504.
    Mr. Lamborn. Well, I am glad to hear that, and hopefully 
that will be a model for going forward.
    And also, I would like to ask you about a different 
subject. My colleague from Nevada asked the Assistant Secretary 
what industry has done to improve safety, especially as we will 
need that for deep water drilling in the transboundary area. 
Can you speak about what industry has done to increase safety 
since the Gulf disaster 3 years ago?
    Mr. Milito. The industry has taken significant proactive 
and positive steps, and I have about 30 seconds left, but I 
think it could take actually a couple of weeks to go through 
them.
    At the outset, on May 17th, within a month after the tragic 
incident, the industry provided its recommendations to Interior 
for improving and making the regulations more effective. Since 
then, the industry has created the Marine Well Containment 
Company and the Helix Well Containment Group, which both 
provide containment caps on the ready in the event that there 
is an incident.
    We have also created the Center for Offshore Safety, which 
helps create a culture of safety, and enforces safety as a core 
value, not just as a priority, but as a core value. And what we 
are doing is working on a systems-based approach to safety.
    API has developed various standards that are now in the 
regulations and incorporated by reference. One of the key 
issues coming out of Macondo was cementing. We have a document 
called Standard 65 Part 2, ``Isolating Potential Flow Zones 
During Well Construction,'' which is the global standard for 
cementing wells.
    I can go on and on. There is a two-day forum next week in 
Houston on offshore safety being hosted by the Center for 
Offshore Safety. We are committed to safety. And every day the 
experts in the industry are developing the standards and we are 
working with the government to make sure we have a robust 
regime in place. We are also working on spill response so we 
have a system in place that has the plans that can be followed 
most effectively and also has the communication mechanisms in 
place so that government and the public are completely aware of 
what is happening in the event of a response to a spill.
    So, we are doing all we can, and I would welcome the 
opportunity to be able to brief this Committee, any offices, on 
everything we have done, because there is a lot going on that I 
think would be good for this Committee to be aware of.
    Mr. Lamborn. OK, thank you for that answer. Thank you all 
again for being here. I have a lot more questions I would love 
to ask, but my time is up. So I will now turn to Representative 
Grijalva.
    Mr. Grijalva. Thank you again, Mr. Chairman. Mr. Milito, I 
wanted to ask you to go back to the SEC resource extraction 
payments rule. Authorized under Dodd-Frank Section 1504, I 
think the accurate statement is that rule was fully mandated by 
Dodd-Frank and the SEC was obligated by law to release the rule 
in its current form. And I think the rule goes to the core of 
SEC's mission of investor protection. That was the intent of 
the rule. Secret payments can be easily demanded by corrupt 
governments. They can also be a signal that maybe a company is 
involved in risky business overseas or risky decisions, risks 
that I think the investor needs to know about when making 
investments.
    So, my question remains, why would you believe or API take 
the position that oil companies shouldn't release this 
information when it is clearly, I think, critical for the 
investment community and part of, I think, a legal fiduciary 
responsibility on the part of companies to release that? And 
that is my question.
    Mr. Milito. Yes, our concern is the way the rule was 
finally put into its current form. And there is two main areas 
I would like to point out. One is the requirement to report 
payments on a project-by-project basis. When you are working 
with nations around the world, and you are engaging in 
contracts that are for multi-billion-dollar projects, you are 
putting out, through this mechanism, all your financials for 
the world to see, including other nations, which we may not 
want to gain competitive advantages over our own U.S.-based 
companies and put U.S. shareholders in a position where they 
could potentially have a negative impact on their own 
performance of retirement funds, IRAs, 401k's, and things like 
that.
    The second issue concerns the conflict of law issue, where 
we have Section 1504, but those specific countries that the 
Chairman described prohibit those types of disclosures. And it 
is our position that the SEC has the ability to provide 
exemptions for conflict of law issues, as well as----
    Mr. Grijalva. OK.
    Mr. Milito [continuing]. Being able to----
    Mr. Grijalva. Yes.
    Mr. Milito [continuing]. Put a rule in place that doesn't 
require these disclosures on a project-by-project basis.
    Mr. Grijalva. The EU just released a rule that also has 
this budget project-by-project release requirement of 
information. So would there still be competitive disadvantage, 
as you are stating?
    Mr. Milito. There would be. We are concerned about the EU 
rule, as well. We support the extractive industry's 
transparency initiative, which is really a solid model, because 
when a country is reporting under EITI----
    Mr. Grijalva. OK, but----
    Mr. Milito [continuing]. They are providing all the 
payments being brought in, and then you can match it up with 
what the countries are actually providing, to see if those 
countries are being honest. So we actually have a system 
under----
    Mr. Grijalva. Thank you.
    Mr. Milito [continuing]. EITI that provides a better 
system----
    Mr. Grijalva. Thank. Mr. Manuel--I only have a few minutes. 
Mr. Manuel, do you agree with the statement of your panelist, 
Mr. Milito, regarding this SEC rule, the disclosure rule that 
we have been talking about?
    Mr. Manuel. Well, I would have to get back to you on the 
details, but I think I generally support your position on this, 
that disclosure is the best policy on these issues and that the 
industry shouldn't have anything to fear from disclosure and 
transparency.
    Mr. Grijalva. Liability caps--$75 million, I think, is set 
right now. Let me ask you. Do you think Congress should raise 
that cap to ensure that oil companies are held accountable for 
their spills, rather than what occurred with BP, where the 
taxpayers ended up with the brunt of that responsibility?
    Mr. Manuel. No, we certainly do. I mean we are open to any 
amount. But certainly $75 million is an outdated one that was 
based on the assumption that we would know that that would be a 
finite amount of oil, that this was based on tankers that 
obviously have a finite amount of oil they can carry. But it 
was inadequate for a spill like this one that came from a well 
that was not capped for months.
    So, I think it is appropriate to raise it dramatically, if 
not even have an unlimited cap. But whatever could politically 
pass we would support. But certainly $75 million, as it stands 
now, is completely inadequate and bad for the area that it 
operates in, but bad for----
    Mr. Grijalva. Yes.
    Mr. Manuel [continuing]. Bad for taxpayers.
    Mr. Grijalva. Mr. Chairman, if we can't have transparency 
disclosure, perhaps another mechanism for assuring the 
taxpayers are somewhat protected is to deal with that liability 
cap. But I am sure there is opposition to that as well. With 
that, I yield back.
    Mr. Lamborn. Thank you. Representative Duncan.
    Mr. Duncan. Thank you, Mr. Chairman. And thank you to the 
panel for being here to talk about the Transboundary Agreement. 
I think it is very, very important.
    I think you all would agree with me that unemployment in 
the United States is north of 7 percent. But unemployment in 
North Dakota is 3 percent or less. Unemployment in Texas, 
Louisiana, and Oklahoma, the oil-producing, energy-driven 
economies, is relatively low, compared with the U.S. 
unemployment rate north of 7 percent. And so, we talk about 
jobs. I think that is important.
    Mr. Simmons, you note in page two of your testimony in the 
written section, second paragraph, it says, ``Energy trade 
between the United States and Mexico is growing, especially for 
America's finished petroleum and natural gas exports. Mexico's 
heavy oil production is falling, but that means more spare 
refining capacity on the Gulf Coast.''
    We talk about the spare refining capacity a lot of times 
when we are talking about the Keystone Pipeline, that we have 
the refining capacity to refine that Canadian oil into the 
petroleum products. And the other side of the argument says, 
``Well, that is not going to be used in the United States, and 
it is not going to do anything to lower the price at the pump 
for Americans, it is just going to pass right through.'' And I 
say, ``So what?'' Because global demand is high, that is the 
reason prices are high. But if we can increase supply globally, 
that is going to lower the price for everyone, including here 
at home.
    I would argue that a lot of those contracts being 
negotiated and those products refined at American refineries 
will be used here. But beside that, we are creating American 
jobs. The capacity is there, the refineries are built, 
Americans are trained. If they had the raw oil product in order 
to refine, that we would be continuing to put Americans to work 
and producing energy resources. We would be trading with a 
friendly neighbor to our north, in Canada.
    But we are talking about Mexico and the Transboundary 
Agreement here. So I would ask--well, first off, let me just 
say when I am talking about jobs that drilling equals jobs, 
refining equals jobs, Keystone equals jobs, transboundary 
equals jobs, and jobs equal the American way of life. Just 
wanted to say that.
    So, what I want to ask is, by what means are we 
transporting oil from Mexico to the Gulf Coast? Do we see any 
changes with the Transboundary Agreement on the amount of 
Mexican oil that may be coming to the U.S. for refining? And I 
ask that to Mr. Simmons.
    Mr. Simmons. The vast majority of oil is transported by 
tanker, as I understand it, between Mexico and U.S. refineries. 
Much of Mexico's oil, they are the number one recipient of our 
finished gasoline products. Much of their oil comes to the 
United States because they don't have enough refining capacity 
in Mexico. Much of the oil comes to the United States, is 
refined, is then shipped back to Mexico as finished gasoline 
products, finished petroleum products.
    Mr. Duncan. So those are American jobs that----
    Mr. Simmons. Those are American jobs that happened because 
of Mexican oil production. Transboundary will help that, and 
especially if the Transboundary Agreement could lead to greater 
Mexican production overall. That means more American jobs, 
because we could have more refining in the U.S. plus the 
additional production in the Gulf, because all of those 
companies that operate, not all of them, but a vast majority of 
those companies that operate in the Gulf, all have U.S. 
businesses that will increase the number of jobs.
    Mr. Duncan. OK. Well, thanks for that. And I want to shift 
gears a little bit for Mr. Groves, because I am a Co-Chair of 
the Sovereignty Caucus here in Congress, along with the 
Chairman, who is the Chairman of the Sovereignty Caucus. So you 
have both of us here.
    You mention the sovereignty of the United States with 
regard to transboundary, and in your written testimony, I don't 
think you mentioned this in your verbal testimony, you referred 
to the U.N. Law of the Sea Treaty and the United Nations 
Convention on the Law of the Sea. Can you talk a little bit 
more about how transboundary is much better than the U.S. 
entering into any kind of treaty with the U.N.?
    Mr. Groves. Well, sure. I mean the Transboundary Agreement 
is everything that the Law of the Sea Treaty is not, in terms 
of advancing our interests while protecting our sovereignty.
    First of all, it is a bilateral agreement which, by its 
nature, is much easier to manage. You don't have 190 other 
countries in the mix, pulling their interests one way or the 
other.
    Mr. Duncan. By bilateral you mean both countries are all 
in, they are in agreement to do this.
    Mr. Groves. Right, and they were closely involved in 
negotiating the Agreement, just those two parties.
    Mr. Duncan. It wasn't forced upon them.
    Mr. Groves. It wasn't forced upon them. This is something 
that they both see as in their national interests on both sides 
of the international border. They both want to engage these 
transboundary reservoirs in a business-like way that doesn't 
infringe on one another's rights.
    The reciprocal obligations and risks are there, rather than 
them being unbalanced between developed and developing 
countries. And there aren't any complex dispute resolution 
mechanisms that would turn over the interpretation of the 
agreement to a court sitting over in Hamburg, Germany, or 
elsewhere. They have narrowly crafted those issues that could 
go for dispute resolution, and they have decided that it is 
going to be U.S. and Mexican representatives deciding those 
issues.
    So, everything that is wrong about the Law of the Sea 
Treaty is corrected and is done in the correct way in the 
Transboundary Agreement.
    Mr. Duncan. Thank you for that. I am out of time. So, Mr. 
Chairman, I yield back.
    Mr. Lamborn. Thank you. Representative Costa?
    Mr. Costa. Thank you very much, Chairman. I want to thank 
the Ranking Member for holding this hearing, and appreciate the 
last witness's clarification on the impacts of the 
transboundary legislation that we are talking about here this 
morning. I, too, support it, not only the additional millions 
of barrels of additional oil that would be produced, but over 
300 billion cubic feet of natural gas. I think we need to come 
together on a bipartisan effort on this legislation for all the 
right reasons that have been stated already.
    Mr. Chairman, I want to follow up on your last line of 
questioning with regard to safety. And the API witness, I 
think, did a good job in touching on that. It would be helpful, 
I think, if we could request an update under the category of 
lessons learned after the BP spill on what the current best 
management practices are, and have that information provided to 
the Subcommittee.
    And I know that the Department of the Interior has also 
worked with the American Petroleum Institute as well to ensure 
that we have learned those lessons and we are applying them 
today, both in offshore and deep water exploration. We want to 
continue it.
    [NOTE: Documents submitted for the record by the American 
Petroleum Institute in response to Mr. Costa's request have 
been retained in the Committee's official files.]
    I think the President's announcement yesterday, an 
additional 21,000--or 21 million, I guess it was--acres of 
lease is under the good news category. But, obviously, we don't 
ever want to repeat the horrific spill that occurred 2 years 
ago.
    I have a question to Mr. Manuel. I am one here that has, I 
think, been very clear about my support of using all the energy 
tools in our energy toolbox, having both an interim and a long-
term energy policy. I have not only been on record here and 
have voted for, but when I was in California, a robust 
renewable portfolio. We are going to be, by the year 2020, in 
California have over 30 percent of our energy will be 
renewable. And we have looked at all-of-the-above conservation. 
I have supported CAFE standards, because I think you have to 
use all of the above. There aren't any silver bullets in it.
    But Mr. Manuel, I would like to know, in your opinion, with 
the efforts that we pursue in renewable technologies, are they 
developed fully enough to provide the energy necessary in the 
United States that won't hamper our economy, either today, 
tomorrow, or in the near term? Because there are some that 
suggest, i.e. the XL Pipeline, that we ought to make a 
statement that we are going to change overnight. What is your 
view?
    Mr. Manuel. Well, we support all of the above, as long as 
all of the above is clean energy. We think that we are 
optimistic----
    Mr. Costa. Coal?
    Mr. Manuel. No. We want to start----
    Mr. Costa. Oil?
    Mr. Manuel. No. All the fossil fuels--I will save you some 
time. All the fossil fuels----
    Mr. Costa. OK. So you think we could convert, without 
hampering the American economy, and do away with all the fossil 
fuels, as you just stated? When?
    Mr. Manuel. Well, we want to try and reduce our use of 
fossil fuels by 80 percent. We think we can do that.
    Mr. Costa. By what?
    Mr. Manuel. By 80 percent.
    Mr. Costa. Eighty----
    Mr. Manuel. I will get back to you on the date for that. 
But we are optimistic of that----
    Mr. Costa. Well, no, the date is important.
    Mr. Manuel. Well, I will get back to you on that. Well, I 
do our lands policy for us. I will get back to you on the 
specifics--I am happy to get back to you today on the date.
    Mr. Costa. Well, see, I guess that is where we differ. 
Because, I mean, I don't think that is realistic.
    Mr. Manuel. Well, we are----
    Mr. Costa. I think perhaps in the next--I don't know what 
the time period is, I am not an expert in this. But whether it 
is 20 years plus, or less than 20, we will continue to build 
up, as we are doing in California, a more robust renewable 
portfolio. But all of the above doesn't mean that you eliminate 
fossil fuel, as you just stated. I mean maybe in the middle of 
this century we will have new technologies, and new 
developments in the ability in which fossil fuels are the 
minority of the energy usage in America and around the world.
    But I don't think the position you just stated is any more 
reflective of reality than the people that believe that we can 
drill our way out of all of our energy problems. We can't do 
either of the above. We have to use all the energy tools in the 
energy toolbox.
    Mr. Manuel. Well----
    Mr. Costa. And I think what is lacking is a plan to get 
there.
    Mr. Manuel. I could follow up with you and your office on 
that, but we are optimistic that, through innovation, through 
energy efficiency, we can dramatically reduce the amount of 
fossil fuels we use in powering the United States without 
seeing impact, a negative impact, on the U.S.----
    Mr. Costa. What about nuclear?
    Mr. Manuel. Pardon me?
    Mr. Costa. What about nuclear?
    Mr. Manuel. No, we are not fans of nuclear, either. I am 
from the Sierra Club, so----
    Mr. Costa. All right. Give me the year. Get back to me on 
that year.
    Mr. Manuel. I will.
    Mr. Lamborn. Thank you. Thank you. But there is nothing 
left. OK, let's have a second round of questions. There is a--
oh, excuse me. First we will hear from Representative Thompson.
    Mr. Thompson. Thank you, Chairman. Thank you, gentlemen, 
for your testimony. I mean I wasn't going down that path, but 
Mr. Manuel, I have to ask. It doesn't sound like you support 
``not all of the above,'' you support ``none of the below.'' 
And ``some of the above'' you don't support, either.
    I just have to ask--and you probably have a handle on this, 
how much does the production tax credit cost? Do you know what 
we invest, as taxpayers, and a production tax cost?
    Mr. Manuel. For clean--I would have to get back to you on 
the specifics on the----
    Mr. Thompson. It is a significant amount of money. Do you 
know how long it has been in effect?
    Mr. Manuel. No, I will have to get back to you on that, 
too.
    Mr. Thompson. A very long time. The question is, what will 
happen to the wind industry if that credit is not extended?
    Mr. Manuel. No, I know they need that now to----
    Mr. Thompson. Despite the fact we have had that tax credit 
in place, spending a lot of taxpayer-invested monies for a very 
long time.
    Mr. Simmons, the Assistant Secretary stated that the 
Department of the Interior estimates that the transboundary 
area currently contains as much as 172 million barrels of oil 
and 304 billion cubic feet of natural gas. Do you agree with 
those estimates?
    Mr. Simmons. Until we can look further, yes.
    Mr. Thompson. Oh.
    Mr. Simmons. If I just might add, one of the interesting 
things, and one of the great things that has happened in the 
Gulf over the past 20 years is that the amount of resources 
that they thought were available 20 years ago, it turns out 
that there is more than double, and up to triple and quadruple 
as many oil and gas resources in the Gulf, once we were able to 
look. And that is really the message.
    Once we can go look, once we can use modern technologies, 
there is more hydrocarbon resources than we ever thought there 
was, previously.
    Mr. Thompson. Can you follow up on that? You mentioned in 
your testimony estimated and proven reserves, and some 
opponents of production like confusing those two terms. Can you 
follow up on your previous statement and explain for us the 
difference between estimated reserves and proven ones? And why 
is it that actual reserves tend to be higher than the initial 
guesstimates of reserves?
    Mr. Simmons. Well, frequently what people talk about is 
proven reserves, proven oil reserves. And that is the oil that 
is in the ground that we have a very good idea of how much, 
because oil companies have drilled, they have started 
producing, they know. I mean they report to the SEC that, 
``This is how much oil we have.'' They know with very 
reasonable certainty.
    But they know that there is more oil in the ground, but 
they haven't drilled yet in other areas. But because of the 
geology, they believe that there is much more oil. And I am 
spacing on the exact term, but those are defined as other types 
of reserves, not proven reserves. Proven reserves are ones that 
oil companies are very certain about the amount of oil. We have 
much more oil than what are the proven reserves.
    And before I forget, since you asked about the wind 
production tax credit, according to the Joint Tax Committee, 
the wind production tax credit will cost $12.1 billion for the 
extension for this year alone, regardless of the past billions 
of dollars since it has been in effect since about 1992.
    Mr. Thompson. Thank you. Mr. Milito, if opened up for 
production, what specific impacts would the transboundary area 
have on jobs? Any projections?
    Mr. Milito. Well, it would be difficult to project the 
actual jobs that could be created. We are looking at direct 
employment in the tens of thousands, because of the Gulf of 
Mexico. But we have seen recently various companies paying 
millions and millions of dollars for leases in the vicinity of 
that area. I think 852 is where the Perdido production platform 
is. There are four fields that feed into that. It is very close 
to the boundary there.
    One thing I would mention is that these aren't just Gulf 
jobs. If you look at the indirect jobs, you are looking at 
support jobs. We have a report from Quest Offshore we could 
provide to the Committee that shows in New Jersey there are 40 
companies that provide services and supplies to Gulf 
operations; Massachusetts, 30 companies; you have steel 
production plants in Ohio. So it really has tentacles that feed 
throughout the whole country. But it just would continue to 
drive economic growth.
    And what I mentioned before is that we are limited to 
developing in the Gulf of Mexico. So if that is going to be the 
case, we have to open up new areas in the Gulf of Mexico and 
provide them for development so we can maintain that 
employment, as well as try to increase it, although we support 
opening up other areas, as well. So it is hard to project, but 
it is of tremendous economic benefit to this country in many 
respects.
    And the other thing we have to realize is that the revenues 
from this type of production go to the Federal Government. So 
we are averaging about $4 billion, some years $20 billion, from 
offshore production. That is all going to the treasury. So it 
is a good step in making sure we are addressing our budget.
    Mr. Thompson. Yes. Thank you, Mr. Chairman.
    Mr. Lamborn. Thank you. Representative Holt.
    Dr. Holt. Thank you. Before I begin my questions, Mr. 
Simmons, I would like to ask you to go back and check with your 
tax experts and provide for the record the actual cost of the 
wind production tax credit.
    Mr. Simmons. Sure thing.
    Dr. Holt. Per year. It was actually a 2\1/2\ year 
extension.
    Now, I believe Mr. Grijalva asked about the liability cap. 
But he only asked one of the witnesses. I would like to ask the 
other three: Mr. Milito, and Mr. Simmons, and Mr. Groves. The 
liability cap for offshore oil spills is set, it is a cap set 
at $75 million. Do you think Congress should raise the cap to 
ensure that oil companies would be accountable for the cost of 
cleaning up the spills?
    Mr. Milito. I think you have to look at the system as a 
whole, because there is no cap on environmental clean-up costs.
    Dr. Holt. And should the oil liability cap be left at $75 
million? Yes or no?
    Mr. Milito. Well, I think you can't just make a yes or no 
answer, because there is more to the----
    Dr. Holt. We have to vote up or down. Yes or no?
    Mr. Milito. Well, there is a whole system in place, 
Congressman, that we have to look at, including the fact that 
there is no cap on environmental clean-up costs, and that the 
cap is lifted in the event that there is----
    Dr. Holt. Are you familiar with the $75 million cap?
    Mr. Milito. I am.
    Dr. Holt. OK. That is the cap I am talking about. Should it 
be left at $75 million?
    Mr. Milito. I think it depends as to what the overall 
legislative package looks like.
    Dr. Holt. Yes or no?
    Mr. Milito. I----
    Dr. Holt. You just can't----
    Mr. Milito. You can't look at this in a vacuum. That is----
    Dr. Holt. Mr. Simmons?
    Mr. Milito. Respectfully, Congressman----
    Dr. Holt. Mr. Simmons, should it be left at $75 million?
    Mr. Simmons. I don't know, because it is not the only way 
that oil companies are held accountable----
    Dr. Holt. So, then, let me see if maybe somebody here 
knows. Mr. Groves?
    Mr. Groves. You are barking up the wrong tree, Mr. Holt. I 
am expert in treaty and international law.
    Dr. Holt. So, let me ask you as somebody who works in the 
field, should the taxpayer be on the hook for any expenses 
above $75 million? Even if it is the result of malfeasance, or 
whatever it is, by the drilling company?
    Mr. Groves. Well, I am all for protecting the taxpayers----
    Dr. Holt. OK. So let me try something else, then, thanks.
    The maximum fine that the Department of the Interior could 
levy against BP for one of the worst oil spills in history was 
$21 million. That is the maximum fine for something that has 
cost into the billions. And we have all read, we all know, we 
have had some testimony--although not from the CEOs--we have 
had some testimony about how it came to pass. A fine is 
relevant and warranted.
    But let me ask the panel, each of you, please, all four of 
you, do you think Congress should increase the fines that the 
Department of the Interior could levy in the case of such a 
spill to deter--well, to enforce good behavior, let's say? Mr. 
Milito?
    Mr. Milito. Well, my understanding is that BP has already 
paid $4 billion in criminal fines, and----
    Dr. Holt. No, that is--no, no. There is a fine. There is a 
penalty. And again, I would like you to answer the question 
that I am asking, because we have to decide whether that is 
sufficient, or whether we need to change the law to provide 
some sanction.
    Mr. Milito. And with all due respect, Congressman----
    Dr. Holt. Yes.
    Mr. Milito [continuing]. I think you can't look at these in 
a vacuum.
    Dr. Holt. OK.
    Mr. Milito. I think you have to look at the system as a 
whole, and look at----
    Dr. Holt. So on that particular--the ability to levy a 
fine, should it be raised?
    Mr. Milito. Well, the litigation right now is likely to be 
in the billions. That is what----
    Dr. Holt. OK.
    Mr. Milito. All indications are the fines and penalties are 
going to be in the billions in the ongoing litigation. That is 
what all appearances are, that it will be in the billions.
    Dr. Holt. Yes. I mean the Department of the Interior is the 
regulator.
    Mr. Milito. Correct.
    Dr. Holt. They can levy fines.
    Mr. Milito. Yes.
    Dr. Holt. Should that be raised?
    Mr. Milito. Like--I will repeat myself.
    Dr. Holt. OK, Mr. Simmons?
    Mr. Milito. We have to look at the whole system, because we 
can't look at these in a vacuum.
    Dr. Holt. I am glad you are not running any of the 
companies in my district.
    Mr. Simmons?
    Mr. Simmons. Well, I mean, I would like to see the actual 
legislation, because otherwise it is a hypothetical, and I 
really can't----
    Dr. Holt. No, it is not hypothetical.
    Mr. Simmons. I cannot--it----
    Dr. Holt. You know, on the books there exist penalties that 
may be levied for malfeasance, for damages, to enforce good 
behavior. Should that fine, the amount that might be levied, be 
increased?
    Mr. Simmons. Well BP already paid $40 billion.
    Dr. Holt. That is not what I am asking.
    Mr. Simmons. But it matters critically to what you are 
asking, because what you are asking is what will enforce good 
behavior. What enforces good behavior is not just the fines and 
not just----
    Dr. Holt. OK, so----
    Mr. Simmons [continuing]. Not just this one liability, but 
it is the entire system.
    Dr. Holt. So--OK. You are saying that fines have no effect 
on behavior. And, in fact, when----
    Mr. Simmons. No----
    Dr. Holt [continuing]. The fine is only $21 million, you 
can bet it has no effect on behavior.
    Yes, Mr. Groves?
    Mr. Simmons. That is not what I am saying.
    Mr. Groves. Again, Mr. Holt, I would defer to industry 
experts on this. But I figure in legislation like this, when 
you are putting maximum limits on fines or liability caps, that 
there is a balance between what type of certainty you are going 
to be giving to the industry, whether they are going to----
    Dr. Holt. OK.
    Mr. Groves [continuing]. Engage in the behavior----
    Dr. Holt. Dodging again. Mr. Manuel?
    Mr. Manuel. No, we do support raising the civil penalties, 
and think that should be amended as part of this bill. That 
would be a great amendment to 1613.
    Dr. Holt. Thank you. Finally, an answer.
    Mr. Lamborn. Let's have a second round. There is only a 
handful of us here. This will go relatively quickly. But there 
are certainly some follow-up questions I would like to ask. One 
second here.
    Mr. Groves, we were talking earlier about the Law of the 
Sea Treaty.
    Mr. Groves. Yes, sir.
    Mr. Lamborn. And what would be the revenue impact if the 
Law of the Sea Treaty were in effect for the Gulf of Mexico, as 
opposed to the transboundary type of agreement that we are 
looking at in this legislation? You said that one is a good 
approach, the Law of the Sea Treaty is not the good approach. 
What is the difference?
    Mr. Groves. Well, the good approach is when companies are 
exploiting the resources in the Western Gap, for example, and 
the Gulf of Mexico, that all 18\3/4\ percent of the royalties 
that are generated from production there are transmitted to the 
U.S. Treasury for the benefit of the American people.
    If you join the Law of the Sea Treaty, then a portion of 
those revenues are siphoned off, and don't go to the treasury 
for the American people, but are instead sent down to the 
International Seabed Authority in Kingston, Jamaica, to be 
redistributed to the developing countries of the world. So I 
don't consider that to be a provision that is in the best 
interests of the United States.
    Mr. Lamborn. And would the proportions and the amounts of 
that distribution to other countries, is that even known in the 
Law of the Sea Treaty language?
    Mr. Groves. No, they just know that they are going to get 
their cut of any of the royalties generated. We had a 
discussion here about proven reserves. I think some of those 
are going to become better known in the Western Gap, where 
leasing activity has been active since 2001.
    I say that any dollars that are siphoned off from the U.S. 
Continental Shelf----
    Mr. Lamborn. OK.
    Mr. Groves [continuing]. That don't go to the American 
people is a bad idea.
    Mr. Lamborn. Thank you. And, Mr. Simmons, to finish up 
with, seeing this as a good model for going forward, should the 
U.S. also be negotiating agreements with countries like Canada 
and Russia to clarify some of the boundary issues that might be 
out there that would allow for further U.S. development of our 
resources?
    Mr. Simmons. Definitely. I mean, greater clarity and 
resolving uncertainty is always valuable, especially when it 
comes to areas such as along the Canadian border and also along 
the border with Russia, where we have very large hydrocarbon 
resources that we are not currently using.
    Mr. Lamborn. Are there any issues with Cuba and the Gulf of 
Mexico that should be resolved, or hanging?
    Mr. Simmons. I don't know on that one.
    Mr. Lamborn. OK. Mr. Groves?
    Mr. Groves. Yes, just like we have the Western Gap in the 
western Gulf of Mexico, there is an Eastern Gap, an area of 
extended continental shelf where the U.S., Mexico, and Cuban 
international waters intersect. And there will need to be 
another treaty to delimit those lines before production or 
exploration can begin in the Eastern Gap.
    Mr. Lamborn. Well, I would certainly hope that our 
Administration is taking note of this, and begins some of these 
important discussions.
    Thank you all for your testimony. I would now turn to 
Representative Holt.
    Dr. Holt. Thanks. I won't go back to the liability and the 
sanctions. I think we have established that the Institute for 
Energy Research, which advocates massive increase in offshore 
drilling, and the American Petroleum Institute, thinks that the 
taxpayers should be on the hook for anything over $75 million 
in damages, and that----
    Mr. Lamborn. I am not sure they said that.
    Dr. Holt. They sure did. And that the sanctions are 
useless--sanctions in the form of fines levied by the 
Department of the Interior, so let me ask something else. Let 
me ask Mr. Milito, the American Petroleum Institute 
representative. Do we have too many safety inspectors on the 
offshore rigs?
    Mr. Milito. No, we do not.
    Dr. Holt. Do we need more?
    Mr. Milito. I think we have to take a look and see, and 
work with BSEE to determine where the gaps might be. But I 
think that is----
    Dr. Holt. Do you think one inspector for every 29 rigs is--
--
    Mr. Milito. Absolutely not.
    Dr. Holt. Absolutely not.
    Mr. Milito. No. But what I would say is----
    Dr. Holt. Has the API made a recommendation to Congress for 
an increase in the budget to get maybe 1 for every 10 rigs?
    Mr. Milito. We have sent a letter to Congress----
    Dr. Holt. You have?
    Mr. Milito [continuing]. Requesting additional funding for 
the agencies for----
    Dr. Holt. Good.
    Mr. Milito [continuing]. Inspection, permitting, and 
everything else.
    I would like to say that the public should not foot the 
bill for any costs related to an oil spill. In terms of the way 
that is done, you have to look at a system as a whole, and the 
public should not foot the bill for any effects of a spill.
    Dr. Holt. Well, this is with regard to the other point that 
I was making.
    Mr. Milito. Exactly. But I want to be on the record and 
clarify what my response was----
    Dr. Holt. So you think the public should not be on the 
hook?
    Mr. Milito. Absolutely not.
    Dr. Holt. You would not say that we should raise the 
liability limit. You would like it to be voluntary, and the 
industries will pay for it----
    Mr. Milito. I would not even say that I am opposed to it, 
but I can't say I support it without looking at the system as a 
whole.
    Dr. Holt. OK. Mr. Simmons, let me ask you the question 
about--do we have too many inspectors?
    Mr. Simmons. I don't know. It does not appear----
    Dr. Holt. So 1 per 29 rigs might be about right, then?
    Mr. Simmons. No, that is not what I am saying. I am saying 
that I don't know, and it is not an issue----
    Dr. Holt. So it could be less. I mean you don't know. It 
might be more, it might be less. Maybe 1 per 50 would be OK, or 
1 per 10 might be OK. You just can't tell. Is that right?
    Mr. Simmons. It is not an issue that I am an expert in and, 
therefore, cannot give you a good answer.
    Dr. Holt. Well, let me ask this. If our fatality rate, as 
we have seen from the investigative commission, is about four 
times the world average, does that suggest that our inspections 
are adequate?
    Mr. Simmons. It may, it may not.
    Dr. Holt. It may not. I see.
    Mr. Simmons. It all depends on what the context is.
    Dr. Holt. OK. Well, as I said before, I am sure glad that 
you are not running any companies in my district. If you are 
that little in touch with what is going on in the industry and 
how many workers are dying and how much dollars in damage are 
done, God help us.
    Mr. Simmons. No, and that is--and I am sorry, sir, but you 
just can't look at one aspect of it, and then try to put words 
in my mouth. I mean that is----
    Dr. Holt. I yield back the balance of my time. I thank you.
    Mr. Lamborn. Finish your statement, please.
    Mr. Simmons. Just that, we have to look at the entire 
system. We have to look at the entire legal framework. We have 
to look at the entire safety framework. By pulling a few 
numbers and saying that this means--X means Y, that is not a 
valid form of reasoning, and it is a bit offensive.
    Mr. Lamborn. OK. I want to thank you all for being here. As 
the diplomats would say, maybe Ambassador Manuel, we have had a 
frank and candid discussion.
    [Laughter.]
    Mr. Lamborn. Thank you for your testimony, for offering 
your views, all four of you, and for being here today, and for 
having that second abbreviated round of questions.
    Members of the Committee may have additional questions as a 
follow-up for the record, and I would ask that you respond to 
those in writing if you are submitted those questions. And if 
there is no further business, without objection, the Committee 
stands adjourned.
    [Whereupon, at 12:03 p.m., the Subcommittee was adjourned.]

                                 
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