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






                   THE GEOPOLITICAL POTENTIAL OF THE 
                            U.S. ENERGY BOOM

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 26, 2014

                               __________

                           Serial No. 113-153

                               __________

        Printed for the use of the Committee on Foreign Affairs





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




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

                                 ______

                         U.S. GOVERNMENT PRINTING OFFICE 

 87-336PDF                     WASHINGTON : 2014 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001



















                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
STEVE CHABOT, Ohio                   BRAD SHERMAN, California
JOE WILSON, South Carolina           GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas             ALBIO SIRES, New Jersey
TED POE, Texas                       GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona                 THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania             BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina          KAREN BASS, California
ADAM KINZINGER, Illinois             WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama                   DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas                 ALAN GRAYSON, Florida
PAUL COOK, California                JUAN VARGAS, California
GEORGE HOLDING, North Carolina       BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas            JOSEPH P. KENNEDY III, Massachusetts
SCOTT PERRY, Pennsylvania            AMI BERA, California
STEVE STOCKMAN, Texas                ALAN S. LOWENTHAL, California
RON DeSANTIS, Florida                GRACE MENG, New York
DOUG COLLINS, Georgia                LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina         TULSI GABBARD, Hawaii
TED S. YOHO, Florida                 JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana                 


     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director
               Jason Steinbaum, Democratic Staff Director


















                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Admiral Dennis C. Blair, USN, Retired, member, Energy Security 
  Leadership Council, Securing America's Future Energy...........     6
Mr. Harold Hamm, chairman, Domestic Energy Producers Alliance....    18
Ms. Elizabeth Rosenberg, senior fellow and director, Energy, 
  Environment and Security Program, Center for a New American 
  Security.......................................................    25
Michael Levi, Ph.D., David M. Rubenstein senior fellow and 
  director, Program on Energy Security and Climate Change, 
  Council on Foreign Relations...................................    33

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Admiral Dennis C. Blair, USN, Retired: Prepared statement........     8
Mr. Harold Hamm: Prepared statement..............................    20
Ms. Elizabeth Rosenberg: Prepared statement......................    27
Michael Levi, Ph.D.: Prepared statement..........................    35

                                APPENDIX

Hearing notice...................................................    60
Hearing minutes..................................................    61
The Honorable Jeff Duncan, a Representative in Congress from the 
  State of South Carolina: Material submitted for the record.....    63
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Statement and material 
  submitted for the record.......................................    65

 
                   THE GEOPOLITICAL POTENTIAL OF THE 
                            U.S. ENERGY BOOM

                              ----------                              


                       WEDNESDAY, MARCH 26, 2014

                       House of Representatives,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The committee met, pursuant to notice, at 10:08 a.m., in 
room 2172 Rayburn House Office Building, Hon. Edward Royce 
(chairman of the committee) presiding.
    Chairman Royce. We're going to call the hearing to order 
here and ask for all the members to take their seats. This is 
the Geopolitical Potential of the U.S. Energy Boom.
    Simply put, increasing U.S. energy production would boost 
our national security. It would also boost our economic 
security. Reducing our reliance on energy imports from the OPEC 
Cartel would make the United States less vulnerable to 
political and security-related disruptions that we face from 
time to time with respect to our energy supply. Increasing our 
energy exports would advance our geopolitical interests 
including by undermining the coercive leverage through energy 
that the President of Russia and others have used.
    Indeed, Russia's annexation of the Crimean Peninsula was 
made easier by its energy grip over Ukraine. Russia's state-
controlled gas company, Gazprom, threatened to cut off supplies 
to Ukraine earlier this month. This is something that Russia 
has done in Eastern Europe in 2006 and in 2009. They turned off 
the valves to Ukraine. Gazprom is now threatening to double the 
price Ukraine pays for natural gas. Now, remember these aren't 
market forces at work there. This is a monopoly that the 
Russian Government has created, and this is the dependency that 
we see in Eastern Europe. Now, this could obviously cripple 
Ukraine's already weak economy which we're trying to help.
    America's newly developing energy supplies could make a 
difference zapping President Putin's strength while bolstering 
Ukraine and many other European countries. Over the past 3 
years just seven of the applications to export natural gas have 
been approved by the Department of Energy, while 23 are still 
pending. This is government at a glacial pace. But while the 
United States recently became the world's largest producer of 
natural gas, Russia is still the biggest exporter of gas. That 
is because while Putin is freely selling oil and gas around the 
world, we impose major impediments to exporting our energy. How 
much of this is Russia's economy? Well, 70 percent of their 
exports, 52 percent of what goes to pay for the budget in 
Russia of the military and the government is from their natural 
gas and oil exports. So, this is a lost opportunity.
    I'm going to quote the chairman of the Joint Chiefs of 
Staff, General Martin Dempsey. I think he's got this right when 
he said earlier this month before our colleagues in the 
Appropriations Committee. ``An energy independent and net 
exporter of energy as a nation has the potential to change the 
security environment around the world.'' He's not quite 
grammatical but we agree with his premise. ``Notably in Europe 
and in the Middle East. And so, as we look at our strategies 
for the future, I think we've got to pay more and particular 
attention to energy as an instrument of national power.''

    Recent innovations in energy exploration mean that U.S. 
production of natural gas is projected to rise 44 percent by 
2040. This increased energy production has boosted 
manufacturing creating thousands of American jobs. It has the 
potential of creating thousands more, but instead of exporting 
natural gas companies are forced to flare the glut created by 
this bureaucracy. President Obama could move quickly to remove 
the obstacles placed on American energy exports.
    Since the President has chosen not to use his authority to 
permit natural gas exports, Congress can do the job for him by 
passing legislation to increase the number of countries that 
would receive accelerated approval of natural gas exports. The 
Domestic Prosperity and Global Freedom Act in the Energy and 
Commerce Committee would extend expedited approval of natural 
gas exports to all 159 World Trade Organization countries.
    The President should also stop blocking the long-delayed 
Keystone XL Pipeline which would create an estimated 20,000 
jobs, direct jobs, and enhance our energy security and 
partnership with Canada, one of our close allies, also one of 
our most reliable allies. This is an opportunity not to be 
missed, an opportunity to reduce our vulnerability to political 
decisions and events in unfriendly and unstable countries. Yet, 
Secretary Kerry is conducting yet another review further 
delaying Keystone.
    We should end our self-imposed sanctions on energy exports. 
America leads the world with its dynamic and innovative energy 
sector. Let's allow it to benefit the U.S. economy and our 
security interests worldwide.
    I will now turn to the ranking member for his statement, 
Mr. Eliot Engel of New York.
    Mr. Engel. Thank you very much, Mr. Chairman, for holding 
this very timely hearing. This is a very important hearing.
    Events in Ukraine over the past few weeks have brought 
discussions about the future of American energy, and 
specifically whether or not the United States should export 
natural gas into the headlines and onto the opinion pages. The 
Washington Post had such an article this morning.
    Over the past decade, Russia has used its gas resources as 
a weapon to settle political disputes and Ukraine has often 
been on the receiving end of these attacks. Just days into the 
current crisis, Gazprom announced that the prices it charged 
Ukraine would go up 37 percent the following month, and in 2009 
Russia completely cut off Ukraine's gas flows leaving millions 
of people in the cold.
    The significant increase in U.S. natural gas production in 
recent years has generated new interest in U.S. exports. To 
date, the Department of Energy has approved seven applications 
to export U.S. liquified natural gas to countries in Europe, 
Asia, and South America, and that's on top of other planned 
exports to countries with which we have a free trade agreement. 
So, just to be clear, American companies have been approved to 
export natural gas.
    When Secretary Kerry recently testified before the 
committee he noted that approved LNG projects would eventually 
produce 8.5 billion cubic feet of gas per day. That number is 
even higher now with this week's approval of the Jordan Cove 
plant in Oregon. Let's not forget it takes lots of time and 
money to construct these complex multi-billion dollar 
facilities.
    The first LNG export facility at Sabine Pass, Louisiana is 
expected to go on line next year. Exports from that plant could 
go to a number of countries, including Ukraine, Romania, 
Hungary, or other Eastern European countries provided they have 
the necessary import infrastructure.
    However, it's not clear what impact U.S. exports would have 
on Europe's energy relationship with Russia. U.S. gas 
production has already ended most gas imports into our country, 
expanding the supply available for other countries, so Russia 
will continue to be a major European energy supplier due to its 
large reserves and proximity to its customers. By contrast, 
U.S. natural gas must be chilled into a liquid and shipped 
across the Atlantic, which obviously could be very costly.
    A Rice University study found that higher U.S. gas prices 
plus higher export costs could make shipments to both Europe 
and Asia unprofitable. In other words, the impact of American 
gas on European markets may be limited. As we weigh the pros 
and cons of increased energy exports, we must also carefully 
consider the impact on working people, small businesses here at 
home, and environmental aspects, including those in my district 
in New York.
    A 2012 study by the U.S. Department of Energy concluded 
that gas prices would rise by up to a third if the U.S. 
exported 12 billion cubic feet per day, yet the total volume of 
all export applications currently pending at the DOE is 36 
billion cubic feet per day, three times as much. If that volume 
of gas were exported then domestic gas prices could go much 
higher, and that would almost surely have a very negative 
impact on all of our constituents.
    On a related issue, I'd be interested to hear from the 
panel on what would happen to domestic gasoline prices if the 
40-year-old ban on crude oil exports were lifted. As we examine 
the future of American energy, we also need to consider the 
environmental impacts of extracting shale gas and oil. This 
process requires the injection of chemicals and other 
substances to unlock gas or oil deposits. I believe that 
companies should be required to disclose what they pump into 
the ground just as they must tell us what they put in our food.
    Using more natural gas in the United States to produce 
electricity could displace dirtier coal, thus lowering 
greenhouse gas emissions and the negative impact on our 
climate. We could also bolster U.S. national security by using 
natural gas as a transportation fuel, which helps reduce our 
reliance on oil.
    In fact, Representative Ros-Lehtinen and I introduced 
bipartisan legislation last year, the Open Fuel Standard Act, 
that requires half of all new vehicles to run on non-petroleum 
fuels such as natural gas or electricity. This bill would give 
consumers greater flexibility to choose more affordable fuel 
sources.
    So, I'm very interested in the prospect of us exporting 
energy, but I think we have to weigh the pros and cons and come 
up with a solution. It opens up great possibilities for us, and 
that's why I am very interested in hearing from the panel, and 
what the panel has to say. So, again, thank you, Mr. Chairman, 
for holding this important hearing, and I look forward to the 
testimony.
    Chairman Royce. Thank you, Mr. Engel.
    We are going to go 2 minutes with Mr. Steve Chabot of Ohio, 
and then 2 minutes to Mr. Brad Sherman of California.
    Mr. Chabot. Thank you very much. And, first, I'd like to 
thank Chairman Royce for calling this timely hearing today. I 
want to thank the panel of distinguished witnesses for taking 
the time to join us. We're all looking forward to hearing your 
testimony this morning.
    The potential benefits afforded us by the recent U.S. 
energy boom are really astounding. We are presented with an 
opportunity to significantly strengthen our national security, 
to improve our economy here at home, and increase the global 
reliance on U.S. resources into the foreseeable future. And 
this is particularly timely when we find ourselves in a 
situation where we see the Russians, particularly Putin, acting 
up as he is now.
    While energy independence may not be realistic, energy 
interdependence is, and it should absolutely be pursued. The 
bottom line is the U.S. must seriously consider the 
geopolitical merits of exporting greater quantities of U.S. 
natural gas and oil, and we should be considering policies very 
seriously that are preventing us from doing more of that right 
now. If we did so, it might well undermine Russia's influence 
over some of our European allies that are so dependent on 
Russia for both their fuel, whether it be gas or whether it be 
oil.
    And, as I said before, when you consider what is happening 
with respect to Crimea, Ukraine, potentially many other 
countries in the region, we absolutely have to consider this. 
So, I want to thank the chairman again for calling this very 
timely hearing this morning. I yield back.
    Chairman Royce. Mr. Sherman.
    Mr. Sherman. Mr. Chairman, thank you for having these 
hearings. Our Subcommittee on Terrorism and Trade has had 
several hearings on this already, and we're having additional 
hearings tomorrow. The hearings tomorrow will focus just on oil 
as opposed to gas because oil and gas are extremely different 
on this issue.
    Petroleum is by far the cheapest fuel to transport across 
water. Natural gas is by far the most expensive fuel to 
transport across water. The United States is not in our 
lifetime going to be a net exporter of oil, or even a net 
exporter of energy, but we can be a net exporter of natural 
gas, and we can consider the export of oil from Alaska and 
import of oil onto our East Coast. This will have very little 
effect on anything, except it will reduce transportation costs, 
and it will raise the question of whether we can stop the 
process and keep the Alaskan oil in a time of world emergency, 
or disruption of the markets, whether we'll have both the legal 
and physical infrastructure to make that change.
    The question then is whether we export natural gas. Keep in 
mind that in Germany they're paying triple, in Japan they're 
paying quadruple for natural gas than what we are in the United 
States. If we export, our natural gas prices will go up. That 
will be here in the United States for natural gas, very 
substantially. That will be good for the natural gas industry, 
including jobs in the natural gas production and transportation 
industries, but it means higher prices for consumers, it means 
higher prices for manufacturers, it may take away a huge 
advantage for manufacturers that cost us far more jobs than we 
will pick up in the energy sector.
    From the environmental standpoint, most environmentalists 
will oppose anything that produces or moves any carbon fuel. On 
the other hand, to the extent that the world burns more natural 
gas, that may be a boom for the environment compared to the 
chief alternative, which is coal, which produces twice as much 
carbon and greenhouse gases, and even far more than that in the 
terms of soot and pollution as compared with burning natural 
gas. And you can argue that even fracking is not as bad for our 
environment as is the burning of coal. I yield back.
    Chairman Royce. Thank you, Mr. Sherman. We're going to have 
a diverse group of energy specialists this morning. Let me 
start with Admiral Dennis Blair. During his 34-year Navy 
career, he served in the Atlantic and Pacific fleets, and 
commanded the Kitty Hawk Battle Group. He was Commander-in-
Chief of the U.S. Pacific Command. He was also the Director of 
National Intelligence from 2009 to 2010. He is currently a 
member of the Energy Security Leadership Council, and 
Commissioner on Geopolitics at Securing America's Future 
Energy.
    Mr. Harold Hamm is the chairman of the Domestic Energy 
Producers Alliance. Mr. Hamm is also chief executive officer 
and chairman of the board of Continental Resources, 
Incorporated. He previously served as president/chief executive 
officer and as a director of Continental Gas from 1967 until 
2004.
    From 2008 through 2013, Ms. Elizabeth Rosenberg served as a 
Senior Advisor at the U.S. Department of Energy. She is 
currently a Senior Fellow and Director of the Energy 
Environment and Security Program at the Center for New American 
Security.
    Before joining the Council on Foreign Relations, Dr. 
Michael Levi was a non-resident science fellow, and a science 
and technology fellow in foreign policy studies at the 
Brookings Institute.
    Now, without objection the witnesses' full prepared 
statements will be made part of the record. The members here of 
the committee are going to have 5 calendar days to submit any 
statements or any questions they might have of the witnesses, 
and any extraneous material for the record.
    And we'll ask Admiral Blair to go first. Please summarize 
your remarks and then we'll go to questions. Admiral Blair.

  STATEMENT OF ADMIRAL DENNIS C. BLAIR, USN, RETIRED, MEMBER, 
 ENERGY SECURITY LEADERSHIP COUNCIL, SECURING AMERICA'S FUTURE 
                             ENERGY

    Admiral Blair. I think, I agree this is a very timely and 
important hearing. Energy has been a huge factor in national 
security matters during my experience in it. We are now in an 
era in which we have new possibilities due to increased 
domestic production. And I urge the committee to think hard, 
think long about how we can take advantage of this to bring 
advantages to our national security.
    I'm co-chairman of a Commission on Energy and Geopolitics. 
It's a bipartisan group of high-ranking former U.S. military, 
diplomatic, and national security officials. It's a project of 
the nonpartisan, nonprofit organization, Securing America's 
Future Energy, and we just published a report called ``Oil 
Security 2025: U.S. National Security Policy in an Era of 
Domestic Oil Abundance.'' And we make a series of 
recommendations to take advantage of the booming U.S. oil 
production to enhance American national security.
    Our increased production has already supported our national 
security objectives. The additional 3.5 million barrels per day 
that we now produce in this country compared to what we 
produced in 2005 has compensated for the virtually curtailed 
oil production in Libya, and the slower increase in Iraq's 
exports than was expected.
    We've been able to maintain sanctions against Iran, 
including sanctions against its oil exports. Back in 2005, we 
were not able to pursue this policy because the market was too 
tight.
    So, increased American oil production has already been very 
positive, but our study concluded that it will not be the cure 
all that some pundits have prescribed or prophecized. As long 
as we fuel 93 percent of our transportation sector with 
petroleum, the security and resilience of the global oil market 
will be a vital American national security concern. If supplies 
are interrupted prices go up, and no matter how much we produce 
at home or import from North America, our economy will suffer, 
and may suffer badly.
    The Middle East will continue to be a region of vital 
interest. With an overall tight global oil market driven by 
increasing world demand, the Middle East will remain the swing 
producer. It will be the only region able to increase 
production quickly, and economically to compensate in the 
medium term for supply disruptions, whether natural or manmade. 
And at the same time, OPEC will manipulate the production for 
its own purposes, to keep prices high to support its own 
foreign policy objectives, so the United States will continue 
to be vitally concerned about this region, but we must do so in 
a smart way.
    Our study makes recommendations in four areas. First, we 
recommend a series of global policy recommendations to make the 
world oil market more secure, more resilient to supply 
interruptions. As one of the largest consumers and producers of 
oil, the United States can encourage better coordinated 
international action to toughen oil production and transport 
systems, to take swift and effective action to deal with 
shortages.
    For long-term improvement, we should share our mechanical 
fracturing technology to increase total oil supplies. We should 
help build more resilient and stable political conditions in 
producing countries.
    In the Middle East, we recommend insuring the security of 
oil producing friendly countries, but with a diplomacy-centered 
approach. The military support component should be reconfigured 
in a flexible deployed posture with a demonstrated capability 
to bring major forces forward when needed, is what is required.
    The Middle East will continue to be a volatile and violent 
place primarily because of domestic tensions within the 
countries there. And over the long term, we need to support 
peaceful evolutionary reform to develop more stable and 
eventually more democratic societies and governments there.
    China will account for almost half of the increased energy 
demand over the 20 years, and the United States needs to 
involve China in plans to deal with supply interruptions and 
price spikes. We should help China with tight oil development 
and include it in the International Maritime Security 
operations needed to protect oil shipping. Of course, all these 
actions depend on the Chinese exercising restraint in the 
aggressive actions that it is taking now around its maritime 
borders.
    And, finally, and most importantly, the United States must 
diversify the energy resources for its own transportation 
sector. We need to shift a significant portion of our car, 
truck, and airplane fuels away from petroleum primarily to 
natural gas and electricity. This means government-supported 
research and development, and other government policies that 
while not picking commercial winners and losers, remove the 
barriers to this shift away from oil for transportation.
    Developing a strong forward-looking energy policy is one of 
the most important things we can do for this country's national 
security, and I urge this committee to take a strong role in 
forging one. Thank you.
    [The prepared statement of Admiral Blair follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                              ----------                              

    Chairman Royce. Thank you, Admiral Blair. Mr. Hamm.

    STATEMENT OF MR. HAROLD HAMM, CHAIRMAN, DOMESTIC ENERGY 
                       PRODUCERS ALLIANCE

    Mr. Hamm. Good morning, Chairman Royce, Ranking Member 
Engel. I think the last time I saw the ranking member Engel was 
on location with a hard hat on in North Dakota in the Bakken 
oil field up there, and appreciate that. In addition to the 
DEPA that I represent, also co-chair, the Council for Secure 
America, where we had several of our friends of Israel that 
toured the field up there, appreciate that.
    Continental Resources is primarily an oil producer, but 
we've certainly produced our fair share of gas, as well. The 
American energy independence on the horizon 3 years ago. I've 
been in a position to see that and actually DEPA put a stake in 
the ground at that time in October 2011, and that we were going 
to achieve American energy independence in this country by 
2020. Quite a lot of skeptics at that time, but today we don't 
see near as many.
    This technology that's come about is tremendous. You know, 
we hear a lot about fracking and all that, but really what's 
gone on is the space-age technology that's brought the 
horizontal well-bore in existence and the ability to go down 
three miles, drill over three miles further, and contact so 
much more rock of this type, rock that we couldn't produce 
earlier. So, it's a tremendous thing that's happened. It's 
unlocked a great deal of resources and it's brought about this 
reality that we have today.
    Today I see what's necessary to continue this American oil 
and gas renaissance to achieve energy security for our country 
and also the world. This includes utilizing American crude oil 
as a diplomatic tool to reduce the unfair advantage in the 
neighborhoods of rogue nations. And although LNG exports can't 
happen quickly, and someone mentioned it couldn't be done 
overnight, virtually we could help with oil exports that could 
have an immediate impact to the world.
    You know, during OPEC that was mentioned here, reactionary 
Federal laws were passed in the 1970s. The Natural Gas Boiler 
Act was one of those. It took a long time to get rid of that, 
and brought on a lot of the problems that we have today. The 
global energy industry has changed during all that time. 
Elected officials have repealed or let expire nearly all of 
those post-embargo regulations except those banning exports, 
those crude oil exports. And we've had almost a virtual ban of 
LNG. We're seeing a few permits come through, now it's up to 
seven, but there's been like 25 that's been out there waiting 
in the wings.
    I think the debate really, whether we're going to see lower 
prices to consumers or not, the real debate is about the 
principles of free trade in the world. And if America is going 
to be an energy leader, we're certainly going to have to act 
like one and be able to export what's produced here.
    Will prices of natural gas go up if we're exporting? That 
is a good question, but I think the real answer to that is that 
we're going to see a lot of stability in prices as we go 
forward. We're not going to see the ups and down swings that 
we've had with natural gas in the past. $2.50 is not good for 
anybody, it's not good for supply, and $8 or $10 is not good 
for the consumers, but we'll see a much broader market as we go 
forward.
    Someone mentioned jobs, heard about 10 million jobs in this 
industry today. If we're allowed to go forward with exports, 
I'm sure we're going to add about another 1 million jobs. We're 
also going to add about 1 million or more barrels of production 
per day in this country for sure, in addition to what we would 
as we go forward.
    You talk about jobs. Somebody said well, you know, the 
refineries, you know, if we only refined here the product and 
ship it out that the large jobs are there. But with the 
refineries, it takes about as much to run a refinery if you run 
at 75 percent capacity or 100 percent capacity. The jobs are 
created downstream, that's where the jobs are.
    So, I'll summarize and stop there. You know, you have my 
testimony, and I'll be ready to answer questions. Thank you.
    [The prepared statement of Mr. Hamm follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                              ----------                              

    Chairman Royce. Thank you, Mr. Hamm. Ms. Rosenberg.

    STATEMENT OF MS. ELIZABETH ROSENBERG, SENIOR FELLOW AND 
DIRECTOR, ENERGY, ENVIRONMENT AND SECURITY PROGRAM, CENTER FOR 
                    A NEW AMERICAN SECURITY

    Ms. Rosenberg. Chairman Royce, Ranking Member Engel, and 
distinguished members of the committee, thank you for the 
opportunity to testify today on the Geopolitical Potential of 
the U.S. Energy Boom. In my remarks, I'll discuss several 
themes that are explored in much greater detail in my written 
testimony, which I have submitted for the record.
    Remarkable recent increases in U.S. energy production have 
substantial economic and geopolitical benefits. Aside from 
strengthening our economy, which is instrumental to our 
nation's security, the domestic energy boom means that a larger 
portion of global oil and natural gas supply comes from 
reliable sources.
    The broad innovation and economic gains associated with the 
energy boom reduce U.S. indebtedness, including to countries 
sometimes hostile to U.S. interests, and allow the United 
States new capacity and flexibility to advance foreign policy 
interests.
    To fully realize the geopolitical potential of the U.S. 
energy boom, however, national leaders must revise paradigms 
and policies that restrict energy exports. We would not be wise 
to hoard energy at home, and disengage from strategic 
relationships with major global energy producers. That approach 
will not make us safer.
    We would have more scope to promote stable global markets, 
U.S. prosperity, and our foreign policy interests with greater 
energy production and a more nimble and permissive export 
regime for liquified natural gas or LNG, and crude oil.
    For this reason, national leaders should accelerate the 
permitting of LNG export facilities and allow the export of 
crude. U.S. crude exports are subject to near total restriction 
currently. Lifting these restrictions would ease supply 
bottlenecks and market dislocations, and signal drillers to 
continue production growth. This would generate more revenue 
and expand the share of global crude from a stable producer, 
crude exports would raise some oil prices in some parts of the 
United States to come in line with global benchmark pricing; 
however, it's unlikely that this would increase retail gasoline 
prices for consumers, and they might even drop marginally.
    If the United States maintains current crude export 
restrictions it will prevent U.S. oil production expansion. 
This means foregoing an opportunity to shrink OPEC's market 
share and its cartel pricing power. Foregoing crude exports 
would also mean reduced U.S. policy leverage over Iran. If 
international nuclear talks with Iran fail, U.S. policy leaders 
may want to implement tough new sanctions to remove all Iran's 
oil exports from the market.
    Congressional proposals to this effect are credible if 
sufficient affordable alternative oil supplies are available so 
that the international community will participate in sanctions. 
The United States should help insure that these alternatives 
are available by encouraging its crude production and exports 
instead of relying on OPEC to do so.
    Future planned U.S. LNG exports represent an economic and 
strategic benefit for the United States. They would bring 
greater supplier diversity, more competitive pricing 
arrangements, and less politicized contract terms for allies 
and partners abroad. The United States is a stable producer and 
would ship LNG along trade routes that involve few maritime 
choke points and hot spots. U.S. LNG would represent an 
important economic plank of the U.S. rebalance to Asia, and 
would meaningfully contribute to the energy security of 
America's alliance partners in Northeast Asia.
    Additionally, LNG exports will directly and indirectly help 
to diversify European gas markets away from their 30 percent 
reliance on Russia. This, other technical assistance, and 
diplomatic engagement to help Europe access its indigenous 
shale gas and reform regional markets will have meaningful 
impact in eroding Russian pricing power, and coercion on 
Europe.
    Refraining from selling LNG or crude abroad in order to 
support domestic manufacturing or refining industries, or to 
halt energy production growth would undermine U.S. foreign 
relations and the scope of our leadership abroad. It would also 
cause the United States to lose out economically to other 
countries that promote greater production and export.
    As the United States thinks about the energy and foreign 
policy agenda that can best promote prosperity and our national 
interest, it must prioritize responsible production of energy 
and its unencumbered export.
    Thank you for the opportunity to testify. I look forward to 
answering your questions.
    [The prepared statement of Ms. Rosenberg follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                              ----------                              

    Chairman Royce. Thank you. Dr. Levi.

 STATEMENT OF MICHAEL LEVI, PH.D., DAVID M. RUBENSTEIN SENIOR 
  FELLOW AND DIRECTOR, PROGRAM ON ENERGY SECURITY AND CLIMATE 
              CHANGE, COUNCIL ON FOREIGN RELATIONS

    Mr. Levi. Chairman Royce, Ranking Member Engel, members of 
the committee, thank you for inviting me to speak with you here 
today. I'm a Senior Fellow for Energy and Environment at the 
Council on Foreign Relations, and Director of CFR's program on 
Energy Security and Climate Change.
    Rising U.S. oil and gas production is delivering important 
economic security and climate benefits even as it poses real 
environmental challenges. I want to begin by discussing these 
in the context of energy exports in Russia before touching on 
some broader issues.
    The United States should allow both oil and gas exports. 
The basic geopolitical calculation is not fundamentally about 
Russia. The United States has long promoted open markets as the 
best guarantor of energy security. In the last 2 years, it has 
effectively challenged Chinese restrictions on raw materials 
exports at the World Trade Organization. If the United States 
were to block exports or restrict them only to friends or NATO 
allies, that would undermine its ability to challenge other 
countries' restrictions, and to uphold a global open trading 
system. Turning our back on our longstanding strategy would be 
unwise.
    Exports are, however, not without costs. While both oil and 
gas exports would on balance be mildly beneficial to the U.S. 
economy, and while oil exports would probably nudge gasoline 
prices down, natural gas exports would raise the domestic 
natural gas prices slightly, increasing home heating and 
electricity bills. At a minimum, Congress should mitigate harm 
to the most vulnerable by insuring that the Low-Income Home 
Energy Assistance program is properly funded.
    Energy exports would also promote greater domestic energy 
development, and along with it local environmental risks. That 
makes it all the more important for state authorities to 
develop strict environmental rules and for the Federal 
Government to impose minimum national standards, including for 
disclosure, where practical.
    I haven't said anything yet about Russia. Let me focus 
first on natural gas. U.S. natural gas exports would, indeed, 
hurt Russia. U.S. exports would prompt Russia to lower its 
natural gas prices, reducing Russian revenues and harming the 
state. The ultimate impact, though, would be limited by the 
fact that relatively high-cost delivered U.S. gas exports can 
push prices down too far, and because Russian revenues are 
dominated by oil, not gas sales.
    U.S. natural gas exports would do far less to reduce 
European dependence on Russian natural gas. U.S. exports will 
flow mainly to Asia because that is the most profitable 
destination. Russia can largely maintain its market share in 
Europe by under pricing U.S. exports. In addition, in a future 
crisis Europe's ability to shift from Russian to U.S. supplies 
will be limited by scarce terminal and pipeline capacity.
    Expediting or eliminating the Department of Energy review 
process wouldn't fundamentally change any of this analysis. 
Commercially attractive projects have mostly been able to get 
DOE approval. It is the commercial fundamentals and the time to 
build facilities that is the main restraint on U.S. exports.
    I haven't mentioned oil exports in the Russian context yet. 
That's because oil exports are a fairly weak tool against 
Russia. Europe can already buy oil from elsewhere if Russian 
supplies are cut off. It doesn't need U.S. exports to do that. 
Our own oil exports might also eventually reduce world oil 
prices by a few dollars marginally hurting Russia, but not 
dealing it a large blow.
    I'd like to close with two broader observations about the 
geopolitical potential of the energy boom. The first is that 
the greatest security dividends will come from increased 
production, not from increased exports per se. How different 
would our conversations about how to confront Russia today be 
if we were a natural gas importer, which is what essentially 
every expert predicted 10 years ago?
    On the oil front, the greatest geopolitical dividend is a 
reduced risk of higher oil prices, and all the security 
complications that entails. It's impossible to pin down the 
precise impact of the U.S. boom on oil prices, but the odds of 
higher prices have been reduced.
    The second broad observation is that we create real risks 
by overstating the benefits of the boom. The oil boom will not 
make us energy independent in any meaningful way, and it's 
essential that we continue to pursue efforts to cut our own oil 
consumption in order to reduce our vulnerability to disruptions 
in the world.
    It's also essential that we carefully weigh the 
environmental risks of oil and gas production in deciding what 
areas to open to development. In fact, I would submit that 
putting our industry on as firm and sustainable a regulatory 
foundation as possible is essential to fully exploiting the 
long-term geopolitical opportunities presented by the boom.
    Members of the committee, thank you again for inviting me 
to be here today. I look forward to answering any questions you 
have.
    [The prepared statement of Mr. Levi follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                              ----------                              

    Chairman Royce. Thank you, Dr. Levi.
    My focus has been fundamentally on a particular set of 
circumstances in Eastern Europe in which Russia does have a 
monopoly, monopoly with some countries, near monopoly with 
others. Poland, two-thirds of their gas is from Russia today.
    What gets our attention, I think, on the committee was, I 
don't know how many of the members here saw the story, but a 
few years, actually last year, Russia was involved in its 
machinations in Ukraine. They were able to turn off the valve, 
or threaten to turn off the valve. And what the Poles did, and 
what the Hungarians did was to sell 2 billion cubic yards of 
gas, run it through their pipelines back into Ukraine in order 
to keep Ukraine on life support. And watching what Russia has 
done repeatedly in terms of turning off the valves, you know, 
going to this larger explanation that Ms. Rosenberg and others 
explained in terms of the competitive effect, or what happens 
when you do have a monopoly. And that's what Russia has been 
able to do with Gazprom, by having a state-run company, and 
basically nationalizing this and controlling it, they've been 
able to do the same thing that OPEC does in tandem with Russia 
in terms of trying to set the oil price. They have been able to 
set the price, and they've been able to do one thing further, 
which is actually turn off the valves in winter when somebody 
doesn't do their bidding, which has created enormous 
consternation inside Ukraine, for example.
    We would not be here today, we would not have had a 
government fall in Kiev had it not been for the ability of 
Russia to help create a crisis there. So, geopolitically, as 
we're looking at Eastern Europe, my interest has been what 
could we do in order to try to engineer a circumstance where 
enough gas gets approval. It'll take a while, you know, 
obviously for the facilities to be built, although there are 
facilities in Spain, for example, that would feed into the 
pipeline, but the futures market operates instantaneously. The 
market responds quickly. The ruble, currencies fall quickly 
when they hear about a national plan, and your ability to 
control a monopoly is dissolved when there is an alternative. 
So, this is the question for me, is how much of an advantage is 
it for us in terms of our strategic interests and those of our 
allies?
    I note, by the way, that the Speaker of the House has a 
letter from the Head of State of the Czech Republic, Slovakia, 
Hungary, Poland, all asking for just such an initiative. For 
the same reason that Ukraine has this dependency, they have 
this dependency. So, their request is can you develop a 
strategy where you can export into that market? That's what I'm 
interested in today, and I would just ask Ms. Rosenberg, or Mr. 
Levi, or anyone else. I know there's a little bit of difference 
of opinion on this but, Ms. Rosenberg, what would be your take 
on that?
    Ms. Rosenberg. So, the point of the role of U.S. LNG is 
helping to diversify European gas assets, gas supplies and its 
ability to help Europe get out from under some of the influence 
of Russia, LNG has a role to play, but as has been noted 
already, the impact won't be immediate, and it won't be the 
silver bullet here. So, it's true that sending a strong signal 
from the United States----
    Chairman Royce. Well, let me ask you this. Lithuania's sole 
supply of natural gas comes from Russia. Clearly, this is one 
of the reasons you see the Lithuanians toying with the idea of 
an LNG facility. Now, pricing may not depend upon this, maybe 
the monopoly doesn't drive price, but in Lithuania's case it 
pays the highest price for gas in all of Europe. So, it sounds 
like there's perhaps a more direct connection to that monopoly 
than we'd like to assume. The Lithuanians certainly believe it, 
so that's why I raise these points.
    Ms. Rosenberg. Right. I would note that Lithuania will be 
in the position to benefit from LNG, additional LNG supplies 
available to its market, which will help diversify its gas 
supply. That being the goal for reducing the pricing influence 
of Russia.
    Chairman Royce. Mr. Levi.
    Mr. Levi. The answer to your question is going to depend on 
the particular country. And we need to look at how each has 
integrated or not integrated into the European energy space.
    Let me just focus on a few pieces of this. Ukraine is 
different from these other countries. In the case of Ukraine, 
Russia is not threatening to raise prices from typical levels 
to much higher ones, they're threatening to raise prices from 
severely depressed levels, subsidized levels to the kind of 
price that a country like the United States might offer. So, we 
are hard-pressed to combat that. If we want to help make 
Ukraine more resilient there, we need to provide assistance 
that helps them transition from their heavy industry, which is 
completely unprofitable unless they get subsidized Russian gas 
to a more sustainable foundation. Our aid packages are 
typically focused on getting through the current crisis.
    Chairman Royce. All right, but--I take your point, although 
they're talking about doubling the price of gas, but I take 
your point.
    The reality, though, is if you're in manufacturing, I used 
to be in business, and you're going to have interrupted supply, 
and you find out that in the winters your supplier, Russia, is 
going to turn off the valve, that doesn't leave for a lot of 
rationale for investment for overseas in rebooting your 
economy. Mr. Hamm.
    Mr. Hamm. Thanks, Chairman. You know, it's not about 
Russian revenues, it's about heat, and that was your point. And 
when you have the ability to turn off that heat, you know, we 
can relate that pretty well with the winter we've had here this 
past winter. So, you have to have alternatives. And if the 
alternatives are there immediately, you have an impact, so 
providing the alternatives to the LNG transport and other 
things, you know, that could be that you'd have storage there, 
and a few things like that, that could alleviate those 
situations where they couldn't turn the heat on.
    Chairman Royce. Thank you, Mr. Hamm. Mr. Engel.
    Mr. Engel. Thank you, Mr. Chairman.
    I, too, have the concerns that the chairman has. I am 
intrigued by the possibility of exporting gas and oil to 
counter Russia, to give Putin less of a monopoly, or less of a 
start. And I think that by and large we would have to be crazy 
not to consider it. I think it needs to be looked at and 
considered, and I'm all for that from a geopolitical point of 
view. I'm not saying we should rush to it, but we should do it. 
And we should do it, I think look at this as soon as possible.
    But the bottom line when I look at my constituents, and the 
rest of us look at our constituents, people back home want to 
know the bottom line, will prices of natural gas go up? What 
will the impact be on gasoline prices? The average person is 
more concerned about their own pocketbook, and that's a concern 
of mine.
    The whole fracking issue. Mr. Hamm, I'm very glad I went to 
North Dakota, saw you there, and was frankly impressed by and 
large. I still have questions, but impressed with what I see.
    The average person in my district hears about fracking and 
they go crazy because they think it's going to ultimately 
contaminate their drinking water. They hear all kinds of horror 
stories. So, I think those of us, we have to weigh the 
overriding concerns and geopolitical concerns which are very 
important, but we also have to care, obviously, about what our 
constituents feel about the danger, potential danger of 
fracking, or whether the prices of natural gas will go up, 
prices of gasoline will go up. So, I'm going to give, let me 
start with you, Mr. Hamm, the opportunity to talk a little bit 
about what I've said.
    Mr. Hamm. Thank you, Chairman Engel. You know, you saw 
firsthand, you know, the psyche that goes into the fracking 
process up there, and that's good. You know, there's a lot of 
concern out there and a lot of situations. I think before you 
debate all the benefits of price and all that, just take into 
consideration what's really happened already with the tight oil 
that's been on, particularly the Bakken. We've seen average 
prices reduced by about 20 percent on diesel because of the 
content of that quality premium crude up there. Also brought 
down the price of gasoline. We've seen it lower this year than 
before, so it's very helpful as we see the broaden market. And 
it will also help this broadened market of gas, natural gas is 
helping.
    I mean, I used to talk about natural gas in terms of 55 Bcf 
per day, now we're approaching 75. We're able to take care of 
that market and do it very well because of the increased supply 
we have approaching 200 years supply that many of us think is 
there. So, overall, I think the price is going to be much more 
stable, and can take care of these LNG exports.
    Mr. Engel. Because there is, and I mentioned it, a 2012 
Energy Department study that said natural gas prices could rise 
by up to a third under a high export scenario of 12 billion 
cubic feet per day, and the total volume of all export 
applications before DOE is 36 billion cubic feet per day, or 
three times higher than DOE's high scenario. So, I worry about 
the effect of domestic prices if all the gas in the contracts 
are exports.
    Dr. Levi, let me ask you, you testified that the impact of 
U.S. energy exports on U.S. relationships around the world is 
being overstated. You mentioned that the infrastructure 
constraints in Europe, for example, and higher LNG prices would 
make it unlikely that U.S. gas would displace Russian gas. 
Could you talk more about these market dynamics?
    Mr. Levi. Absolutely. The reality is that in the European 
market, Russian gas is less expensive than delivered U.S. gas. 
Certainly, the domestic gas price here is much lower, but once 
you liquify it, transport and regassify it, you end up with a 
fairly high price.
    Now, there are some consumers who will pay for diversity, 
and will pay to spread their bets a bit, and that's why I would 
not say that U.S. gas will displace no Russian gas. But for the 
most part, these companies want to be competitive on a day-to-
day basis in the global economy, and are going to go to the 
lowest price.
    And the other thing to keep in mind is crisis dynamics. We 
all saw over the last several months during this record cold 
snap in the United States how infrastructure constraints in 
this country made it difficult to bring our abundant natural 
gas to parts of the country where it was in extraordinarily 
high demand driving natural gas and electricity prices up. 
Infrastructure constraints are real, and companies don't over-
bill massively just to respond to unusual events. It's no 
different in Europe. And that would undermine Europe's ability 
to absorb very large amounts of gas from a different source 
during a crisis.
    Mr. Engel. Thank you. Thank you, Mr. Chairman.
    Admiral Blair. Mr. Chairman, could I just add one point to 
the discussion? I get a little impatient about discussions of 
the day-to-day price when you realize that by having a low day-
to-day price with a very vulnerable, rickety program, you are 
subject to crises which we will then have to spend billions, 
and tens of billions, and hundreds of billions of dollars on to 
fix with military force or higher, or other forms of national 
power. I've seen it in the Middle East where the price of oil 
was not what we were paying at the pump, it was the price of 
what we were paying plus the lives, the treasure of the country 
that we were sending over to that part of the world in order to 
keep stability and restore order there.
    So, the idea that we just have to keep the lowest possible 
price on a day-to-day basis and not think about some 
consequences that could happen if we don't take prudent action 
to be more resilient and more independent, is I think really 
shortsighted. And we have to balance these long-term needs, 
which we have paid in the past, which we will pay in the future 
unless we take prudent action now in terms of diversity and 
resilience.
    Mr. Engel. Well, Admiral, I agree with you, but we have to 
balance it because the average consumer out there, the average 
constituent that all of us has cares a lot about what happens 
in the Ukraine, as I do. But the bottom line for them is how 
much are they paying out of their pocketbook, and that is 
certainly a factor that those of us that make policy have to 
consider because the people back home are concerned about 
fracking, are concerned about the price of natural gas, and are 
concerned about the price of gasoline.
    So, while I believe that we need to look at our policy 
because I don't like what Putin's done, I want to have a 
counter balance to Putin. Our constituents, the first thing 
that's important to them is the bottom line in terms of what 
they pay. And every one of us that needs to be responsive to 
our constituents really have to take that into strong account.
    Admiral Blair. Yes. With respect, Mr. Engel, I think we're 
undervaluing the American people a little bit here. I think 
they understand that to make life better for their children, 
not to have to send military forces out to handle situations 
which could have been handled had we taken prudent domestic 
action earlier is a smart investment. And with good leadership, 
I think they will understand that, and that they will support 
wise policy in that area.
    Mr. Engel. Well, I hope so, but please understand that 
everything is a balance, and those of us who run for office 
have to weigh that balance.
    Mr. Levi. Congressman, if I can briefly add. The main 
investments in resilience in the current context need to be 
made by our friends and allies in Europe to build extra 
capacity so that they can be resilient in the face of a crisis. 
Their under-investment leads to our having to come in and bail 
them out.
    Chairman Royce. We're going to go to Mr. Duncan of South 
Carolina.
    Mr. Duncan. Thank you, Mr. Chairman.
    As I noted through my amendment that was accepted in the 
Ukraine legislation we marked up in this committee yesterday, I 
strongly support U.S. promotion of natural gas exports and 
advances in energy extraction and exploration technologies.
    I further believe that it's urgent that the administration 
strive to expedite approval of LNG export terminals. The 
approval of the Jordan Cove project in Oregon on Monday is a 
good sign, but we've got more work to do.
    I think blanket approval would have an equally important 
psychological impact on the geopolitical environment especially 
surrounding the Ukraine.
    I point the committee to a Thursday, March 20th, Wall 
Street Journal opinion called, ``A Gas Export Strategy,'' and 
I'll provide a copy for the record, Mr. Chairman. But the 
Russian economy and Mr. Putin's political cronies are highly 
dependent on petrodollars. And I think it's important that we 
send the right signal not only to Russia, but really to a lot 
of folks around the globe.
    I also want to point in that article it mentions that 
European nations are currently dependent on Russia for 70 
percent to 100 percent of their natural gas, and that Deputy 
Chief of Missions for the Czech Republic told at a House 
hearing this year that his country has found that even the 
decline in U.S. gas imports in recent years has freed up more 
gas for Europe, lowered prices, and thus weakened the Russian 
negotiating position during contract renewal talks. I think 
that's imperative, that we think about if it's weakened their 
negotiating position, if it's weakened their income, and their 
income stream to Putin's presidency.
    So, I can't really talk about the energy and geopolitical 
arena without talking about the benefits of the U.S. energy 
boom with respect to why we need the Keystone Pipeline, 
Keystone XL. I recently met with some Members of the Canadian 
Parliament, and it's crystal clear to me that the President's 
polarization and unexplainable delay on the transport of 
Canadian crude oil to the U.S. refineries through Keystone has 
hurt the geopolitical relationship with one of our most 
important and biggest trading partners, and that's Canada.
    I also want to mention for the sake of the discussion here 
today that former Joint Chief Chairman Martin Dempsey said in a 
House hearing just last week:

        ``An energy independent U.S. and a net exporter of 
        energy as a nation has the potential to change the 
        security environment around the world, notably in 
        Europe and in the Middle East. And so, as we look at 
        our strategies for the future, I think we've got to pay 
        more attention, and particular attention to energy as 
        an instrument of national power.''

    I think that sums up my position. If we want to change the 
geopolitical environment, the United States being energy 
independent, and lessen our dependence on anything coming from 
the Middle East changes the geopolitical environment with 
regard to support for terrorism and other things that may come 
out from the Middle East. So, I think that is a tremendous 
summary of where we are.
    So, I'd like to shift gears, Admiral Blair, and focus in 
this hemisphere to the south, and that's with Venezuela, 
because I think it's imperative that as we talk about energy 
and political dynamics, that we think about that tremendous 
exporter to the U.S. that Venezuela is. So, they have the 
largest proven reserves of oil in the world, estimated in 2013 
at 297 billion barrels. In 2011, Venezuela was the fourth 
largest foreign supplier of crude oil and products to the U.S. 
With the protests and violence that have resulted in the deaths 
of more than a dozen Venezuelans at the hand of President 
Maduro's regime, should the U.S. use its economic leverage and 
halt our imports, or limit our imports of Venezuelan oil? And 
as that revenue doesn't impact the people in Venezuelan as much 
as it would impact the regime that's down there with President 
Maduro.
    So, if you could speak to two things. If you could speak to 
Chairman Dempsey's remarks that I mentioned earlier about 
American energy independence and its being an exporter, and its 
impact on geopolitical dynamics. And then if you could speak to 
Venezuela, I certainly would appreciate it. So, Admiral.
    Admiral Blair. Sir, I certainly share General Dempsey's 
contention that if the United States uses its new-found oil 
abundance smartly it would be a real game changer.
    I guess my feelings have solidified by watching the Middle 
East. We did not send troops into the Middle East to take 
possession of oil fields and to take over the oil, but we sent 
them there in large numbers because of the oil-based importance 
of that region to the world economy and, therefore, to the U.S. 
economy. And the stability and security of that region was 
important to us from a national security point of view.
    Had we not been so dependent on the Middle East in that 
sense, we would have treated the troubles there the way we 
treated them in other parts of the world that are going through 
turmoil, where there's suffering going on, where there may be a 
combination of interests and opportunities, but this huge 
investment, the military force there at the bottom was caused 
by the oil importance of that region. So, I agree completely 
that energy security for this country, more flexibility in 
terms of our energy picture would make a huge difference, a 
decisive difference in the position of the United States in the 
world, so I think that's completely true.
    On Venezuela, unfortunately, as you know better than I, the 
oil market is pretty well an international global market. And 
exactly where it comes from, and exactly where it goes to is 
really not--really does not make that much difference. We are 
not very dependent on Middle East oil, for example, but we are 
dependent on oil, and that's what makes the difference. So, I 
don't really think that--I haven't found that blocking 
particular exports from particular countries really makes a big 
difference in the whole thing.
    As you know, Venezuela is doing a pretty good job of 
running its oil industry into the ground on its own without any 
help from anybody else. And the dissatisfaction within 
Venezuela is caused by that in terms of the standard of living, 
the corruption and so on. It's doing a pretty good job of 
discrediting Maduro's administration as it had the Chavez 
administration before he died. And they're going to have a hard 
time holding on to power. So, I think that we've got a lot of 
important internal forces in Venezuela that are working for us, 
and if we could do a few things to help those along, I think 
that would be just fine. But I think the Venezuelan people are 
going to take care of this corrupt, and autocratic, and 
misguided government that they've had to endure for a while 
themselves.
    Mr. Duncan. Well, I appreciate that. I'm out of time, Mr. 
Chairman. I will remind the committee there is no national 
security without energy security. With that, I yield back.
    Chairman Royce. We go to Mr. Brad Sherman of California.
    Mr. Sherman. Thank you.
    I misspoke a little earlier, our subcommittee hearings on 
the export of oil are next week, not tomorrow.
    I don't think we should be fantasizing about the United 
States being a net exporter of oil. That's just not going to 
happen. Yes, it would dramatically change the world, so would 
the invention of coal fusion, but that's not around the corner 
either.
    And the wars that we have fought in the Middle East have 
been about oil used chiefly for vehicles, not natural gas which 
competes with coal, which while dirty is at least abundant. And 
I don't think a country has fought a war just to meet its 
carbon targets, as much as every country would like to brag to 
the world that it's creating less greenhouse gases.
    What is the--and I don't know who to address question to 
so, Dr. Levi, you'll answer it unless somebody knows more. What 
does it cost per Mcf to liquify natural gas, move it 1,000 
miles over water, and regassify it? And does the price go up 
much if you're moving it 10,000 miles instead of 1,000 miles? 
Is there a major cost to the ocean transport, or is the key 
cost liquification and regassification? Ms. Rosenberg.
    Ms. Rosenberg. Sure. Perhaps $6 to $8 for the liquefaction, 
the transportation, the regassification. Of course, as you 
mentioned, the price depends somewhat on how far you're 
transporting it. And Europe being----
    Mr. Sherman. So, you could make quite a profit if it wasn't 
for the Federal Government and buying gas for $3.35 per Mcf and 
spending $6 to $8 to transport it and selling it in Japan where 
it sells for 16 bucks.
    Ms. Rosenberg. That's the reason why many----
    Mr. Sherman. That's why we're here.
    Ms. Rosenberg. Yes, and why there's an expectation that, in 
fact, much U.S. LNG will be exported primarily to that market, 
the East Asian----
    Mr. Sherman. Okay. So, we have a circumstance where 
American manufacturers are paying less than a quarter of what 
Japanese manufacturers are paying. And if we allowed this 
export, we would still have an advantage because American 
manufacturers wouldn't have to pay for liquification, et 
cetera. But instead of having a four times advantage, we'd have 
a say two times advantage.
    Has anybody done a study as to how many manufacturing jobs 
we would lose if we lost that tremendous advantage to our 
manufacturers for the price of natural gas? Dr. Levi?
    Mr. Levi. It's difficult to pin down. I did some basic 
calculations a year or two ago that suggest that the impact on 
U.S. manufacturing would be roughly neutral, and on overall 
jobs would be beneficial. The reason it's neutral for overall 
manufacturing is because exports affect manufacturing in two 
ways. First, they raise the price of natural gas, but they also 
spur our demand for manufactured products, particularly steel 
and cement that are heavily used in the natural gas industry. 
About 30 percent of the cost of a well is----
    Mr. Sherman. So, the non-energy industry would lose jobs, 
but the energy industry would pick up jobs, and some of those 
jobs would be classified as manufacturing jobs because the 
energy industry isn't just the people who lay the pipeline, 
it's the people who make the steel for the pipeline.
    Now, I'd point out that one way to possibly deal with this 
would be to impose some tax on our exports of natural gas. I 
would point out that the U.S. Constitution has a provision 
designed to prevent that, and I don't know if--I'm going to ask 
others unless the panel has any loopholes in there? Any 
proposals to talks of the export of natural gas that would get 
through the Constitutional provision?
    I can ask Constitutional experts, Dr. Levi, unless you have 
an answer?
    Mr. Levi. I share your policy inclination, but the 
provision is being upheld in the face of a variety of attempted 
loopholes over the last decades.
    Mr. Sherman. My old bros in the tax law industry have 
always found a loophole to prevent a tax, and I'm sure that 
that same energy can be used to impose one.
    In 2012, the Department of Energy found that domestic 
natural gas prices would rise by about a third. Do you tend to 
agree with that outcome? And what does that do for my dream of 
having a natural gas-powered vehicle fleet in the United States 
instead of petroleum, which would be a game changer in 
geopolitics? Mr. Hamm.
    Mr. Hamm. Yes. Well, I think that number is quite high. You 
look at what happened this winter, we had a tremendous draw, 
the increased demand was way high, but we didn't see natural 
gas prices go up a third. We saw it increase moderately, so I 
don't believe those numbers. Nobody in the industry believes 
those numbers.
    I'd like to comment, too, on the fantasy of exports from 
the----
    Mr. Sherman. I'm sorry, I've got limited time, and 
commenting on my fantasies is something that will have to be 
reserved for others.
    Mr. Hamm. We're exporting currently 4 million barrels a 
day.
    Chairman Royce. Mr. Perry of Pennsylvania.
    Mr. Perry. Thanks, Mr. Chairman. Mr. Hamm, if you want to 
comment on the export, please go ahead.
    Mr. Hamm. I appreciate that. A lot of people don't 
understand the extent of the exports that we're doing today. We 
are exporting. We are exporting refined products to the tune of 
4 million barrels a day according to current IEA numbers. So, 
if anybody doesn't think we're exporting, read the numbers, 4 
million barrels. And we're exporting the very things that are 
important to the consumers, diesel, gasoline, propane. That's 
what we're exporting today, 4 million barrels a day, so that's 
going on.
    One other example I'd like to point out, the Hawaiian 
example. That's been--the product that they use there is being 
delivered by South Korea; yet, due to the ban we can't send 
them oil from America. We can't send oil to supply that demand, 
so it's being supplied by foreign oil. So that's just another 
fairly good example.
    Mr. Perry. Thank you. Dr. Levi, regarding disclosure and 
fracking, because you mentioned it a couple of times in your 
testimony, just exactly from your opinion what is it that the 
folks that are doing hydraulic fracturing aren't disclosing?
    Mr. Levi. There aren't consistent rules to require 
disclosure of all the contents of fracking fluids. Now, let me 
be clear, I am not personally worried that injection of 
fracking fluids is contaminating water. My recommendations are 
driven by a desire to increase public confidence in the 
process.
    Mr. Perry. I don't know that there's a lack of public 
confidence, in my opinion. I mean, I think there's a certain 
constituency, but I think your words are powerful, so I think 
it's important that you realize when you say certain things 
they have an effect. And even though there might not be 
regulatory efforts to your standard at a Federal level or to 
your desire, something as simple as an OSHA-required MSDS, 
Material Safety Data Sheet, requires that everybody disclose 
every single thing on every job site, including everything 
that's put into the ground. So, when people say nothing is 
disclosed, to me that is a gross--you're not decrying the facts 
as they really are. And if you want to comment, go ahead. I'm 
not here to impugn you, but I want to make the record clear.
    Mr. Levi. No, and I want to make the record clear, as well. 
I did not intend to say that there is no disclosure. I think we 
could do better.
    Mr. Perry. Well, we can always do better at everything, I 
imagine, but that's important. So, when you talked about--I 
think you also talked about you would advocate for increased 
production. So, would you be advocating for more drilling 
permitting on Federal lands in the United States?
    Mr. Levi. I think you need to look on a case-by-case basis. 
I think if we're looking at the shale boom right now, the 
opportunity is primarily on private lands. That's not mainly 
because of Federal policy, that's because of the geology. So, I 
don't know that that is the place to focus our energies.
    I think we would do better if we wanted to focus energies 
on making sure that infrastructure can be built. We heard about 
flaring, for example.
    Mr. Perry. Right.
    Mr. Levi. Gas not being used. That's primarily not because 
of a lack of exports, it's because people don't have the right 
regulatory infrastructure in which to build pipelines to bring 
that gas to domestic markets. So, those are the places I would 
focus first.
    Mr. Perry. Okay. So, based on that, I mean, I understand 
the geology. We've got to go where the source is, but it seems 
to me that wherever it is, whether it's Federal or private 
lands, our strategy ought to be whatever is economically viable 
and supports what's good for America. That's what we ought to 
be doing. And regarding the pipeline then, are you saying 
you're supportive of the Keystone XL Pipeline, concluding that 
or starting with construction of that and finishing it?
    Mr. Levi. I think that the benefits of approving the 
Keystone XL Pipeline would exceed the costs. There are costs, 
but if I were to provide advice, it would be that we approve 
the pipeline and start focusing on things that actually matter 
for Americans.
    (Simultaneous speech.)
    Mr. Perry [continuing]. My time, but I'm fascinated that 
you think the benefits would exceed the costs. But the folks 
that are willing to invest, obviously, think that the benefits 
far outweigh the cost from every single measure. But, anyhow, 
I'm not looking for an answer, I just find that fascinating.
    Admiral Blair, just because your organization and you look 
at it holistically, what would be good for America from a 
geopolitical perspective in energy? Should we be drilling in 
ANWR?
    Admiral Blair. We are not going to either drill or conserve 
our way out of our current dependency. What we really need to 
do is get off oil in the transportation sector. That's the 
single--that's where I'd put my first emphasis.
    Mr. Perry. Okay, so what about a second emphasis? Because 
we're not going to get off oil by the flip of a switch, so in 
the meantime what are we doing?
    Admiral Blair. Right. I think that we should be drilling 
more under safe and rigid environmental constructions, and from 
my--and I believe that that should be done in Alaska, as in 
other places.
    Mr. Perry. Thank you, Mr. Chairman.
    Chairman Royce. So, we go to Mr. Sires of New Jersey.
    Mr. Sires. Thank you, Mr. Chairman, and thank you for the 
panel being here today.
    You know, this fellow, Putin, I think while we sleep he 
plots. And I think he's been plotting this for a long time, 
taking over. And I think he saw what Saudi Arabia means to oil, 
he figured that by assuming the gas in Russia he could do the 
same thing. But I want to bring it closer to home, because we 
have a--I know we're focused on the Ukraine, and what's going 
on, but I want to bring it closer to home.
    We have a situation in Venezuela. You have Maduro who is 
constantly using the oil, and basically bending other leaders 
in the Caribbean and in Central and South America, their arms 
in terms of what they can say and can do. And we have a 
situation now where the OAS I think is afraid to speak because 
of all the members who are dependent on Maduro's oil.
    What would be wrong for us to become an exporter of fuel to 
the Western Hemisphere and play a role, and take away some of 
this influence of some of these leaders? Can you talk a little 
bit about that?
    Admiral Blair. I can address part of that, Congressman 
Sires. As Mr. Hamm said, we do export distilled products and a 
lot of that does go to Latin America. But the question is--and 
as you know, the main recipient of cheap Venezuelan oil is 
Cuba.
    Mr. Sires. Also, Dominican Republic and some of the other 
islands, you know, and some of the other----
    Admiral Blair. Right. But I don't think we want to get into 
a price war for who can give away the cheapest oil to Latin 
American countries with Venezuela. That's a losing game in the 
long run.
    I think in the long view, increasingly the Venezuelan 
people, and certainly a lot of others in Latin America 
recognize the Venezuelan Government for what it is, and they 
turn to other forms of government. And I don't mind mentioning 
that along, but I think we ought to recognize that the long-
term trends are in favor of those Latin American countries who 
realize that stronger democracies, better rights, more open 
economies are going to win. And that's playing in our favor in 
the long run.
    Mr. Sires. I also think long term, Venezuela is starting to 
realize that giving away the oil is not in their best interest, 
and I think their attitude is changing. So, if there attitude 
is changing and we--and there's a void there, I mean, North 
America is going to be flush with oil. You've got Mexico, you 
have us, you have Canada. I don't know, I just think we could 
be a bigger player in some of these areas.
    And can you talk about the winners and losers of exporting 
oil, because I know that the National Economic Research 
Association conducted a study of the impact on the U.S. economy 
of exporting fuel. Can you talk a little bit about the winners 
and losers?
    Ms. Rosenberg. Congressman, can I make a point on your 
former question on Latin America?
    Mr. Sires. Sure.
    Ms. Rosenberg. I think, actually, that we would do well to 
learn a lesson from the conversation we're having about Europe 
and helping Europe to get out from under Russian influence, 
energy influence. So, when we talk about exporting energy to 
Europe, we also talk about the impact of exporting energy 
technology. That's something we can do for Latin American 
countries, as well, exporting energy technology and know how, 
technical assistance to help establish or improve some of the 
legal taxation, regulatory regimes that can help them to better 
access their own domestic energy resources to improve markets 
pricing in that region which can help them to also diversify 
their supply base and rely less on certain supplies that they 
receive from Venezuela.
    Mr. Sires. I agree with you. I mean, it gets some of these 
countries away from somebody's, you know--they got them under 
their thumb. They can't move.
    Mr. Levi. Congressman, on the exports question, producers 
would benefit, refiners would pay more for their oil supplies. 
Those are the main constituencies affected. There would be 
smaller consequences for the overall economy, positive 
consequences that are relatively small, and small consequences 
for consumers, slightly lower gasoline prices, but not much 
lower gasoline prices.
    Mr. Sires. My time is up. Thank you very much, Mr. 
Chairman.
    Chairman Royce. Thank you, Mr. Sires. We're now going to go 
to Mr. Yoho.
    Mr. Yoho. Thank you, Mr. Chairman. Appreciate it, and I 
appreciate all the panel being here.
    Admiral Blair, now this is for everybody, and this is kind 
of a rhetorical question, but the number one charge for the 
Federal Government is national security, and I think we're all 
in agreement with that. And as Congressman Duncan said, we 
can't have national security if we don't have energy security, 
and that goes with food security and several other things.
    You were talking about--do you feel energy independence or 
security is possible, Admiral Blair, in this country, the 
United States of America?
    Admiral Blair. I think energy security is possible, 
Congressman, not energy independence. And security means that 
the system that we depend on, a combination of what we make 
ourselves, and imports is resilient enough and we have enough 
repair capacity that we can handle most of the interruption 
that would occur. And I think we can build that if we can get 
this amount of petroleum down that we use in the transportation 
sector from 93 percent, which it is right now, down to say 50 
percent, 40 percent.
    Mr. Yoho. Right.
    Admiral Blair. Then we have energy security. It's not 
independence, and I think that's kind of a phony----
    Mr. Yoho. Well, I think we get tied up on energy 
independence versus security, and I think security is the more 
important issue. And I agree with you 100 percent, and it's 
imperative, wouldn't you agree, that we are secure in the fact 
that--I lived through the 1970s oil embargo. Dr. Levi, were you 
around then?
    Mr. Levi. Depends which one you're asking about.
    Mr. Yoho. The one where the ships weren't coming in and I 
had to wait in line for hours to get 10 gallons of gas that we 
could buy on odd or even days depending on the last number of 
our license plate. And I never want to be there again. And I 
think every policy we do as a Federal Government should be to 
make America stronger because if we don't do that, who's going 
to do that? Nobody else is going to look out for America. So 
everything we do, and I think the energy sector is the number 
one driver, it supports so many things. I've got a real strong 
ag background. The price of diesel goes up, the price of every 
product you buy goes up immediately. And to be secure, we have 
to have a secure, steady supply, whether it's from our allies 
like Canada or Mexico. And it's just imperative that we work 
out that security agreement.
    And, Mr. Hamm, in your opinion do you see it possible that 
the U.S. could be a net exporter of energy?
    Mr. Hamm. Yes, we are today. I mean, we get right down to 
it.
    Mr. Yoho. I was glad to see you clarify that because I 
agree, we can, and I think we should be. Because I think that, 
again, it makes America stronger.
    Our manufacturing sector, if our policies aren't for the 
betterment of America, these manufacturers with the increased 
prices are going to go overseas. You know, we're already 
fighting regulations, rules, mandates, the Affordable Care Act. 
So many of these companies are running overseas because they 
can't afford to do business here, and the assault on coal in 
this area is just unconscionable that a government would do 
that. So, again, every policy we do should be to make America 
stronger.
    With the net export do you project the cost and the price 
in America to go up? And it sounds like across the board it was 
pretty much no, or not nearly what we're saying, hearing from 
the experts.
    Mr. Hamm. That's correct.
    Mr. Yoho. Dr. Levi. Is it Levy or Levi? Levi. We've got a 
county in our district called Levy County, so excuse me.
    Mr. Levi. I'll have to visit it.
    Mr. Yoho. And it's a great county, it's a big agricultural 
county.
    You were saying that strict economic rules would increase 
the cost to the average consumer, especially the very one most 
vulnerable. You were talking about the LIHEAP program and how 
it's important that we keep that in there.
    Mr. Levi. Right.
    Mr. Yoho. It's kind of a subsidy that we keep there, but 
yet with our strict environmental rules does that not increase 
the cost of the energy?
    Mr. Levi. It does increase the cost of energy. Let me give 
you some figures to then give you a broader context. The 
International Energy Agency did a study a couple of years ago 
where it outlined 22 golden rules for gas to put on sound 
footing, and estimated that it would cost an extra 7 percent in 
capital costs for each well to comply with those. When I talked 
to senior executives from one of the top oil services company 
and said is that realistic, 7 percent, they said no, it's much 
lower. So, that's important to keep in mind.
    It's also important to keep in mind that if there is a 
public backlash against development and people say you can't 
drill no matter how you do it, the prices will go up far more.
    Mr. Yoho. But I think we need that balance between national 
security and cost, as the Admiral brought up. I don't think we 
need to worry so much about the cost because you can't put the 
cost against national security. So, I think we--our policies 
that we move forward, we can't be strong, and we can't export 
gas if we don't put in the infrastructures today.
    Mr. Hamm. Could I comment on that?
    Mr. Yoho. Mr. Chairman, I'm about out of time. Can he 
comment?
    Chairman Royce. We'll let Mr. Hamm comment, and then we'll 
go to Gerry Connolly of Virginia.
    Mr. Hamm. Right now we have a very strong state system for 
regulations. We don't need an overlying Federal system. We have 
a 2,000 foot pipeline right now that's held up, that's 
federally controlled, federally controlled lands in North 
Dakota that's held up a pipeline system up there for over 10 
months. We have all the rest of it built, so that's what we get 
up against.
    Mr. Yoho. I agree. Thank you for your comment.
    Chairman Royce. Gerry Connolly of Virginia.
    Mr. Connolly. Thank you, Mr. Chairman. And let me just say 
to my friend, Mr. Yoho, Mr. Levi and I both read about that `73 
in history books, and delighted to be with somebody who 
actually lived through it.
    Mr. Hamm, let me just, given your last comment. I mean, 
basically, another way of interpreting what you just said was 
the states can handle fracking regulation on their own and we 
don't need no stinking Federal Government to get in there and 
regulate for us. The fact of the matter is there is wide 
variety of regulation in fracking that's anything but uniform. 
We go from some states that have fairly strict controls, 
California, to some other states that have wild west controls, 
I don't know, like maybe Pennsylvania. Your view is that's a 
system that's working just fine in protecting consumers and 
communities, and doesn't need any help from the Federal 
Government whatsoever. Is that right?
    Mr. Hamm. That's correct. That system has done a very fine 
job in Oklahoma. We've got over 100 years, and fracked hundreds 
of thousands of wells, zero pollution to fresh water. 
Pennsylvania has been to Oklahoma. They've gone through all of 
our regs there. They've got a very good system, and it's 
working fine there.
    Mr. Connolly. Okay. Good to have it on the record.
    Mr. Levi, you were asked about the Keystone Pipeline. Is 
there any evidence at all that the Keystone Pipeline will help 
us in terms of our domestic security? Admiral Blair doesn't 
like the term energy independence, and I take his point, but 
for the sake of shorthand in achieving energy independence, my 
impression is all of that oil has been signed up for five long-
term contracts going to Port Arthur, Texas for a reason, not 
for consumption here, but for export. Correct me if I'm wrong.
    Mr. Levi. I don't think that the Keystone XL Pipeline would 
substantially increase American national security for the 
reasons that Admiral Blair talked about in a broader context. 
We live in a global oil market.
    Mr. Connolly. I'm asking a different question.
    Mr. Levi. About exports.
    Mr. Connolly. Is there any evidence any of it would go for 
domestic consumption? And if so, how?
    Mr. Levi. Well, I'm confident that at least some of it 
would go for domestic consumption. The intention, as I 
understand it, is that it would be refined in the United States 
and some of the refined products would be shipped abroad where 
there's a bigger market, and others of them would be sold 
domestically.
    Mr. Connolly. Have you looked at the long-term contracts 
signed by the owners of the Keystone Pipeline?
    Mr. Levi. I have not.
    Mr. Connolly. Every single one--there are five long-term 
contracts, which is a little unusual for a pipeline because 
generally they kind of participate in the spot market. But all 
five contracts are long-term contracts, and all five are with 
companies that specialize in export. And the reason you go to 
Port Arthur as opposed to throughout the Middle West all the 
way down to Port Arthur presumably, is because you're near the 
ocean where there are big ships that can carry product. I mean, 
why would I pipe oil or product to Port Arthur, Texas in order 
to refine it so that consumers in the middle of Nebraska can 
benefit from it?
    Mr. Levi. We have sophisticated refineries in Texas, and 
when you have refineries in place, multi-billion dollar 
refineries that are tuned to a particular quality and type of 
oil, you don't take them apart and put them somewhere else.
    Mr. Connolly. Uh-huh. Are you aware of the fact that the 
documents filed by the company that would own the Keystone 
Pipeline, the Canadian company, actually admit explicitly that 
if the pipeline were to be built, the price of oil and other 
related products in the Midwest would probably increase?
    Mr. Levi. Yes, and I think that's a correct judgment. 
That's part of the goal. It's important to distinguish between 
oil and refined product. I do not believe they have said that 
the price of refined products would increase. The price of 
refined products is set by a global price, not the price of----
    Mr. Connolly. Yes, but one of the reasons is because 
there's a bit of a--or there has been at the time of the filing 
of those papers, bit of a glut in the Midwest markets, in part 
because there wasn't this terminal all the way down in Port 
Arthur, but okay.
    Admiral Blair, is--do you think that there's--with respect 
to--the title of this hearing is Geopolitical Potential. Do we 
have a geopolitical potential in light of the Russian invasion, 
and occupation, and annexation of Crimea? Do we have a 
potential in Western Europe and former Eastern Europe to have 
our countries, and former Republics of the Soviet Union, to 
actually provide product, especially natural gas, as a 
substitute for Russia? And do you think that's a realistic 
thing to promise any time soon given logistics, and 
infrastructure, and so forth?
    Admiral Blair. Representative Connolly, what I've learned 
about the natural gas business is it's sort of a three-
dimensional chess game. And, in fact, we've already improved 
the energy security of Europe by our domestic natural gas. In 
that same Port Arthur area, there are a bunch of liquid natural 
gas facilities built for importing natural gas from Qatar 
because when those were started building 7, 8 years ago we 
thought we would need it. Those plants are completely idle now. 
That gas went to Rotterdam, liquified there, brought the price 
down from the artificially oil-based price that Gazprom had 
been charging. And that has, in fact, improved the lives of 
Western European consumers. It's not a global market like oil, 
but it does have these global interactions.
    I think the--so, I think diversity of liquid natural gas 
supply is important for Western and Eastern European security 
from Russia. I think, though, that it's not the only factor, 
that the interconnection of pipelines and LNG terminals is 
necessary in order for Europeans to be able to switch from 
Russian gas to LNG. And this is something that they have to do. 
And I think they would pay a premium for it. It would be 
duplicative.
    As you remember, since we both sat in oil lines together, 
there was a----
    Mr. Connolly. You're mixing me up with Ted Yoho.
    Admiral Blair. But as you remember, this Russian gas to 
Europe controversy has been going on since early 1980s, and 
Europe has this approach avoidance with Russia. I think Crimean 
incidents have demonstrated the avoidance side pretty 
conclusively, and the Europeans need to build themselves a more 
flexible natural gas structure which then Qatar, Australia, and 
American liquified natural gas could feed so that they wouldn't 
get the lights switched off, so that they wouldn't get the 
price jacked up. And I think that that ought to be a joint 
venture that we work on together.
    Mr. Connolly. Mr. Chairman, my time is up, but I commend 
that last thought to you, as you kind of played a potential 
trip to the region. I think that's really a very important 
point. In the long run, Europe itself has to look at 
infrastructure that would allow for alternative supplies.
    Chairman Royce. To reach that market. And you're right, Mr. 
Connolly. I think that's one of the things that Lithuania or 
the Baltic states are looking at in terms of this floating 
platform which is underway in terms of the building of this.
    I better turn to Mr. Tom Marino of Pennsylvania. He's been 
very patient.
    Mr. Marino. Thank you, Chairman. I apologize, I've been 
juggling the schedule like everyone has this morning.
    Let me get right to the point. As a prosecutor, I'm going 
to ask direct questions, I would like direct answers. Dr. Levi, 
what is in fracking that has not been transparent to the 
public, particularly in the State of Pennsylvania where I come 
from?
    Mr. Levi. I can't give you a state-by-state take, but in 
general the public does not always know what is in the fluids 
being used in the particular fractal.
    Mr. Marino. But in Pennsylvania, and correct me if I'm 
wrong, that has to be listed, and they have access to that 
information. Is that----
    Mr. Levi. They have access to that information. I'm not 
sure exactly when. But you know the Pennsylvania rules better 
than I do.
    Mr. Marino. Right. And my good friend from California, 
Pennsylvania, the EPA has stated that Pennsylvania is one of 
the best states in the Union when it comes to protecting the 
interest of people as far as their health in fracking, and the 
process by which it is being monitored, so we just give--offer 
the country an opportunity to come to Pennsylvania and see how 
we do it, if that's what you're going to have to do.
    I don't want to see the Federal Government--Federal 
Government, we've seen what the Federal Government has done 
over the past 4 years. It's put us $18 trillion into debt, so 
the less Federal Government in my life the better, but we do 
need to make sure that standards are followed like they are in 
Pennsylvania.
    So, you know, I hear from people that do not like fracking, 
do not like gas, they'll say to me did you--there's a program 
that shows where you turn the spigot on and you put a match to 
it and poof. Well, you know, 45 years ago when I was at my 
uncle's cabin in Cascade, Pennsylvania, that was kind of neat 
when he turned the spigot on and snapped the light on and poof, 
there it was. That's methane. Okay? That happens, nothing new.
    As far as energy independence, is there such a thing, and 
can we achieve it? And anyone who wants to address this, 
please.
    Admiral Blair. I would say, Mr. Marino, that back to these 
oil embargos that we talked about, back in the '60s and '70s 
Norway and the U.K. were in theory energy independent. They 
produced more than they consumed, and they sent it over. When 
the prices went up because of the OPEC embargo, Norwegians and 
Brits paid four times as much for gas as they had the year 
before.
    Mr. Marino. I guess we need to put a meaning on energy 
independent, don't we?
    Admiral Blair. Security is the right word.
    Mr. Marino. Security.
    Admiral Blair. Security is the right word.
    Mr. Marino. I like that.
    Admiral Blair. And I think that's what we're really looking 
for. And then security means that don't get jacked around by 
other countries, or groups of countries in pursuing our own 
interests. And we can jack around countries that are 
misbehaving for their purposes.
    Mr. Marino. Great point. As I said, I live in the middle of 
it. I'm out in the country. I like seeing the bear and the deer 
grazing on my property. I get my water from a well out of the 
ground. I have children, and how dare someone who opposes gas 
drilling say that I would jeopardize my children's health. I 
know this process. I've been on more rigs, I've done more 
readings, I've reviewed more studies, I've talked to more 
scientists.
    In fact, in one of the areas in my district in Pennsylvania 
there is a big deal about it's polluting the water. Well, 
finally the EPA came and said there is no scientific evidence 
whatsoever that fracking is polluting the water. And if it 
does, and attempts to cause harm in the environment I'm going 
to be the first guy there in line saying it's got to stop and 
we have to fix this.
    Let's talk about the price for a moment. I'm concerned 
about the price of gas, natural gas going overseas for this 
reason, and this reason alone. I don't want to see the American 
people, I don't want to see the people in Pennsylvania have to 
pay a higher price for their gas that is their gas because they 
can sell it for a better price overseas. I don't have a problem 
with it being sold overseas at whatever price they can get, but 
I think the people in Pennsylvania, and the people in this 
country deserve a fair price on the natural gas. Care to talk 
about that?
    Mr. Hamm. If you don't mind, I'd like to address that.
    Mr. Marino. Please.
    Mr. Hamm. I can assure you that with the Marcellus 
production being so tremendous, the people of Pennsylvania will 
never have to pay more for their natural gas due to LNG 
exports.
    Mr. Marino. That's just what I want to hear.
    Mr. Hamm. I have one more comment. You know, the Bakken on 
ramp on Keystone that's projected for the Keystone XL Pipeline 
would add 300,000 barrels, none of which is contracted for 
exports.
    Mr. Marino. Good segue, because I want to finish with 
saying, let's talk a moment not about if it's going to decrease 
the price of oil, or the consumption. Let's talk about this 
administration who talks a good job about creating jobs, but 
could create 20,000 jobs instantly if they signed--if the 
President signed to have the Keystone XL Pipeline go into 
effect, and then an additional several hundred thousand jobs 
over the next few years. And let's talk about, you know, there 
was an issue about refining. Yes, I know a little bit about oil 
refining, too. There are different plants that refine for 
different reasons and come up with different byproducts that 
could be sold in this country cheaper. So, if for nothing else, 
how about creating jobs? And I see that my time has expired, 
and I must yield back. Thank you.
    Mr. Connolly. Mr. Chairman.
    Chairman Royce. Yes, over here, Mr. Connolly.
    Mr. Connolly. Mr. Chairman, the Washington Post did an 
extensive analysis of job creation related to the Keystone 
Pipeline, and they found no such figures as suggested by my 
friend from Pennsylvania. So, I would ask with unanimous 
consent that the Washington Post analysis be entered into the 
record.
    Mr. Marino. If my friend would yield for a moment?
    Mr. Connolly. I have to--I'm going to--this is a special 
request for the chairman.
    Chairman Royce. Let me yield first to the gentleman.
    Mr. Marino. And I can come up with ten articles which show 
the jobs that will be created on this. Now, you know, there's a 
back and forth on this, and we know there's a back and forth on 
this, but there's no downside to this. There's no downside 
whatsoever to executing this XL pipeline.
    Mr. Connolly. Mr. Chairman.
    Chairman Royce. I'm going to return, I'm going to award 
time to the gentleman. I'm going to recognize the gentleman 
from Virginia.
    Mr. Connolly. Yes. Thank you, Mr. Chairman. I would just 
say to my friend from Pennsylvania, that's not the point. The 
point is he cited some figures about job creation that are 
directly disputed by the Washington Post analysis which was 
fairly thorough. And he's more than welcome to enter something 
into the record that would dispute it, but I'd like the 
Washington Post analysis in the record because it's a 
considerable variance from the assertions made by my friend 
from Pennsylvania.
    Chairman Royce. Let me opine on this for one moment, if the 
gentleman will. Let me respond to the gentleman from Virginia 
that both of you would be allowed to submit for the record your 
facts and figures, whether they be from an article in the 
Washington Post, or whether they be from some studies that have 
been put together by those who have--support the pipeline.
    Mr. Connolly. I thank the chair.
    Chairman Royce. And I would also just like to thank our 
witnesses for the efforts they put into their statements. There 
is considerable information within those statements themselves. 
Ms. Rosenberg and gentlemen, it's impressive what you've put 
together laying out your arguments. I think we've had a dynamic 
discussion here because of our witnesses about the geopolitics 
of energy.
    I do think it's logical. I see the point that one of the 
things that keeps Russia afloat as a nation is the exports of 
their gas and oil; 70 percent of their trade is exports. So, 
clearly, in their calculus, exporting the oil is key to their 
influence. They're wielding a tremendous amount of influence as 
a consequence of it.
    And, clearly, we do have a situation here where for a 
number of reasons the administration is blocking exports. I 
mean, the pipeline would be one example, but another example 
would be the LNG, and the question of whether we're going to 
use that strategically with respect to the situation in Eastern 
Europe.
    Now, I guess for me one of the vexing things about this is 
that when you have a glut in your market of gas, you end up 
seeing that gas flared. And if there's an environmental 
consequence, it's flaring of gas. Certainly, in Africa we 
worked to address that issue, flaring of gas across Africa back 
when I used to chair that subcommittee, and that's being 
addressed. So, we do have a glut, we do have flaring of gas 
here in the United States. It would seem to me logically if we 
could export that gas in order to help break the monopoly 
pricing situation, that would be good.
    Energy innovations, you know, this is the hard thing to 
keep up with, the constant change in this industry of energy 
innovations. They are making the United States more 
competitive. We're seeing that. We're also seeing companies 
from around the world moving to the United States because we 
have lower cost manufacturing here. Mr. Connolly, this is just 
one point I would make.
    If we see the Keystone Pipeline, a pipeline built not here 
to where we basically have a hand in the outcome, and where 
it's proximate to our markets, but instead to Vancouver where 
it is shipped to our economic competitors overseas in Asia. 
Right now, our principal competitor there has an energy price 
that's 30 percent higher than our's. It's one of the reasons 
why our manufacturing is still competitive despite the labor 
differential.
    So, it does seem logical to me that we would want to make 
certain at the end of the day that that energy is refined in 
refineries which are cleaner burning here, cleaning burning 
than the ones that are in Asia, and in which that product 
instead of being unleashed in a market with a higher energy 
price is proximate to, you know, the Southeast United States, 
and to manufacturing facilities there, because we're going to 
continue to be in that economic conundrum where we're competing 
with Asia, principally a country in Asia which right now is 
disadvantaged. I don't want to see us mishandle a situation and 
have our economic competitor end up with a lower cost of energy 
than we have here in the United States as a consequence of us 
treating Canada in a way that, frankly, our ally is taking very 
personally at the moment. So, let's create the jobs here. We 
need to build on our domestic strengths. We need to use them, 
also, as an asset for national security.
    And, again, I thank the witnesses, and I thank the members 
of this panel. We're adjourned.
    [Whereupon, at 11:53 a.m., the committee was adjourned.]
                                     

                                     

                            A P P E N D I X

                              ----------                              


               Material Submitted for the Record


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                               __________

Material submitted for the record by the Honorable Gerald E. Connolly, 
     a Representative in Congress from the Commonwealth of Virginia


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]




                                 [all]
