[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


 
               21ST CENTURY ENERGY MARKETS: HOW THE 
             CHANGING DYNAMICS OF WORLD ENERGY MARKETS 
             IMPACT OUR ECONOMY AND ENERGY SECURITY

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 3, 2015

                               __________

                           Serial No. 114-16
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


      Printed for the use of the Committee on Energy and Commerce

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                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
  Chairman Emeritus                    Ranking Member
ED WHITFIELD, Kentucky               BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
JOSEPH R. PITTS, Pennsylvania        ELIOT L. ENGEL, New York
GREG WALDEN, Oregon                  GENE GREEN, Texas
TIM MURPHY, Pennsylvania             DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas            LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee          MICHAEL F. DOYLE, Pennsylvania
  Vice Chairman                      JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio                DORIS O. MATSUI, California
CATHY McMORRIS RODGERS, Washington   KATHY CASTOR, Florida
GREGG HARPER, Mississippi            JOHN P. SARBANES, Maryland
LEONARD LANCE, New Jersey            JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky              PETER WELCH, Vermont
PETE OLSON, Texas                    BEN RAY LUJAN, New Mexico
DAVID B. McKINLEY, West Virginia     PAUL TONKO, New York
MIKE POMPEO, Kansas                  JOHN A. YARMUTH, Kentucky
ADAM KINZINGER, Illinois             YVETTE D. CLARKE, New York
H. MORGAN GRIFFITH, Virginia         DAVID LOEBSACK, Iowa
GUS M. BILIRAKIS, Florida            KURT SCHRADER, Oregon
BILL JOHNSON, Ohio                   JOSEPH P. KENNEDY, III, 
BILLY LONG, Missouri                 Massachusetts
RENEE L. ELLMERS, North Carolina     TONY CARDENAS, California
LARRY BUCSHON, Indiana
BILL FLORES, Texas
SUSAN W. BROOKS, Indiana
MARKWAYNE MULLIN, Oklahoma
RICHARD HUDSON, North Carolina
CHRIS COLLINS, New York
KEVIN CRAMER, North Dakota

                                 7_____

                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               JERRY McNERNEY, California
JOSEPH R. PITTS, Pennsylvania        PAUL TONKO, New York
ROBERT E. LATTA, Ohio                ELIOT L. ENGEL, New York
GREGG HARPER, Vice Chairman          GENE GREEN, Texas
DAVID B. McKINLEY, West Virginia     LOIS CAPPS, California
MIKE POMPEO, Kansas                  MICHAEL F. DOYLE, Pennsylvania
ADAM KINZINGER, Illinois             KATHY CASTOR, Florida
H. MORGAN GRIFFITH, Virginia         JOHN P. SARBANES, Maryland
BILL JOHNSON, Ohio                   PETER WELCH, Vermont
BILLY LONG, Missouri                 JOHN A. YARMUTH, Kentucky
RENEE L. ELLMERS, North Carolina     DAVID LOEBSACK, Iowa
BILL FLORES, Texas                   FRANK PALLONE, Jr., New Jersey (ex 
MARKWAYNE MULLIN, Oklahoma               officio)
RICHARD HUDSON, North Carolina
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
                             
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     2
Hon. Jerry McNerney, a Representative in Congress from the State 
  of California, opening statement...............................     3
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     5
    Prepared statement...........................................     6
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     7

                               Witnesses

Adam Sieminski, Administrator, Energy Information Administration, 
  Department of Energy...........................................     9
    Prepared statement...........................................    12
Scott D. Sheffield, Chairman and Chief Executive Officer, Pioneer 
  Natural Resources Company......................................    23
    Prepared statement...........................................    25
Charles T. Drevna, President, American Fuel & Petrochemical 
  Manufacturers..................................................    52
    Prepared statement...........................................    54
John Kingston, President, McGraw Hill Financial Global Institute.    65
    Prepared statement...........................................    67
    Additional information submitted for the record \1\
Amy Myers Jaffe, Executive Director, Energy and Sustainability, 
  University of California, Davis................................    82
    Prepared statement...........................................    84
Brad Markell, Executive Director, AFL-CIO Industrial Union 
  Council........................................................    95
    Prepared statement...........................................    97
Graeme Burnett, Senior Vice President for Fuel Optimization, 
  Delta Airlines, and Chairman of the Board, Monroe Energy.......   106
    Prepared statement...........................................   108

                           Submitted Material

Letter of March 2, 2015, from Shawn Bennett, Executive Vice 
  President, Ohio Oil and Gas Association, to Mr. Whitfield, 
  submitted by Mr. Johnson.......................................   145

----------
\1\ Additional information submitted by Mr. Kingston has been 
  retained in committee files and also is available at  http://
  docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=103071.

 
21ST CENTURY ENERGY MARKETS: HOW THE CHANGING DYNAMICS OF WORLD ENERGY 
             MARKETS IMPACT OUR ECONOMY AND ENERGY SECURITY

                              ----------                              


                         TUESDAY, MARCH 3, 2015

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:31 p.m., in 
room 2123, Rayburn House Office Building, Hon. Ed Whitfield 
(chairman of the subcommittee) presiding.
    Members present: Representatives Whitfield, Olson, Barton, 
Shimkus, Pitts, Latta, Harper, McKinley, Pompeo, Kinzinger, 
Griffith, Johnson, Ellmers, Flores, Mullin, Hudson, Upton (ex 
officio), McNerney, Tonko, Green, Castor, Sarbanes, Welch, 
Loebsack, and Pallone (ex officio).
    Staff present: Nick Abraham, Legislative Clerk; Charlotte 
Baker, Deputy Communications Director; Leighton Brown, Press 
Assistant; Allison Busbee, Policy Coordinator, Energy and 
Power; Tom Hassenboehler, Chief Counsel, Energy and Power; 
Brandon Mooney, Professional Staff Member, Energy and Power; 
Tim Pataki, Professional Staff Member; Chris Sarley, Policy 
Coordinator, Environment and the Economy; Christine Brennan, 
Democratic Press Secretary; Jeff Carroll, Democratic Staff 
Director; Michael Goo, Democratic Chief Counsel, Energy and the 
Environment; Caitlin Haberman, Democratic Professional Staff 
Member; Meredith Jones, Democratic Director of Outreach and 
Member Services; Rick Kessler, Democratic Senior Advisor and 
Staff Director for Energy and the Environment; and Timothy 
Robinson, Democratic Chief Counsel.
    Mr. Whitfield. I would like to call the hearing to order 
this afternoon and certainly want to thank our panel of 
witnesses. We look forward to your testimony and your insights. 
And also we will appreciate the opportunity to ask you 
questions after you finish your opening statement.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Today's hearing is entitled ``21st Century Energy Markets: 
How the Changing Dynamics of World Energy Markets Impact Our 
Economy and Energy Security.'' And I would like to recognize 
myself for a 5-minute opening statement.
    When it comes to energy markets, the transformation over 
the last decade has been dramatic. In fact, several 
longstanding energy trends have completely reversed themselves. 
America has gone from declining oil and natural gas production 
to unprecedented increases that now make us the world's largest 
energy producer and a potential exporter.
    As a result, fears about rising import dependence and 
skyrocketing energy prices have been replaced with surging 
domestic supplies that are driving down prices so low, in fact, 
that they are now discouraging additional drilling in the U.S.
    The downstream changes have been every bit as dramatic. 
Domestic refineries, a number of which were optimized to handle 
imported crude, now have the option of transitioning to use 
more North American oil. And for manufacturers, the offshoring 
trend has stalled and, in fact, some of the manufacturing 
capacity that has been forced overseas by competitive pressures 
is now returning to America because of low energy prices. And 
North America's new energy supplies have necessitated a major 
infrastructure build-out in order to deliver this energy to the 
consumers and businesses that need it.
    The changes also have significant geopolitical 
implications. Many of our energy-importing allies were resigned 
to growing dependence on OPEC and other unfriendly exporters, 
like Russia, but now they see America as a potential new source 
of reliable and affordable energy supplies. As a result, 
America has the opportunity to influence the geopolitical 
situation of these countries that used to dominate global 
energy markets and assert our own influence instead.
    There is no question that America's oil and natural gas 
boom has been very good news for America, but that is not to 
say that it doesn't bring new concerns. We have simply traded 
one set of challenges for another. Unfortunately, our energy 
policy is largely based on old laws rooted in assumptions of 
scarcity and may no longer be up to the task of addressing 
these new challenges and taking full advantage of emerging 
opportunities.
    So with these changing times, we think it is essential that 
we visit these laws, look at new opportunities, and whether or 
not it is in the best interest of America to bring about these 
changes or not. So today we are going to continue that 
discussion by exploring current and evolving energy markets. We 
hope to be able to better assess where we are and what new 
policies may be needed. Our existing energy policy was not 
created overnight, nor will any changes to it happen overnight. 
This will be a thorough and deliberative process and one in 
which all affected parties will be heard.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    Today's hearing is entitled, ``21st Century Energy Markets: 
How the Changing Dynamics of World Energy Markets Impact our 
Economy and Energy Security.'' I welcome this diverse and 
knowledgeable panel to discuss these issues.
    When it comes to energy markets, the transformation over 
the last decade has been dramatic. In fact, several 
longstanding energy trends have completely reversed themselves. 
America has gone from declining oil and natural gas production 
to unprecedented increases that now make us the world's largest 
energy producer and a potential exporter. As a result, fears 
about rising import dependence and skyrocketing energy prices 
have been replaced with surging domestic supplies that are 
driving down prices--so low in fact that they are now 
discouraging additional drilling in the U.S.
    The downstream changes have been every bit as dramatic. 
Domestic refineries, a number of which were optimized to handle 
imported crude, now have the option of transitioning to use 
more North American oil. And for manufacturers, the offshoring 
trend has stalled, and in fact some of the manufacturing 
capacity that had been forced overseas by competitive pressures 
is now returning to the U.S. because of the low energy prices. 
And North America's new energy supplies have necessitated a 
major infrastructure buildout in order to deliver this energy 
to the consumers and businesses that need it.
    The changes also have significant geopolitical 
implications. Many of our energy-importing allies were resigned 
to growing dependence on OPEC and other unfriendly exporters 
like Russia, but now they see America as a potential new source 
of reliable and affordable energy supplies. As a result, 
America has the opportunity to fight back against the 
geopolitical influence of the countries that used to dominate 
global energy markets, and exert our own influence instead.
    There is no question that the America's oil and natural gas 
boom has been very good news for America, but that is not to 
say that it doesn't bring new concerns--we have simply traded 
one set of challenges for another. Unfortunately, our energy 
policy is largely based on old laws rooted in assumptions of 
scarcity, and may no longer be up to the task of addressing 
these new challenges and taking full advantage of emerging 
opportunities.
    We explored one such landmark law, the 1975 Energy Policy 
and Conservation Act, in a hearing last December. At the 
hearing, we learned more about the energy policy context under 
which this 40-year-old statute was enacted, and how its 
provisions may no longer be relevant.
    Today, we continue the discussion by further exploring 
current and evolving energy market dynamics. We hope to be able 
to better assess where we are and what new policies may be 
needed. Our existing energy policy was not created overnight, 
nor will any changes to it happen overnight. This will be a 
thorough and deliberative process, and one in which all 
affected parties will be heard.

    Mr. Whitfield. Thank you very much. I yield back the 
balance of my time. And I recognize the gentleman from 
California, Mr. McNerney, for 5 minutes.

 OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. McNerney. I want to thank Chairman Whitfield and 
Ranking Member Rush for holding this hearing. Oil markets are 
changing rapidly. We have reduced oil and gasoline prices, 
increased domestic oil production. At the same time we have 
seen oil prices plummet from $100 a barrel to under $50 a 
barrel, and this has led to great savings for the American 
consumers.
    But we have learned in California that prices at the pump 
don't always track the price of crude. For example, in my State 
we have seen the steepest increase in gasoline prices in 
history. It went from 20 cents a gallon overnight in San 
Francisco and Los Angeles last Thursday to Friday, and prices 
in Sacramento rose over 40 cents per gallon in 1 week.
    So soaring wholesale gas costs are prompting higher retail 
prices at service stations and State refineries are switching 
over to pricier seasonal blends, while at the same time 
refinery problems have effectively lowered capacity.
    Given that we are experiencing these spikes at a time the 
rest of the Nation is enjoying lower gasoline prices, I think 
it is important to mention the dangers of depending on just one 
source of fuel for our transportation needs.
    We should consider carefully the potential problems that 
could arise if we decide to alter our approach to managing 
crude oil resources. When we talk about exporting crude oil, we 
are mainly taking about the light sweet crude that comes from 
tight shale formations. To extract this resource requires a 
tremendous supply of another very precious resource, especially 
in California, namely, water. In my State, in my region, we 
know all too well how important water conservation is and how 
dwindling water resources can really harm our economy and our 
way of life.
    I am concerned that until we develop new, more efficient, 
and environmentally protective ways to use and conserve water 
in hydraulic fracturing, we will be wasting an endangered 
resource mainly to ship another resource abroad for the 
financial gain of a few. I think we need to carefully weigh the 
safety of our drinking water and irrigation supplies before we 
begin to extract crude and bypass U.S. refineries in order for 
producers to obtain slightly higher prices abroad.
    Low oil prices, combined with additional domestic 
production, decreases our reliance on foreign oil, which often 
comes to us from unstable regions of the world. I believe a 
major factor in this equation should be on supporting and 
enhancing our efforts at conservation.
    And this brings me back to the hazards of being dependent 
on one source of fuel for our transportation needs. It is time 
we diversify our fuel sources. We have made great strides in 
improving our fuel economy in the last 5 years. It is time to 
start improving our fuel options. We should be looking more 
toward plug-in hybrids, fully electric vehicles, natural gas, 
and even hydrogen-based transportation.
    I know that in recent years a barrel of crude oil produced 
in the United States has sold for less than a barrel of crude 
oil in the world market. I am interested to hear both sides of 
the debate on how allowing export of U.S. crude will affect 
both the global and the U.S. oil and gasoline markets, and 
equally important, how regional markets in the U.S. could be 
affected.
    We should also consider whether rushing into short-term 
production of as much oil as possible is the best strategy for 
our long-term national security. In the wake of the 1973 oil 
embargo, we created the Strategic Petroleum Reserve so that in 
the event of a worldwide unrest we would have petroleum to 
continue operating and to protect our national security. We 
should consider whether our oil fields in North Dakota and 
Texas might serve a similar purpose in the future.
    Finally, I want to consider the threat of climate change 
and how increased production, refining, and export of the new 
American oil fuels will impact the Earth's future climate.
    Mr. Chairman, I look forward to hearing the witnesses, and 
I yield back.
    Mr. Whitfield. Thank you very much.
    At this time I recognize the chairman of the full 
committee, Mr. Upton, for 5 minutes.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Well, thank you, Mr. Chairman.
    Energy markets are changing, and they are changing for the 
better. America is producing more while using and importing 
less, and the energy boom is translating into a jobs boom, and 
that is not a bad thing, not just in energy production, but 
also energy infrastructure and manufacturing.
    The combination of increased domestic oil supplies and 
decreased demand not only strengthens our energy security, but 
it also presents new opportunities for energy diplomacy. The 
days of energy-exporting aggressors like Russia exerting 
uncontested geopolitical influence may be numbered now that 
America is emerging as an energy superpower.
    And while the overall effects of our domestic energy 
abundance are overwhelmingly positive, yes, they do create some 
challenges and complications when viewed under the lens of our 
existing Federal energy policy. For example, the recent drop in 
oil prices has been great news for consumers in Michigan and 
across the country who are finally getting a break at the gas 
pump after several years of prices above $3 and $4 a gallon. 
But at the same time, current prices pose a challenge for 
producers, their employees, and their communities in which they 
live, and in fact some energy workers, thousands of them, have 
already lost their jobs.
    Couple these changes with a new global petroleum landscape 
of enduring complexity and emerging volatility, it only further 
reinforces the point that the time to examine these issues is 
now.
    Clearly, the changes in energy markets affect different 
parties in different ways, and Congress needs to be aware of 
all of the impacts before considering any modifications to 
energy policy. That is why we took a very careful and 
deliberate approach on the issue of natural gas exports in the 
last Congress. For more than a year before we proposed 
legislation to expedite LNG export approvals, we thoroughly 
studied the potential impacts on natural gas producers and on 
users like manufacturers and consumers. We acted only after 
listening to all the interested parties and concluding that LNG 
exports would be beneficial for the economy and a net jobs 
creator, and we passed it in a bipartisan way.
    We also heard from many foreign policy experts and embassy 
officials about LNG exports and concluded that they promised 
significant geopolitical benefits. And I would note that with 
Russia once again threatening to cut off Ukrainian natural gas 
supplies, I believe that enactment of our LNG bill can't come 
soon enough.
    When it comes to revisiting the 40-year-old restrictions on 
oil exports, we will take the same deliberative approach. We 
recognize that the export of oil and other liquid hydrocarbons 
presents different issues than natural gas. That is why we 
again are undertaking a thorough review and will consider all 
the perspectives, including producers, refiners, and consumers.
    That is the purpose of today's hearing and why we are 
soliciting public comments on changing energy markets. If we 
choose to change the law on exports of oil and other liquids, 
it will only happen after an open review of the current policy. 
Our energy abundance has greatly changed energy markets and 
presents a wonderful number of new opportunities, and we will 
consider carefully our approach to all of them.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Energy markets are changing, and they're changing for the 
better. America is producing more while using and importing 
less, and the energy boom is translating into a jobs boom--not 
just in energy production but also energy infrastructure and 
manufacturing.
    The combination of increased domestic oil supplies and 
decreased demand not only strengthens our energy security, but 
also presents new opportunities for energy diplomacy. The days 
of energy-exporting aggressors like Russia exerting uncontested 
geopolitical influence may be numbered now that America is 
emerging as an energy superpower.
    While the overall effects of our domestic energy abundance 
are overwhelmingly positive, they do create some challenges and 
complications when viewed under the lens of our existing 
Federal energy policy. For example, the recent drop in oil 
prices has been great news for folks in Michigan and across the 
country who are finally getting a break at the gas pump after 
several years of prices above three bucks a gallon. But at the 
same time, current prices pose a challenge for producers, their 
employees, and the communities in which they live. In fact, 
some energy workers have already lost their jobs.
    Couple these changes with a new global petroleum landscape 
of enduring complexity and emerging volatility, and it only 
further reinforces the point that the time to examine these 
issues is now. Clearly, the changes in energy markets affect 
different parties in different ways, and Congress needs to be 
aware of all of the impacts before considering any 
modifications to energy policy.
    That is why we took a very careful and deliberative 
approach on the issue of natural gas exports. For more than a 
year before we proposed legislation to expedite LNG export 
approvals, we thoroughly studied the potential impacts on 
natural gas producers and on users like manufacturers and 
consumers. We acted only after listening to all interested 
parties and concluding that LNG exports would be beneficial for 
the economy and a net jobs creator.
    We also heard from many foreign policy experts and embassy 
officials about LNG exports and concluded that they promised 
significant geopolitical benefits. And I would note that with 
Russia once again threatening to cut off Ukrainian natural gas 
supplies, I believe that enactment of our LNG bill can't come 
soon enough.
    When it comes to revisiting the 40-year-old restrictions on 
oil exports, we will take the same deliberative approach. We 
recognize that the export of oil and other liquid hydrocarbons 
presents different issues than natural gas. That is why we 
again are undertaking a thorough review and will consider all 
perspectives--including producers, refiners, and consumers. 
That is the purpose of today's hearing and also why we are 
soliciting public comments on changing energy markets. If we 
choose to change the law on exports of oil and other liquids, 
it will only happen after an open review of the current policy.
    America's energy abundance has greatly changed energy 
markets and presents a number of new opportunities, and we will 
carefully consider our approach to all of them.

    Mr. Upton. And I yield to the chairman emeritus of the full 
committee, Mr. Barton.
    Mr. Barton. Thank you, Mr. Chairman.
    First of all, I want to compliment you on the statement 
that you just made. I appreciate what you said about 
deliberative process and keeping an open mind and having 
hearings like this so that we can get all the facts.
    The United States is probably the most blessed Nation in 
the world in terms of energy resources. Some of the people at 
the table before us have helped to develop those resources. 
Others have helped to conserve them and make sure that they are 
produced in an environmentally safe fashion.
    As we go forward in this Congress, we need to work 
together, hopefully in a bipartisan fashion, to craft an energy 
policy that is acceptable to all sides and is acceptable to 
this great country. We have a tremendous opportunity in the 
world markets today because of our abundance of energy and the 
way we are producing it in an environmentally efficient 
fashion, and I look forward to hearing the testimony of the 
witnesses, Mr. Chairman.
    And I will yield 30 seconds to anybody who--Mr. Flores, if 
he wants it, or Mr. Johnson. Anybody?
    Then, Mr. Chairman, I yield back.
    Mr. Whitfield. Gentleman yields back.
    Some of the members are leaving because we do have one vote 
on the House floor, but before that I would like to recognize 
the gentleman from New Jersey, Mr. Pallone, ranking member, for 
a 5-minute opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Chairman Whitfield.
    Our energy picture is rapidly evolving. Worldwide crude oil 
prices are at their lowest level in 5 years. U.S. gas prices 
have been hovering around $2 per gallon and domestic oil 
production has increased dramatically in recent years, while 
the growth of demand has slowed noticeably. And all this is 
good news for consumers in the near term.
    These changes reflect in part the all-of-the-above energy 
strategy that this administration has pursued, ranging from 
additional exploration and production of fossil fuels to 
development of alternative energy sources and increased fuel 
efficiency standards for our cars and trucks. The 
administration has also recently taken steps to facilitate the 
export of liquefied natural gas and other petroleum products.
    The current low oil prices benefit us all in many ways. 
Overall, low oil prices increase our GDP and decrease the 
amount Americans spend on energy, particularly at the pump. EIA 
projects that U.S. households will spend about $750 less in 
2015 than in 2014 and about $450 less in 2016 than in 2014, and 
the increase in U.S. production is meant to decrease imported 
oil with significant geopolitical implications. For the first 
time in decades, we have some ability to be partial price 
makers rather than price takers.
    However, these conditions are but a snapshot in time and 
there are many factors that could change the energy picture 
dramatically in the future. Lower oil prices can impact the 
economics of additional domestic production. Geopolitical 
instability can adversely affect our allies and our Nation. 
Crude oil prices can fluctuate based on global and domestic 
market forces. Although it is possible that we experience 
sustained low oil prices, it is also possible that oil prices 
and gasoline prices will rise over time.
    Last December this subcommittee held hearings on the 
decades-old crude oil export ban. I believe it is entirely fair 
to consider the merits of a policy that was enacted in the wake 
of the 1973 oil embargo. This is a very different world than it 
was in 1973, but I do not believe a clear picture has yet 
emerged as to what policies we should pursue. Therefore, while 
this is a topic worthy of our examination, we need to act 
carefully and act based on fact. That is the essence of good 
policy and of regular order, which I will continue to insist on 
before we take legislative action.
    Last year the administration issued guidance that certain 
petroleum condensates could be exported without the typical 
restrictions reserved for crude oil exports. While these 
rulings remain controversial, it is clear that the 
administration retains the authority to authorize crude oil 
exports in specific circumstances, and some companies have 
already started to export petroleum condensates, but the extent 
of such exports remains uncharted.
    If we are to consider a more wholesale listing of the ban 
on exports, there are numerous questions that need to be 
answered.
    First, how would lifting the ban affect the short- and 
long-term price of crude oil, and, therefore, the price of 
gasoline? I don't believe there is a consensus on that point.
    Second, how would such a change affect both our refinery 
capacity and the balance of jobs. Refinery capacity is a 
critical element of our infrastructure and can be an important 
source of middle-class jobs. In fact, both parties have long 
bemoaned the lack of new refineries in this country.
    How would exporting crude oil instead of refining and 
exporting finished petroleum products affect potential job 
growth in the years ahead? Is the rush to export crude oil 
beneficial to small refineries, as well as to large, integrated 
oil companies?
    And, finally, what are the environmental and climate 
impacts of lifting the export ban? In 1973 we did not yet have 
the Trans-Alaska Pipeline or widespread use of horizontal 
drilling techniques, we did not have large-scale domestic oil 
production in North Dakota, and we had not yet tapped into the 
oil and gas from other shale plays. But we also had not 
experienced the Exxon Valdez or the BP Deepwater Horizon oil 
spills. The term fracking was not in the common vernacular. Oil 
and gas pipelines weren't sprouting up in backyards, parks, and 
farmland the way they are today. And most importantly, the 
concentration of CO2 in our atmosphere had not yet topped 400 
parts per million.
    In today's world it is no longer wise to consider energy 
policy as distinct from environmental policy. They are linked. 
Each is a facet of the other. Increasing crude oil exports 
means increasing domestic production of crude oil with 
attendant impacts on climate change, on public and worker 
safety, on property owners, and on protection of our above- and 
below-ground water supplies. Too often we eagerly embrace 
short-term profits and benefits without understanding the costs 
of our actions. We should not make such a mistake again here. 
Instead, we should take the long view to ensure we fully 
understand the enduring consequences of our actions and choose 
the cleanest and most sustainable path forward, and that is the 
essence of commonsense energy policy.
    So thank you, Mr. Chairman. I look forward to hearing from 
the witnesses, I guess when we return from the vote. Thank you.
    Mr. Whitfield. Mr. Pallone, thank you very much.
    And I want to apologize to our panel of witnesses once 
again. We think we only have one vote. There may be a second 
vote. But we have a five-star cafeteria downstairs, and it is 
open until 2:30. But we hope to be back here by 15 or 20 after 
2 at the latest. So thank you all for your patience, and we 
look forward to your testimony as soon as we come back.
    They told me to tell you to stay close. So don't go too 
far. So we will adjourn until that time.
    [Recess.]
    Mr. Whitfield. Call the hearing back to order. Rather than 
introduce all the witnesses at once, I am going to simply 
introduce you and then recognize you for your opening 
statement.
    Our first witness will be Adam Sieminski, who is the 
Administrator, United States Energy Information Administration. 
Certainly no stranger to testifying before the Energy and 
Commerce Committee.
    So, Mr. Sieminski, you are recognized for 5 minutes.

STATEMENTS OF ADAM SIEMINSKI, ADMINISTRATOR, ENERGY INFORMATION 
   ADMINISTRATION, DEPARTMENT OF ENERGY; SCOTT D. SHEFFIELD, 
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, PIONEER NATURAL RESOURCES 
    COMPANY; CHARLES T. DREVNA, PRESIDENT, AMERICAN FUEL & 
 PETROCHEMICAL MANUFACTURERS; JOHN KINGSTON, PRESIDENT, MCGRAW 
  HILL FINANCIAL GLOBAL INSTITUTE; AMY MYERS JAFFE, EXECUTIVE 
DIRECTOR, ENERGY AND SUSTAINABILITY, UNIVERSITY OF CALIFORNIA, 
  DAVIS; BRAD MARKELL, EXECUTIVE DIRECTOR, AFL-CIO INDUSTRIAL 
 UNION COUNCIL; AND GRAEME BURNETT, SENIOR VICE PRESIDENT FOR 
 FUEL OPTIMIZATION, DELTA AIRLINES, AND CHAIRMAN OF THE BOARD, 
                         MONROE ENERGY

                  STATEMENT OF ADAM SIEMINSKI

    Mr. Sieminski. Chairman Whitfield, Mr. McNerney, and 
members of the subcommittee, thank you for the opportunity to 
be here today to address changing dynamics in the world energy 
markets. The Energy Information Administration is the 
statistical and analytical agency with the Department of 
Energy. By law, EIA's data analyses are independent of approval 
by any other Federal office or employee, so the views expressed 
here today should not be construed as representing those of the 
Department of Energy or any other Federal agency. My testimony 
focuses on EIA's oil market outlook and its economic 
implications and it draws heavily on our short-term energy 
outlook. I want to talk a little bit about prices, demand, and 
the overall outlook.
    Since the middle of last year, the global supply of oil has 
exceeded global consumption, leading to growth in oil 
inventories and a major decline in prices. In January, the 
monthly average price for West Texas Intermediate crude was $47 
a barrel--that was kind of down towards the bottom or at least 
the most recent bottom--down from an average of $106 a barrel 
in June of 2014. Prices turned up in February with WTI, West 
Texas Intermediate, and Brent, respectively, averaging $51 and 
$58 a barrel. The recent rise likely reflects some optimism 
regarding the pace of market rebalancing, including lower rig 
counts, drilling, and capital expenditures on the supply side, 
and some positive news on the global economy that impacts 
demand.
    Global supply of crude oil and other liquids grew more than 
2 million barrel per day in 2014, 75 percent of that from the 
United States alone. In 2015 and 2016 EIA sees non-OPEC supply 
continuing to grow under our price forecast, but more slowly. 
Lower costs should help support activity in the lower 48 State 
shale oil plays that have contributed to the majority of the 
recent U.S. oil production growth.
    The trend of slow decline in Alaskan production is expected 
to continue, while Federal offshore production, especially in 
the Gulf of Mexico where development projects have long lead 
times, grows due to projects recently brought online and 
startups that are scheduled for 2015 and 2016. Net, in 2016, we 
still see U.S. production rising close to the historic high in 
1970.
    EIA expects economic growth to drive a pickup in global 
consumption through 2016, led by China and the non-OECD Asian 
countries. Consumption in Japan, Europe, and Russia, on the 
other hand, is expected to continue to decline. The rest of the 
OECD countries, led by the United States, is expected to grow 
modestly, and lower oil prices should add to demand growth.
    Recent prices of futures and options contracts suggest an 
unusually high level of price uncertainty with the implied 95 
percent confidence interval for market expectations for WTI 
prices at the end of this year ranging from $32 to $108 a 
barrel. Mr. Chairman, I remember back in December when I was 
here, one of the members said, ``That is a really big range you 
are talking about,'' and I said, ``Yes, it is.'' And that is 
what the market is saying, that is what investors are saying. 
There is a huge amount of uncertainty, and I think during the 
opening remarks some of those uncertainties were mentioned: 
geopolitical events, what is happening with the economy, and so 
on. Absent further sanctions or unplanned disruptions, EIA's 
average price forecast for this year is $55 a barrel and for 
next year about $71 a barrel.
    Now, there is some good news, and the good news is that 
consumers are receiving a direct benefit from lower oil prices. 
U.S. regular gasoline retail prices, which were $3.36 a gallon 
average in 2014, are now more than $1 below that. The average 
household is expected to spend $750 less for gasoline this year 
than in 2014. If that household has more than one vehicle or if 
you live in an area where you are on oil heat or propane heat, 
you will even be saving more.
    Mr. Chairman, I want to take the last few seconds and just 
mention some of the things that we are doing at EIA that I know 
members here in this committee have been very interested in.
    EIA has undertaken a huge effort to improve the quality and 
timeliness of our data and analyses. We just launched a monthly 
survey to improve estimates of both the volume and quality of 
oil production, that should help with this question of oil 
exports, related to which we are working with the producing 
States through the Groundwater Protection Council, which is 
developing a national database of well-level data.
    Next month, EIA plans to begin publishing monthly 
information on movement of crude oil by rail, another important 
topic. We have also begun working with our counterparts in 
Canada and Mexico on validating cross-border flows of energy, 
improved infrastructure mapping, and energy trade.
    Recognizing the growing connection between the U.S. and 
global energy markets, we are redeploying resources to extend 
our international data analysis capabilities. And one key focus 
area is global oil demand growth, that has significant 
implications for future oil prices, and petroleum product and 
crude oil exports. Another is world supply and demand for 
natural gas, which we will determine the extent of 
opportunities for the United States given everything that is 
happening with LNG and LNG exports.
    Mr. Chairman, I want to thank you again for the opportunity 
to testify here, and I will look forward to the rest of the 
day.
    [The prepared statement of Mr. Sieminski follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Whitfield. Thank you very much, Mr. Sieminski.
    Our next witness is Mr. Scott Sheffield, who is the 
chairman and chief executive officer of Pioneer Natural 
Resources.
    And, Mr. Sheffield, you are recognized for 5 minutes, and 
the red lights will come on when the time is up. So thank you.

                STATEMENT OF SCOTT D. SHEFFIELD

    Mr. Sheffield. Thank you, Mr. Chairman. Chairman Whitfield, 
Mr. McNerney, committee members, it is great being here today. 
I represent Pioneer Natural Resources and its 4,000 employees. 
We are one of the most active independents in the U.S. I have 
40 years experience as a petroleum engineer, 30 years as CEO of 
Pioneer.
    What is interesting today, listening to Netanyahu's speech, 
what brought home to me is that I was raised in Tehran, Iran. 
That was the big topic today. I spent over 10 years traveling 
to Tunisia as we had an office in North Africa. What hasn't 
changed in the last 40 years, the world is very still very 
dependent upon Middle Eastern and North African crude.
    What has changed in the U.S. is this piece of rock--which I 
left one at your table--is that we have actually found six 
world-class oil fields. This represents the Wolfcamp field in 
west Texas. It is now the U.S.' largest oil field that we have 
found, over 75 billion barrels. We used to get 50 barrels a day 
out of this. Now we are getting over 2,000 barrels a day out of 
this rock with new technology.
    The shale revolution has been a game-changer for this 
country. We now are the largest liquids producer in the world, 
surpassing Saudi Arabia and Russia. We have almost doubled 
production from 5 million barrels a day to 9.3 million barrels 
a day since 2008, reduced imports from 60 percent to 30 percent 
in a very short timeframe. We have been the largest job creator 
in the country for over the last 6 years.
    Also, we have reduced the trade deficit. Our industry $200 
billion annually. A combination of less imports, but we are 
refining and sending out over 4 million barrels a day of 
refined products. In addition, one-third gasoline that we 
refine is being exported.
    This is my fifth downturn in my career since 1981. We have 
seen over 900 rigs drop from a high of 2,000, almost 50 
percent, we have seen 50 billion of CAPEX reductions by the 
industry over the last 2 months going into 2015, industry 
layoffs of over 50,000 workers and continuing, leading to 
flattening to declining production going into 2016 at current 
prices. The strategy of OPEC is to preserve and grow market 
share. I can promise you, OPEC loves the export ban being in 
place in the U.S.
    Let me explain how oil is traded and how it works. For my 
entire career sweet crude internationally, sweet crude 
domestically traded at the same price. Over the last 3 years we 
have seen a big variance of $10 to $15 per barrel in those 
prices. Today it is $11 a barrel in those prices.
    There is no benefit for consumers. Consumers are paying 
world gasoline prices. Through studies that Adam has done at 
EIA and other independent studies, that has been proven, that 
the U.S. Consumer is paying a world gasoline price based on 
international oil prices.
    Allowing U.S. crude to be sold overseas would increase 
global supply, causing gasoline prices to decline. So, for 
instance, if you lifted the ban today, we put 300,000 barrels a 
day on the market, it would compete with OPEC, it would lower 
the price of the international crude. The domestic price would 
move toward it, like it has over the last 30, 40 years.
    Removing the crude ban allows U.S. Producers to compete. 
Just a $10 swing in price makes a difference of this country 
growing or declining $2 million barrels a day. A great example, 
Pioneer was the first company to export processed condensate 
last summer through a Commerce Department confirmation. We are 
actually realizing $8 a barrel higher price by exporting to 
Europe, Japan, South Korea. We are taking that cashflow, 
drilling more wells, more production, more jobs in this 
country.
    With the ban lifted, U.S. remains the largest producer, 
lowers gasoline cost, adds U.S. jobs, increases Government 
revenues, and what is most important, is selling oil to our 
allies in Europe, Japan, South Korea, reducing dependence, 
their dependence on Iran and Russia.
    It is important to act now. If you lifted the ban today, I 
can promise you Pioneer would add more rigs today, more jobs, 
more U.S. investment, and the other 7,000 independents in this 
country would do the same.
    Thank you very much.
    [The prepared statement of Mr. Sheffield follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
            
    Mr. Whitfield. Thank you, Mr. Sheffield.
    At this time, I would like to introduce Mr. Charles Drevna, 
who is the president of the American Fuel and Petrochemical 
Manufacturers.
    Welcome, and you are recognized for 5 minutes.

                 STATEMENT OF CHARLES T. DREVNA

    Mr. Drevna. Chairman Whitfield, Mr. McNerney, and members 
of committee, thanks for the opportunity to provide AFPM's view 
on trends in today's energy markets.
    I want to leave you with a couple of key messages today. 
First, I think we can all agree it is incredible that the U.S. 
is at a point where we are able to have a real conversation 
about lifting the crude export ban. Seems like just yesterday 
when the committee was hearing testimony from a trove of peak 
oil alarmists, and I was cautioning against market-interfering 
and counterproductive initiatives, including the RFS.
    Now, 7 years later, over the same time, we are producing 
more than 70 percent of our oil and it is projected to go 
higher. Imports are down, 66 percent to about 45 percent. But 
when you take out Canada and Mexico from that equation, we are 
down to around 20 percent of imports. This is nothing but great 
news for our economy and the consumers, with the noted 
exception that 7 years later the assumptions used to promote 
the RFS have been proven invalid and the RFS continues to 
inhibit free markets and consumer choice.
    Takes me to my second key message. The distribution and 
refining systems are undergoing significant and rapid changes. 
These changes are happening for the most part because new 
production is not connected to the refinery delivery 
infrastructure that existed prior to the shale oil boom. As a 
result, upstream producers, midstream distributors, and 
refiners are rapidly adapting existing infrastructure while 
investing in new infrastructure, whether via pipeline or rail.
    Changing market dynamics have also impacted the economics 
of many refineries, including those along the east coast that 
were literally days away from closure. The ability of these 
refiners to utilize Bakken crude is a great example of this 
revitalized energy industry.
    The refining industry is also undergoing more significant 
change. The U.S. is home to the largest and most advanced 
refining complex in the world. That is a fact that should give 
all concerned with economic growth and national security an 
enormous amount of comfort. We produce about 20 percent of the 
world's fuel and since 2009 we have been a net exporter of 
petroleum products. With new domestic supplies coming on, the 
industry is undergoing even more changes to accommodate this 
vital resource.
    Leads me to my third message. You may have been led to 
erroneously believe that refiners are unable to process the 
light crude being produced. I am here today to categorically 
state that the refining industry is well equipped to handle all 
the increased production expected to come online in the coming 
years. Refiners already have significantly reduced imports, 
increased utilization rates, changed their crude mix, and 
invested in additional refining modifications to utilize more 
light crude.
    For example, Turner Mason estimates that if the economics 
continue to be favorable, an additional 900,000 barrels per day 
of capacity is possible with existing capacity and the 
investments already planned. This would ensure refiners have 
the capacity to use all new crude for at least the next several 
years.
    Of course, an adverse regulatory regime and changing market 
dynamics could render this bright future moot. Whether it is 
market-distorting legislation and regulations, the 
manufacturing renaissance-destroying ozone NAAQS, or others in 
a litany of uneconomic and conflicting regulations, U.S. 
refiners continually face uncertainty in the way global 
competition doesn't. As gasoline demand continues to drop in 
the coming decades, refiners will be increasingly dependent on 
export markets, which means competing penny by penny, gallon by 
gallon with global competitors who are subject to a very 
separate set of rules.
    I mention all this to set up my final point, which is that 
after AFPM believes that the right energy policy for America is 
based in free markets, which lower cost and increased benefits 
to consumers. As a result, AFPM does not necessarily oppose 
lifting the crude export ban. However, AFPM strong believes 
that a holistic energy policy that addresses other anti-free 
market policies at the same time is essential. Going back to 
what Chairman Upton stated, we have to get this thing right in 
a holistic approach, not do it piecemeal in a vacuum. We have 
done that for too long in this country on energy policy, such 
as it is.
    For instance, with the restrictive Jones Act shipping 
requirement in place and the world without the crude export 
ban, it would be cheaper to ship a barrel of crude from Houston 
to a European refiner than it would be to ship it to the Monroe 
facility. This makes zero sense.
    As Congress debates lifting the ban, I urge you not to make 
the mistakes of the past by narrowly focusing on one issue and 
leaving it in a wake of unintended consequences in the market. 
We have time to gather the facts and develop a more holistic 
approach.
    Thank you. I would be happy to answer any of your 
questions.
    [The prepared statement of Mr. Drevna follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]    
        
    Mr. Whitfield. Thank you, Mr. Drevna.
    Our next witness is John Kingston, who is the president of 
McGraw Hill Financial Global Institute.
    Great to see you again, and you are recognized for 5 
minutes.

                   STATEMENT OF JOHN KINGSTON

    Mr. Kingston. Thank you. Chairman Whitfield, Congressman 
McNerney, and members of the subcommittee, good afternoon and 
thank you for inviting me to share the views of the McGraw Hill 
Financial Global Institute. I am the newly appointed president 
of the institute.
    We are McGraw Hill Financial's thought leadership platform. 
MHFI provides independent benchmarks, credit ratings, portfolio 
and enterprise risk solutions and analytics, and is home to 
some of the most iconic brands in U.S. finance, economics, and 
business, including Standard & Poor's Rating Service, S&P 
Capital IQ, S&P Dow Jones Indices, Platts, and J.D. Power.
    Prior to being appointed president of the institute, I 
spent more than 29 years with Platts, the MHFI brand that 
provides the energy industry with independent news, analysis, 
and benchmark price assessments that are used as the basis for 
billions in energy commerce throughout the globe. I hope to 
provide you with helpful insight from all of our brands, as 
well as additional unique insights from the institute.
    Over the last 30 years, oil prices have seen several booms 
and busts. However, the price slide of recent months is like no 
other. In 1998-1999 the boom-bust cycle could be attributed 
mostly to the Asian financial crisis and the collapse in demand 
from that region. The price collapse of 1985-1986 bears more 
resemblance to the current cycle. Key producers like Saudi 
Arabia were determined to recapture market share against a 
backdrop of some increases in supply and some cuts in demand. 
Despite the similarities, the mid-1980s did not feature the 
enormous North American-generated increases in supply that we 
are witnessing today.
    While the Saudis and their Gulf allies are determined to 
hang on to market share this time, this is not the immediate 
reason for the price to climb. Instead, it is the growing 
imbalance between supply and demand that finally combined this 
year to send the market plunging. It would have happened 
earlier had there not been so much disruption of international 
supply lines due to various political reasons.
    Once Libya came back toward 1 million barrel per day in 
June and July, that tenuous balance could hold no more. It is 
interesting to note that since that surge out of Libya, that 
country's output has fallen back significantly, yet the price 
remains at depressed levels. So while there are global factors 
contributing to the drop in oil prices, none compare to the 
scale of what the U.S. shale revolution has done in just a few 
short years.
    It is important to note that the amount of capacity in the 
world that is on the sidelines because of political issues is 
enormous. One recent estimate put it at about 4.5 million 
barrels a day. It starts with small countries like South Sudan 
and Syria, and it rises up to averages close to a million 
barrels a day in Iran due to sanctions and Libya due to civil 
war. And this does not even take into account where political 
mismanagement of a country's industry can and sometimes has 
given it a productive capacity far less than what it should be. 
Venezuela is obviously in this category. If there was any sort 
of significant move toward peace in these areas, since the cost 
of production in most of those regions are all significantly 
less than the U.S., oil prices would come under even greater 
pressure.
    The price slide has raised repeated questions just about 
how cost competitive the U.S. industry can be in the lower 
price environment and also raises the question of the 
competitiveness of U.S. crude exports should they be allowed. 
It is safe to assume that some, if not all refiners around the 
world probably have some models about how U.S. crudes would 
perform in their facilities if exports were allowed.
    The rise in U.S. crude exports to Canada, mostly via rail, 
indicates that Canadian refiners at least are finding U.S. 
crudes to be attractive. If they weren't, those export numbers 
would be falling, not rising.
    So as to how U.S. crudes will do battle in an international 
market if export bans were lifted, all we can say is we will 
see. And I have some numbers to talk about later.
    I will now turn my focus to the impact the current pricing 
environment is having on U.S. producers. Based on earning 
calls, MHFI's subsidiary S&P Ratings is seeing a 35 percent 
CAPEX expenditure cut this year. Those numbers go up to 50 
percent in some cases, down to 10 percent for the major 
producers. And many are running capital expenditure budgets 
that just hold on to maintenance levels.
    This year S&P does not expect the price impact on companies 
to translate to significant debt defaults, although reducing 
CAPEX certainly affects the employment market. The oil and gas 
sector has been aggressively adding jobs during the economic 
recovery. During that period job growth for the oil and gas 
industry was 39 percent, as opposed to the 8 percent growth in 
the U.S. job market overall. However, the industry showed job 
losses of 2,000 in January, and regions that are heavily 
reliant on the energy sector could see a greater negative 
impact on employment.
    While the regional impact of oil prices will differ, in the 
near-term low oil prices are a boon, though, for the overall 
economy. According to S&P's U.S. economist, savings could tally 
up to $87.6 billion for the national economy. That is $1,000 
for the average household in 2015 alone.
    Out in the State capitals, operating budgets appear safe in 
the short term. In the long term, however, given a long-term 
secular slide in oil prices, States will need to react by 
altering their fiscal management. No two States are alike, even 
ones with similarly sized oil-producing industries. Therefore, 
many questions need to be answered, such as what oil price and 
production level did the State assume in their budget.
    I am glad to provide more information on any of these 
issues discussed here today or any others offered by MHFI in 
the question-and-answer session or any time in the future. 
Thank you.
    [The prepared statement of Mr. Kingston follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]       
       
    Mr. Whitfield. Thanks, Mr. Kingston.
    At this time I recognize Ms. Amy Jaffe, who is executive 
director of the Energy and Sustainability Program at the 
University of California, Davis.
    And you are recognized for 5 minutes.

                  STATEMENT OF AMY MYERS JAFFE

    Ms. Jaffe. Thank you very much, Chairman Whitfield and 
Representative McNerney, for this excellent opportunity to 
address the committee. I look forward to our discussions. I am 
going to focus my remarks on the geopolitical aspects of the 
questions at hand.
    But before I turn to that, I just wanted to make the point, 
also in the geopolitical context, that markets react to 
stimulus. So we had a very high oil price artificially imposed 
into the market by OPEC. That created opportunities for 
companies like Mr. Sheffield's companies to pursue 
unconventional resources, more expensive resources. As a 
result, we are having this boom in the United States. Over time 
we learn by doing so the cost of producing the expensive oil 
comes down.
    That put OPEC back in a bind, right? So they thought they 
had the upper hand, Russia thought it had the upper hand, Iran 
thought it had the upper hand, and all of a sudden the market 
responded.
    So now we are at a juncture where Saudi Arabia had an 
opportunity. The markets responding, they have to come up with 
a strategy, they have to decide what strategy to come up with, 
and they have a unique opportunity to row the boat in the same 
direction as the United States and use a lower oil price to put 
geopolitical pressure on countries like Russia and Iran to come 
to the peace table and have negotiations on serious conflicts 
we are seeing in the Middle East and elsewhere. And I do 
believe that our allies in the Gulf Cooperation Council had 
those goals in mind when they set the policy to create a market 
share war in the market.
    We now have an opportunity as the United States to leverage 
that opportunity and to lead from the front. And we know from 
watching what is happened in the markets when OPEC tried to 
hold the price up and we have other kinds of barriers into the 
market that it is like the little boy with his finger in the 
dike. You can put your finger in the dike in one place, but if 
there is pressure from the water there will be a crack 
somewhere else and the water will pour out somewhere else. That 
is sort of how the export ban is, right?
    We now have 430 million barrels of oil, close to historic 
highs, sitting in storage in the U.S. southwest. At Cushing, 
Oklahoma, alone we have 49 million barrels. That is near the 
record high in history in the United States of 42 million 
barrels, right? So to say that the refining industry feels like 
over the next 3 years they will be able to refine those 
barrels, that doesn't help us now. We have this giant stockpile 
of oil that is sitting with no place to go.
    And that is a market inefficiency. And we need to think 
about the way that markets balance. Refineries have accidents, 
and when we have a refinery accident all the crude oil that was 
going to go through that refinery has to go somewhere else or 
it has to sit in storage. We had put the ban in place at a time 
when there was no futures market, there was no hedging, there 
was no transparent pricing, right? We are in a totally 
different market today and we need to think about the 
inefficiencies that we create.
    We are exporting gasoline. And we import gasoline, so we 
are a major participant in the global market for gasoline. The 
idea that somehow holding something in, like having our finger 
in one part of the dike, is going to product consumers from the 
global trends in gasoline is ridiculous because we are both an 
importer and an exporter, so all our gasoline prices are 
subject to international market prices.
    We just had a refinery accident in California. The pressure 
that that puts on the California market comes. And if we are 
exporting gasoline from California, then that contributes to 
the supply balance in the State, right? We cannot pretend that 
exports of gasoline don't affect the price of gasoline but our 
crude import costs do. That is sort of a ridiculous way of 
thinking about a market.
    So my point to you is, for the United States to hoard our 
oil, for oil to be trapped now in inventory unnecessarily, I 
mean, companies are scrambling around trying to find another 
tank, and U.S. prices are depressed by $10 a barrel compared to 
the international market. So we really need to think forwardly 
about whether our export and import policies are consistent 
with our desire to help our allies, Europe and in Asia, to be 
able to remain independent of the energy weapon and the kinds 
of things we see today in the market coming from Russia and 
other countries, and we need to reconsider all of our policies 
for trade and energy in that context.
    Thank you very much.
    [The prepared statement of Ms. Jaffe follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]    
    
    Mr. Whitfield. Thank you, Ms. Jaffe, very much.
    At this time I would like to recognize Mr. Brad Markell, 
who is the executive director of the AFL-CIO Industrial Union 
Council.
    Mr. Markell. It is a mouthful.
    Mr. Whitfield. Welcome. And you are recognized for 5 
minutes.

                   STATEMENT OF BRAD MARKELL

    Mr. Markell. Chairman Whitfield, Mr. McNerney, and members 
of the subcommittee, thank you for inviting the AFL-CIO to 
share its views on the important topic of 21st century energy 
markets.
    Growing domestic oil production is providing the United 
States with significant economic boost and a significant 
reduction in our dependence on foreign oil. In July 2014, the 
AFL-CIO Executive Council unanimously passed a policy statement 
opposing lifting the existing restrictions on crude oil 
exports, which I reference in my written statement.
    Our view is clear: Easing restrictions on crude oil exports 
threatens the long-run health of the refinery sector and the 
high quality jobs it provides. Simply put, if we lift the ban 
on crude oil exports, we will export both our oil and the jobs 
and economic activity associated with refining that oil. The 
threat of these job losses is concentrated in the Gulf of 
Mexico States.
    I want to raise a key point, one that I haven't heard 
discussed. If the export restrictions are lifted, the amount of 
oil exported will over time far exceed the amount needed to 
balance the current refinery capacity that is optimized for 
medium and heavy oil. Refinery workers and their communities 
would be subject to the same offshoring trends that have 
devastated domestic manufacturing, from textiles, to apparel, 
footwear, autos, steel, electronics, and on and on.
    And the jobs that could be lost are very good jobs. 
According to the 2012 Economic Census, the average job in the 
refining sector paid over $100,000 per year, supported by over 
$1.8 million in value added per employee. These are exactly the 
kind of jobs we should be striving to keep in the United 
States.
    Some of these jobs are threatened by the recent Department 
of Commerce clarification of its policies regarding processed 
condensate, which may have already effectively breached the 
export restrictions, without a single hearing, public notice, 
or public comment. It seems clear that lots of very minimally 
processed oil will be exported.
    Much of the discussion on oil exports focuses on the 
mismatch in refinery capacity, and in this static view of the 
industry the easiest fix for the problem is to reduce imports 
of light crude oil and then export any remaining domestic light 
crude unprocessed.
    Rather than export domestically produced light crude oil 
that refineries are not optimized to process, there is another 
solution, one that emphasizes investment in America and 
expanding employment opportunity for American workers. In 2014, 
McKinsey examined the implications of increased domestic 
production of light, tight oil on refineries under scenarios 
where the crude oil export ban is not lifted. McKinsey believes 
that, quote, ``The continued growth of light, tight oil in 
North America has the potential to drive a fundamental 
restructuring of the downstream industry in North America and 
beyond.''
    Domestic production of oil is projected to remain above 8 
million barrels a day through at least 2035. The question is 
not whether this oil will be produced, but where it will be 
refined. It should be refined in the U.S. so we can reap the 
full bounty of jobs, economic activity, and the energy security 
that our increased production of crude oil makes possible.
    As the American Petroleum Institute put it in 2011 when 
making the case for domestic refining, quote, ``Because the 
refining industry operates on a global basis, America faces the 
choice of either manufacturing these products at home or 
importing them from other countries.''
    The position of the AFL-CIO is premised on the belief that 
in the end markets win out. Economically exploitable fossil 
fuels do not stay in the ground, they are produced when the 
price is high enough. The simple question before us is, where 
do we want oil produced in the United States to be refined and 
made into products? Would we prefer that billions be invested 
in the U.S. or overseas? Would we prefer to create management, 
engineering, craft occupation and production employment in the 
U.S. or overseas?
    For the AFL-CIO, the choice is clear: We are unabashedly 
for creating as many American jobs as we can from the increased 
domestic production of oil. That means keeping the current 
crude oil export restrictions in place, not sending crude oil 
and the jobs it creates overseas.
    Thank for your time and I look forward to any questions.
    [The prepared statement of Mr. Markell follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]    
    
    
    Mr. Whitfield. Thank you, Mr. Markell.
    At this time I would like to recognize as our final witness 
Dr. Graeme Burnett, senior vice president for fuel optimization 
at Delta Airlines and also chairman of the board of Monroe 
Energy.
    So, Dr. Burnett, you are recognized for 5 minutes.

                  STATEMENT OF GRAEME BURNETT

    Dr. Burnett. Thank you. Good afternoon, Chairman Whitfield, 
Ranking Member McNerney, and members of the committee. Thank 
you for inviting me to testify before you today. I would ask 
that my full remarks be included in the record.
    I have been involved in the refining industry in locations 
around the globe for over 30 years. I am currently the senior 
vice president for fuel optimization at Delta Airlines, and in 
this position I manage Delta's jet fuel supply, as well as 
serve as chairman of the board of Monroe Energy, the company 
that owns and operates Delta's refinery in Trainer, 
Pennsylvania. Delta Airlines purchased and restarted the idled 
Trainer refinery in 2012 in order to manage our largest 
expense, jet fuel, and has created over 400 jobs.
    We, like other airlines, participate in oil markets on a 
daily basis. So we believe that as an end user of crude oil and 
as a refiner we are uniquely positioned to comment on the 
longstanding crude export law. We strongly believe the current 
law remains a critically important policy that provides 
significant benefits to American consumers.
    As a result of increased domestic production, the U.S. is 
importing less crude, which means that we are already directly 
impacting the global supply-demand picture without the need for 
exports and prices have tumbled as a result.
    The EIA has projected the average American household will 
spend about $750 less on gasoline in 2015 compared to the prior 
year, in addition to equally significant savings on home 
heating oil. Estimates have suggested that the total windfall 
to American consumers could top $230 billion in 2015. These 
savings go straight back into American consumers' pockets, 
allowing them to use those savings on goods and services, thus 
stimulating the economy.
    On the other hand, the oil and gas production sector is 
still less than 1 percent of GDP. Compare that with consumer 
spending, which is 68.5 percent of GDP. Current crude oil 
export policy has broad-based economic value.
    So the question arises, why would any policymaker want to 
risk jeopardizing the current consumer benefits we are 
experiencing and institute a policy that would benefit only a 
narrow sector of the economy? Oil producers want to export 
crude to get higher prices. Producers claim that U.S. 
refineries cannot absorb new U.S. production, and that is 
simply a myth. Energy experts Baker O'Brien have conclusively 
demonstrated that the U.S. refining industry has been investing 
to absorb all the projected increase of domestic production 
through the end of the decade, resulting in lower fuel prices, 
creating jobs at home, and increasing energy security.
    Let's not forget the U.S. continues to import 33 percent of 
its crude oil needs from outside of North America. Unlike LNG, 
there is no real excess requiring export as it can all be used 
at home. Should Congress eliminate restrictions on crude oil 
exports, lawmakers also risk endangering energy security 
because repeal of current law would mean refineries in Europe 
could buy U.S. crude at a lower cost than refineries located on 
the east cost. Lower freight rates enable them to refine the 
crude and send products back to the northeast at a lower cost, 
leading to closure of domestic refining capacity.
    Energy security is not just about producing enough crude 
oil for the Nation's needs. Energy security is about 
maintaining the domestic refining capability to transform that 
feedstock into the products we consume here in America. Put 
simply, lifting the ban will benefit European refinery workers 
at the expense of thousands of American jobs while endangering 
U.S. refining capacity that is critical to our national 
security.
    OPEC is a cartel and the global crude oil market is not a 
free market. Crude oil price is ultimately controlled by a few 
oil-producing states. Exporting crude oil will not reduce 
OPEC's power, which represents about 60 percent of the total 
petroleum traded worldwide. Saudi Arabia's decision last year 
not to cut production and allow prices to crash clearly 
demonstrates that they are the controlling factor for crude 
price.
    Furthermore, it is imperative to remember that public 
opinion overwhelmingly supports leaving the crude oil export 
law in place. Polls in New Hampshire and nationwide are showing 
that large majorities of voters across party lines oppose 
exporting more U.S. Oil to foreign countries.
    So Delta's position is clear: There is no imperative to 
lift the ban. If export restrictions are lifted, feedstock 
costs will rise, U.S. Refining capacities will be reduced, jobs 
will be lost, and the consumer will pay higher prices at the 
pump. It is better for America to maintain present law and 
export the refined products. Our Nation's economic and security 
interests are best served by allowing American refiners to add 
value to crude oil here and become less reliant on foreign 
crude oil from unstable and unfriendly countries.
    Thank you for this opportunity to testify before the 
committee. I look forward to answering any member questions.
    [The prepared statement of Dr. Burnett follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]   
        
    Mr. Whitfield. Well, Dr. Burnett, thank you.
    And thank all of you for your statements. We appreciate it 
very much.
    As I said in the beginning, this is sort of an 
informational-type hearing because we want to focus more 
thoroughly on this issue of the pros and cons of lifting the 
export of crude oil ban.
    Let me just ask a generic question here. First of all, how 
many other countries in the world that produced a significant 
amount of crude oil prohibit the export of it? Are there some 
countries that do prohibit the export of their crude oil?
    Mr. Kingston. None that I know of, though Russia will have 
an export tax that sometimes they will really ratchet up if 
they want to keep the oil in-house. They would just raise that 
tax so high that it becomes uneconomic to try to send it 
anywhere else.
    Mr. Whitfield. OK. OK. So I know that we are exporting a 
significant amount of refined products, gasoline, diesel fuel, 
condensates, and so forth. And do any of you feel like that 
because we are doing that that it is putting pressure or 
causing gasoline prices to go up? Gasoline prices have been 
going down, and we are, I guess, exporting a large amount of 
gasoline products today and diesel.
    Did you want to make a comment on that, Mr. Drevna?
    Mr. Drevna. I appreciate it, Mr. Chairman.
    I think it is fraught with peril when you start talking 
about what prices are going to do. Whether crude oil or product 
prices, as Mr. Sheffield said, prices are based upon the 
international market.
    What we have been able to show by taking a crude oil 
product, refining it here in the United States, and exporting 
it is a couple of things. It shows we are globally competitive, 
it shows we can keep jobs here, and keep those refineries 
running at optimal levels. That is the benefit of the exports. 
Without being able to export a finished product--mostly diesel 
too, some gasoline, but mostly diesel--we are able to keep 
those refineries up and running, and that is a national 
security thing.
    If I may say one other thing, sir, I think what we don't 
need to have this devolve into is an upstream versus downstream 
kind of debate. We are all in this together. And the only thing 
that we are asking is that, whatever you do, you look at the 
whole picture and just not one time perhaps when there is some, 
because of some contango going on in the markets, that we have 
an overflow of stored crude.
    So let's take our time, take a breath, and look at this 
think going forward and not just one snapshot in time. Thank 
you.
    Ms. Jaffe. I would like to also address that question. It 
is obviously a ridiculous thing to say, but because we are 
exporting gasoline it doesn't affect the price. Obviously, if 
we banned gasoline exports we would get gasoline buildup in 
storage and that would depress the price of gasoline. And we 
have a particular problem in the State of California, for 
example. In different refining areas in the southwest maybe 
there is a little bit more flexibility, but in California where 
there aren't a lot of pipelines to bring refined products, 
whenever we have a refining accident or problem it immediately 
hits consumers in the State. And there are difficulties because 
you can't necessarily be cost effective to bring ships around 
because of the Jones Act and so forth. Those things actually 
are affecting California refiners exactly today.
    And I don't know what the statistics are for how much 
gasoline is being exported from California, but I can tell you 
that when Chevron had their Richmond accident, and when it 
caused this sudden burst in gasoline prices that were very 
difficult for average Californians, the industry was still 
exporting from California diesel fuel and gasoline.
    So it is a market, and I think that is sort of what was the 
point of my remarks, which is that if we are going to talk 
about a market dynamic we have to look exactly, I agree with 
Mr. Drevna, we have to look across the entire market. But it is 
not clear to me why we would have a restriction on crude oil 
but not a restriction on products. I mean, it seems to me that 
we believe in free trade or we don't believe in free trade, and 
I am not sure why we are picking one product over another.
    Mr. Kingston. I want to kind of bring those two statements 
together. Mr. Drevna talked about refineries, they are better 
off operating at a high level. And then what Amy said was that, 
yes, if you export, if you stop the exports you would have a 
gigantic buildup of gasoline and it will push the price of 
gasoline down. The problem is it would also push down the 
economics of running those refineries.
    So at a certain point you can't make the refineries run. So 
if you have some kind of restriction that floods the market and 
you don't have demand to meet, and demand is not going to rise 
that fast, you are going to have terrible economics and you are 
going to have refineries start to cut down.
    This is why we all benefit from letting these refineries 
run at the highest level they can. If that means that they are 
going to export some, that is great. You know, in this country 
we have had minimal growth in gasoline consumption, minimal 
growth really in energy consumption, and there have been some 
year-to-year comparisons where we are down for the year. That 
is kind of a good thing. I think almost everybody agrees that 
unless it is being brought about by a weak economy, that is 
generally a good thing, it is a function of efficiency, et 
cetera.
    So you have got this world-class refining sector. If you 
want it to run, if want to create the jobs that the gentleman 
from the AFL-CIO talks about, let 'em rip. Let this great 
refining sector run at a high level. And if that means exports, 
so be it.
    Mr. Whitfield. Well, my time has expired. At this time I 
recognize the gentleman from California, Mr. McNerney, for 5 
minutes.
    Mr. McNerney. Thank you, Mr. Chairman.
    I thank the witnesses for your statements. I appreciate Mr. 
Drevna's comment about looking at the big picture and taking 
our time to make the decision correctly to benefit our country 
the most.
    I want to sort of paint a broad picture here. For opening 
up exports I see two big benefits. One is geopolitical. We can 
help Ukraine and the Baltic countries and a lot of the 
countries that are having problems because of their suppliers. 
Another benefit is it is going to create jobs in drilling, it 
is going to create profits for companies. Those are significant 
benefits.
    On the other hand, my concerns are right now the domestic 
prices are pretty low for natural gas and for petroleum, and 
that gives our manufactures a real leg up. And I see a 
manufacturing renaissance, an opportunity for a manufacturing 
renaissance in this country. So I don't want to give that away. 
I mean, we have the potential to create millions of jobs in 
manufacturing with a current price differential that gives our 
country an opportunity to create those manufacturing jobs.
    The other concern I have is environmental groundwater 
contamination, a big problem potentially in California where 
the groundwater is so valuable. And also climate change. I 
mean, encouraging more production, encouraging more 
consumption, it is going to create more greenhouse gas, it is 
going to put us farther down that dangerous path.
    So that is sort of a broad brush. Does anyone want to 
comment on my observations here? Mr. Sheffield.
    Mr. Sheffield. Yes, Mr. McNerney, a couple on the water 
side. We are having droughts out of west Texas too, just like 
California. We started focusing on brackish water zones, we are 
going below the water table out in west Texas. We found a lot 
of water that we can use from the brackish standpoint. We have 
also signed major agreements with the cities of Odessa and we 
are working on Midland to use effluent water. Our goal is to 
use no fresh water after a period of time of about 5 years.
    On the environmental issues, we are going all out to 
install vapor recovery units to capture all the methane. We are 
working with EDF at Fred Krupp. I visit him all the time in 
regard to looking at ways to again capture all methane at the 
sites when we frack wells and so on. So the industry is going 
all out on both methane emissions and also using other sources 
of water besides fresh water.
    Mr. McNerney. Well, I appreciate that, and I think most of 
the players are willing to go down that path. They are willing 
to make the extra investment. There may be a couple of bad 
players out there, and it is going to be up to the way that we 
regulate that market to make sure that the bad players don't do 
much damage and hurt the reputation of the industry as a whole.
    So that is something I hope to work with my colleagues on 
in the future to make sure that we do that.
    Mr. Kingston. I would like to address the gasoline price. 
You know, this is not just theoretical. We had a Brent-WTI 
spread that for years and years WTI was over Brent. And then as 
the boom got going in the U.S. and crude stocks built up, not 
just in Cushing but everywhere, that price plummeted, and I 
think at its widest WTI was $27 below Brent.
    There was no evidence at all that that lowered the price of 
gasoline in the U.S., because as numerous commentators, 
including the recent Brookings Institute study have shown, the 
price of gasoline in the U.S., because the U.S. is a gasoline 
importer and an exporter, as a result of that we are tied to 
the world market. The world market is therefore ultimately tied 
to the price of Brent crude oil.
    Mr. McNerney. So there is no differential between American 
gas prices and the world gas prices? There is a differential--
--
    Mr. Sheffield. Ultimately, on a spot wholesale level, I 
mean, yes, there is a difference, but ultimately if one gets 
too cheap to the other they will just gather it up and export 
it to the other place. So they stay within a range. But the 
crude price, because a lot of that crude was stranded at 
Cushing, dropped significantly below the price of Brent and the 
price of gasoline did not follow.
    If the case is to be made that keeping a large supply of 
crude here in the U.S. lowers gasoline prices, it would have 
happened. It is not just theoretical. We had the experiment. 
Nobody set out to have the experiment, but we had it, and there 
was no evidence at all that that kept the price of gasoline in 
check.
    Mr. McNerney. Mr. Markell.
    Ms. Jaffe. Let me just add one thing about our relationship 
with the Europeans.
    Mr. McNerney. Well, I recognized Mr. Markell first.
    Mr. Markell. So this focus on gas prices is something I 
wish we could get off the table. It is important. I own two 
SUVs, I am very concerned about gas prices. But it is very 
clear that U.S. gas prices are set internationally based on 
those spot markets. There is a small swing from market to 
market and as the gap gets too wide then it closes. From my 
point of view, it kind of takes the focus off the jobs and 
economic angle that I think we are not paying enough attention 
to.
    So there is a lot of talk about gasoline prices. To me, the 
question is settled. U.S. gas prices are set on the 
international market and whether we export crude or don't 
export crude, that is going to be the truth in the future as 
well.
    Mr. McNerney. I have run out of time.
    Mr. Olson [presiding]. The Chair now recognizes himself for 
5 minutes of questions. Welcome to our experts.
    December 22 of 1975, Gerald Ford signed the law that 
created the export ban we are talking about today. To show you 
the change in America that has happened since that time, that 
very next day he signed a bill to try to make our country adopt 
the metric system of measurement. The metric system. That world 
has been turned upside down and our energy world has been 
turned upside down since that time.
    We have seen a boom in oil production that means some parts 
of America are seeing some tremendous benefits, places like my 
own State of Texas and North Dakota. Energy means amazing 
opportunities for these small towns. But we have also seen the 
impacts on the global economy. Our reliance on foreign oil is 
slipping away faster and faster and faster, more than we could 
ever have dreamed 5 years ago. This benefits our trade balance, 
our energy security, and our economic growth. These are huge 
benefits and they are real.
    Growing supply has slashed the price of oil. That is great 
for Americans at home because the price is so low at the pump, 
but for my hometown of Houston this has meant good people have 
lost thousands and thousands of good-paying American jobs. It 
is a simple fact that fewer rigs are working and less money is 
being invested.
    Market forces and global politics are hitting my hometown 
hard, but this town, Washington, is adding to the trouble. In 
this environment we shouldn't be making it harder to drill. And 
that is why it is time we fix pipeline permitting. Energy means 
nothing if we can't get it to the markets. And further, the 
Endangered Species Act should be a protection, not a weapon. 
And we should be more open to safe offshore development. And we 
need to keep our rules on our refineries reasonable. And that 
is why I am an unspoken critic of the ethanol mandates.
    Lastly, today I agree that is important to consider the ban 
on most crude exports, but exported oil won't be a cure-all. 
But free trade is very important and no law should be above 
scrutiny, and this committee is at a very point in this early 
conversation.
    My first question is for every panelist. I hear from the 
oil producers that their oil is trapped. They say its unfairly 
marked down compared to global prices. I hear from refiners who 
say the opposite. They argue there is plenty of capacity and 
they are expanding every day to take more and more American 
crude.
    Which statement, one of three, best sums up your views 
about these two opposing views? Number one, we have enough 
refining capacity to absorb light oil. We are there. Number 
two, we have more light oil than can be refined reasonably or 
absorbed currently. And number three, we have the right amounts 
of oil and capacity in our refineries, but not enough pipelines 
to get from A to B.
    So three choices. Mr. Sieminski, you are first, sir, one, 
two, or three, with some comments if you want to.
    Mr. Sieminski. Chairman Olson, thank you. Well, I think 
your number three, that we don't have enough pipelines, I think 
that was the case for oil from Cushing, Oklahoma, 3 or 4 years 
ago. But the infrastructure to bring oil south from Cushing to 
the Gulf Coast I think is now in a lot better shape. So that 
leaves me with one or two.
    I would say, sir, that it is a combination. I think that 
the capacity to refine the crude oil is probably there, but not 
at an equal price between Brent and WTI. So in other words, if 
the West Texas Intermediate price is discounted enough, then 
refiners would be happy to take a lot of it.
    Mr. Olson. I am sorry, sir, my time is up.
    One-point-five for you, Mr. Sheffield, one, two or three, 
please. I am pretty sure you are probably going to be a one, 
you have the capacity.
    Mr. Sheffield. Yes, I think what we are not hearing from 
the refiners is the economic penalty. They invested $85 billion 
to redo their refineries because they all thought light sweet 
crude was declining and we would never find it again. It was 
all going to be heavy crude from Canada, heavy crude from 
Mexico, heavy crude from Venezuela. They invested $85 billion. 
So to refine light sweet crude, they have to charge an economic 
penalty.
    Secondly, they are keeping the $10. They are not passing on 
the $5 of it back to the producers to create jobs or $5 back to 
the American consumer. So I think it is obvious for me.
    Also, I left out a key point, you brought up pipelines, is 
that what is interesting about the law in 1975 is that Canada--
I love Canada, we had an office there--Canadian producers, they 
can use our storage, they can use our refiners, and they can 
apply for a license to export their crude oil.
    Mr. Olson. And I have used my time as the chairman overly. 
So I will yield back the balance of my time and give my time 
now to Mr. Barton--or are we going to go--I am sorry. Oh. Gene. 
I am sorry.
    Mr. Green from Texas is recognized.
    Mr. Green. Well, I think it is appropriate that you have 
four Texans left over while we have that one vote on the House 
floor. So Congressman Flores and Joe Barton and I.
    I want to thank the Chair for doing the hearing today and 
thank our witnesses.
    We are here to discuss an important issue in the district I 
represent. Because I have at any given time--our district lines 
change in Texas all the time. I have had five refineries in my 
district, from Exxon in Baytown to Valero in the City of 
Houston. And so this is a balancing act.
    I am looking at our refineries now having the best margins 
that they have had that I can remember, and the price of gas is 
reasonable, $2.15 a gallon, $2.10, in Houston. But I also have 
a whole bunch of jobs that come from the Baker Hughes, the 
Halliburtons, and everyone else who are actually so--and I 
understand the problem. We are trying to balance it. We want 
the refinery margins, but we also want to keep those folks 
working in the oil patch. And so that is where the balance come 
from.
    And, if we can, we will see how it works. But, 
Administrator Sieminski, it is good to see you again, and thank 
you for the good work you all do.
    You mentioned that EIA is composing a study that would 
discuss crude oil in exports. Where are you at on that study?
    Mr. Sieminski. Congressman, we have done this study on what 
drives gasoline prices, and I think you heard a number of 
people talk about the results of that. Gasoline in the U.S. 
seems to be set more in the international market rather than 
elsewhere. We are looking at options for petroleum refineries 
to process additional light sweet crude oil. We will have that 
study out in about a month.
    We have also a study underway to look at the implications 
of increased crude oil exports on the refining system, in 
general, and we will have that out, I think, sometime in April.
    We also published an oil import tracking tool that makes it 
easier to see some of the changes that have taken place down in 
Texas and Louisiana.
    So I would say over the course of the next 6 to 8 weeks we 
will have--we will have two or three more big studies out.
    Mr. Green. Well, Congress doesn't move that fast. I think 
we will probably be able to see those studies before they do.
    Mr. Sheffield, first of all, thank you and Pioneer for some 
of the things you are doing because it makes it easier--when I 
drive through Eagle Ford, I hate to see the flaring for lots of 
reasons, environmentally, but, also, I know somebody is not 
getting paid for that product that they are producing. And we 
have pipeline issues and transmission issues there.
    What does the world condensate market look like for U.S. 
exporters? I know the Department of Commerce is doing that. Is 
that kind of a safety valve for what we need? Because we have a 
current procedure for exporting condensate. Are we having some 
success in that?
    Mr. Sheffield. Yes. We are exporting 20,000 barrels a day 
now at Pioneer of condensate, and it is going to Japan, South 
Korea, and Europe. They need it.
    About 8 weeks ago there were some articles written about 
that the market is closed. That is because, for a period of 
about a week, the international sweet price and the domestic 
sweet price narrowed to about $2 for just a period of 2 or 3 
days, and now it is widened back. And that will allow--most 
experts are thinking that we can export about 200,000 barrels a 
day out of the Eagle Ford.
    Several other companies have been approved to be able to go 
and export their process condensate. And so that process will 
continue. And it will probably--it helps us for about 6 months 
on this inventory so that the biggest issue is the sweet crude 
from the Bakken sweet crude from Colorado in the Niobrara and 
the sweet crude from the Permian Basin.
    Mr. Green. OK. How long does it take Department of Commerce 
to review Pioneer's application to export the condensate, the 
regulatory delay, and the timeframe?
    Mr. Sheffield. Yes. It took a few weeks.
    Mr. Green. That's amazing. We are waiting for exporting on 
LNG for years.
    Mr. Sheffield. Obviously, we were very pleased.
    Mr. Barton [presiding]. Keystone proposal. Let's----
    Mr. Green. Oh, yes. Well, and I know there was some 
testimony about--I actually have two of the huge tanks that 
Keystone has built in Channelview, Texas. And you are right 
about getting the Cushing crude oil down there, but we still 
need it to come from Canada across the border.
    But the export numbers you are talking about, 20,000 and up 
to 200,000--you know, the five refineries off and on I have 
represented because I am real familiar with them--they all have 
been retooled in the 1990s to do the heavier crude--Venezuela, 
Mexico--and we don't have small refineries in our area. In 
fact, all of them have been expanded over the years.
    We probably have the smallest, about 200,000, 250,000 
barrels a day. And I remind people even from TransCanada, if 
that is a 750,000-barrel-per-day, we use over a million just in 
East Harris County to do it.
    Charlie.
    Mr. Drevna. Thanks, Congressman.
    I would like to make a comment about the retooling and the 
billions of dollars that we invested, which is true. But I 
think there is another myth out there circulating that, you 
know, the only thing those refiners do is just suck up all the 
heavy crude and that is all they use. They use a mix.
    And we are pretty good at what we do, just like Mr. 
Sheffield's company is really good at what they do. We have--
you know, we use light crude, we use middle grade, and we use 
heavy. And we can take more--more light by backing out the 
middle, backing out some heavy.
    So it is not one of those all-or-nothing kind of things. 
Like I say, we have been doing this for a long time, and we can 
take the extra crude.
    And given what Adam Sieminski was talking about, I disagree 
somewhat that--``OK. Well, we are OK. We have got some 
pipelines going, and we are good and we can go home.'' No. We 
were pretty good going north and south. We found out that we 
weren't. We are awful going east and west, and probably always 
will be awful for a long--you know, for a long time.
    Mr. Barton. The gentleman's time is expired.
    Mr. Green. I am out of time. But, Ms. Jaffe, it is always 
good to have you before our committee. I like to have a Texan 
from out in California.
    Mr. Barton. The Chair is going to recognize himself for 5 
minutes because I actually think it is my turn. So I am going 
to do that. We are doing the Pony Express. Yes. You know, we 
have a vote on. So we are going to vote coming back and 
changing the chairmanship.
    Mr. Sieminski, could you tell the subcommittee how many 
barrels per day of refined products we export and how many 
barrels a day of refined products we import?
    Mr. Sieminski. Well, I could get the exact numbers for you 
for the record, Congressman, but the total amount of exports is 
now up to 3 \1/2\, 4 million barrels a day of products.
    [The information follows:]

        When excluding crude oil, the United States exports 3,834 
        thousand barrels per day and imports 1,884 thousand barrels per 
        day of refined products. The United States is a net exporter of 
        refined products by 1,950 thousand barrels per day.

        This data is based on 2014 monthly averages. EIA usually 
        considers all refined products that are not crude oil, as 
        opposed to just looking at Finished Petroleum Products. 
        Furthermore, HGLs (Hydrocarbon gas liquid) and other liquids 
        are included in the aforementioned refined products data.

    Mr. Barton. But is it fair to say we are exporting more 
than we are importing?
    Mr. Sieminski. We are a net exporter of products.
    Mr. Barton. Net exporter.
    Mr. Sieminski. That is correct. By a small amount.
    Mr. Barton. OK. Thank you, sir.
    So if we were to eliminate the ability to export refined 
products, that would not be a good thing?
    Mr. Sieminski. I think Mr. Drevna said that refiners are 
actually benefiting through capacity, and Mr. Kingston--that 
having the ability to export products actually allows you to 
run your domestic refinery system efficiently.
    Mr. Barton. Better. Yes.
    Mr. Sieminski. Yes. And that actually works to the 
advantage----
    Mr. Barton. We are for exports of refined products.
    Mr. Sieminski. That is correct.
    Mr. Barton. Now, Mr. Sheffield, I need--I mean, you all 
know this, but I am the sponsor of the bill to repeal the ban 
on crude oil exports. So I am pro crude oil exports. I think 
you all know that, but I guess in full disclosure.
    You testified, Mr. Sheffield, that, if all companies--all 
producers were allowed to either sell in the domestic market or 
sell in the world market crude oil, that while you would get a 
slight increase in your price domestically, the overall world 
price would at least be pressured to go down because you would 
be competing against the Russians and the OPEC nations in the 
world market and, since U.S. production is going up, that would 
overall bring the world price down--or tend to bring the world 
price down. Is that correct?
    Mr. Sheffield. Exactly. Anytime you put more supply in the 
international market, especially at this point in time, you are 
going to bring the international price down.
    Mr. Barton. So it may be counterintuitive to some, but if 
we allow crude oil exports, at least over time we are going to 
stabilize world prices and probably bring them down because we 
are increasing U.S. domestic crude oil production. Is that 
correct?
    Mr. Sheffield. Exactly. And lower gasoline prices for the 
American consumer.
    Mr. Barton. Mr. Drevna, you and I know each other real 
well. I was very gratified to hear your testimony that your 
association is not automatically opposed to the repeal of the 
ban on crude oil exports.
    What would need to be done to expedite that? You had some 
qualifications, and I just want you to be able to put those on 
the record.
    Mr. Drevna. Absolutely, Congressman.
    When you look at--as I said earlier, if you look at just 
lifting the ban on the exports of crude oil in a vacuum, there 
are a lot of other tangential things that must be looked at so 
we don't try to solve one problem and create two or three 
others. And chief among them is the Jones Act.
    Now, I know everyone is going to say you can't repeal the 
Jones Act. Well, you can't even talk about it. Well, I think it 
is time we talk about it.
    Mr. Barton. Well, we can talk about it.
    Mr. Drevna. Yes. In the context of the crude oil--you know, 
we have had four or five refineries--some shut down, but we 
have three or four or five others that were--I mean, days--I am 
literally days away from shutting down on the East Coast. 
Bakken crude--getting that Bakken crude there saved them.
    So what all I am saying is, you know, for 40--ever since we 
had this thing in 1975 and the Arab oil embargoes, we have been 
having an energy policy here in the country that sort of goes--
it lurches from crisis to crisis, and we never look at anything 
holistically.
    Mr. Barton. So you just want to look at the whole picture.
    Mr. Drevna. Look at the whole picture and see what it does 
to the total economics. If the price of crude goes up somewhat 
and it is still OK, fine. But----
    Mr. Barton. I have got 30 seconds. I want to go to Dr. 
Burnett--I am sorry, not Mr. Burnett.
    Delta is the Delta Airlines. Correct?
    Dr. Burnett. Correct.
    Mr. Barton. But does the parent company own the Delta 
refinery or are you a subsidiary of the----
    Dr. Burnett. Yes. Monroe Energy is a wholly owned 
subsidiary of Delta Airlines.
    Mr. Barton. OK. Now, does Delta Airlines use the total 
production of the Delta refinery?
    Dr. Burnett. The way it works is that all refineries 
produce gasoline, diesel, as well as jet fuel. So we use the 
jet fuel directly into the New York Harbor to our airport hubs 
there.
    Mr. Barton. But some of your refinery capacity results in 
refined products that you sell to others, and probably some of 
that is overseas. Now, I don't know that.
    Dr. Burnett. No. What we do is we actually swap with 
Phillips 66 in traffic euro. We swap the gasoline and diesel 
for jet fuel in other locations. So we have a virtual jet 
refinery of about 170 barrels a day.
    Mr. Barton. Your refinery would oppose us restricting your 
refined products to only going to Delta. Correct?
    Dr. Burnett. Correct.
    Mr. Barton. I just want that on the record.
    And my time has expired.
    Mr. McNerney, have you asked questions already?
    Mr. McNerney. Yes, I have.
    Mr. Barton. You have.
    Then we are going to go to--no, sir. I just--I remember 
that you have to go minority, majority. That is all.
    The Chair recognizes the distinguished gentleman from 
Illinois, Mr. Shimkus, for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman.
    Great hearing. It is a great discussion. And, of course, a 
lot of us have been talking about this. And I do believe--and I 
have mentioned this even in the last couple Congresses--you put 
more crude oil on the world market, world market price should 
go down. Pricing would be from Brent versus a captive West 
Texas intermediary anymore.
    I think the political concern is what Mr. Sieminski and I 
talked about on California prices. If we do this, but then some 
other variable raises the gasoline prices, not a supply and 
demand debate, but, politically, people are going to say, ``See 
what you did. You exported the crude oil and gas prices went 
out.''
    It is very hard for politicians to be able to--without a 5-
second sound byte, to be able to explain the macro- and the 
microeconomic issues that we are involved with. So that is 
probably why we are not going as fast on this as we are doing 
with LNG issues, which makes a--it is an easier argument.
    I want to talk just quickly--because Mr. Drevna opened the 
discussion on the Jones Act. The Coast Guard Admiral Paul 
Zukunft recently said--and I will just take one of the quotes--
``I think at the end of the day it would put our entire U.S. 
fleet in jeopardy where our fleet of roughly 80-plus 
international U.S.-flagged vessels will rapidly go to zero. And 
then there is a time of crisis. Who are we going to charter to 
carry out our logistics? Very difficult if we don't have U.S.-
flagged ships.''
    And, you know, we are having this big internal Homeland 
Security debate right now--I think the bill probably just 
passed--and national security issues. U.S.-flagged vessels on 
our inland waterway systems is a have-to. We are just not going 
to have--especially in the inland waterway systems, which my 
district borders the Mississippi, it borders the Ohio, it 
borders the Wabash. Just the national security implications of 
that I think is difficult to do.
    So does anyone disagree with that analysis? Charlie.
    Mr. Drevna. No. I don't disagree, Congressman. You have to 
realize, though, what we are talking about from the refining 
sector is solely the international fleet. You know, and we are 
free-marketers.
    Mr. Shimkus. Yes. But you are talking maybe from New 
Orleans or Texas to New England--to the New England coast.
    Mr. Drevna. Right.
    Mr. Shimkus. Saying that that is international, but it is 
really national.
    Mr. Drevna. Well, but we have international ships coming in 
and out of there every day.
    Mr. Shimkus. But they are not going from U.S. port to U.S. 
port.
    Mr. Drevna. Exactly.
    Mr. Shimkus. I mean, we are--so, anyway, I think it is a 
very difficult proposition.
    Ms. Jaffe, I have been involved--I am headed to Lithuania 
next week for the 25th anniversary. I deal with Eastern 
European issues. That is why the LNG--I am going to go visit 
the LNG terminal.
    Talk through the international security implications for 
our allies, first of all, who are held hostage by extortionists 
who are not our friends, and, also, the--and so I got it 
confused.
    Because in that we put more competitive crude oil on the 
market, what does that do to our enemies and their ability to 
do the things that they are doing?Can you talk to that a little 
bit.
    Ms. Jaffe. Yes. So I think you raise a very interesting, 
important point. All of the oil that has been disrupted 
recently--Libyan oil where we now have ISIS attacking near the 
Kirkuk oil field--that would--when Iraq oil gets disrupted or 
Libya's oil gets disrupted now, that hurts the supplies going 
to Europe. That gives Russia a tighter stranglehold on the 
supplies that they provide to Europe.
    So our goal, as their ally and as a world leader and as a 
believer in free markets, should be not only to make sure that 
we have enough oil here in the United States, but, also, that 
we are leading from the front on making sure that powers like 
the Russians or Iran are not able to use oil and gas as a 
geopolitical lever, as a weapon.
    Mr. Shimkus. And the import terminals in, like, Europe as a 
whole, there is more crude oil import locations than what you 
would have on LNG east to west. Is that safe to say?
    Ms. Jaffe. You know, I mean, Europe is a market. I mean, I 
think the interesting thing about the LNG export question--I 
mean, that seems obvious because we have this fear that the 
Russians would cut off natural gas supply to Europe. That would 
be----
    Mr. Shimkus. Not a fear. A truth.
    Ms. Jaffe. Yes. Absolutely.
    So my point to you is, but on the crude oil side, Europe 
has actually lost their supplies from Libya. And I think the 
President a year, 2 years ago correctly released supplies from 
the Strategic Petroleum Reserve to loosen up the light crude 
market at the time we were importing still because we want to 
help out our allies from Europe and we don't want to see Europe 
having shortages.
    So, ultimately, we have to concern ourselves. We need to 
look at, if there is a refinery on the east coast of the United 
States whose economics are questionable, you know, is that how 
we are going to run our foreign policy. We are going to have 
our foreign policy be orientated to keep one refinery open in 
the United States because we have these allies.
    And during Rita and Katrina--I will speak as a Texan for a 
moment--you know, Europe lent us the gasoline that we needed to 
be able to reevacuate people and bring them back and forth 
safely to Texas, you know. And we are now telling them that we 
don't want to provide them with any supply because there might 
be a competitive advantage for one refiner? That doesn't make 
sense.
    Dr. Burnett. I would like to respond somewhat to that 
because supply disruptions in Libya and elsewhere do affect the 
price of crude oil, but there is plenty of crude oil supply 
available in the world. That is why we have a low price today. 
The issue for our friends and allies in Eastern Europe and 
elsewhere is LNG and product availability, not crude oil.
    Mr. Whitfield [presiding]. The gentleman's time is expired.
    At this time I recognize the--who is next on the list? The 
gentleman from Iowa, Mr. Loebsack, is recognized for 5 minutes.
    Mr. Loebsack. Thank you, Mr. Chair.
    Sorry that we have had to run back and forth. I think 
whoever is in charge of this institution wants to make sure we 
get our 10,000 steps in today. And so I really appreciate--and 
I haven't been able to listen to all of the testimony. I 
apologize. Just back and forth. A lot of meetings in the 
process, too. I have a lot of questions on this, as you might 
imagine.
    I do want to start out with Ms. Jaffe, if I could. First of 
all, I got my PhD at UC Davis. So I am glad you are there. But 
it was in political science. And the West Village, you know, is 
quite an undertaking, being a net zero energy undertaking, and 
I commend UC Davis for doing that. And I don't know if you 
have--you must have some role in that. I know that you are in 
the graduate college of management. But thank you for being 
here today.
    And I kind of want to explore maybe with not just you this 
whole geopolitical thing that Congressman Shimkus brought up 
and others.
    First of all, which specific countries are we talking about 
that we can help if we are allowed to do so? Which countries?
    Ms. Jaffe. Well, I think that, ultimately, we are in a 
global market. Right? But when we have disruptions, the 
disruptions--and we are not out of the woods with international 
disruptions.
    The militias that are funded by ISIS have made a decision 
that they are going to try to capture as many oil fields as 
possible inside Syria and Iraq. You know, the response towards 
that has been, you know, not 100 percent effective.
    We have the civil war in Libya which is disrupting exports. 
You could have a civil war, as we know, from watching events 
around the Middle East and in Africa. There is many different 
places where oil supply can get disrupted.
    Mr. Loebsack. But what----
    Ms. Jaffe. And the people that it is hurting is--that is 
why the price of Brent crude, which is the global marker----
    Mr. Loebsack. Right.
    Ms. Jaffe [continuing]. Is now $10 higher than our prices 
here in the United States. Because those are the countries--
Europe and those are the countries that are losing their 
supply.
    Mr. Loebsack. But are we talking about specifically Ukraine 
or--I mean, where are we talking about where we can help folks 
so that they are not being extorted by Russia and whatever--you 
know, the arguments that are being made on that.
    Ms. Jaffe. I think it is any country in Europe that has a 
refinery. I mean, it is the whole continent. And it also 
affects availability of supply to Asia as well.
    Mr. Loebsack. So how does that--I mean, how do we then, 
practically speaking, put into effect that kind of a policy 
other than lifting the ban? How does it happen, then, that we 
can help those countries? Because we never really hear sort of 
specifically how that works.
    Ms. Jaffe. Well, we have several different tools.
    First of all, we now have this surge in light crude oil 
production in the United States. We have light crude oil 
sitting in the Strategic Petroleum Reserve. There is no----
    Mr. Loebsack. I am sorry. But I just want to be more 
specific. Maybe somebody here can be specific.
    How does that oil then get to where we want it to go? You 
know, how does that happen if we have a policy that lifts the--
--
    Ms. Jaffe. Well, we have to lift the export ban to be able 
to be an effective player in the global market.
    Mr. Loebsack. Right.
    That enables that to happen. But how does it happen 
specifically?
    Mr. Kingston. Well, I would like to point something out. It 
is entirely possible that you could lift the export ban and 
nothing happens.
    Mr. Loebsack. Right.
    Mr. Kingston. But that doesn't mean that it is an empty 
gesture.
    Mr. Loebsack. Right.
    Mr. Kingston. I think back to the fight in the late 1990s 
over the lifting of the ban on exporting Alaskan crude, and 
there was a lot of effort put into this Congress to get that to 
be lifted. BP spent a lot of money. At Platts, we wrote a lot 
of stories on it, and they lifted it. And they made a lot of 
effort at selling--and after about 3, 4 months, the Asian 
refiners said, ``You know what? We don't really like this 
stuff. It doesn't work that well.''
    Mr. Loebsack. I mean, because things are happening in the 
Ukraine that might not allow for this actually to happen. It 
depends upon the situation.
    Mr. Kingston. But there is really a kind of a positive 
thing to it. Mr. Drevna mentioned Turner Mason before. They are 
a very highly respected engineering consulting firm, and we 
have a partnership with them for many years. And every day we 
publish refinery yields and netbacks and refining margins.
    And if you look at the domestic crudes, they are 
consistently the biggest winners in refining margins and not 
just because of the low price.
    Mr. Loebsack. Right.
    Mr. Kingston. So it is entirely possible that the export 
ban could be lifted and still the refineries in the U.S., which 
have certainly a big advantage in transportation costs and a 
big advantage in fuel costs because they are using cheaper 
natural gas to run it as opposed to oil in another part of the 
world--they are just the winners in this battle.
    But the fact that the possibility of exporting it is there 
tends to keep things in check. So the advantages that you would 
get from, let's say, maybe keeping a lid on the Brent price, 
which affects gasoline price--that advantage still exists and, 
meanwhile, the refineries are still operating. So the jobs that 
the AFL-CIO is concerned about, they still exist, too. So the 
refineries can still win this battle even if the export ban is 
lifted.
    Mr. Loebsack. Yes. I will just tell you for the record that 
the concern I have--and you can say it is irrational that this 
is nothing like what it was prior to 1973 and 1974. But go 
back--we had a Drain America First policy. We all remember that 
before the crisis back in the 1970s, the first crisis.
    And just for the record, I have a lot of concerns that we 
not get into a situation like that. I know it is completely 
different in many ways. We have more sources of oil here 
domestically and around the world, that sort of thing, and we 
didn't even have North Sea oil back then. But I still have a 
real concern about that. I just want you folks to be aware of 
that from a national security perspective. I think we have to 
be thinking about that.
    I do want to ask Mr. Drevna and Dr. Burnett about oil 
prices going down now, understanding how markets work. 
Obviously, we know that oil prices aren't going to stay at the 
current level forever.
    So what strides is the industry taking towards future 
energy investments instead of asking for us to lift exports in 
terms of expanded drilling operations, et cetera? What are you 
doing to prepare for future spikes? I guess that is the 
question.
    Mr. Drevna. Well, from the refining side, you know, we are 
continuing to upgrade. We are continuing to--not a technical 
term--we are continually changing the valves and making sure we 
can use the abundance of supply that we have here in the 
country today.
    So that is why I say it--but are we there yet? We are 
getting there very closely, again, because of what we talked 
about earlier, you know, the--unfortunately, the midstream 
distribution center was not built in this country to handle 
what we have today.
    It is going to take time for us to get caught up, but not 
that much time. So, you know, we are putting lot of money and a 
lot of effort into upgrading the refinery so they can use the 
light sweet crude.
    One last thing I would mention. We talk about the upstream 
folks winning, the refining folks winning. This is not a win/
lose game. We should be talking about what is best for America 
and the American consumer and whatis best for energy and 
national security. Then everybody wins.
    Mr. Loebsack. Thank you.
    And thank you, Mr. Chair.
    Mr. Whitfield. At this time I recognize the gentleman from 
Texas, Mr. Flores, for 5 minutes.
    Mr. Flores. Thank you. Had an equipment malfunction.
    Chairman Whitfield, thank you for holding today's hearing 
on this timely issue.
    Several major studies over the last year, including CBO, 
Brookings and Columbia University, all agree on a key issue: 
American consumers and households will benefit if we repeal the 
outdated ban on crude oil exports.
    Some have countered that, if we lift the ban, OPEC will 
simply respond by cutting production, stabilize the price in 
their favor. I think clearly that the most recent actions by 
OPEC rebut that assertion, and I don't think it is appropriate 
to try to reassert it at this point in time.
    Also, we have seen in recent months OPEC wants to keep 
market share by maintaining production even in a low-price 
environment, and they hope to undercut U.S. shale producers, 
thereby reducing the incentive to reinvest in a business.
    The Brookings Institution, along with respected economic 
consulting firm NERA, looked at different OPEC scenarios, cuts 
of production and maintaining current production levels.
    And here is what they concluded: ``The benefits of lifting 
the ban depend on the energy market conditions and how other 
oil suppliers, especially OPEC, respond.''
    And then they go on and say--the key phrase they said is, 
``What is most important is our finding that in all of these 
modeling scenarios there are positive gains for U.S. 
households.''
    And so the shale revolution in the United States has 
fundamentally altered the global energy picture, and I think we 
owe it to hard-working American families and the consumers to 
facilitate the continuing improvements that we are seeing in 
this market.
    Columbia University also reached a similar conclusion, 
stating, ``While in the past market observers have generally 
assumed OPEC will offset a large share of non-OPEC production 
to defend prices, current OPEC behavior in response to the U.S. 
Shale boom casts doubts on the cartel's ability or desire to 
offset non-OPEC supply.''
    Mr. Sheffield, like you, I went through five of these 
downturns. I had counted four, but you are right. I recounted 
after you said five. It is five.
    Mr. Kingston, my first question is for you. What is your 
view of OPEC's potential reaction if we were to lift the ban on 
crude exports?
    Mr. Kingston. Well, I think you said it in your answer.
    OPEC is certainly not going to change its policy now, which 
is to hold on to market share, just because the export ban is 
lifted, particularly, as I mentioned earlier, I don't think you 
can necessarily count on how much oil is going to go out the 
door.
    I think certainly, as Mr. Sheffield pointed out, you know, 
the light condensate doesn't have a great market in the U.S. So 
that would continue to flow. But that doesn't look like that 
needs a change. The Commerce Department has clarified that.
    So if you are talking about, you know, crude out of the 
gulf coast or whatever, how much would OPEC cut, it doesn't 
change really the global supply-and-demand balance.
    Mr. Flores. Thank you. And try to keep your answers short 
because I have several questions for each of you.
    Would you agree that opening new markets for U.S. Oil 
producers would be good for both the U.S. and our allies, 
regardless of what OPEC does? I think you answered that 
affirmatively. So yes.
    Mr. Kingston. Yes. I would agree with that.
    Mr. Flores. Mr. Burnett, given that the U.S. Shale 
revolution and OPEC's recent response to keep market share, on 
what basis can you assert unequivocally that OPEC will respond 
by cutting production if U.S. Crude oil can be bought and sold 
in the global marketplace?
    Dr. Burnett. Historically, Saudi Arabia and OPEC have cut 
production to maintain market prices.
    Mr. Flores. But they haven't this time.
    Let me move on to the next question.
    You make more products than just jet fuel. Right?
    Dr. Burnett. Yes.
    Mr. Flores. You refine the full distillation scheme. So do 
you export any jet fuel?
    Dr. Burnett. We do not export jet fuel.
    Mr. Flores. OK. Do you export any other refined products?
    Dr. Burnett. We occasionally export some diesel and some 
gasoline, but it is mostly swapped for jet fuel in other 
locations.
    Mr. Flores. Would it be appropriate to stop you from 
exporting those other refined products?
    Dr. Burnett. I am sorry?
    Mr. Flores. Would it be appropriate to stop you from 
exporting any of those other refined products?
    Dr. Burnett. Of course not.
    Mr. Flores. OK.
    Dr. Burnett. It is a free market. Products are in a free 
market.
    Mr. Flores. If we said that you could no longer sell those 
refined products and you were forced to sell them only in the 
U.S., what would happen to pump prices?
    Dr. Burnett. What would happen if refineries are not 
allowed to export gasoline or diesel is that you would start 
cutting back refineries and closing refineries.
    Mr. Flores. OK.
    Mr. Sheffield----
    Dr. Burnett. So, ultimately, the prices will go back up.
    Mr. Flores. That is perfect. That goes right to where I 
want you to go.
    Mr. Sheffield, if we keep the ban on crude oil and keep 
prices depressed, what does that do to reinvestment in the 
upstream industry?
    Mr. Sheffield. I think you will see the drop of 900 rigs go 
to a drop another 1,000 rigs. It will lead to significantly 
declining production, and this country will be importing 60 
percent, 70 percent, 80 percent of our oil from the Middle 
East.
    Mr. Flores. And so, Ms. Jaffe, if that happens, who gets 
hurt?
    Ms. Jaffe. All I can say, sir, is I am in the same 
direction as you. In either case, when you ban and try to do 
something to twist the market around, the consumer is the one 
that gets hurt.
    Mr. Flores. That is exactly where I am going.
    So does anybody disagree with me that, if you put--well, I 
am out of time--if you put artificial constraints on the market 
of any kind, whether it is upstream, downstream, midstream, or 
anywhere else, you hurt the American consumer and hard-working 
families who have been crushed under this economy for the last 
6 years?
    Thank you. I yield back.
    Mr. Whitfield. Gentleman yields back.
    At this time I recognize the gentleman from New York, Mr. 
Tonko, for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chair.
    I don't think there is any doubt that there are competing 
private interests at stake as we attempt to answer the question 
of whether or to what extent we should allow exports of 
domestically produced crude oil. The real question is whether 
it is in the national interest and the public interest, for 
that matter, to do so.
    Even with new drilling technologies, the United States has 
lower proven reserves and higher production costs than many 
other oil-producing countries and we still use a lot of 
petroleum products.
    Mr. Sieminski indicates in his testimony that--and I 
quote--``The implied 95 percent confidence interval for West 
Texas intermediate crude oil calculated for the current short-
term energy outlook ranges between $32 per barrel to $108 per 
barrel.''
    Now, there is no insult intended here for the Energy 
Information Agency. That doesn't seem very helpful. Basically, 
EIA is saying that, ``We have no idea what the price per barrel 
is going to be.''
    So, Dr. Burnett and Mr. Drevna, how do you or your member 
companies make investment decisions in the face of this price 
volatility? Does the price matter less than other factors? 
Perhaps is demand for specific refined products the controlling 
dynamic? Just how do you make those decisions?
    Mr. Drevna. Sir, you make them on what you think the demand 
is going to be. The refiners are somewhat different than our 
friends and colleagues in the upstream segment. We operate on 
demand. You know, if the price of crude is here or here or 
somewhere in the middle, it is going to depend on what the 
demand is and what we see that demand.
    As Mr. Sieminski will tell you, since a theory back in 
2007, when we connected two dots and drew the demand through 
the roof, that has collapsed over the years. So we have had to 
scramble. We have had to do some different things. So it all 
depends on what we call that spread.
    So we make decisions based on what we think the demand is 
going to be, what we think the regulations are--or what they 
are, and what we can do to adjust that spread to, A, provide 
the product, B, pay our employees, C, keep the equipment going, 
and, D, make a profit.
    Mr. Tonko. Thank you.
    Dr. Burnett.
    Dr. Burnett. Yes. What we do is we look at the 
fundamentals, supply-demand balance, to set what we expect the 
crude oil price to be over a longer term. Refinery investments 
are done over many years.
    So we have to try and take a forward position on what the 
crude oil price is going to be based on fundamentals and then, 
as Mr. Drevna said, look at the demand side of products and try 
to get an estimate of what those differentials or what we call 
cracks are and look at the economics of each project based on 
those assumptions.
    Mr. Tonko. Does the fact that we have an export ban 
increase or reduce the uncertainty that you will see a return 
on refinery investment?
    Dr. Burnett. I think what the industry needs is certainty 
on what the legislative outlook is going to be. The problem is 
uncertainty.
    Mr. Tonko. And Mr. Drevna?
    Mr. Drevna. Yes. I mean, we do, as most industries in this 
country do, a really good job of handling economic uncertainty. 
What we don't do a good job and can't do a good job is handling 
regulatory and legislative uncertainty because that just 
creates paralysis.
    Mr. Tonko. So some order of predictability as to what that 
operating climate is is important?
    Mr. Drevna. Absolutely. Because, as Dr. Burnett mentioned, 
these investments aren't made on a 2- or 3-year basis or on an 
election-cycle basis. They are made on a long-term basis.
    Mr. Tonko. And if a low oil price sends a signal to slow 
production of domestic oil, what is the problem with doing that 
from a national perspective? Anyone?
    Mr. Sheffield. We actually gave an exhibit to our testimony 
that we filed the last Friday by PIRA, and it shows a wide 
range of prices, from $40 up to about $100, and the effect of 
$10 swinges.
    And $10 swings is the difference between 2-million-barrel-
a-day loss in this country or a 2-million-barrel-a-day gain. So 
it is a great chart to look at that is filed in our testimony.
    Mr. Tonko. Does anyone else have a comment on any of that? 
Dr. Burnett?
    Dr. Burnett. Yes. I think that I need to go back and say 
that, if you lift the ban right now, the effect on the global 
supply and demand really is a zero-sum gain because you export 
more, but you will be importing more.
    So the issue is: Whenis the demand cycle going to pick up 
enough to support prices and enable domestic production to 
increase again?
    And so we are looking at--you have to look the world growth 
and GDP over the next few years to make that determination.
    Mr. Tonko. Thank you so much.
    I see my time is up. So I will yield back. Thank you, Mr. 
Chair.
    Mr. Olson [presiding]. Gentleman yields back.
    The Chair recognizes the gentleman from Ohio, Mr. Johnson, 
for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman. You caught me off 
guard there for a second. Let me move my chair.
    Well, thank you, gentlemen, for joining us today.
    Mr. Chairman, before I get started with my questions, I 
would like to ask that a letter from the Ohio Oil and Gas 
Association expressing their members' support for lifting the 
crude export ban be submitted for the record.
    Mr. Olson. Without objection, so submitted.
    [The information appears at the conclusion of the hearing.]
    Mr. Johnson. Gentlemen, as you know, I live in energy-rich 
eastern and southeastern Ohio. You have all heard of the 
Marcellus and the Utica shale. You can't turn a corner there 
without seeing the renaissance in energy production.
    As you know, we passed a bill here in the House dealing 
with streamlining and quickening the liquid natural gas export 
permitting process.
    I would like to hear from each of you. What are the most 
significant differences, both pro and con, domestic and 
geopolitical, to LNG exports versus crude exports?
    The folks back at home, where we have a wealth of that 
resource, both of them, would like to know. And we will just 
start down at the end.
    Sir, if you would like to take a first crack at it.
    Mr. Sieminski. Sure. Probably the most important thing in 
looking at the future prospects for LNG exports is what the 
price of oil is going to be because, internationally, the 
reason the U.S. can export LNG into the global markets is we 
had a big spread between the U.S. price of natural gas and the 
world price of natural gas because, in most places outside of 
the United States, natural gas prices are tied contractually to 
oil prices.
    So as oil prices came down or have come down, that is 
actually going to put some pressure on the idea of exporting 
LNG from the U.S. So it would make it less profitable to do 
that.
    Mr. Johnson. OK.
    Mr. Sheffield. Yes, Mr. Johnson. We both have ample 
supplies of natural gas. We have too much of it in this country 
now. We have a 150-, 200-year supply of natural gas, and we 
have got a long supply now, finding over 100 billion barrels of 
recoverable oil in several key fields, in addition to liquid-
rich plays in the Utica and the Marcellus, which is where 
people are focused.
    We need to lift the ban on oil. We need to be able to 
export it and expedite LNG so there is plenty. Europe needs it. 
The rest of the world--Japan, South Korea--they all need it.
    How can you ask Japan and South Korea not to take Iranian 
crude when we will not export them oil? Europe is taking 40 
percent of their needs from Russia oil. They need exports from 
the U.S. in addition to LNG.
    Mr. Johnson. OK. Thank you.
    Sir.
    Mr. Drevna. Congressman, it is interesting because, you 
know, when you look at the LNG, you know, we have an abundance. 
We have more than we need. And, you know, this body did the 
right thing in passing the legislation to export it.
    We are still in that ``maybe we are here, maybe we are 
there'' stage. Mr. Sheffield mentioned we have got a lot. But 
do we have a lot right now? And how long would that last?
    You have to look at the oil export. And, again, I am not 
saying we shouldn't export. I am saying just look at everything 
in total.
    The world supply, you know, is a big barrel and everybody 
takes what they want. The more we produce here, the less we 
have to export. That will have an impact on prices, just like 
the shale boom has already had an impact on global prices.
    Imagine what prices would be today--and I am not the, you 
know, fortune teller--but imagine what prices would be today if 
we hadn't had the entrepreneurs like Mr. Sheffield and his 
company to get this stuff to market. With all the stuff that is 
going on in the global market, we would still be 40, 50, 60 
percent. So we have had an impact on global prices.
    Mr. Johnson. OK.
    Mr. Drevna. One thing we are saying is let's do it the 
right way.
    Mr. Johnson. OK. Mr. Kingston.
    Mr. Kingston. Two things.
    One area where I see the big difference is that allowing 
crude exports would affect an international benchmark, Brent, 
to which we are tied, because our gasoline market is ultimately 
tied to Brent. It would work to probably push down the Brent 
price. Therefore, there is a benefit to us.
    In the case of LNG, you are not going to be pushing down--
you would be pushing down an international benchmark that 
doesn't affect us. As Mr. Sieminski noted, there are other 
prices out there. They would be affected. Our Henry Hub price 
would probably rise.
    But I think where it is a benefit to the U.S. is I get very 
concerned about the problem of stranded gas, where the U.S. 
just simply has so much gas that you start to see a rollback in 
production, you start to see wells shut in, you start to see 
workers go somewhere else. And you just need that safety valve 
to make sure that industry can keep running.
    Mr. Johnson. OK. Ms. Jaffe.
    Ms. Jaffe. So I agree with what Mr. Kingston said, but I 
would add the following thing. And I respect the other 
panelists who have made this point. We are really arguing about 
who gets the margin. Right?
    We are not really arguing about, if you put a lot of 
gasoline in the market, that eventually lowers the price that 
refiners in other locations can pay for crude oil and 
eventually brings the price down. So, either way, when you are 
having oil exit the United States in any form, it will 
eventually bring the price down.
    So we are arguing about who gets the margin. And what I 
would say to you--and, you know, it would take a careful 
study--is that, if a refinery operates at 88 percent of 
capacity or 85 percent of capacity, that doesn't affect how 
many people get employed there. If Mr. Sheffield lays off 100 
rigs, a lot of people lose their jobs.
    Mr. Johnson. Ms. Jaffe, I am sorry to cut you off, but I 
know I am out of time.
    Mr. Chairman, can Mr. Markell and Dr. Burnett respond to 
this? Can you indulge me?
    Mr. Olson. Without objection.
    Mr. Johnson. Mr. Markell.
    Mr. Markell. So the big difference is that, in crude oil, 
there is a lot of downstream processing and a lot of jobs. And, 
with all due respect, it is not just about the margins. It is 
about who gets the paycheck, how much overtime they get and, 
ultimately, how many people are employed.
    With LNG, there is minimal downstream processing, minimal 
downstream jobs. We are not importing it. And, from our point 
of view, we are looking for a price that is somewhere in the 
middle where we can keep the manufacturing competitiveness that 
we have. But certainly we have got a lot of stranded gas, and 
we need to find a way to build the pipelines to get it out.
    Mr. Johnson. Thanks, Mr. Markell.
    Dr. Burnett.
    Dr. Burnett. I think there are two major differences 
between crude and LNG. One is, as you heard, LNG is a real 
excess in the U.S. Crude oil is not. We are still importing 33 
percent.
    The other major difference is that LNG is sold into an 
absolutely free open market. Crude is still controlled by OPEC, 
whether you like it or not. They still can impact the price up 
or down. So there are two major differences.
    Mr. Johnson. OK. Thank you.
    Thank you, gentlemen.
    I yield back.
    Mr. Olson. The gentleman's time is expired.
    The Chair recognizes the gentleman from Oklahoma, Mr. 
Mullin, for 5 minutes.
    Mr. Mullin. Thank you, Mr. Chairman.
    And I would like to thank, you know, our panel that is in 
front of us today because this is a very important topic. It is 
something that probably we should have discussed a few years 
back. But for Congress' point of view, we are right on time.
    I want to talk to Mr. Burnett for just a second. I am kind 
of confused here why you would be so worried about our crude 
oil exports when, apparently, you are not too worried about 
exporting gas and diesel.
    When we are talking about you thinking the prices are going 
to go up, we haven't seen that happen while your company, I am 
assuming, as you said a while ago when Mr. Flores was talking 
to you, that you export oil and diesel. Don't you?
    Dr. Burnett. OK. The issue is that, if you lift the export 
ban, you are going to enable European refiners who are 
currently struggling to have a more sustained life and you----
    Mr. Mullin. So can your company not compete with them?
    Dr. Burnett. And the problem is that we cannot compete with 
them because they can buy their U.S. crude oil cheaper than I 
can in Trainer. They can then refine it and send it back to the 
Northeast cheaper than we can make it because of freight rates. 
So they can put us out of business.
    Mr. Mullin. Well, we are not hearing that from the other 
refineries. I mean, your other companies--there is other 
refineries that actually support this.
    So I am saying that your company can't compete with them?
    Dr. Burnett. The people that are supporting this are 
probably integrated oil companies. All of the independent 
merchant refiners like ours are part of the crude coalition, 
are against crude exports.
    Mr. Mullin. Are you not buying that same crude to be able 
to produce gasoline and diesel?
    Dr. Burnett. We are buying domestic crude----
    Mr. Mullin. Are you not bound to compete with those 
refineries at that time?
    Dr. Burnett. I am sorry?
    Mr. Mullin. I mean, are you not bound to compete with your 
oil and gas--I mean, your diesel and gasoline?
    Dr. Burnett. What you have heard, I think, repeatedly is 
that product prices on the Northeast are set by Brent price.
    Mr. Mullin. Sure.
    Dr. Burnett. And so the European refiners are selling 
gasoline and diesel at a Brent price, but they can export it to 
the Northeast lower than we can produce it because of freight 
rates.
    Mr. Mullin. Well, I guess I am just not quite wrapping my 
head around it just yet. Hopefully, I will because, to me, it 
is kind of contradicting yourself. And, I mean, I appreciate 
business. So the last thing I want to do is put any businesses 
out of business.
    But you have 400 jobs, and we have roughly 350,000 jobs, 
using a rough figure, that supports the idea of bringing that 
crude oil to you to begin with. And I think your company could 
possibly--I am not in the business--but could compete, maybe, 
without have to be--and just indulge me here for a second. And 
I don't mean to be frank, but it almost sounds a little bit 
selfish.
    Dr. Burnett. We want to compete on a level playing field. 
By lifting the export bans without dealing with other issues, 
it makes us uncompetitive.
    Mr. Mullin. Well, I obviously don't know your business as 
well as you do, but there is other refineries that are saying 
they can compete with it.
    Mr. Sheffield, can you enlighten me a little bit. You 
talked about storage capacity and the buildup, about the 
capacity running out. Can you expand on that.
    Mr. Sheffield. Yes. Cushing storage--I know Amy Jaffe said 
it is around 50 million barrels--is at an all-time high. There 
is recent pipelines installed by Enbridge called the Flanagan 
South, and that is bringing a lot of oil down from Canada.
    So at the same time our sweet crude from our shale plays, 
some in Oklahoma, the School play, and, also, the Mississippi 
Lime play, everything, Niobrara Play, the Bakken play, they are 
all moving toward Cushing before it gets to the gulf coast.
    So storage is at a high. I know the Plains All American 
CEO, Mr. Armstrong, stated that we have about 60 to 90 days of 
storage left at Cushing.
    Gulf coast, what we called PADD 3, it is filling up, too. 
It is over 210 million barrels, and it could be filled up 
shortly also over the next several weeks.
    So it is a big issue. It is what Turner Mason says: The 
wall is coming, and it is coming faster. And that is why we 
have wide crude prices today.
    Mr. Mullin. So if we were to lift exports, you would feel 
like there would be a little bit more stability in the markets, 
not necessarily being able to--I am switching gears with you 
and going from storage capacity to stabilizing the market with 
the big swing that we see right now in the prices. I mean, they 
will jump up $10 and they will go down $10.
    Do you think, if we were to be able to control our own 
destiny, by having the exports out, by being able to compete 
and have a competitor against OPEC, would we be able to see 
more stability coming to the market?
    Mr. Sheffield. Yes. Like I said, a $10 swing, we would put 
more rigs to work. I know 7,000 other independents would put 
more rigs to work. They would do it in Oklahoma.
    That would help stabilize U.S. production and actually 
increase it over the next several years. OPEC loves the fact 
that we have an export ban, I promise you. We are playing right 
into their strategy.
    Mr. Mullin. Thank you.
    My time is out. I appreciate your time.
    Thank you.
    Mr. Whitfield [presiding]. Thank you.
    At this time I recognize the gentleman from Kansas, Mr. 
Pompeo, for 5 minutes.
    Mr. Pompeo. Great. Thank you, Mr. Chairman.
    And thank you all for bearing with us today.
    Mr. Burnett, you said that you want the ban on crude oil 
exports, but not on condensate, not on other products you 
produce. Right?
    Dr. Burnett. No. That is not quite what I said.
    Mr. Pompeo. All right.
    Dr. Burnett. Crude oil.
    Mr. Pompeo. Crude oil. Right.
    Now, Delta sells airplane tickets. So should we put an 
export ban on not allowing foreigners to purchase airplane 
tickets?
    Because that would help consumers, too, because American 
consumers would have that empty seat out there. There would be 
less competition for the seat. Prices would be lower. Right? Be 
good.
    Dr. Burnett. We want an open playing field both in refining 
and in airlines.
    Mr. Pompeo. Right.
    What you really want is you want the things you sell to be 
available to be sold on the marketplace at the highest price 
you can get and the things that you purchase to be price-
controlled. That is what you are really advocating for here 
today.
    And I have heard lots of different comments. Mr. McNerney 
says $50 is pretty low for crude. Mr. Drevna, you said you are 
not a fortune teller. I have got reports from Goldman Sachs not 
24 months old that said crude is going to be at 200 bucks a 
barrel.
    Truth is we have no idea, none of us collectively, and we 
shouldn't worry about that. It shouldn't trouble us that we 
don't know.
    You know, Mr. Markell, you said we have got to keep the 
price in the middle. The middle of what? I mean, that is not a 
question. That is a rhetorical. I do have a question for you 
for you, though.
    Mr. Markell. LNG. Not crude.
    Mr. Pompeo. So where should we keep crude oil prices? High 
or low? You want middle for LNG. Where do you want crude oil 
prices?
    Mr. Markell. I don't have an opinion on where crude should 
be.
    Mr. Pompeo. Yes. None of us should have an opinion. This is 
the unstated joke from so much of what I have heard from the 
folks in----
    Mr. Markell. It is in the boost of our economy and low oil 
prices is----
    Mr. Pompeo. Yes. Maybe that is is right.
    Goldman now thinks oil might go to 20 bucks a barrel, by 
the way. These are smart people who are putting their own money 
at risk, which is very different than us. We are putting 
everyone else's money at risk.
    The person who has the best chance to get it right is them, 
and they are just wrong a lot. And that is OK. That doesn't 
trouble me. But we shouldn't put a set of policies in place 
that feign any knowledge on our part about what is really going 
to go on.
    Let's go the other way. Mr. Sheffield, your export product 
is price-controlled. We have an export ban. Right? That is a 
price control. Would you agree? Crude?
    Mr. Sheffield. Crude.
    Mr. Pompeo. Right? We can't export it. It is a ban. It is a 
price control.
    Your inputs--steel, labor, all kinds of chemicals that you 
use--are any of those price-controlled or are you subject to 
market forces? Do you have to compete globally to purchase your 
inputs?
    Mr. Sheffield. It is market forces. Then what is 
interesting by the comments about the--from the laborers is 
that we have added over 2 million jobs over the last several 
years with this shale boom, and a lot of that is in the steel 
industry, too.
    Mr. Pompeo. You bet.
    Union employees. Right?
    Mr. Sheffield. Yes.
    Mr. Pompeo. In the steel industry. Good union workers 
getting paid good salaries. Yes. No. I think that is right.
    Mr. Sheffield, you had a chart, and I want to make sure I 
understood it. You had a chart that I think disagreed with what 
Mr. Markell said. He said that this oil will be produced 
anyway. Right?
    The idea was, even if we leave the ban in place, you are 
going to go ahead and produce this crude. And your chart seems 
to suggest otherwise, and I am just trying to reconcile these 
two ideas.
    Mr. Sheffield. Yes. This is from a group, PIRA, out of New 
York. At roughly $50 a barrel, we will lose about 2, 2\1/2\ 
million barrels a day.
    And so what is going to happen? They are not going to get 
it from us. They are going to get it from Saudi Arabia, Iran if 
they can, or other countries in North Africa. They are going to 
import it again.
    Mr. Pompeo. I appreciate that.
    Mr. Drevna, you said in your testimony, if we were to move 
forward with lifting the export ban, that your organization 
would want to see other anti-free market policies addressed at 
the same time. You mentioned RFS. You talked a little bit about 
the Jones Act.
    I assume it is the case that, if we got to the Jones Act 
and we got to RFS, you would be thrilled to see the crude oil 
export ban lifted as well.
    Mr. Drevna. Congressman, as I said, we are basically free-
marketers. As a matter of fact, if I look up and down the 
panel, we are probably the most free-marketers sitting here 
because----
    Mr. Pompeo. You are not including up this direction here.
    Mr. Drevna. No. No. No. No. No. No.
    No. We want a free market and a level playing field for all 
U.S. industries.
    Mr. Pompeo. Thank you.
    Mr. Chairman, I yield back.
    Mr. Whitfield. The gentleman yields back.
    At this time I recognize the gentleman from Virginia, Mr. 
Griffith, for 5 minutes.
    Mr. Griffith. Thank you, Mr. Chairman. I appreciate that 
very much.
    In January, the Department of the Interior released a draft 
Offshore Leasing Plan covering 2017 to 2022, which proposed 
opening part of the Atlantic, including areas off the coast of 
Virginia, my home State.
    Although I represent the mountains and the coal territory 
and don't have the coast, I do obviously care about what 
happens in Virginia very much, and they would open that up for 
oil and gas leasing.
    Mr. Sieminski, I would have to ask: They have made it 50 
miles off the shore of the coast. DOD had some concerns there, 
and I am just curious.
    Does your organization have any idea of whether or not 
DODhas had problems in the Gulf of Mexico dealing with oil 
exploration or natural gas exploration?
    Mr. Sieminski. Well, I am from the Department of Energy.
    Mr. Griffith. I understand.
    Mr. Sieminski. The opening of those leases--I mean, I think 
that we are now seeing production rising in the Gulf of Mexico, 
and that is, you know, in the aftermath of the Macondo spill.
    I think the issues associated with offshore leasing tend to 
be environmentally oriented. There are some people that are 
concerned about the impacts on water and the environment and, 
generally, climate.
    Mr. Griffith. And, generally, we believe, if you open up 
the mid-Atlantic, you would agree--or the data indicates that 
there is an abundant energy source out there even though we 
don't have any recent data----
    Mr. Sieminski. Yes. From time to time EIA has looked at 
what the resource base is around the United States, and there 
is a possibility that there are both oil and gas resources in 
the mid-Atlantic.
    Mr. Griffith. And the last time any real research was done 
was back in, I believe, about 1980, and it takes about 10 years 
to go from start to finish and we are just now getting started. 
But we are 50 miles out, which it would be better, I think, if 
we were closer in. I find that interesting.
    And you all wouldn't have any way of knowing this, but I 
voted on my first resolution as a member of the Virginia 
legislature in 2004, requesting that we go down this road. And 
am I not correct that it takes about 10 years to go from start 
to finish and that, if we had started in 2004 when the 
legislature first----
    Mr. Sieminski. In the offshore area, that is very typical.
    Mr. Griffith. And so, if we had started then, we would 
already be seeing both tax revenues and jobs and all kinds of 
things in the eastern part of the State. Wouldn't that be 
accurate?
    Mr. Sieminski. I think the first thing that would happen is 
we would probably end up updating all of that geologic 
information with modern 3D seismic technology and that kind of 
thing.
    So the up-front part is actually spending money. Now, there 
are jobs associated with that. Whether the revenues come in 
depends on what you find and how quickly you can produce it.
    Mr. Griffith. There is a pretty good indication that we 
have got a fair amount of natural gas and at least a little bit 
of oil.
    Even based on the older technologies, that showed up; did 
it not?
    Mr. Sieminski. Yes. I mean, we know that there is oil and 
gas in eastern Canada and--and those trends tend to move right 
down the coast.
    Mr. Griffith. And the Canadians are already--they have 
already got their straw dipped into that pool, don't they?
    Mr. Sieminski. That is correct.
    Mr. Griffith. Yes. So one might argue that the Canadians 
are getting fuel out of that source and selling it back. It 
might actually be flowing up to Canada from----
    Mr. Sieminski. Well, it is a pretty long way from----
    Mr. Griffith. I agree. I agree.
    Mr. Sieminski. That would be a big straw.
    Mr. Griffith. I just want to see my folks getting some 
advantage out of all this.
    I will open this up for anybody who wants to take it. I 
think I already know the answer.
    But if the United States is getting more oil and more 
natural gas, what impact would that have on, say, Russia, Iran, 
ISIS, even China? Who wants to take that?
    Mr. Sieminski. Well, my microphone is turned on. I usually 
try to avoid answering questions.
    But let me comment that, when you listen to the panel here, 
Congressman Griffith, I think that more production on the 
market, regardless of its source, is going to tend to lower 
prices and benefit consumers.
    So, you know, that is true whether it is natural gas or oil 
or airline tickets. I mean, the more that you can put out 
there, the better off consumers are.
    Mr. Griffith. But when a country is basing a big part of 
its liquidity on energy and all of a sudden a new giant rises 
up or gets extra strength, that, in essence, would mean that at 
least for the Chinese, the Russians, and maybe even ISIS, that 
it will negatively impact their ability to do things that we 
might be opposed to. Would you not agree?
    Mr. Sieminski. That certainly--I mean, one of the factors 
that is out there--one of the--very quickly, on looking at the 
time, this question of why there is this wide range of views of 
oil prices, whether it is, you know, $20 or $30 or $100 and 
over, a lot of that has to do with not being able to pin down 
answers to many of these geopolitical questions.
    Is Venezuela going to have a problem in the near term 
producing their 2 million barrels a day of oil? What about 
Iraq? And because of ISIS, what about production outages in 
places like Libya?
    And then, on the downside, it is things like the economy in 
China and whether or not Libya's going to return to the market. 
And it is true. Nobody has the--it is not--EIA doesn't have the 
answers to that.
    Mr. Griffith. Nobody does.
    Mr. Sieminski. Nobody has the answers.
    Mr. Griffith. If I might, Mr. Chairman, indulge.
    But aren't we better off if the United States is 
controlling more of that by having more production? Because 
then, if the Venezuelans do something or if there is a problem 
somewhere else, at least our own internal economy is not 
negatively impacted as much.
    And aren't we in a much better position today than we were 
just 5 years ago? And, hopefully, we will be in an even better 
position 10 years from now.
    Mr. Sieminski. I suspect that everybody on this panel would 
agree with you.
    Mr. Griffith. And I would say to you that, when this first 
started, our new boom in energy, which we can continue to use, 
particularly if we open up the mid-Atlantic and keep looking 
for ways to do this--I used to feel that maybe my children 
wouldn't have the economy that we had.
    Now I believe, if we don't screw it up here in Washington, 
our children and our grandchildren and our great-grandchildren 
can live in the United States, where we are still the number 
one economic Nation in the world.
    With that, I yield back.
    Mr. Kingston. Can I just say one thing? I just want to 
separate one country that you mentioned.
    This is a benefit to China. I mean, you mentioned Russia, 
Iran, ISIS, this hurts. This helps China. Huge net importer.
    Mr. Griffith. OK.
    Mr. Whitfield. At this time I recognize the gentleman from 
Mississippi, Mr. Harper, for 5 minutes.
    Mr. Harper. Thank you, Mr. Chairman.
    And thanks to each of you for being here and taking time to 
discuss what is a very important issue.
    And, if I may, Mr. Drevna, I wanted to ask you a couple of 
questions in the time that I have, since Mr. Griffith used up 
most of my time.
    Mr. Griffith. I am sorry.
    Mr. Harper. Hey, you needed some more time. That is it.
    First of all, I want to say, you know, we appreciate each 
of you being present. But particularly, Mr. Drevna, I thank you 
that you are here to share AFPM's insight on this issue.
    I would like to focus my time on your testimony. In your 
written statement, you noted that your organization is not 
opposed to lifting the ban on crude exports, but you mentioned 
two public policies, two areas in particular, that should be 
considered during this debate.
    So I would like for you to elaborate a little bit more on 
the RFS and the Jones Act and how they are related in this 
debate on the crude oil export ban.
    Mr. Drevna. Thank you.
    And I only get 5 minutes to elaborate on the RFS. As the 
chairman can attest to, it is probably not enough time.
    But, in any event, if you are going to talk about a free 
and open market, if you are going to talk about consumer 
protection and consumer choice, if you are going to talk about 
getting the economy moving, the RFS, as I said in my written 
statement and my oral testimony, it is--in 7 short years, it 
has become an anachronism.
    All the assumptions that were made back in the day where 
theESA 2007 was passed, where EIA had gasoline demand going 
through the roof, and that has plummeted some 43 percent over 
those years, where we have a volumetric and not a percentage 
basis where we have, you know, 36 billion gallons, where the 
thought was, ``Well, we are going to eliminate or reduce 
foreign energy sources.''
    We are doing that because of companies like Mr. 
Sheffield's, not because we are producing ethanol. As a matter 
of fact, we are producing ethanol and we are exporting it and 
we are importing it. You know, what is the point?
    The environmental benefits have shown to be, if not nil, 
negligible--if not negligible, negative. So it is time to look 
at that because it is not a free market. Let the consumer 
decide. Do they want more ethanol or biodiesel in their gas 
tank or they don't?
    On the Jones Act--and, again, this is a--whose ox is going 
to be gored is what you have to decide if you lift the ban 
today without looking at the Jones Act. It will be a zero-sum 
gain. There will probably be some job gains on this side. There 
will be job losses on the other side. That is a fact.
    So at least know the facts before you make the decision, 
and that is all we are asking. Again, we are not opposed to it, 
but, you know, for energy security and national security, let's 
do it all. Let's have all the above and not what we have now 
with all of the above and none of the below--or very little of 
the below. So that is basically what we are trying to say, 
Congressman.
    Mr. Harper. Thank you very much. Out of mercy, I will yield 
back.
    Mr. Whitfield. The gentleman yields back. That concludes 
the questions.
    Once again, I want to thank the panel of witnesses. We do 
appreciate your insights. This is an interesting question, and 
certainly, with the changes taking place, we want to look at it 
thoroughly. So we may be calling you again very soon.
    We will keep the record open for 10 days. And that will 
adjourn today's hearing.
    And thank you all very much for your participation.
    [Whereupon, at 4:09 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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