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


 H.R. 702, LEGISLATION TO PROHIBIT RESTRICTIONS ON THE EXPORT OF CRUDE 
                                  OIL

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JULY 9, 2015

                               __________

                           Serial No. 114-64
                           
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


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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
                    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....................     5
    Prepared statement...........................................     6
Hon. Bobby L. Rush, a Representative in Congress from the State 
  of Illinois, opening statement.................................     7
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     8
    Prepared statement...........................................     8
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................     9

                               Witnesses

Petr Gandalovic, Ambassador to the United States, Czech Republic.    10
    Prepared statement...........................................    13
Commander Kirk Lippold, President, Lippold Strategies............    17
    Prepared statement...........................................    19
W. David Montgomery, Senior Vice President, NERA Economic 
  Consulting.....................................................    25
    Prepared statement...........................................    27
Mark Kreinbihl, Group President, The Gorman-Rupp Company.........    38
    Prepared statement...........................................    40

                           Submitted Material

H.R. 702.........................................................     2
Statement of the Energy Equipment and Infrastructure Alliance....    81
Statement of the Chamber of Commerce of the United States........    85
Statement of America's Natural Gas Alliance......................    87
Statement of Americans for Tax Reform............................    88
Statement of United States refineries............................    89

 
 H.R. 702, LEGISLATION TO PROHIBIT RESTRICTIONS ON THE EXPORT OF CRUDE 
                                  OIL

                              ----------                              


                         THURSDAY, JULY 9, 2015

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:02 a.m., in 
room 2123 of the 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, Long, Ellmers, Flores, Mullin, Hudson, Upton 
(ex officio), Rush, McNerney, Tonko, Engel, Green, Doyle, 
Castor, Sarbanes, Welch, Loebsack, and Pallone (ex officio).
    Also present: Representative Cramer.
    Staff present: Nick Abraham, Legislative Associate, Energy 
and Power; Will Batson, Legislative Clerk; Leighton Brown, 
Press Assistant; Allison Busbee, Policy Coordinator, Energy and 
Power; Tom Hassenboehler, Chief Counsel, Energy and Power; A. 
T. Johnston, Senior Policy Advisor; Brandon Mooney, 
Professional Staff Member, Energy and Power; Dan Schneider, 
Press Secretary; Christine Brennan, Democratic Press Secretary; 
Jeff Carroll, Democratic Staff Director; Michael Goo, Chief 
Counsel, Energy and Environment; Caitlin Haberman, Democratic 
Professional Staff Member; Rick Kessler, Democratic Senior 
Advisor and Staff Director, Energy and Environment; John 
Marshall, Democratic Policy Coordinator; and Alexander Ratner, 
Democratic Policy Analyst.
    Mr. Whitfield. I would like to call the hearing to order 
this morning, and today's hearing is on H.R. 702, Legislation 
to Prohibit Restrictions on the Export of Crude Oil.
    [H.R. 702 follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. We have one panel of witnesses this morning, 
and I will introduce each of you individually right before you 
give your opening statement. But we are very excited about this 
panel of witnesses because they have a great deal of expertise 
and can give us some insights into the positive and any 
negative impacts that might occur if we lift the restrictions 
on export of crude oil. And I would like to recognize myself 
for 5 minutes for an opening statement.
    I want to thank, first of all, Congressman Joe Barton of 
Texas, Chairman Emeritus of this committee, for introducing 
this bill. He has bipartisan support on this bill, and it 
certainly raises an issue that there is more and more 
discussion about it around the country and around the world.
    Americans believe in free trade, and our Nation has greatly 
benefited from policies that allow us to export our products 
around the world. Everyone from farmers to automakers enjoy the 
advantages of a global economic and customer base. However, oil 
does remain basically an exception to the rule. 1970s-era 
restrictions still prohibit most exports of American crude.
    But as we all know, the reasons for these restrictions are 
certainly different than they were in the '70s. Most 
significantly, we have gone from a Nation with dwindling 
petroleum output to the world's number one producer of liquid 
hydrocarbons. In fact, American production growth has been so 
robust that the domestic supply of oil is now outstripping 
demand. This is especially true for the lighter grades of crude 
not suitable for most domestic refiners but still very much in 
demand around the world. Allowing American companies to serve 
this global market would provide substantial economic as well 
as geopolitical benefits, and that is what H.R. 702 seeks to 
remedy.
    There has been tremendous job growth associated with 
increased oil and gas production over the last decade, and it 
should be noted that this includes many jobs far away from the 
Nation's oil fields, such as those manufacturing the equipment 
used by these energy companies. Unfortunately, we have seen the 
loss of thousands of direct and indirect oil jobs over the past 
year as supplies have exceeded demand and prices have dropped. 
New production is being cut back, not because of a shortage of 
places to drill but because of a shortage of customers.
    Lifting the export restrictions and allowing the market for 
American oil to extend beyond our own borders could create 
nearly a million additional jobs, according to an estimate from 
a lot of different groups. Put another way, these are jobs that 
would already exist today if the export ban was not in place.
    The pro-exports consensus is a broad one, including groups 
across the political spectrum, from the Brookings Institute to 
the Bipartisan Policy Center to the Heritage Foundation. It 
also includes numerous high-ranking Obama and Clinton 
Administration officials as well as many who served under both 
Bush Administrations.
    Of course, one of the concerns that we always hear about is 
we want to be sure to keep gasoline as affordable as possible, 
and would this have an impact on gasoline prices? I think most 
people would agree that this would certainly not cause gasoline 
prices to increase, but that is an area that when we get into 
questions, I am sure we will be asking some of our witnesses 
about. I might also say that the Energy Information 
Administration, Government Accountability Office, and the 
Congressional Budget Office predict that oil exports would 
actually help lower the prices at the pump, just one more 
benefit of oil exports.
    So we look forward to a great hearing this morning. Many 
members are open to the discussion, have not made any kind of 
decision about this, but as I have said in the beginning, there 
is more and more discussion about this issue around the 
country, and we do look forward to the testimony of our so-
called experts this morning.
    [The prepared statement of Mr. Whitfield follows:]

                Prepared statement of Hon. Ed Whitfield

    This morning, we will be discussing H.R. 702, a bipartisan 
bill introduced by Joe Barton that would lift the restrictions 
on the export of oil produced in the U.S.
    Americans believe in free trade, and we as a nation have 
greatly benefitted from policies that allow us to export our 
products around the world. Everyone from farmers to automakers 
enjoys the advantages of a global customer base. However, oil 
remains an exception to the rule. 1970s-era restrictions still 
prohibit most exports of American crude.
    But as we all know, the reasons for these restrictions are 
no longer true. Most significantly, we have gone from a nation 
with dwindling petroleum output to the world's number one 
producer of liquid hydrocarbons. In fact, American production 
growth has been so robust that the domestic supply of oil is 
now outstripping demand. This is especially true for the 
lighter grades of crude not suitable for most domestic refiners 
but very much in demand around the world. Allowing American 
companies to serve this global market would provide substantial 
economic as well as geopolitical benefits, and that is what 
H.R. 702 seeks to unleash.
    There has been tremendous job growth associated with 
increased oil and gas production over the last decade, and it 
should be noted that this includes many jobs far away from the 
nation's oil fields, such as those manufacturing the equipment 
used by energy companies. Unfortunately, we have seen the loss 
of thousands of direct and indirect oil jobs over the past year 
as supplies have exceeded demand and prices have dropped. New 
production is being cut back, not because of a shortage of 
places to drill, but because of a shortage of customers.
    Lifting the export restrictions and allowing the market for 
American oil to extend beyond our own borders could create 
nearly a million additional jobs, according to an estimate from 
IHS. Put another way, these are jobs that would already exist 
today if the export ban was not in place.
    The pro-exports consensus is a broad one, including groups 
across the political spectrum, from the Brookings Institution 
to the Bipartisan Policy Center to the Heritage Foundation. It 
also includes numerous high ranking Obama and Clinton 
Administration officials as well as many who served under both 
Bush Administrations.
    Of course, we are always concerned about keeping gasoline 
as affordable as possible, and some critics of oil exports have 
raised fears of price spikes. However, reports from the Energy 
Information Administration, Government Accountability Office, 
Congressional Budget Office and others predict that oil exports 
would help lower the price at the pump--just one more benefit 
of oil exports.
    The economic arguments alone make oil exports worth 
pursuing, but as with LNG exports the foreign policy benefits 
are also very important. Our allies around the world have made 
clear that they would rather get their oil from America than 
from unfriendly and unreliable suppliers. Every barrel of U.S. 
oil on the world market is one less barrel that can be sold by 
oil-rich states like Russia and OPEC members. And to the extent 
we would be supplanting their oil exports, we would also be 
supplanting their influence.
    Oil exports have the potential to be a jobs success story 
and a foreign policy success story, and H.R. 702 comes at a 
time when we can use a whole lot more of both.

    Mr. Whitfield. With that, I would like to recognize the 
gentleman from Illinois, Mr. Rush for a 5 minute opening 
statement.

 OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Rush. Thank you, Mr. Chairman, for holding this 
important hearing today on H.R. 702, Legislation to Prohibit 
Restrictions on the Export of Crude Oil which was introduced by 
my good friend and colleague, the Chairman Emeritus of this 
Full Committee, on the Full Committee, Mr. Joe Barton of Texas.
    Mr. Chairman, as we enter into the era of new American 
energy renaissance, I think that it is entirely appropriate for 
this subcommittee to revisit the Energy Policy and Conservation 
Act of 1975. This policy, which restricts the export on 
domestically produced crude oil, may in fact be outdated as 
conditions today have shifted dramatically from the 1970s when 
the bill was first enacted.
    While I come to this issue, Mr. Chairman, of crude oil 
exports with an open mind, I believe that there are a variety 
of ways that this issue could be structured. I look forward to 
engaging the witnesses on the questions of lifting the ban 
entirely as H.R. 702 would or with conditions to protect the 
American consumer against unforeseen consequences.
    Another option, Mr. Chairman, which we should consider is 
exporting crude oil regionally to targeted areas in order to 
maximize American diplomacy and leverage. In fact, Mr. 
Chairman, I am currently working on a bill that would remove 
limitations on the export of energy resources to Cuba. My bill 
would promote market access for the efficient exploration, 
production, storage, supply, and distribution of energy 
resources to our neighbor 30 miles off the coast of Florida. 
This would include the exportation of crude oil as well as 
American technology and technical assistance in developing 
Cuba's clean and renewable energy sectors.
    Mr. Chairman, I think it is very important to look at what 
the effect of displacing oil from our foreign competitors and 
opponents and whether it be Russia or Venezuela and replacing 
it with U.S. energy resources, what the effect might have on 
our overall national security and diplomatic objectives.
    So Mr. Chairman, I look forward to hearing from today's 
panel of witnesses on how lifting this ban might impact the 
American economy in terms of manufacturing, employment, 
gasoline prices, and imports. Mr. Chairman, in addition to 
examining the lasting impacts of lifting the ban, it is also 
important to look at the impacts to our national security and 
our overall global diplomacy objectives.
    So Mr. Chairman, as we move forward on the path to enacting 
an American energy strategy for the 21st century, it is vital 
that we examine policies that may have run their course in 
light of the new realities of our time. I think today's hearing 
is most timely and essential to examining some of these 
critical and important issues, and I look forward to engaging 
today's witnesses. With that, I yield back the balance of my 
time.
    Mr. Whitfield. Thank you, Mr. Rush. At this time I would 
like to recognize the Chairman of the Full Committee, Mr. Upton 
of Michigan, for 5 minutes.

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

    Mr. Upton. Thank you, Mr. Chairman. America's energy 
picture has changed dramatically, and this committee has been 
working hard to keep pace. Clearly times have changed since the 
1970s when the oil export ban was put into place. Few back then 
could have imagined a domestic oil glut that jeopardizes new 
drilling and the jobs that will go with it, but that is the 
situation that many experts say that we face today.
    The energy sector has been the Nation's most significant 
jobs creator over the past decade, but the recent drop in oil 
prices, as many as 100,000 energy industry jobs, in fact, have 
been lost.
    Proponents of the legislation that we are considering today 
argue that allowing American oil on the global market would 
boost production and bring back those lost jobs and, in fact, 
add quite a few more. And the demand for American oil is there, 
especially from our allies who want to reduce their dependence 
on a market dominated by unfriendly and unstable nations.
    As I stated in a previous hearing with Secretary Moniz, we 
need to get this policy right. Yes, we do. We need to be 
certain that any actions taken don't have unintended 
consequences that negate the benefits. The question of what to 
do with our incredible resource abundance is a great kind of 
problem to have, and I look forward to working with my 
colleagues on both sides of the aisle on that issue.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    America's energy picture has changed dramatically and this 
committee has been working hard to keep pace. Clearly times 
have changed since the 1970s when the oil export ban was put in 
place. Few back then could have imagined a domestic oil glut 
that jeopardizes new drilling and the jobs that go with it, but 
that is the situation many experts say we face today.
    The energy sector has been the nation's most significant 
jobs creator over the past decade, but with the recent drop in 
oil prices, as many as 100,000 energy industry jobs have been 
lost. Proponents of the legislation we are considering today 
argue that allowing American oil on the global market would 
boost production and bring back those lost jobs and add many 
new ones.
    And the demand for American oil is there, especially from 
our allies who want to reduce their dependence on a market 
dominated by unfriendly and unstable nations.
    As I stated in a previous hearing with Secretary Moniz, we 
need to get this policy right. We need to be certain that any 
actions taken don't have unintended consequences that negate 
the benefits.
    The question of what to do with our incredible resource 
abundance is a great kind of problem to have, and I look 
forward to working with my colleagues on this issue.

    Mr. Upton. And I would yield to other members wishing time. 
Mr. Barton, I yield time.
    Mr. Barton. Well, first of all, Mr. Chairman, thank you for 
yielding, and I want to thank Subcommittee Chairman Whitfield 
for hosting this hearing. I want to thank the Ranking Member 
Mr. Rush for the open mind that he expressed in his opening 
statement. This is an important issue for me obviously. The 
other subcommittee chairmen here, Mr. Pitts, and Mr. Shimkus, 
can testify that I don't show up on time to many hearings in 
the morning, but I am here for this one because it is a big 
deal.
    The issue that we are debating today is the last remnant of 
the Carter scarcity of energy policy of the 1970s. We have a 
former Assistant Secretary of Energy out in the audience, Mr. 
Jan Mares, who was in the Reagan Department of Energy in the 
early '80s, and when the Reagan administration came into 
office, you had in place an energy policy that said America was 
running out of energy. And we had restricted the use of natural 
gas. We had put price controls on natural gas. We had done all 
kinds of things because we thought America was out of energy 
and America could not compete in energy policies.
    Beginning with President Reagan and continuing through 
President Clinton and President Bush, we have repealed every 
bit of that policy except one thing that is this, the issue 
that America cannot export crude oil. We can export everything 
else in America, but we can't export crude oil. We can export 
refined products, but we can't export crude oil.
    We have had hearings on this in the Ag Committee, the 
Foreign Affairs Committee, the Small Business Committee, but 
until today, we have not held a hearing in the committee of 
jurisdiction which is our committee. I think if you listen to 
the witnesses, especially my good friend, Ambassador Gandalovic 
from the Czech Republic, you will see the absolute positivism 
of repealing this ban. America is number one in energy 
production. It is number one in oil production. If we can use 
our energy resources strategically, it will help us in that 
area, but it will also help us economically as Chairman Upton 
has just pointed out.
    So thank you, Mr. Chairman, Mr. Chairman, Mr. Rush, for 
agreeing to have this hearing and thank the witnesses.
    [The prepared statement of Mr. Barton follows:]

                 Prepared statement of Hon. Joe Barton

    Thank you Mr. Chairman----
    I am so pleased that this committee is having this hearing. 
Our friends on the House Foreign Affairs Committee held a 
hearing in April. Our friends on the House Small Business 
Committee held a hearing in June. Our friends on the House 
Agriculture Committee held a hearing just yesterday.
    Last year when I brought up this issue I was told to go out 
and educate my colleagues and garner support for my bill. Well, 
I've done that. And I will continue to do this until this bill 
is on the House floor.
    As of this morning, H.R. 702 had 77 cosponsors. But what is 
more interesting is that those cosponsors hail from 30 states. 
Because as folks look at the issue and read the supply chain 
study by IHS, they quickly realize that this is not an oil 
patch issue, it is an American issue.
    One point that I want to make is America is a trading 
county. We don't need to or should we get to zero imports 
before we export. Just yesterday, GAO testified that whether 
prices fall or stay the same, the lifting of the ban on crude 
oil exports will stimulate economic activity.
    This ban is the last remnant of Carter's scarcity policy 
from the 1970s. And it just makes no sense for us to even 
consider allowing Iran to export crude oil while not allowing 
ourselves the ability to. This bill is good policy for both 
economic and strategic reasons.
    At last count there were more than 16 major studies just 
since March of last year on why lifting the crude oil ban was 
in the best interest of America. This bill will create jobs, 
lower gas prices, and stabilize world energy markets.
    I've said it before and I'll say it again--momentum is on 
our side and the facts are on our side.

    Mr. Barton. And with that, I am willing to yield another 
minute to anybody on our side that wishes. Mr. Mullin of 
Oklahoma.
    Mr. Mullin. Thank you and I want to just reiterate what my 
friend from Texas was saying and also point out the fact that 
this is about bringing stability to a market. In Oklahoma 
alone, we have lost 20,000 jobs since January, and you know, an 
entrepreneur that is able to understand what the sacrifices 
means is with us today sitting over there in the corner, Harold 
Hamm, an individual that started with absolutely nothing and 
was able to achieve the successes because of barriers that were 
lifted and taken out of place. But today we are limiting 
entrepreneurs like him, and this is something that we need to 
have an open conversation about, and I thank the chairman for 
bringing this to our attention. I yield back.
    Mr. Whitfield. The gentleman's time has expired. At this 
time Mr. Pallone was going to make an opening statement, but I 
think he has been delayed. So is there anyone----
    Mr. Rush. Mr. Chairman, we want to reserve Mr. Pallone's 
time----
    Mr. Whitfield. OK. All right.
    Mr. Rush [continuing]. Until he arrives.
    Mr. Whitfield. OK. We will reserve Mr. Pallone's time when 
he arrives. He can give his opening statement. At this time I 
would like to introduce our witnesses and recognize each one of 
them for 5 minutes for their opening statement.
    Our first witness is Mr. Petr Gandalovic, who is the 
Ambassador to the United States for the Czech Republic. I am 
just going to introduce you individually before you give your 
opening statement. Mr. Ambassador, we are delighted you are 
with us this morning, and you are recognized for 5 minutes for 
an opening statement.

STATEMENTS OF PETR GANDALOVIC, AMBASSADOR TO THE UNITED STATES, 
  CZECH REPUBLIC; COMMANDER KIRK LIPPOLD, PRESIDENT, LIPPOLD 
 STRATEGIES; W. DAVID MONTGOMERY, SENIOR VICE PRESIDENT, NERA 
 ECONOMIC CONSULTING; AND MARK KREINBIHL, GROUP PRESIDENT, THE 
                      GORMAN-RUPP COMPANY

                  STATEMENT OF PETR GANDALOVIC

    Ambassador Gandalovic. Thank you Subcommittee Chairman 
Whitfield, Ranking Member Rush, and members of the 
subcommittee. I appreciate the opportunity to be here today to 
provide my perspective on the utmost importance of the 
strategic energy alliance between the United States and Europe 
as energy exports from democratic countries like the United 
States enhance the energy security of the Czech Republic and 
the European Union.
    Since 1989 when we reestablished our independence, we have 
always known that we cannot achieve true state sovereignty 
without having energy sovereignty. Bearing this in mind, one of 
the first steps of our revived independent diplomacy was to 
start negotiations with Germany on the building of a new 
transit oil pipeline that would connect us with the Western 
markets and diminish our previous 100 percent dependence on oil 
supplies from the East, namely Russia.
    This truly strategic decision was successfully materialized 
in the IKL. It means Ingolstadt Kralupy Litvinov pipeline, 
which has connected us via Germany with the Italian seaport of 
Trieste, at the Adriatic Coast. The existence of that oil 
pipeline has given us the opportunity to import oil from 
international markets.
    Nowadays, we import around one half of our oil consumption 
through this pipeline. It is interesting that most of this oil 
comes from Azerbaijan which flows via Georgia to the Turkish 
port of Ceyhan on the coast of Mediterranean Sea, then onto the 
port of Trieste in Italy and then through the Alps to Germany 
and finally via this IKL pipeline to the Czech Republic, or oil 
from Kazakhstan that follows a similar route.
    What is crucial for our energy security is that the 
capacity of this IKL pipeline is large enough that in case of 
emergency we can practically cover our oil needs from other 
than Russia territory and potentially also from the United 
States.
    Moreover, we have also done our homework in the area of 
natural gas. In the '90s, we signed a contract with Norway that 
diminished our 100 percent dependence on deliveries from the 
East. We also built the so-called Gazelle pipeline that has 
interconnected us, our gas transit network with the German one. 
Thanks to this interconnection, we have been significantly 
integrated with the German and European gas market, and as a 
result, we also buy natural gas on spot markets in Western 
Europe. This interconnection with Germany also provides us with 
an alternative supply route in case of extraordinary supply 
disruptions from the East.
    Apart from the diversification of transit routes, we have 
always given particular importance to diversification of energy 
sources. Therefore, our energy mix has been based on nuclear 
energy, coal, oil, gas, hydro, and renewables.
    I mentioned that energy security has always been a priority 
to the Czech Republic. Since 2004, we have been trying hard to 
emphasize the issue of energy security within the European 
Union in general. We made energy security one of the official 
priorities during our presidency in 2009. We led the 
negotiations during this gas crisis between Russia and Ukraine, 
finalized the Third EU energy package, which is the crucial 
component of the European energy legislation and organized the 
so-called Southern Corridor Summit.
    Energy security has always been on top of the so-called 
Visegrad Group, V4, so-called. It is the grouping of countries, 
Czech Republic, Hungary, Slovakia, and Poland, and it is one of 
the official priorities of its current Czech presidency. The V4 
group strives for energy sources diversification and, with its 
demand reaching 42 cubic meters of natural gas per year and 
almost 40 million tons of oil per year, accounts for an 
important European regional market.
    As I mentioned earlier, we always keep in mind that we have 
to do our homework. Thanks to this approach, I am glad to be 
able to say that the energy security of the Czech Republic has 
reached a very good level. It is important to stress that our 
energy security is based on the assumption that access to the 
global markets means access to oil and gas exported by 
countries that see energy as business and not as a political 
tool. Hence, I would like to reiterate the crucial statement: 
The larger the number of stable democracies among the world 
energy exporters, the more robust the energy security of the 
Czech Republic and the European Union will be. Moreover, U.S. 
energy exports would send a strong signal to the world 
community that democracies stick together.
    Mr. Chairman, Mr. Ranking Member, members, thank you for 
your attention.
    [The prepared statement of Mr. Gandalovic follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Whitfield. Mr. Ambassador, thanks for that opening 
statement. And our next witness is Commander Kirk Lippold who 
is retired from the U.S. Navy and is now President of Lippold 
Strategies, and we are delighted you are with us this morning. 
You are recognized for 5 minutes.

                   STATEMENT OF KIRK LIPPOLD

    Mr. Lippold. Thank you, Mr. Chairman. Mr. Chairman, Ranking 
Member Rush, my name is Commander Kirk Lippold. I appreciate 
the opportunity to testify before the subcommittee. While I may 
disagree with this bill, I would like to personally thank 
Representative Joe Barton for his dedicated support to our 
Armed Forces, specifically our veterans. Sir, you have made 
service to our Nation a source of pride for our citizens.
    In my 26-year career in the Navy, I was a surface warfare 
officer serving on five different ships, including guided 
missile cruisers and destroyers to protect U.S. national 
security interests across the globe. Foremost among those 
missions was to safeguard the sea lanes of communications, or 
SLOCs, that facilitate the global economy, including oil 
imports to the United States. I have experienced firsthand, 
particularly in my command of the USS Cole when it was attacked 
by Al Qaeda terrorists during a routine refueling stop, the 
devastating effects of reliance on imported oil when the men 
and women who serve our country are placed in harm's way.
    The U.S. Navy has a unique role in the world in cooperation 
with our allies to ensure the safe conduct of trade including 
in oil. Since the 1970s, we have had policies in place to 
encourage energy independence that include investment in energy 
research and efficiency, diversity of fuel inputs, and the 
strict regulation of oil exports. At its heart, the legislation 
being contemplated before this committee will have far-reaching 
national security implications. Before we drastically alter the 
law and these longstanding and successful policies, we should 
proceed with great caution to evaluate their real-world 
consequences.
    The United States is still import dependent despite 
significant gains in domestic energy production. While the 
United States has experienced an impressive boom in domestic 
crude oil production, a blunt fact persists: The United States 
remains overly dependent on those oil imports. We still import 
a staggering amount of oil. According to the U.S. Energy 
Information Administration, the U.S. imports in 2014 totaled 
more than 2.6 billion barrels or around 30 percent of supply.
    Another key point is that domestic consumption will outpace 
domestic production for the foreseeable future. There are 
significant national security benefits to decreasing our 
reliance on imported oil supplies. It keeps the nation focused 
and working toward achieving energy independence. It markedly 
decreases our reliance on unfriendly or dangerous regimes that 
do not share our interests or values. Lastly and most 
importantly, energy independence leaves the United States and 
its leaders with more workable options in achieving our foreign 
policy and national security objectives.
    History, as always, is instructive. The original purpose of 
the export regulations was to bolster national security by 
furthering energy independence. That purpose still holds true. 
Lifting export regulations may have the unintended consequence 
of undermining our national security goal of energy 
independence. Given the current strategic environment, 
precipitously lifting the regulation of exports would not 
confer equal strategic benefits. Advocates of lifting the 
export ban frequently point to Russia's aggressive invasion in 
Ukraine as a ready opportunity for the use of energy diplomacy. 
That notion makes little sense. As an initial matter, all 
credible economic studies on the subject project that the vast 
majority of U.S. crude oil purchased on world markets would 
make their way to Asia, not Europe. Indeed, the number one 
beneficiary of lifting the ban is likely to be China, a nation 
whose recent activities in the Pacific and South China Sea 
reflect more the actions of a rival hegemon for security 
dominance in the transpacific region than a responsible 
international partner.
    The United States does not need to export crude oil to 
influence international markets. With strict export regulations 
in place, other countries are better off because the United 
States is producing more of its own supply which increases the 
supply of crude outside the United States, thereby reducing 
prices and alleviating bottlenecks. With the export ban staying 
in place, the United States gets the dual national security 
benefits of ample supply and leverage on the international 
stage.
    Another key consideration is the need to maintain the 
strong domestic refining base that provides the United States 
with significant and under-appreciated national security 
benefits. Lifting the crude export ban would expose one of 
America's most important industries to the unpredictable 
vagaries of international markets and international politics. 
Military assets mobilize on petroleum products, like gasoline, 
diesel, and jet fuel. They do not run on crude. Maintaining and 
expanding our robust refining base directly improves the 
operational flexibility the United States requires for rapid 
mobilization necessary for modern force projection.
    While tempting, from the perspective of gaining a 
commercial foothold in a new market arena at this time, too 
many times in my career I have experienced the stark reality of 
our national leaders not thinking through the impact of changes 
in international and domestic policy. We cannot afford to wave 
off these potential consequences as inconsequential under the 
guise of market principles. The regulation of crude oil exports 
was put in place with the long-term objective of decreasing 
U.S. reliance on foreign sources of energy, specifically oil. 
The day may come when the United States is no longer overly 
dependent on oil imports and we may be in a position to change 
our export laws, but for the sake of national security, that 
day is not today.
    [The prepared statement of Mr. Lippold follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Whitfield. Thank you, Commander. And our next witness 
is Dr. David Montgomery who is Senior Vice President for NERA 
Economic Consulting Group, and thanks for being with us. You 
are recognized for 5 minutes.

                STATEMENT OF W. DAVID MONTGOMERY

    Mr. Montgomery. Thank you, Mr. Chairman and Ranking Member 
Rush. It is a privilege to appear before you today and I very 
much appreciate your invitation.
    I have retired as Senior Vice President of NERA Economic 
Consulting, though I continue to work with my team there and on 
other things that are interesting. I found that is a great 
benefit of retirement.
    What I would like to do in my 4 minutes and 40 seconds is 
give a quick overview of the major conclusions of my testimony 
and then just touch on a few elementary points in a little more 
detail.
    My conclusion, and I think the conclusion of every 
independent study that has tried to quantify the effects of 
crude oil export ban, is that restrictions on crude oil exports 
pose a cost on the economy in several forms. They cause us to 
lose domestic production of crude oil that we would otherwise 
be able to produce. They cause a loss in investment and 
corresponding economic growth. They have done so for the past 
several years and will continue to do so.
    Oil export restrictions actually lead to higher gasoline 
prices than we would have had in the recent past and going 
forward. And finally, it is my conclusion that restrictions on 
crude oil exports actually decrease our energy security, and I 
would amplify a bit on each of those points.
    How is it that production is reduced? The evidence that 
production is reduced by restrictions on crude oil exports is 
the differential that we see in the market between the price of 
the light tight oil that is what the boom in oil production in 
the United States has produced. The boom in oil production has 
come about because we have discovered ways, the oil industry 
discovered ways, to produce oil from tight formations that were 
not previously possible to produce. That oil is light oil 
because that is what the production technology is able to 
extract, and that is what is there. The light oil is coming 
from Texas, from Oklahoma, from New Mexico, from North Dakota, 
the major sources, huge amounts of that oil, growing rapidly 
over the last few years. The problem is the U.S. refining 
sector is set up to process heavy oil, and it can't simply swap 
one for the other. So since the oil can't be exported, it has 
been stuck in the United States and its price has been 
depressed.
    When we did our study at NERA 1 \1/2\ years or so ago, the 
price of oil produced in North Dakota where the famous Bakken 
field is was selling at about the same discount from 
international market crudes as it is today. That means that 
there is a disincentive for production, and we are losing 
production. That is what leads in large part to the negative 
effects on the economy which are taking the form of less 
investment, less growth in the oil and gas sector. And just let 
me remind you that over the past couple of years the oil and 
gas sector has been the primary source behind economic growth 
overall. It has been the major growing sector in the economy. 
So we would lose that stimulus.
    Let me turn then to the effect on consumers, gasoline 
prices. It only takes one sentence to raise the fear that 
gasoline prices will go up. It takes about four to explain why 
they will go down. But the key factor here is that it is net 
imports that matter. It is net imports that matter for the 
effect of the United States on world oil markets and mid-
imports that matter for national security. Net imports are 
basically the difference between how much crude oil we produce 
in the United States and how much oil we consume in the United 
States.
    Since it would take massive refinery investments to be able 
to use the light oil that we are now producing in the Bakken 
and other places in U.S. refineries, it is much more economic 
to export that oil than it is to expend all that money to 
refine the products domestically. But it makes absolutely no 
difference to our total call on oil markets because that is 
determined by how much hydrocarbon we are producing in liquid 
form and how much hydrocarbon we are consuming in liquid form. 
All the change in oil exports does is it allows us to avoid 
wasteful investments in refineries domestically, to use the oil 
here, to export that oil and actually increase the world's 
total oil supply. That is the important part. By removing the 
restrictions on crude oil exports, we will increase the world's 
oil supply. That will tend to drive down the price of oil on 
world markets of crude oil.
    Now, the price of refined products is based on the price of 
crude oil in the world market. U.S. refineries are already 
exposed. They export 4 million barrels per day of products. 
They see prices go up and down all the time. The price of 
gasoline in the United States is determined by that world 
market. If we soften the price of crude oil in the world 
market, we reduce gasoline prices in the United States.
    And the same thing is true of energy security. Even if we 
take Commander Lippold's definition of energy security--and I 
agree with everything else he said--we differ on the issue of 
whether it is imports to the United States or net imports that 
matter. I think it is far worse than what Commander Lippold 
described. The world oil market is one market. We can't just 
defend ships going to United States and ships coming from the 
United States. We are affected by the world oil price, and we 
will be forever because even EIA sees no prospect of oil 
independence in the United States. That means if there is a 
supply disruption anywhere, it is going to affect the United 
States. If there are military interventions, we are going to 
have to defend everybody's ships, not just ours.
    But if we increase our oil exports, one of the likely 
consequences is Persian Gulf countries will cut back their 
production, and that removes a major source of risk.
    I conclude my testimony at this point. Thank you.
    [The prepared statement of Mr. Montgomery follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Whitfield. Thank you, Dr. Montgomery. And our next 
witness is Mr. Mark Kreinbihl, who is the Group President of 
The Gorman-Rupp Company, and we appreciate your being with us. 
You are recognized for 5 minutes.

                  STATEMENT OF MARK KREINBIHL

    Mr. Kreinbihl. Thank you, Chairman Whitfield and committee 
members for this invitation to testify in support of lifting 
the ban on U.S. crude oil exports. Gorman-Rupp started in 1933 
by two entrepreneurs, J.C. Gorman and H.E. Rupp in Mansfield, 
Ohio. Currently Jeff Gorman is our CEO and third generation. We 
design, manufacture, and sell pumps in the many different 
markets. The oil and gas market uses our equipment in several 
different areas, primarily for water transfer and wastewater 
transfer, directly or indirectly related to the energy 
industry.
    In October of 2014, we started our planning process for our 
2015 forecast budget. 2014 was a good year, and the outlook for 
2015 was looking to be even better. We planned on a 12 \1/2\ 
percent increase in sales with a corresponding operating 
budget. I have provided in my testimony a chart that correlates 
the number of gas and oil rigs to our incoming orders. When the 
price of oil went down and the number of drilling rigs were 
reduced, our business was impacted. A distributor in Texas was 
planning a major expansion until drilling activity reduced. A 
Canadian distributor anticipated levels of business that ended 
up being cut back significantly.
    The combination of just these two distributors accounts for 
$4 million of cancelled orders on our books. The impact of our 
business has been a surplus of inventory and a reduction in 
workload. That has required the elimination of all but 
essential overtime. Thirteen temporary employees were 
terminated. These traditionally have been temp to full-time 
employees. We have implemented voluntary unpaid leave of 
absences. Wage increases were postponed due to business 
conditions. All hiring is scrutinized. There are 21 retirements 
of which only a portion will be replaced. Our full-time 
employees is 25 less than the end of last year. We have not 
hired summer help. Traditionally we hire college students bound 
for college of the Gorman-Rupp employees. Capital expenditures 
have been postponed on items that are not essential to the 
operation.
    I put my company example forward as typical of what is 
happening in tens of thousands of energy supply chain companies 
throughout the United States. While my numbers might not make 
the news, the aggregate of all similar stories throughout the 
country has a profound impact on American workers and the total 
U.S. jobs and growth picture. Lifting the ban will help turn 
this around.
    Here are several important reasons why. It would remove the 
competitive disadvantage and allow the United States to compete 
in the worldwide battle for energy market share. New production 
will drive substantial additional investment in products and 
services from crude oil supply chain, generating up to $63 
billion of supply chain economic output nationally. This 
investment would create up to 440,000 new supply chain jobs 
nationally by 2018.
    These export-dependent jobs and GDP growth would be widely 
spread throughout the American economy. They would exist in all 
50 states and throughout 60 different industry sectors. Of the 
national supply chain gains, 10 of the top 15 states gaining 
jobs are non-producing states. By GDP growth, 11 of the 15 
states are non-producing states.
    The Energy Equipment and Infrastructure Alliance, of which 
my company is a member, estimate there is at least 120,000 
supply chain businesses and 615,000 workers supporting American 
oil and natural gas production, 100,000 of which are small 
businesses.
    The U.S. energy sector has been a leader in developing new 
technologies for energy exploration and extraction. Taking 
advantage of those technological advances before competitors do 
would give the U.S. energy industry incentives to innovate and 
become even better at finding and extracting oil and natural 
gas in an efficient and safe manner. Lifting the oil ban on 
crude oil exports is a step that could yield almost immediate 
results at a time when the United States continues to see 
sluggish growth in the kind of good jobs the energy sector 
provides.
    Thank you again, Mr. Chairman, for inviting me to address 
your committee.
    [The prepared statement of Mr. Kreinbihl follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
    Mr. Whitfield. Well, thank you for your opening statement. 
And Mr. Pallone has arrived, and he is the ranking member of 
our Full Committee, and I would like to recognize him for 5 
minutes for his opening statement.
    Mr. Pallone. Thank you. Thank you, Chairman, for bearing 
with me. Today we have been working on the 21st Century Cures 
and bringing it to the floor on a bipartisan basis, so I 
appreciate the opportunity.
    I also wanted to thank Commander Lippold for your service 
to our country. As I have said before, it is not a bad idea to 
reconsider the merits of a policy enacted in the wake of the 
1973 oil embargo. The world is very different than it was 40 
years ago, and our energy picture is evolving rapidly. Domestic 
oil production has increased dramatically in recent years, and 
demand growth has slowed noticeably. The current relatively low 
price of oil and the increase in domestic production benefit us 
all. Low oil prices boost our GDP and decrease the amount 
Americans spend at the pump. However, there is no guarantee 
that these conditions will last. We still import much of our 
oil, and while oil prices might remain where they are, gasoline 
prices have already risen significantly since our March hearing 
on this issue.
    Many factors could change the future energy picture, 
including geopolitical instability and international domestic 
market forces. These are important issues to consider before 
shipping the oil we produce here to countries around the world. 
And that is why we need to better understand where exported oil 
will go, whether it be to Asia, Europe, or other locations. I 
welcome the Czech Ambassador, and I am interested to hear about 
what type of U.S. oil could benefit his country as he spoke.
    I believe that we need to answer a host of complicated 
questions before considering a wholesale dismantling of our 
Nation's ability to restrict oil exports as proposed in H.R. 
702. First, how would lifting the ban affect the price of crude 
oil and therefore the price of gasoline? I don't think there is 
a consensus on that point, though I think my constituents would 
all agree the prices at the pump are still far too high. 
Exports may help oil companies, but will they really benefit 
consumers?
    Second, how would such a change affect both our refinery 
capacity and associated jobs? How would exporting crude oil 
instead of finished petroleum products affect job growth in the 
years ahead? Some, like the steelworkers want to keep and grow 
those jobs in the United States. Exporting the oil could mean 
exporting those jobs and paying a higher price for gasoline.
    Third, if we are going to export crude oil, shouldn't the 
American people receive some direct benefit in the form of 
increased revenues? Shouldn't we consider a fee on exports to 
ensure all Americans benefit from the exploitation and 
exporting of the natural resources?
    And fourth, what are the environmental and climate impacts 
of lifting the export ban? Are we still going to put our 
beaches and oceans at risk just to add oil to the world market? 
Increasing crude exports means increasing impacts on climate 
change, public health and safety, property owners, and our 
water supplies. And we have to choose the cleanest and most 
sustainable path forward.
    Finally, Mr. Chairman, are we really ready to treat oil as 
just another commodity like peanuts or grain? Because if oil is 
no longer something to be restricted, then isn't it also time 
to remove the many subsidies we have given to oil over the 
years in the name of national security? I never thought those 
subsidies were good policy. But if oil is no different than 
peanuts, why should it enjoy special liability exemptions under 
Superfund and other statutes? Why should we subsidize oil 
production on federal lands?
    These are only some of the issues that I believe we have to 
address before completely doing away with the ban on exports. 
We shouldn't embrace short-term gains without understanding the 
long-term costs of our decisions because we can't afford to get 
it wrong.
    And to that end, maybe it would be wiser to explore some 
smaller intermediate steps first such as easing restrictions on 
crude exports to our neighbors in Mexico before abruptly 
eliminating all our national security protections for this 
critical energy source.
    And again, I want to thank you, Mr. Chairman, Mr. Barton, 
for sponsoring the bill and helping begin this discussion, and 
I do apologize for interrupting now the questions. But I know 
we are doing a lot now to get the votes for our 21st Century 
Cures bill, but I wanted to have the opportunity to speak on 
this. Thank you.
    Mr. Whitfield. Thank you, Mr. Pallone, and that concludes 
our opening statements. And once again, thank you, panel 
members, for coming and for your statements. At this time I 
would like to recognize myself for 5 minutes of questions, and 
then we will give other members of the committee that 
opportunity as well.
    Generally speaking, when we do consider the export of 
products from America, I mean, we have been quite successful, 
and it is quite difficult to understand how, as Mr. Barton 
said, we can export almost anything, but we can't export crude 
oil. And from my discussions with people about this issue, the 
two primary reasons that you hear about are, number one, oh, 
this is going to increase gasoline prices. And then the second 
reason that I have heard that some refiners have already made 
adjustments so that they can refine light, sweet oil that is 
coming primarily out of our domestic production now, and 
originally they were doing heavy crude and heavy, sour, and 
they have made these investments so they can do it. Now other 
refiners have not made that investment, and they are 
complaining that it would put them at a disadvantage.
    But Dr. Montgomery, you had indicated and I have heard 
others say this and I would see what Commander Lippold says 
about it, but gasoline prices are determined by the world 
market price. And if more oil is being produced into the world 
market, you would think that that would reduce gasoline prices, 
and that is what EIA has said and other groups. Do you agree 
with that, Dr. Montgomery?
    Mr. Montgomery. [Audio malfunction in hearing room.]
    Mr. Whitfield. OK. And Commander Lippold, do you have a 
comment on this?
    Mr. Lippold. Mr. Chairman, I am not an economist, so I 
couldn't really judge the prices. But what I can say is that 
obviously if you are introducing more oil onto the world 
market, that creates a cushion and a degree of stability from a 
national security perspective is obviously good because it 
gives the ability for nations to now take in the oil----
    Mr. Whitfield. Right.
    Mr. Lippold [continuing]. And produce it. But when you are 
looking at our country, it is the fact that we have still got 
that 30 percent and we are trying to export that concerns me.
    Mr. Whitfield. Yes. I mean, one of the arguments that you 
made, which I think is a little bit of a stretch myself, but 
you were saying that because if we put more oil into the 
market, the world market, you are saying that would be a 
disadvantage. Explain that to me once again.
    Mr. Lippold. Well, right now when you look at the oil that 
we are producing which is the light tight or light crude----
    Mr. Whitfield. Right.
    Mr. Lippold [continuing]. In discussion, the refineries 
right now say that they have the excess capacity to be able to 
produce that which creates the refined product which goes out 
onto the market and therefore, the more you have in the market, 
just common sense says it is going to bring that price down. By 
keeping it here at home, we are able to adjust and be able to 
react more because we are not as dependent on other nations. It 
also gives us the flexibility that if we need to export refined 
product around the world and we are exercising that capacity 
within our refineries, it gives us the capability to get that 
product where it needs to go for any kind of an emergency for 
any countries, whether it is in the Pacific rim, whether it is 
in Eastern Europe, because if you can deliver refined product 
right off the bat, that is what they are going to need to make 
their economies and militaries be able to protect their 
nations.
    Mr. Whitfield. Mr. Ambassador, all of us on this committee 
have had representatives from all over Europe talk about the 
importance of doing this for the benefit of their countries, 
and you are being here today to explain those benefits is 
particularly helpful.
    Right now, how much oil is the Czech Republic consuming a 
day? Do you know the answer to that question? In barrels. I 
think you all talk about it in tons, right?
    Ambassador Gandalovic. Our total consumption is 195,000 
barrels a day----
    Mr. Whitfield. One hundred ninety-five thousand barrels a 
day?
    Ambassador Gandalovic [continuing]. Which goes, as I said, 
about 50 percent from Russia and another 50 percent is combined 
from Azerbaijan, Kazakhstan, and other smaller suppliers.
    Mr. Whitfield. But in your discussions with other European 
leaders, on this issue I am assuming that the majority of them 
would support our efforts to lift this restriction on the 
export of crude oil.
    Ambassador Gandalovic. Well, of course, as ambassador of 
the Czech Republic, I cannot represent or speak on behalf of 
other countries, but just from the perspective of the Visegrad 
Group, as I said, is Hungary, Poland, Slovakia, and the Czech 
Republic, there are members of this grouping whose dependence 
on Russia is almost 100 percent.
    So in this respect, they would probably need to adjust 
their refineries and make some homework in interconnectors to 
be able to import other than Russian crude oil.
    Mr. Whitfield. Right.
    Ambassador Gandalovic. So then of course U.S. opportunity 
would be welcome I guess.
    Mr. Whitfield. OK. Well, my time is expired, so Mr. Rush, I 
will recognize you for 5 minutes.
    Mr. Rush. I want to thank you, Mr. Chairman, and I also 
want to again thank the witnesses. I have a question for 
Commander Lippold. Commander, in your testimony you say that 
security benefits to changing export regulations are unlikely 
to materialize in the near future. Do you see any benefits to 
national security and our diplomacy efforts if we were to 
export crude oil among other energy resources to our neighbor, 
Cuba? Could U.S. imports to Cuba displace Venezuelan or Russian 
imports? And if so, what implications might that have in the 
region for us politically and diplomatically?
    Mr. Lippold. So the question that I would look, or the 
answer that I would give to that is going to be if we are going 
to be exporting it to countries to try and displace, once again 
we are getting into the issue, we are beginning to parse out 
who we want that oil to go to, and from a national security 
perspective, I think most people here on the committee would 
agree that the number one people that we need to take care of 
first is going to be here in the United States. If we are 
dependent on oil, all we are doing is while we may be giving 
our oil to one person as one type, we are still going to be 
taking in more amounts of oil to make up for the total quantity 
that has to be consumed within the United States.
    So I don't see an immediate advantage in taking our oil and 
then saying, well, we will export it. We do already export 
through licenses a certain degree of that oil under the 
existing law to Canada, and we have just prevented it from 
going to other nations. But if we drop the thing wholesale and 
decide we are going to be able to export it to everyone, the 
ramifications in second- and third-order effects on national 
security and stability have not been thought through yet.
    Mr. Rush. Dr. Montgomery, I was just handed a study by the 
Chairman Emeritus of the Full Committee, and it is an IHS 
study. Are you familiar with that, IHS study that was released 
in March 2015?
    Mr. Montgomery. I am familiar with some IHS studies. You 
will have to describe this one a little bit more for me I am 
afraid.
    Mr. Rush. Well, let me just quote from it. It says in 
states with a diverse and mature set of supplier industries, 
the supply chain can account for half of the value added from 
lifting the export ban. Illinois, an oil-producing state with 
diverse supplier industries, would derive 58 percent and 54 
percent of the total GDP impacts from its supply chain. 
Illinois consistently stands to gain from lifting the ban in 
all supply chain sectors examined in the IHS study.
    Do you have any commentary on that which I have quoted?
    Mr. Montgomery. Yes. I think it is first missing the point 
that one of the primary benefits that comes from increasing 
crude oil production in the United States and oil exports is a 
reduction in gasoline prices which accrues to everyone in the 
U.S. economy. It is directly beneficial to consumers. It is 
money in their pockets, and it in turn provides additional 
income for them to spend locally in their own economies. So 
that is one point.
    The second point though is that this emphasis on value-
added I think is a misconception and is bad economics because 
it is mistaking costs for benefits. High value-added in the 
refining sector is actually means it takes more capital 
investment, more workers in order to produce the same amount of 
hydrocarbons or the same number of BTUs. And I actually think 
Mr. Kreinbihl used a great phrase which I am going to copy 
frequently. What we are really seeing here is a situation in 
which we can compete more effectively internationally as crude 
oil producers than as refiners because what we are looking at 
is the prospect for producing several hundred thousand barrels 
per day in addition to what we are producing today. Nothing is 
being taken away from U.S. refiners. It is true. They are 
already using all the light tight oil we produce today. The 
opportunity with removing the export ban is we can produce more 
crude oil which we can export which will help our balance of 
trade.
    Now some refiners say we want that oil for ourselves. But 
they have to make additional investments in order to use it, 
which means that it costs more to export a barrel of product 
than it does to export a barrel of crude. So the economy 
benefits more from exporting the crude because we don't have to 
make this wasteful investment in refining. We can invest in 
something else, improved agricultural productivity, for 
something we have a comparative advantage in.
    Mr. Rush. Thank you. I yield back, Mr. Chairman.
    Mr. Whitfield. At this time I recognize the gentleman from 
Texas, Mr. Barton, for 5 minutes.
    Mr. Barton. Thank you. I want to build on what Mr. Rush 
just asked Dr. Montgomery, but I am going to ask the question 
to Mr. Kreinbihl. I have studied that study that Congressman 
Rush referred to, and my understanding is that what it means 
for a state like Illinois, if you have a manufacturing base 
that supplies oil field equipment and supplies pipeline 
equipment and supplies electrical equipment. In other words, if 
you have a manufacturing base and distribution base, that even 
though you are not producing the oil, you benefit from it. That 
is the kind of company and business that you are in, is that 
not correct, Mr. Kreinbihl?
    Mr. Kreinbihl. That is correct, and I think as I have 
pointed out, I did provide a chart in my testimony showing the 
correlation between the number of drilling rigs and our 
incoming orders.
    As I tried to mention in my testimony before, what really 
happens for us is it is not just the oil and gas or the crude 
that is exported. It is all the ancillary things that happen. 
They need pumps to build the hotels and dewater the 
construction site for that. They need pumps for transferring 
just water to and from the sites. And I am speaking of pumps 
because that is my background. But I think you can take that 
and use it throughout the manufacturing industry. Everybody 
seems to benefit from an increase in the economy and the 
activity that the oil----
    Mr. Barton. So a state like Illinois, which again has some 
oil production but is centrally located, has a manufacturing 
base, those small businesses and some large businesses would 
benefit because they would send equipment to the Bakken in 
North Dakota, over into Pennsylvania, even down into Oklahoma 
because if the drilling rigs went back into production, their 
business would increase. Is that not a fair assessment of what 
that study indicates?
    Mr. Kreinbihl. That is very correct.
    Mr. Barton. OK. I want to go to Ambassador Gandalovic. 
Commander Lippold indicated that if we lift the ban, most of 
the oil production that we would export would go to Asia, and 
certainly Asia would be a good market. I would point out that 
under current law, oil that goes through the Trans-Alaska 
Pipeline can go to Asia right now.
    You represent a part of the world that we would say would 
be Central Europe or Eastern Europe, and you indicated that 
your country specifically and the countries around you that you 
have economic relationships with, would want to import some of 
this oil. So what is your assessment of what Commander Lippold 
said about the benefits primarily going to Asia as compared to 
your part of the world?
    Ambassador Gandalovic. Well, again, I just want to speak on 
behalf of the Czech Republic only, first, and second, I have to 
explain to you the structure, the ownership structure of the 
oil distribution and refinery sector in the Czech Republic.
    Simply said, the pipelines and storage capacities are owned 
by the state while refineries and of course distribution of 
product is private. So we don't have, as a state, any influence 
on whose oil these refineries are going to buy. As a state, we 
have actually put in place such a system that there is more 
opportunities from both ends, for these refineries. So it gives 
us energy security to certain level that even if there is a 
disruption of supply from one end, there is an alternative.
    So I cannot assure you that even if you pass this bill, 
there will be a direct purchase from our refineries, I mean 
from refineries that operate in the Czech Republic of the U.S. 
crude oil. I cannot assure and predict. I can predict that if 
there is an alternative coming from the United States as 
democratic state that doesn't use exports of natural resources 
as a political tool, the world itself will be a more safer 
place.
    Mr. Barton. My time has expired, Mr. Chairman. Thank you.
    Mr. Whitfield. At this time I recognize Mr. Pallone, the 
gentleman from New Jersey, for 5 minutes.
    Mr. Pallone. Thank you, Mr. Chairman. The initial purpose 
of the export regulation was to protect the United States from 
state-owned oil actors organized through OPEC, and the oil 
market was not and is not today truly a free market. Oil is a 
commodity unlike any other, and our Nation is 
disproportionately impacted by oil imports.
    Secretary Moniz recently expressed doubt about the wisdom 
and timing of lifting the crude export ban when we still import 
7 million barrels of crude oil per day. And some of those 
barrels come from Canada and Mexico, but others come from 
Venezuela, Saudi Arabia, and Iraq.
    So Commander Lippold, my questions are all for you. Is it 
in the best interest of the U.S. national security to continue 
relying on potentially volatile regions and nations for our oil 
consumption? And could lifting the export ban result in a 
decrease of lower priced domestic crude oil for refineries in 
the Northeast?
    Mr. Lippold. Not being an economist, I wouldn't know how it 
is exactly going to ripple through and affect the markets. But 
I can tell you from a national security perspective, the fact 
that we are still as dependent as we are on imported oil does 
have an effect on our ability to act independently on the world 
stage.
    Mr. Pallone. And could lifting the export ban result in 
further imports from the Middle East?
    Mr. Lippold. I don't know if we exactly know that. One of 
the problems is if we lift the export ban and we introduce 
crude onto the market, every study that is out there indicates 
that the vast majority of it will go to the highest bidder. Oil 
will always follow the path of greatest financial gain. Right 
now that is going to be to Asia, and that is going to have a 
ripple effect that goes through every part of our economy, 
including Gorman-Rupp. I mean the previous testimony. A few 
years ago, their president said that the Chinese were copying 
their pumps, building what they are doing, and yet we are going 
to be now providing them, if we export it, fuel that is going 
to be taking on those very industries that undermine our 
industrial base. That is not something we want to do.
    Mr. Pallone. I want to ask you something about refining 
capacity. We have heard suggestions that there is insufficient 
refining capacity for the light tight oils that are being 
produced today and that therefore we have a surplus of oil that 
must be exported. But do you believe that that is the case?
    Mr. Lippold. No, I do not. The refineries right now are 
indicating that they do have the excess capacity and capability 
to take the light tight oil and refine it for distribution.
    Mr. Pallone. So if refiners are incapable or unwilling to 
process this oil, then our discussion today would be different. 
However, in a recent survey of a majority of the American Fuel 
and Petrochemical Manufacturers Association's membership 
indicated that construction is already underway on additional 
refining capacity that will be able to process an additional 
720,000 barrels of new light sweet crude a day. The new 
capacity is on track to be operational in 2016 when this 
outpaces EIA's oil production forecast.
    So Commander, does this match your understanding of U.S. 
refiners' ability to handle or process our domestic light sweet 
crude?
    Mr. Lippold. It does, but I would also add onto that to say 
not only are they working to be able to take on more capacity 
by building onto the refineries that exist, but one of the key 
things we also have to do is look at the refining industry that 
goes also with the production industry as well and the amount 
of regulation that is imposed on them today and figure out how 
can that process be best streamlined so that we can in fact 
increase capacity on both sides to be able to make us toward 
that long-term goal of energy independence. Everyone talks 
about it, we aim toward it, and now we need to start putting 
some of the pieces in place because as the Czech Ambassador 
very well said, if you have energy sovereignty, you are going 
to have national sovereignty. We do not have that energy 
independence and sovereignty right now. We are still overly 
dependent on foreign oil from countries that clearly we have 
seen, especially over the last 15 years, do not represent our 
interests and values. The more we can disconnect from that, the 
better off our Nation will be in the long run.
    Mr. Pallone. Well, let me just ask you about the Czech 
Republic. I notice that the ambassador didn't clearly indicate 
that U.S. oil would displace Russian or European crude. If we 
lift the export ban, does U.S. oil flow to the Czech Republic 
and how would the Czech Republic benefit if at all?
    Mr. Lippold. I think one of the greatest problems that you 
would have is that they are geared to take certain amounts and 
types of oil and refine it. If you only have--given 195,000 
barrels a day, I don't know and perhaps the ambassador could 
enlighten and say this is how much it is able to process the 
Russian crude which is medium sour versus the light tight oil 
that the U.S. would be sending them.
    So again, one of the great capabilities that we have in our 
country is in our refining capacity in that we don't have to 
lift the export ban if we have a refined product available that 
if energy is used as a weapon somewhere in the world, we can 
turn around and export refined product to give them immediate, 
tangible benefit that is going to help us and give us 
flexibility.
    Mr. Pallone. All right. Thank you. Thank you, Mr. Chairman.
    Mr. Whitfield. Mr. Ambassador, do you want to respond to 
that?
    Ambassador Gandalovic. I just wish to say that it is a 
well-known fact that even in Europe there is an access capacity 
of refineries. So we talk of a broader picture that U.S. oil 
could be possibly refined in some other European refineries, 
not speaking of a rather small Czech market only.
    Mr. Whitfield. At this time I recognize the gentleman from 
Texas, Mr. Olson, for 5 minutes.
    Mr. Olson. I thank the chair. Welcome, Dr. Montgomery and 
Mr. Kreinbihl. Warm greetings to our NATO ally, Ambassador 
Gandalovic, and a special shipmate-to-shipmate welcome to 
Skipper Lippold.
    October 12th of 2000 at 11:18 in the morning, you took the 
biggest hit Al Qaida could muster. Their bombs killed 17 of 
your sailors and wounded 39 more. Your leadership kept the Cole 
afloat, and you brought her home. As we say in the Navy, Bravo 
Zulu, Skipper. Bravo Zulu.
    Now to the matter at hand, exports of American crude oil. 
This debate was started in 1975 by a law that is way out of 
touch with 2015. I believe that American free trade is the most 
powerful force for freedom in the whole world, and I do see 
value in ending 1975's ban. I know some refiners will feel some 
pain if we end the ban and stop distortions of the market 
caused by government mandates. But once we have moved through 
this debate, Mr. Chairman, I hope we can take a look at other 
distortions of the market caused by outdated government 
mandates like the broken ethanol mandate. These are not linked, 
exports and ethanol, but they have a common problem: DC in the 
market.
    Skipper Lippold and Dr. Montgomery, I have noticed that you 
all have very different opinions about crude exports causing 
more imports of foreign crude. You each have 1 minute to make 
your case. Skipper, you have the con.
    Mr. Lippold. Thank you, Congressman. I think when you look 
at the imports that we have today, when we are still importing 
30 percent of our oil and the fact that it is not controlled in 
an open, free market, there are entities out there, whether it 
is OPEC or other nations that are acting as cartels that are 
influencing that market and will continue to have an undue 
influence on them, they will directly affect our national 
security should they choose like they did in 1973 or '73, '74, 
following the Yom Kippur War, to squeeze the oil supply and 
force an embargo and put things on us.
    What we need to do is create the capacity and capability in 
this Nation using the oil that we have at hand to refine it 
here at home so that we don't remain dependent. One of the 
greatest concerns that I have right now is that being 30 
percent, that is like saying, hey, you have completed 8 steps 
of a 12-step program on your recovery from addiction to oil.
    Mr. Olson. Skipper, I have to take----
    Mr. Lippold. And now is not the time to go to the bar and 
celebrate.
    Mr. Olson [continuing]. The con back. I am sorry, sir, but 
you are relieved. Dr. Montgomery, you are up, sir. Your 
response?
    Mr. Montgomery. Yes. I think that the first thing to 
remember is that removing the restrictions on crude oil exports 
will lead to an increase in U.S. production of crude oil. It is 
that increased production that would be exported. It is not a 
question of production being constant and oil being taken away 
from U.S. refineries to be shipped overseas. Instead, the 
problem is that we are seeing a big price differential 
indicating that U.S. oil is backed up in those fields and not 
being produced. If it can be exported, that is a net addition 
to the world's oil supply, and it is a net subtraction from the 
total call that the United States is making on the world 
market. And it is those net imports that matter for everything, 
as I said before, but in particular for national security 
because by reducing our net call on world oil markets, we don't 
help Venezuela and----
    Mr. Olson. And Dr. Montgomery, I am sorry. I have run out 
of time. I ask that both of you submit for the record any 
documents or reports that justify your position.
    My final questions are for you, Ambassador Gandalovic. I 
doubt Mr. Putin would be very happy about America ending its 
ban on crude exports. How will his displeasure affect the Czech 
Republic?
    Ambassador Gandalovic. Congressman, with all due respect, I 
would rather not comment on other nations' leaders.
    Mr. Olson. Mr. Montgomery, do you care if the comment about 
Mr. Putin's impact and maybe OPEC's impact if we export crude?
    Mr. Montgomery. Yes. I think I should have included Russia 
in my litany of those who will not be helped by lower world oil 
prices. Russia is currently dependent on its hydrocarbon 
exports for foreign exchange and for keeping its economy going, 
and both allowing unlimited LNG exports from the United States 
as well as removing restrictions on crude oil would take away 
from his economic power.
    Mr. Olson. Thank you. Go Navy, beat Army.
    Mr. Whitfield. At this time I recognize the gentleman from 
California, Mr. McNerney for 5 minutes.
    Mr. McNerney. Thank you, Mr. Chairman. I thank Mr. Barton 
for bringing this issue up, and I thank the panelists for an 
interesting discussion this morning.
    It looks like there are about three issues that are 
involved here: the impact on domestic prices, the impact on 
national security, and the environmental impact. So the first 
two sort of go hand in hand. Dr. Montgomery, I believe you 
stated that it is all about imports, net imports and net 
exports so that if we export more crude than we import refined 
product, we are on the winning side of this thing. Is that what 
I understood you to say?
    Mr. Montgomery. No. Our increased exports of crude oil 
would not be offset by increased imports of refined products. 
Unless people start consuming more gasoline because the price 
of gasoline has dropped, there is going to be no change in our 
product consumption. So it would be a net so that--to a first 
approximate, back of the envelope, the amount of additional oil 
that we produce and export is a net change. It is not going to 
be balanced by increased import, by increased product.
    Mr. McNerney. Well, I didn't mean that we were going to 
import more. I meant that if we export more than we import, 
then we are on the winning side of this thing. That is what I 
understood you to say. But my problem with that is that if we 
depend more on imported refined product, then we have to secure 
our sea lanes which has a very high cost that the consumers 
aren't going to pay at the pump but they are going to pay 
through our National Defense Authorization. Would you agree 
with that, Commander?
    Mr. Lippold. I think that there is going to be a certain 
amount of some cost that is going into any safeguarding of the 
sea lanes of communication for the global economy. The issue is 
that if you begin to increase more coming to the United States, 
obviously that lifeline is going to become more important for 
us, and yes, we would have to develop more assets to put out 
there. And while there may be a cost, I am certainly not going 
to turn down any opportunity to have more ships built to do 
that.
    Mr. McNerney. Thank you. The environmental impact is also 
at surface here. I think the increased production has been very 
good for our economy, but my concern is that the technology 
that we need to keep production clean--by clean I mean carbon, 
greenhouse gas emissions from production, greenhouse gas 
emissions in transportation--that they are not there to keep up 
with the demand that would increase if we lifted the export 
ban. Did I make that clear? So I guess I am concerned about the 
environmental impact of increased emissions, increased 
groundwater contamination, especially in California, if we lift 
this ban, you know, precipitously. Would you agree with that, 
Dr. Montgomery?
    Mr. Montgomery. Not entirely. I mean, yes, the increased 
activity in producing oil will produce somewhat--well, the 
activity of producing oil itself is not going to increase 
greenhouse gas emissions. Let me stop there. It is only if that 
increased production of crude oil does in fact reduce gasoline 
prices.
    So first of all we have to all agree that allowing exports 
of crude oil would cause gasoline prices to fall. If we all 
agree on that, then yes, there would be some increase in 
consumption of gasoline in the United States. We actually 
calculated this in the study we----
    Mr. McNerney. I am not talking about consumption. I am 
talking about fugitive gas emissions in the production process, 
fugitive gas emissions in the transportation process.
    Mr. Montgomery. Those----
    Mr. McNerney. But I don't think our technology is there yet 
to make sure that that increased production in the United 
States and increased transportation in the United States and 
overseas is going to be carefully done. I just don't believe 
that we are there.
    Mr. Montgomery. I believe it is. I have been watching this 
industry for 40 years. There are occasional accidents----
    Mr. McNerney. Well, if that is the case, then why----
    Mr. Montgomery. They operate safely.
    Mr. McNerney. Let me regain my time. Why are they burning 
off so much gas in the production process?
    Mr. Montgomery. In the Bakken it is being burned off 
because they can't build the infrastructure fast enough----
    Mr. McNerney. Well, that is my point.
    Mr. Montgomery [continuing]. To move the gas out.
    Mr. McNerney. They don't have the infrastructure there 
yet----
    Mr. Montgomery. But that is not----
    Mr. McNerney [continuing]. To affect the production that is 
already being done. So if we increase production, then we are 
going to get more of that.
    Mr. Montgomery. We actually----
    Mr. McNerney. And I would like to fall back on what the 
Commander's observation was that the U.S. dependence on 30 
percent of imported oil, we really aren't in a position to 
precipitously lift the ban. I think we can do it in steps, and 
it would make sense to increase production in exports in steps 
but not precipitously. We are not there yet. I will yield back.
    Mr. Whitfield. The gentleman yields back. At this time I 
recognize the gentleman from Illinois, Mr. Shimkus, for 5 
minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. This is a great 
hearing, and I appreciate those who are here. The Ranking 
Member Mr. Pallone really said an interesting statement. At the 
time that--and he is still here so hopefully I get it right. 
The restriction, the current restriction was based upon our 
desire to protect our economy against state oil interest, 
state-owned oil interest. That is why we did it in the '70s. 
The international security debate today is now we need to 
export oil to protect our allies against state-owned oil 
interest.
    We are in a different era. We are in a different age. 
Commander, when you sailed the seven seas, I was on the West 
German border. My defensive position was across the border from 
a country that was called Czechoslovakia at that time. That 
country no longer exists. You have the Slovak Republic and the 
Czech Republic, and they are our allies. And I spent a lot of 
time in Eastern European issues. Just returned with the Speaker 
from Lithuania, Finland, Poland, and Ireland, and they want to 
free themselves from the grip of oil extortion by Russia.
    So the world has changed, and I also take issue with the 
flexibility debate that you have about why we shouldn't export 
because you have more flexibility to respond if you have more 
crude oil on the world market. Recovering crude oil is not 
something you can do overnight. It is a time-consumed process 
of investigation, drilling for discovery and then drilling for 
recovery, and it takes a long process.
    So right now the United States, we export refined product. 
Why do we export refined product? Does anyone know? Because we 
produce more than we consume. So Commander, you wouldn't ask 
the United States to not export refined product when we produce 
more than we consume, would you?
    Mr. Lippold. No.
    Mr. Shimkus. OK. And so the debate on our refining 
capacity, and we have it, too. I have got both sides on the 
aisle who are trying to make this argument. But the idea is we 
want more crude oil on the world market. Economics 101, supply 
and demand. You don't have to be an economist to understand 
that if demand remains the same and supply increases, the price 
goes down. The only political fear is there are some unplanned 
disruption in our refinery, a fire, that there is a price 
spike. Then everybody gets caught by that.
    So I only have 2 minutes left. I want to cover, one, 
Eastern European national security relies on expanded exports. 
Whether it is LNG or crude oil, they are begging the United 
States to be involved in this market for their own security. 
The second thing is the economic argument for pricing is sound. 
More crude oil on the market, demand remains the same, prices 
go down. And the third thing, Mr. Kreinbihl, you mentioned it, 
and it is true. Chairman Emeritus Barton and Mr. Rush were 
talking about jobs related, and we were talking about the State 
of Illinois. Well, Southern Illinois is exhibit number one. We 
are ready. We have marginal wells. We were prepared for using 
the new technology. Prices went down, and there is a halt in 
any activity of recovering from the Illinois Basin which is 
probably going to be one of the most productive basins in the 
country because now the pricing is just not there. So the local 
schools have lost revenue. The local counties have lost 
revenue. The job creators, the haulers, the steel mills have 
all lost the ability to create jobs because of a policy that 
was designed, and I will just end on this, a policy that was 
designed to protect us against state oil interests. Well, we 
don't have to fear state oil interests anymore. They have to 
fear us as we put our crude on the world market. So with that, 
Mr. Chairman, not many questions, but a statement of listening 
to the testimony. I yield back.
    Mr. Whitfield. Great opening statement there. This time I 
would like to recognize the gentleman from Texas, Mr. Green, 
for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman, and I would like to ask 
my full statement be placed in the record.
    Most of you know and maybe not the panel but I represent a 
district in East Houston that at any given time over the last 
20 years, I have had all five of our refineries in the Houston 
ship channel in our district. And I can tell you growing up 
there, this is the best time to be in the refining business in 
Texas that I have ever seen. And I know the issue is that most 
of those refineries were retooled in the '90s to handle our 
overseas crude, Venezuela, you name it, heavier crude because 
that is all we could get.
    But now we are seeing some of those refineries actually 
retooling to take our lighter sweet that we are getting. Now it 
is millions of dollars of investment. It was millions of 
dollars to turn those refineries around from lighter crude in 
the '90s to heavier crude, so it is going to be that. So our 
engineering companies are doing very well right now.
    But Mr. Montgomery, you mentioned massive refinery 
investment would be required in the United States. Do you know 
if that is occurring to handle the lighter sweet?
    Mr. Montgomery. Some is occurring, but not the amount it 
would--but my understanding when I look at studies that were 
done by Baker & O'Brien for EIA----
    Mr. Green. So there is some.
    Mr. Montgomery. But not----
    Mr. Green. I only have 5 minutes and I need to get to 
another panel.
    Mr. Montgomery. Got it. Got it. Yes, there is some taking 
place but not enough to use all of the light tight oil that 
could be produced if we knocked out the differential.
    Mr. Green. My response to that, not everybody switched over 
to heavier crude at the same time in the mid-'90s, either.
    Mr. Ambassador, when you talked about the refining capacity 
in the Czech Republic, and I know Europe has a lot of other 
refinery capabilities, but you said that to handle the lighter 
sweet from the United States that your refineries would also be 
retooled to handle that lighter sweet. Is that true for Europe 
in general or is it just for the Czech Republic?
    Ambassador Gandalovic. I think and I am not an expert in 
this field that taking about 50 percent of non-Russian crude 
oil, the capacity is there to handle the light sweet.
    Mr. Green. OK. Well, maybe I misunderstood earlier. You 
said that there would have to be investment to retool those 
refineries to handle the lighter sweet.
    Ambassador Gandalovic. Yes, there might be disruption of 
deliveries from the East. Further retooling might be necessary.
    Mr. Green. Well, again, as a policymaker in our country, I 
would much rather we have that investment in our refineries and 
even though I want to help Europe both with LNG, but right now 
we are doing very well sending low-sulfur diesel from Texas 
over to Europe. And those are the jobs that we have in my East 
Harris County. They are very high-paying jobs at those five 
refineries, and there are refineries in my area who are 
retooling to handle that lighter sweet to make sure we can do 
it because you can't move a ship very quickly, and you can't 
move a refining industry very quickly because of the high cost 
of the investment. But now we know there is enough lighter 
sweet coming out of the Eagle Ford in Texas and even in West 
Texas where we thought Midland-Odessa was dead for production. 
But now we are seeing just amazing production out of that, and 
I think you will see a lot of our refiners doing like they are 
doing in my own district along the coast of Texas. It is 
starting now, and we will see it. So if we start exporting it, 
we will lose some of that incentive to have these downstream 
jobs.
    I have a district where I have a lot of folks who produce 
oil, too. I represent a lot of service companies, and I want 
them to be working in the field. But I also want to see that we 
have that industrial capacity in our country, like the admiral 
said--or Commander. I am sorry. I promoted you. You should be 
an admiral. But I like your testimony. We need those downstream 
jobs to make sure we have that industrial capacity.
    My colleague from Pennsylvania has steel plants. We used to 
have them, but now we buy so much of our steel from everywhere 
else in the world. But I lost those jobs. I don't want to lose 
our refining capacity jobs. And again, I only have a few 
seconds. I support exporting LNG because we have a process for 
it. And granted, the Department of Energy, and this committee 
has looked at it, has been too slow in deciding their national 
interest. But I have talked to my colleague, Mr. Barton. If we 
want to create a system like where we don't price ourselves out 
of the market on exporting crude oil, like I would worry about 
chemical industry, we are not going to see that because we are 
going to make sure that exporting is in our national interest 
for LNG. And I think we could do the same thing for crude oil.
    But again, thank you, Mr. Chairman.
    Mr. Whitfield. At this time----
    Mr. Green. I could spend all day with the panel.
    Mr. Whitfield. Yes. At this time I recognize the gentleman 
from Pennsylvania, Mr. Pitts, for 5 minutes.
    Mr. Pitts. Thank you, Mr. Chairman. Mr. Ambassador, how has 
the use of energy, you know, by regional players, shaped the 
Czech energy policy and planning?
    Ambassador Gandalovic. How has the use of----
    Mr. Pitts. Energy diplomacy or energy as a political 
weapon. I don't know, however you want to categorize it. How 
has that shaped Czech energy policy and planning?
    Ambassador Gandalovic. Our main policy is diversification. 
So we do not want to rely on one energy resource 
technologically and geographically or I would say in terms of 
foreign supplies. It applies on our domestic energy policy is 
so as I mentioned before in my testimony, we wish to develop 
both nuclear as well as conventional energy sources. Also we 
put a lot of emphasis on renewables. But we do not exaggerate 
their importance. So mix and diversity is our policy.
    And the same thing applies on resources of energy that we 
do not have in our country, oil and gas. Speaking of gas, you 
may also have noticed that Visegrad Group countries, the four 
countries I mentioned, about 1 \1/2\ years ago turned a letter 
to Speaker Boehner to initiate relaxation of U.S. strict export 
policies on gas export. So the same logic that applies to gas 
exports, I believe would apply on our position and position of 
other Visegrad Group countries on the U.S. policy of limitation 
of crude oil exports.
    Mr. Pitts. Thank you. Commander Lippold, would you explain 
again your assertion that lifting the export ban would increase 
reliance on foreign imports? The Energy Information 
Administration, leading experts, academics in the energy field 
all seem to agree that removing the U.S. crude export ban would 
likely increase U.S. production an reduce imports. What is the 
basis of your assertion?
    Mr. Lippold. When you produce more oil and you put it on 
the world market, that oil is going to go wherever the highest 
bidder is going to take it. So we can't control where it is 
going to go, whether it is to Eastern Europe and our partner 
allies over there that may need it because of energy weapon--
being used as a weapon. For example, Russia. Every study that I 
have read says that the majority of that oil is going to go to 
the highest bidder. Right now that is going to be China. 
Obviously, that has huge national security implications. When I 
look at the oil that would be produced and the fact that we 
have it, necessity is going to be the motherhood of invention. 
We are going to be able, whether it is through fracking or 
other things--I have never said don't ever lift this ban. What 
I am saying is if you just immediately drop it, we have not 
thought through those national security effects.
    Right now one of the things that I worry about is that I 
think everyone on the committee would agree. We would like to 
have a national energy policy that is dovetailed and marries in 
with a national security strategy protected with a national 
military strategy. But when you look at if we were to just open 
it and do it, all we have are studies. There have been 
conflicting studies on what that effect would be. There have 
been conflicting studies on the price impact it would have. 
What it doesn't do is that when you are still 30 percent 
dependent on oil to begin to start exporting that oil overseas 
when we have not even solved our energy independence here at 
home, it doesn't make common sense.
    Mr. Pitts. Thank you. Dr. Montgomery, you discussed the 
cost and investments domestic refiners must make relative to 
costs associated with exporting crude. In short, can you tell 
us what would make the U.S. economy more efficient, refining 
more crude or allowing for exports?
    Mr. Montgomery. Unquestionably allowing for exports. 
Essentially what we are doing with the crude oil export 
restrictions is raising gasoline prices in order to subsidize a 
select group of refiners. In essence, the crude oil export 
restrictions are price controls. They are price controls on a 
particular kind of oil. The refiners I think can see that they 
are benefiting from that because otherwise they wouldn't have 
any reason to oppose lifting the export restrictions.
    So I think we will have some refinery investment which will 
take up some light tight oil, but it is still going to strand a 
great deal of oil that could otherwise be produced because 
without those price controls and without those subsidies, U.S. 
refiners can't compete selling all of the light tight oil in 
the world market without a subsidy.
    Mr. Pitts. Thank you. My time has expired.
    Mr. Whitfield. At this time I recognize the gentleman from 
Pennsylvania, Mr. Doyle, for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman, and thanks for holding 
this hearing. I find it very interesting and fascinating.
    You know, I have been in Congress 21 years, and I have 
heard colleagues on both sides of the aisle constantly talk 
about the goal of making our country energy independent so that 
we could free ourselves from having to import oil from the 
Middle East and Venezuela. And the reason we don't export oil 
is because we were importing so much. It seems kind of crazy, 
at least in Pittsburgh, that you would talk about exporting 
something that you are still importing.
    And I want to say another thing, too. There is no urgency 
to do this. I would like to put into the record an article that 
appeared in the Financial Times just 2 days ago entitled Oil 
Market Throws Cold Water on U.S. Export Ban Push.
    When we talk about letting the market work, this is very 
interesting. It says the oil market has thrown cold water on 
the push to repeal the ban. The price of U.S. crude has been 
remarkably strong against global grades, undermining the 
contention that export restrictions have imprisoned domestic 
supplies and forced producers to sell at deep discounts.
    Last week the spot price of light Louisiana sweet crude on 
the U.S. Gulf of Mexico Coast was $61 per barrel, more than the 
price of $59.09 for Dated Brent from the North Sea.
    The article concludes by saying, in an analyst from 
Citigroup, if the U.S. crude export ban is removed and light 
sweet crude starts to flow out of the U.S. Gulf Coast, it would 
struggle to find a home in the well-supplied European market. 
It would only add to the oversupply in the Atlantic Basin and 
could hurt Brent more than it helps WTI. It could well be an 
instance where U.S. upstream players should be careful for what 
they wish for.
    So Mr. Chairman, I think that we can slow this process 
down. There is no urgency to do this and start to consider some 
of the ramifications if we just simply open up, lift this ban 
which will never be put back in place again. I would say to my 
Pennsylvania colleagues, by the way, to be careful what this 
does to our refineries in Philadelphia because it damages them 
greatly, and a lot of that has to do a little bit with the 
Jones Act which I will get into later. But I think we ought to 
slow this process down.
    Why wouldn't we be talking about taking this excess light 
sweet crude and tooling up our refinery capacity to keep it 
here in the United States and eventually over time become the 
energy independent country that we keep telling our 
constituents we want to be? I mean, this doesn't make a lick of 
sense to me as policymakers who are supposed to be thinking 20, 
30, 40 years down the road for the next generation, not how can 
we make a quick buck on the disparity in oil prices. I mean, 
that is not our job. Our job is to look after the future of our 
country, not to look after how people need to make some more 
money in the oil industry.
    I have a couple questions. Did I go over my whole 5 minutes 
or has that clock been running? There is no way I spoke 8 
minutes and 50 seconds, Mr. Chairman so----
    Mr. Whitfield. I think you have spoken too long, Mr. Doyle.
    Mr. Doyle. I mean, were you just so enraptured with my 
speech that you forgot to put the clock on. I think the only--
--
    Mr. Whitfield. Let me just say, you were mesmerizing.
    Mr. Doyle. I think I only used a couple seconds. Let me ask 
the panelists. The Energy Information Administration reference 
case from 2014 projects that U.S. tight oil production, which 
is the type of oil largely responsible for this oil boom, is 
going to increase in the coming years and peak at about 4.8 
million barrels a day in 2021. This was up from 3.5 million 
barrels a day in 2013, and it has been a huge increase from 
where we were in the year 2000. However, except in the high 
resource case, production then begins to decline.
    Commander Lippold, are you concerned that this legislation 
essentially permanently lifts the ban, even though we may start 
to see a decrease in oil production as early as the 2020s?
    Mr. Lippold. Sir, that would clearly be one of the 
considerations that needs to be taken into place as the long-
term predictions on what our oil production capacity is going 
to be and the fact that if you lift this ban precipitously and 
take it off, that the ramifications that it would have exactly 
on the point you made--what is our national security impact 
going to be 20 to 30 years from now--needs to be thought 
through. That is why I say let's take a longer, slow down the 
approach, and take a look at either a phased-in or a more 
thought-out process.
    Mr. Doyle. Yes, I mean, do you think there is a more 
responsible way to allow for some of this oil to be exported? I 
mean, is there a different mechanism that we could do this for? 
And do you think we should just keep the ban in place?
    Mr. Lippold. I think one of the great things about our 
Nation is that we in fact have the capacity that we are 
developing this oil, that it is going to be out there, and that 
we are now going to have a greater degree of flexibility of 
aiming and working toward that energy independent country that 
we want to be. But I think that we shouldn't lift it 
immediately. Could it be lifted at some point, absolutely yes. 
Should we lift it at some point? Absolutely. Less regulation is 
better for the country as a whole.
    Mr. Doyle. Thank you. We saw changes to refineries in the 
1970s to process new types of oil, and I know that some of the 
refineries in my home State of Pennsylvania have made those 
structural changes to process the new oil we are benefiting 
from today. I have read that a large number of refineries will 
follow suit to benefit from the oil boom. I think many 
refineries are going to start to make these structural changes 
in the coming years.
    Commander Lippold, I am a strong supporter of Americans 
working and of organized labor, and I would like if you would 
comment on how the Jones Act plays in this? Because I have 
talked to my refineries up in Philadelphia in my State, and 
there is some concern that because of, you know, U.S. flag 
ships, the Jones Act, it may actually cost more money to take 
that light sweet crude up to our refineries in Pennsylvania 
than it would be to send them over to Europe. And that is going 
to cost a lot of high-paying union jobs that we sustain 
families on that we are very proud of in Western Pennsylvania. 
And I want to know the effect of that because I have got 
colleagues on this committee from Pennsylvania, two 
Pennsylvanians on the other side of the aisle, that I think 
want to hear what the effect this is to Pennsylvania 
refineries.
    Mr. Lippold. I have not studied, Congressman, the effect of 
what the Jones Act would have knowing that that oil be 
transported. I haven't run the analysis to find out what the 
economic costs would be to ship that oil overseas versus 
keeping it in the United States to a certain degree because if 
you look at it, if we were to start pushing, though, one of the 
things you have to consider if we do drop the Jones Act or we 
impact in some way or if we change the export, lift the export 
ban, is obviously it is going to have an impact on the American 
shipbuilding industry as well. That is one of those 
ramifications or ripple effects that we need to think through 
and----
    Mr. Doyle. Dr. Montgomery, how about your analysis of how 
the Jones Act plays in this?
    Mr. Montgomery. We did actually look at that, and on that I 
agree with you completely. If the Jones Act were even lifted 
for shipments of crude oil between U.S. ports, a great deal 
more of the oil that we could produce--a great deal more of the 
light tight oil would go to U.S. refineries in the Mid-Atlantic 
than it will with the Jones Act in place. So yes, the Jones Act 
is clearly hurting the refineries in Pennsylvania, and lifting 
the Jones Act, along with removing the export restrictions, 
would keep a lot more of that crude----
    Mr. Doyle. Well, let me make it clear. We have no intention 
of lifting the Jones Act in the United States Congress, just so 
that that is clear. That is not going to happen. But it is 
going to negatively impact our refineries in Pennsylvania.
    Mr. Chairman, I would just end by asking that we put this 
article from the Financial Times into the record and to say 
that the studies I have seen of the refineries in Europe is 
that they are actually designed to process medium sour oil, not 
light sweet crude. I don't think most of Europe is going to 
benefit from this at all. Thank you.
    Mr. Whitfield. We would like to get a copy of that, without 
objection.
    I might also say that the record is going to be open for 10 
days, and we are also working for an accumulation. There have 
been so many articles written on this issue, and we are going 
to enter all of those into the record because we want a full 
record. And our staff is working with some groups to compile 
that list of articles now. So thank you.
    Mr. Doyle. Thank you.
    Mr. Whitfield. At this time I would like to recognize the 
gentleman from Ohio, Mr. Latta, for 5 minutes.
    Mr. Latta. Well, thank you, Mr. Chairman, and thanks very 
much for the panel. It has been a very interesting discussion 
today, and we appreciate your patience for taking our questions 
and listening to us. But if I could start, Dr. Montgomery, with 
a couple of questions for you, I just want to just double-check 
some facts here. We were talking right now, fortunately the 
numbers are coming down, that we are at about 27 percent of our 
oil is being imported in this country. Is that correct?
    Mr. Montgomery. Yes.
    Mr. Latta. And I think if my quick check here is that that 
is back to the lowest number that we have done since 1965. And 
is it correct that we are using about 18.7, 18.9 million 
barrels of oil a day in the United States?
    Mr. Montgomery. It sounds like the right number, yes.
    Mr. Latta. OK. Well, we will assume that is correct.
    Mr. Montgomery. Yes.
    Mr. Latta. OK. And if you take that 27 percent of the oil 
that we are importing, you know--another quick number, is it 
correct hat Canada is our largest supplier of imported oil?
    Mr. Montgomery. Yes.
    Mr. Latta. OK. And then would Mexico, where would they 
fall? Are they close to second? Third? Somewhere in that?
    Mr. Montgomery. Mexico has trouble with production 
sometimes, but yes. And basically, Western Hemisphere sources 
aside from Venezuela are where we get most of our oil.
    Mr. Latta. OK. So we have been very fortunate in the last 
few years that we have weaned ourselves really off of the 
imported oil from maybe more from the Middle East. We are 
looking at the Canadian and Mexican oil being really pretty 
much our main area, probably over 50 percent then. We are close 
to it today. Would you calculate that number at that?
    Mr. Montgomery. Yes. Yes. We get only occasional shipments 
from the Middle East at this point.
    Mr. Latta. OK. Thank you very much. Mr. Kreinbihl, we are 
almost neighbors. I am from Wood County, and you are from down 
in Mansfield, Richland County. And in my district in Northwest 
Ohio, I have got 60,000 manufacturing jobs. And we have had a 
boom in the State of Ohio because of the Utica shale. Now, I 
don't think that Utica has quite made it into Richland County 
or they have found the discoveries there yet. But I know that 
there have been questions that came to you a little bit 
earlier. But could you go back into it a little bit because 
again, when you look at the jobs that are produced, especially 
the jobs in your industry, could you get into that a little bit 
more about what the Utica has meant in the production in the 
State of Ohio and also with the shale development over in 
Pennsylvania with the Marcellus, how that has helped your 
business?
    Mr. Kreinbihl. There has been quite a bit of activity in 
both of those, the Utica and the Marcellus. I guess what I 
would point out to answer that question is the chart that the 
Energy Equipment and Infrastructure Alliance provided, and it 
really shows the number of different manufacturers and 
suppliers that are involved in this industry. And being in 
Ohio, I have seen some of the growth. As a matter of fact, as I 
drove over here yesterday, I was in traffic with some of the 
equipment that was being moved through the State. So it has an 
effect that as there is more activity going on, whether it is 
pumps or something else, there is just a lot of activity all 
over from a manufacturing and supply standpoint. Does that 
answer your question?
    Mr. Latta. And because also, and off the top of my head I 
can't think of it, but like in unemployment numbers in the last 
several years, how is Richland County doing in the Mansfield 
area?
    Mr. Kreinbihl. Richland County, we have lost a General 
Motors plant here recently. So Richland County has been really 
suffering with unemployment. I will tell you that a college 
roommate of mine lives over in Caroline County or Caroline, 
Ohio, and there is a lot of activity over there and it was 
really booming until the price of oil went down.
    Mr. Latta. Well, thank you very much. Mr. Ambassador, if I 
could, in my remaining time, just ask a couple of quick 
questions. You know, some of us on the committee have been 
privileged to be able to meet with a lot of, especially Eastern 
and Central European, leaders, and the discussion you had about 
the diversification that your country is looking at, why do you 
think--and we have heard this and we have had certain members 
like Mr. Shimkus and some others bring this up. Why is it that 
Europe is looking to the United States for energy needs into 
their future?
    Ambassador Gandalovic. Well, as I said, the more resources 
of energy that are coming from stable democracies in this 
matter from the United States as an ally moreover, the better 
for us countries that are relying on supplies from the outside.
    Mr. Latta. Thank you very much. Mr. Chairman, my time has 
expired, and I yield back.
    Mr. Barton [presiding]. We thank the gentleman from Ohio. I 
now recognize the gentlelady from Florida for 5 minutes.
    Ms. Castor. Well, thank you, Mr. Chairman, and welcome to 
the witnesses. Thank you for your testimony today. My 
overriding concern is with the American consumer and with 
America's national security, and it doesn't make a lot of sense 
to me to export American crude oil to the People's Republic of 
China while increasing costs to American consumers and 
refiners.
    Commander Lippold, first of all thank you for your service 
to our country. You have a very distinguished record of 
service, and I heard you loud and clear that you pointed out 
that the United States still imports a staggering amount of 
oil, and you have urged us to be cautious, to consider the 
real-world consequences. You say, while tempting from the 
perspective of gaining a commercial foothold in a new market 
arena at this time, the national security implications of 
changing the existing policy, regulating the export of crude 
oil is rife with unknown and probably unintended consequences. 
That must be fully considered and addressed. Now, you have 
spent a lot of your career on international security concerns. 
Can you talk to us a little bit about what is happening in 
China, they are increasing cyber security attacks, whether 
state-sponsored or not, what is going on in the South China 
Sea, especially their reclamation of islands and lands to 
seemingly want greater control over the shipping channels. What 
is happening with China's military strategy?
    Mr. Lippold. What you are seeing in China today is a 
country who has taken their economic power and wealth and is 
beginning to expand it on a, first, regional basis to gain 
greater influence over the countries that are around there. 
China has always viewed the South China Sea as their lake. They 
view that as entirely their territory. They tend to ignore the 
territorial limits at 12 miles or the exclusive economic zone 
that goes out to 200 miles. They say that they can expand it if 
it is disputed. They are the big guy on the block, so they will 
do what they want. And that is what you are seeing with the 
building of the islands there today.
    While we have tried to engage with the Chinese, and I think 
we should continue to engage with them on a very positive basis 
where and when possible, clearly they have taken actions 
recently that are not in accordance with our interests or 
values, whether that has been in cyber warfare, how they are 
dealing with things regionally, how they have dealt with us 
economically, and obviously Gorman-Rupp has unfortunately been 
a beneficiary of their trademark violations and in stealing our 
equipment and knowhow, American knowhow.
    So on a variety of fronts we just need to engage with them 
positively where we can and punish them where we have to in 
order to make sure that they behave responsibly in the 
international community.
    Ms. Castor. I mean their international strategic plans have 
been quite interesting. I can't help but think back to when I 
traveled to Afghanistan, and all of the American money, the 
treasure, the lives that we poured into that country and then 
it was pointed out that it was China that was exploiting their 
minerals. The same is happening all across the globe, where the 
Chinese reach is just enormous, into Africa, into South 
America. And I don't know why the United States of America 
would be party to supplying China, the largest importer of 
petroleum across the globe, why we would help them gain that 
strategic foothold. I take your advice very seriously, and I 
think it should give this committee something to think about. 
Thank you, and I yield back the balance of my time.
    Mr. Barton. The gentlelady yields back. We now go to the 
gentleman from Mississippi, Mr. Harper.
    Mr. Harper. Thank you, Mr. Chairman. If I could start with 
Dr. Montgomery? Dr. Montgomery, there was a moment in 
questioning earlier ago that you were trying to answer about 
the flaring excess at production and the impact increases in 
production might have, and I don't think you got a chance to 
finish that. Did you care to comment on that further?
    Mr. Montgomery. I did. Thank you very much. What I wanted 
to say was that we looked at this and did some computations in 
the study that we did at NERA, and what we found is that using 
an oil export ban to try to limit field emissions or greenhouse 
gas emissions associated with fuel consumption is about the 
worst possible climate policy you could think of.
    The administration just announced that it thinks that a ton 
of CO2 does $36 worth of damage. Well, we calculated 
that the economic benefits of oil exports that you would lose 
through the ban amount to several hundred dollars per ton for 
every ton of CO2 emissions that you could avoid that 
way. There are so many other ways to reduce greenhouse gas 
emissions and to deal with the problems of appropriate 
regulation at the field that the oil export ban should be at 
the bottom of anybody's list as a tool for environmental 
policy.
    Mr. Harper. Let me ask you this. Are oil export 
restrictions one of the main reasons why West Texas 
Intermediate Crude trades about $5 less per barrel than its 
international competitor, Brent?
    Mr. Montgomery. For a time there was a problem with 
pipeline capacity for moving it. At this point, I think that is 
exactly the reason. The same thing is true of Bakken in North 
Dakota trading below Brent. It is because the only--and in 
fact, in the last couple of weeks, well, in the last day or two 
Bakken has actually popped up to being pretty much equivalent 
to Brent and what the news reports were saying was that priced 
U.S. refiners out of the market.
    So the fact is that, yes, it is the fact that it is not 
economical to be used in the United States that drives that 
price----
    Mr. Harper. In my home State of Mississippi, we have the 
Tuscaloosa Marine Shale that was really beginning to take off. 
The cost per well was going down, and then of course, the price 
drops out and production stops. And that has been an issue. But 
I have seen estimates that show that eliminating the discount 
that we just talked about would incentivize a significant 
amount of investment in the United States. IHS estimates 
perhaps as much as $750 billion over the next 10 to 15 years. 
What impact would that have on the U.S. economy broadly and who 
would benefit?
    Mr. Montgomery. That kind of investment is basically a 
driver for economic growth. The slow growth that we have had in 
the past few years has almost--we wouldn't have even have had 
that were it not for the investment that was going on in the 
oil and gas industry, and as Mr. Kreinbihl has described, that 
investment produced stimulates activity throughout the economy, 
not just people working on drilling in the oil fields. It 
provides us with lower cost energy, and it is a driver of 
economic growth.
    So that investment, as long as it is driven by the market 
and is not driven by government subsidies to refiners through 
effective price controls.
    Mr. Harper. Thank you.
    Mr. Montgomery. So all investment is not the same. The 
market-driven investment that we have seen because of a 
technological revolution in the oil and gas industry, that 
clearly drives the economy forward. Taking money out of 
consumers' pockets to subsidize a set of refiners doesn't.
    Mr. Harper. Thank you, Dr. Montgomery. Mr. Kreinbihl, if I 
could ask you a question? If the export ban were to be lifted, 
how would you change your business plan to adjust for the more 
positive outlook?
    Mr. Kreinbihl. We have our business plan already in place 
for--as I mentioned, last year when we looked at our business 
plan for this year and we have to look at, OK, if things 
increase a certain percentage or decrease a certain 
percentage----
    Mr. Harper. Sure.
    Mr. Kreinbihl [continuing]. What do we do? What it would 
mean for us is making sure that we hire the people that can 
create the product----
    Mr. Harper. Let me ask this because----
    Mr. Kreinbihl [continuing]. Supply the market----
    Mr. Harper [continuing]. My time is almost up. How quickly 
would you see that positive impact? How quickly?
    Mr. Kreinbihl. I don't know that I can comment on that. It 
depends on how quickly the oil rigs get back into when the 
demand increases.
    Mr. Harper. OK.
    Mr. Kreinbihl. There is quite a bit of supply now.
    Mr. Harper. My time has expired. I yield back.
    Mr. Barton. The gentleman's time has expired. We now 
recognize the distinguished gentleman from Iowa for 5 minutes.
    Mr. Loebsack. Thank you, Mr. Chairman. This has been a 
very, very wonderful hearing. I think we have all learned quite 
a bit, and I want to thank all the panelists. Although my 
colleague from Texas is no longer here, Mr. Olson, one thing we 
can agree on, and I have expressed this concern directly to 
General Dempsey when I was on the Armed Services Committee as a 
proud father of a stepson and daughter-in-law, both Naval 
Academy grads, although they are in the Marine Corps now, but 
go Navy nonetheless, Commander.
    Also, Ambassador Gandalovic, good to see you as always. For 
8 years I have proudly represented Cedar Rapids, Iowa. No 
longer, but they have a wonderful, of course as you know, the 
National Czech and Slovak Museum there. So thank you for being 
here today as well. I do want to start out with you, 
Ambassador. If you could, because I realize a lot of what is 
going on here, the proposal to lift the ban on crude oil 
exports is based on a concern for our national security, for 
the national security of the countries where hopefully the oil 
would be going. Whether it would or not is not a question. Can 
you talk a little bit about the national security interests at 
stake here for the Czech Republic when it comes to where you 
get your oil, where it might come from if this ban were to be 
lifted?
    Ambassador Gandalovic. Well, again, since the changes in 
1989, we saw energy delivery and energy sovereignty as a part 
of our national security, and this is why we put such an 
emphasis on diversification. And so in my whole testimony, it 
is of course representing a country that has done all possible 
measures to enlarge opportunities and diversify resources of 
energy. It is not my role here to tell you, the United States, 
what you do with your national security, but I am representing 
a country that is prepared to accept deliveries, even from the 
United States, as or when or if the ban is lifted, and it is 
actually convinced that those deliveries would benefit to our 
national security as it is coming from an ally.
    Mr. Loebsack. Thank you. And again, I feel for you as the 
ambassador. You are not a politician, yet you have been kind of 
put in the middle of this here today, and I thought you have 
done a very good job representing your country and serving as 
the ambassador and not a politician today. So thank you very 
much for what you have done today as far as your testimony is 
concerned.
    Look, we had another hearing on this issue a while back, 
not on this particular bill but on the issue of lifting the ban 
on export. And I stated at the time that my biggest concern, 
not unlike others up here today, is our national security, U.S. 
national security. Everyone here knows that prior to 1973 
America had essentially a drain America first oil policy. I 
think we can all acknowledge that, driven by the Seven Sisters, 
driven by domestic interests here in the United States and 
pursued by Congress and pursued by the various administrations 
up to that point. So I have a real concern myself about lifting 
this ban from that standpoint given that we still import 30 
percent of our oil, given all the other considerations. I 
understand the economic arguments. I get all that, markets are 
going to drive prices, all those things. But at the same time, 
I just think we have to be very careful that we don't do 
something in the short term which, while it may benefit certain 
actors in the United States, private industry, in particular in 
the oil industry, that we, not as my colleague from 
Pennsylvania expressed his concern on this same issue, that we 
look down the road, that we don't do something now in the short 
term that is going to have a very, very negative effect on our 
national security, on our economic security, on the security of 
the United States. That is why I do appreciate your testimony, 
Commander. And again, I appreciate the testimony of everybody 
here because you are all coming at this from different 
perspectives, and we have to take into account all those 
perspectives. There is no question about that.
    But I do have a question as to--and I stated this question 
when we had the previous hearing similar to this, is there any 
guarantee if we lift this ban that the oil is going to go where 
we might want it to go from our national interests perspective? 
And Mr. Chair, I see I am at the end of my time or near the end 
of my time, so if I don't get to an answer, I would like to 
request answers in writing from the panelists.
    Mr. Barton. Without objection.
    Mr. Loebsack. Commander? I am sorry.
    Mr. Barton. Without objection.
    Mr. Loebsack. OK. Thank you.
    Mr. Barton. Are you yielding back now?
    Mr. Loebsack. If you need me to I will.
    Mr. Barton. Well, your time has expired.
    Mr. Loebsack. OK. I yield back. Thank you, Mr. Chair. Thank 
you. Thank you for your help.
    Mr. Barton. I am a little rusty at this, see, but we are 
only supposed to get 5 minutes. The gentleman from West 
Virginia is recognized for 5 minutes.
    Mr. McKinley. Thank you, Mr. Chairman. And thank you for 
your patience, the panel. Almost 2 hours ago there was a remark 
that was made, and I have heard it over the last few years that 
if we are going to have exports, we ought to at least tax it or 
get some kind of fee on that export. And all I can say is, with 
all due respect to those that want to tax our exports, that 
will require a Constitutional amendment because there is a 
prohibition under Article 1, Section 9, paragraph 5 in the 
Constitution that says no tax or duty shall be laid on articles 
exported from any state. So I just want everyone to understand. 
As much as some people might want to take advantage, you just 
can't do that.
    So some of my questioning is looking for consistency. We 
seem to be here in Congress often picking winners and losers. I 
don't like that, and in this consistency we--I come from a coal 
state. We export a lot of coal, and now we are in the process--
and actually, if I can stay on coal just for a minute. With 
this increasing demand for coal around the world, we haven't 
seen a rise in the price of coal. Coal has been a very stable 
marketplace to have that product. So I reject some of that 
notion that if we export it, we are going to see a rise in 
price because I haven't seen that with coal. And now we have 
got the argument that seems to be moving on LNG, that we are 
finally, finally, going to start exporting our natural gas, 
both for diplomatic purposes and economically. What is the 
consistency here that if we say it is all right to export coal 
and natural gas but we have made--the government is going to 
get involved here and say we are not going to export oil, is 
that consistent? So Commander, I am just curious because you 
seem to be the designated contrarian for this panel. Do you 
support the export of coal?
    Mr. Lippold. I think you have to look at it in the total 
context of energy security and what we are capable of producing 
and what nations need around the world. Right now, we are still 
importing 30 percent of our oil, and until we reach that 
point----
    Mr. McKinley. Just on coal. Just on coal. Do you support 
the exporting of coal?
    Mr. Lippold. I will be honest, sir. I am not familiar with 
coal----
    Mr. McKinley. OK.
    Mr. Lippold [continuing]. And the industry.
    Mr. McKinley. We export----
    Mr. Lippold. So it would be----
    Mr. McKinley [continuing]. About----
    Mr. Lippold [continuing]. Inappropriate for me to comment.
    Mr. McKinley. We export about 15 percent of what we produce 
in coal because obviously this administration doesn't like us 
burning coal in America. So we have found we have got markets 
overseas to produce that.
    What about LNG? Is your view consistent that you would also 
pose exporting LNG?
    Mr. Lippold. Again, I have not gotten into LNG, although I 
will look at it and having studied it to a small degree, when 
you look at our ability to export and have an immediate impact 
especially on the Eastern European countries that are overly 
dependent on Russian gas, that is a critical national security 
issue that we are contributing positively toward and should 
continue to work for us, especially as we develop more fields 
and have that excess capability in our system where we are 
taking not only of our needs that are being met but now can 
give it to other nations as well.
    Mr. McKinley. I appreciate it. I know we have been running 
over here long so I yield back the balance of my time.
    Mr. Barton. The gentleman yields back. We now go to Mr. 
Tonko for 5 minutes.
    Mr. Tonko. Thank you, Mr. Chair. And I would like to see us 
become less dependent on oil, imported or domestic, but that 
has not yet been achieved. Until it is, I think we need to 
proceed cautiously. This is not just another commodity. It has 
one we have paid a high price for in blood, treasure, and other 
environmental and social costs.
    So Commander Lippold, I appreciate your testimony and your 
perspective on this important issue. As I understand it, 
Venezuela and Saudi Arabia have the largest proven reserves of 
oil, more than 250 billion barrels and that Saudi Arabia's oil 
has production costs that are lower than ours, among the lowest 
globally. And given that situation, it seems difficult to 
assess much about the overall direction for the price of oil 
without a sense of what the Saudis plan to do.
    I also imagine that since a number of countries rely on oil 
revenues to meet their obligations, they will continue to 
produce and sell into the market, even if that means they may 
be selling below their production costs. So I don't see how 
increasing exports of the U.S.-produced crude is going to have 
much impact on the global price of oil. And given that during 
that period, the period that our crude oil export ban has been 
in place, we have seen significant increases and decreases in 
prices at the pump. I doubt consumers will see a net benefit 
from lifting the export ban.
    I can see that this change could alter decisions about 
whether to continue investing in domestic refining capacity. I 
can see that it can alter decisions about whether to drill 
additional domestic wells, and I think it will also influence 
decisions about investments in oil pipeline or oil-transporting 
rail cars.
    So Commander Lippold, in his testimony, Dr. Montgomery 
refers to the prospect that the refiners would make additional 
investments to refine more light oil as economic waste. But 
those investments create domestic construction and related 
manufacturing jobs and maintain or create domestic jobs in the 
refining industry. My question to you is, is there strategic 
value in keeping a strong domestic refining industry?
    Mr. Lippold. Absolutely, yes.
    Mr. Tonko. And you indicated in your testimony that you 
believe lifting the export ban would lessen the trend to 
declining imports. Would you expand upon that a bit?
    Mr. Lippold. If you look at if we were to increase the 
capacity of the refiners here in the United States, while they 
have some excess capacity right now to take in the light tight 
oil that is being produced here in the United States, if we 
create the conditions and they expand that capacity going from 
the heavy sour to the light sweet, that is going to give us an 
ability to refine it here in the United States which is going 
to lessen the dependence on oil that we have to import in order 
to meet U.S. domestic needs.
    Mr. Tonko. Thank you. And if drilling slows down, we may 
reduce the immediate benefits to some in the oil sector, but it 
may give us a chance to catch up on other things we need to do 
to better adapt to the new production areas, for example in the 
areas of transportation and pipeline safety. The oil isn't 
going anywhere. If it is still in the ground, it is still 
available for our use. In a sense, it maintains another form of 
strategic reserves. Would you agree with that?
    Mr. Lippold. I would agree to that with a caveat and that 
is while it may be there, just as with any industry, you are 
now asking industries like Gorman-Rupp to be able to keep a 
capacity available so that if we decided we needed to exercise 
use of that strategic reserve that they could immediately tool 
up and be able to expand it. That is a consideration you have 
to look at is do we have the capability and capacity in the 
industrial base to maintain that in addition to keeping those 
strategic reserves in the ground. That has to be thought 
through, and again, this goes back to the point of my argument 
which is before we lift that ban, this is one of those second- 
and third-order effects that we need to look at is how do we 
maintain that industrial capacity that if we have to exercise 
use of that strategic reserve, can we and how quickly can we 
get our industrial base to tool up to be able to do that?
    Mr. Tonko. Yes. Well, lifting the export ban clearly would 
benefit the oil production sector by drilling and other 
ancillary services. It would maintain or expand growth in 
pipeline investments and rail investments. These sectors have 
done very well, and the boom has spurred tremendous growth. But 
it has come at a cost. My constituents, for example, are very 
alarmed at the rapid rise in the number of oil trains rolling 
through our region. They do not believe that investments in 
safer rail cars and contingency plans for dealing with 
accidents have kept pace with the increase in oil production. 
If now we are incurring these costs only to export the oil, 
support for expanded domestic production will be even less 
popular than it is already in non-oil producing areas of the 
country.
    And so I just share these concerns with the committee and 
here at this hearing because they are real and they are lived 
through each and every day. And with that, Mr. Chair, I yield 
back.
    Mr. Barton. The gentleman yields back. Mr. Cramer, who has 
been here the whole time, is not a member of the subcommittee. 
So he is going to have to wait until the two other members of 
the subcommittee ask their questions. We now go to Mr. 
Markwayne Mullin of Oklahoma.
    Mr. Mullin. Thank you, Chairman, and thank you for having 
this very important hearing. As I alluded to earlier, Oklahoma 
has lost 20,000 jobs since January. Obviously we are a rich 
state in our fossil fuels, and it is very important. It drives 
our economy. And to have this conversation to me, as a business 
owner, I am just sitting there scratching my head. And 
Commander, I hear what you are saying, and I understand your 
point of view. But strategically speaking, when we start 
talking about our allies, I mean, we are forcing South Korea 
right now who we are still heavily invested in to buy oil from 
countries that aren't exactly friendly to us right now. How is 
that possibly a good idea? How is it that if we can't at least, 
at least, export crude oil to our allies, don't we weaken their 
hand when we make them dependent on those that don't' exactly 
have our country's best interests in mind?
    Mr. Lippold. Well, if you are to use that as the bottom 
line, we would be in trouble in a number of areas in what we--
--
    Mr. Mullin. Well, it is not the bottom line, sir. It is 
where we are at. It is the point. I am not talking about 
everything. We are talking about export of oil, of a commodity 
that we have an abundance amount of right now and a commodity 
that honestly, we are running out of storage in the United 
States. We are at record-level storages, and we are holding 
onto it. We have plays that we haven't even started in. We 
without doubt could be the number one producer, not because of 
government intervention. In fact, they are choking us because 
of the entrepreneurial spirit. We have the ability to 
strengthen the hand of our allies and strengthen our 
relationship with our allies across the country for providing 
them a commodity that they are in desperate need of. We have 
got the Czech sitting right beside you. Is that not an 
opportunity to strengthen their hand by taking them off the 
dependent of an unstable and unreliable Russia right now?
    Mr. Lippold. I think one of the concerns goes back, sir, to 
the fact that, once again, if we don't look out for our 
interests first, while our allies may be important, at the end 
of the day, we are the ones that are still going to be 
vulnerable and dependent, and we have seen that with exactly 
the impact that has affected your state.
    When you look at a country, or not a country but a cartel, 
principally driven by Saudi Arabia that can influence the world 
oil market in the way they do by depressing prices, by putting 
more on there, not reducing their production quotas, and 
allowing that to happen, even if we put our oil on the market--
--
    Mr. Mullin. Commander, you are----
    Mr. Lippold [continuing]. They still have the capacity to 
lower that down and----
    Mr. Mullin. Well, Commander, you are making my point----
    Mr. Lippold [continuing]. Make those prices depressed.
    Mr. Mullin [continuing]. Because as a business owner, to 
stabilize the market, you put more players in it. Competition 
strengthens the sword of an entrepreneur. We allow them to 
control it because they are the only player on the market. We 
have reserves. We have the ability to go out there and not 
compete but beat. You are talking about our economy and our 
security of our Nation? Unemployment brings insecurity. 
Security is when we have a strong financial stability inside 
our country. We have lost 20,000 jobs and yet we have it 
underneath our feet, and we can't get it because we don't have 
a place to take it to. We are putting it in storage as I 
alluded to earlier. We put it in storage which we are running 
out of storage capacity.
    It is absolutely crazy to think that we limit the ability 
of entrepreneurs. That is the only thing driving our economy at 
the so-called recovery we are having. We are limiting their 
ability. We are not talking about the '70s anymore. We are not 
talking about running rogue on stuff that--depleting our oil. 
The technology has changed. The world has changed, and the 
world is in desperate need of another player in the world 
market so we are not held by the cartel of the Middle East.
    Right now our refineries, 30 percent of our refineries in 
the United States are owned by foreign entities, and they can 
bring their oil to us? They can buy our refineries? They can 
refine their oil? They have a place to bring it to and yet we 
limit ourselves. From a strategic point of view, sir, I find it 
very hard to buy into your argument when we are not able to 
shore up our own allies at this time, at this critical time. We 
have an opportunity to become a world leader. All we have to do 
is loosen the rope just a little.
    Thank you for being here, and I yield back.
    Mr. Barton. We thank the gentleman. I apologize to Mr. 
Johnson. I thought Mr. Mullin was here before. So I erroneously 
allowed him to go first. But we now recognize the distinguished 
gentleman from the great State of Ohio and a catcher on the 
Congressional Baseball Team.
    Mr. Johnson. Go Bucks, who got no playing time in this 
month's game by the way. We can talk about that next time.
    Mr. Barton. Obviously a managerial mistake.
    Mr. Johnson. Thank you, Mr. Chairman. I appreciate the 
time. I want to take just a minute to talk about the incredible 
journey these past few years have meant for the folks I 
represent in Eastern and Southeastern Ohio where the vast 
majority of the exploration and production of shale development 
have been occurring in the State.
    Thanks largely to the oil and gas industry, unemployment in 
shale counties has fallen some 66 percent since 2010. Counties 
in my district which have historically seen higher unemployment 
rates than both the State or the national average are now 
driving down the State's overall unemployment rate. But certain 
challenges are now coming into play, challenges that have 
recently caused about 1,000 rigs to be laid down across the 
United States resulting in an estimated 150,000 layoffs.
    That said, we have an opportunity to address these 
challenges, and I believe it starts by looking at our outdated 
energy policies, many of which were crafted when America's 
energy resources were considered scarce. That is why 
legislation like the LNG Permitting Certainty and Transparency 
Act that passed the House back in January which helps America 
harness our natural energy abundance by requiring DOE by law to 
act on pending LNG export applications in a timely fashion is 
so very much needed and important.
    This legislation would stop Washington from further 
delaying job creation at home and will help positively 
influence global politics abroad. And after much thought, I 
believe the current crude oil exports restrictions are also 
standing in the way of real economic and geopolitical benefits. 
As you all well know, GAO recently testified that removing 
these restrictions could increase domestic production to an 
additional 130,000 to 3.3 million barrels per day from 2015 to 
2025 while decreasing consumer fuel prices. Lifting the ban 
would also create American jobs, and like the LNG Permitting 
Certainty and Transparency Act, it would strengthen America's 
geopolitical hand globally.
    So while I understand that lifting these restrictions will 
cause some bumps in the road, it is hard to ignore the numbers 
contained in the GAO's report along with other recent reports, 
and I think if we go about this the right way, we can smooth 
out those bumps in the road so that everybody in America wins 
and we take our rightful place as the world's leader in energy 
exports.
    And so with that, Mr. Barton, even though you didn't play 
me in the game, I am going to forgive you for that. I would be 
happy to lend my name to H.R. 702----
    Mr. Barton. Well, thank you.
    Mr. Johnson [continuing]. To support your bill.
    Mr. Barton. We will have to rectify managerial mistake.
    Mr. Johnson. All right. We will work on that. We will work 
on that next year.
    Mr. Barton. All right.
    Mr. Johnson. I will be back. Now, onto a few questions. Mr. 
Kreinbihl, in your testimony--and I know you have got a 
business in Mansfield, right?
    Mr. Kreinbihl. Yes.
    Mr. Johnson. And you have got a friend who owns a business 
I think in Carroll County as well?
    Mr. Kreinbihl. Yes.
    Mr. Johnson. In your testimony, you touched on many of the 
harmful impacts that the export ban has had on your business 
such as laying off workers and wage stagnation. Do you know of 
other companies who have been similarly affected by the export 
ban, and what do they have to say about it?
    Mr. Kreinbihl. I think there are many suppliers in the 
industry that are affected by it. A lot of the suppliers to us 
are affected by how our business is and whether they are 
supplying us castings or any of the raw materials that we buy, 
it is affecting them also.
    Mr. Johnson. OK. Would you expect these negative impacts on 
your business to continue getting worse if the ban is not 
lifted?
    Mr. Kreinbihl. It seems like as the number of rig counts go 
down that our business is directly correlated to that, yes.
    Mr. Johnson. OK. Well, to the extent that you can, and I 
understand that it may be hard to quantify, can you give us 
some idea to what extent the export ban has hurt your business, 
your ability to expand and invest?
    Mr. Kreinbihl. I think if we lifted the ban we would create 
the marketplace for then the economy to pick up and generate 
business and the need for supplying that market with our 
equipment and equipment like ours.
    Mr. Johnson. OK. So basically, your sales would go up you 
think as the market expands I guess?
    Mr. Kreinbihl. Yes, and again, our sales are very much 
correlated to the number of rigs and the activity out there.
    Mr. Johnson. OK. All right. Well, thank you very much, 
gentlemen. And Mr. Chairman, I yield back.
    Mr. Barton. We thank the gentleman from Ohio. We are now 
going to turn to the gentleman from New York City, the Big 
Apple, the late-arriving but always welcome, Mr. Engel, 5 
minutes.
    Mr. Engel. Thank you very much, Mr. Chairman, and thank you 
for always being concerned with this important issue. So I want 
to thank the chairman, ranking member, for holding this 
important hearing on the current ban against crude oil exports.
    Let me first of all say the United States has more 
influence over global energy production today than we have had 
in generations, and that is a terrific thing. It is certainly 
vital that we pursue a smart and responsible course for energy 
production distribution. If we develop our energy resources 
while vigorously protecting the health and safety of all 
Americans, our Nation can realize enormous economic and energy 
security benefits.
    Mr. Barton knows, because he and I have discussed this, 
that I have been interested and continue to be interested in 
the geopolitical aspects of this, the fact--and our ambassador 
can attest to the fact that Europe is so dependent on Russian 
oil, and that if the United States were to lift a ban, it might 
make Russia less important. And I think that is a good thing, 
given the way they have acted in Ukraine and in Eastern Europe. 
And so I think that to help wean Europe off of Russian energy, 
this might be a good thing.
    So I am particularly interested in the global ramifications 
of lifting our crude oil ban and the impacts it would have on 
jobs and the economy in the United States.
    Now, since we held the hearing on this issue last December, 
I note that two unions, the Laborers International Union of 
North America and the International Union of Operating 
Engineers, split from the AFL-CIO position and now support 
lifting the crude oil import ban, export ban. Mr. Barton and I 
have had discussions about this.
    So we heard as testimony today that if we lift the ban on 
crude exports, then the vast majority of U.S. crude purchased 
on world market would make its way to Asia, not Europe. I also 
read a Wood Mackenzie report from March of this year that 
concludes the same thing. So let me ask you, Dr. Montgomery, do 
you agree with the conclusion that if we lift the ban, the vast 
majority of our crude oil exports would go to Asia? And if you 
do, does it matter?
    Mr. Montgomery. Yes and no. I am sorry, but yes. Asia is a 
large market, but it is not one we are particularly well set up 
to serve. I mean we would be moved if the refining is taking 
place in the Gulf Coast and Mid-Atlantic. That is a long way to 
get to Asian markets. So basically I think it is extremely hard 
to predict exactly where a physical barrel of oil is going to 
move mainly because it is irrelevant in thinking about the 
global market. Whether we load a ship in the United States and 
follow that ship around Cape Horn or the Cape of Good Hope or 
the Suez Canal to get it to Asia or whether that oil goes to 
Czechoslovakia freeing up some oil that Czechoslovakia might 
have purchased from Russia to move to Asia, it is all going to 
have exactly the same effect. It is not where the barrels go. 
It is how much there is in the total world market.
    Mr. Engel. So let me ask Commander Lippold. I think he will 
disagree, but let me hear your disagreement. Commander, do you 
agree with Dr. Montgomery?
    Mr. Lippold. There are certain----
    Mr. Barton. You have got to put your microphone--you have 
got to push the button.
    Mr. Lippold. Yes. Sorry, sir. I would say yes and no. While 
the oil goes in there and we can't trace where that barrel of 
oil would go, clearly you put more oil onto the world market, 
the highest bidder is going to get that oil, and transportation 
costs will be absorbed in that total thing. Right now the 
majority of that oil is predicted to go to Asia and studies 
indicate that.
    Mr. Engel. So let me ask about imports. Despite the recent 
increase in domestic crude oil production, the volume of oil of 
the U.S. imports is not drastically different from the time the 
ban was put into place in the 1970s. The U.S. Information 
Administration, according to them, imports in 2014 totaled more 
than 2.6 billion barrels or around 30 percent of supply. So 
testimony today, we have heard that lifting the crude oil 
export ban would result in a greater reliance on imports than 
would otherwise have taken place. So I would like to ask Dr. 
Montgomery and Commander Lippold, do you agree? Dr. Montgomery?
    Mr. Montgomery. No, I do not believe that--I mean, I do not 
believe that lifting the export ban would lead to an increase 
in imports. I look at net imports. The additional production 
that we would be exporting will be far larger than any 
conceivable increase that we might have in refined product 
imports.
    So on balance, we are going to reduce--our import position 
is going to improve if we export the crude oil.
    Mr. Engel. Commander?
    Mr. Lippold. I believe that if you are going to start 
exporting and you are still importing 30 percent, that fact 
isn't changing. It still affects our national security in a 
negative way because we are not achieving that goal of energy 
independence.
    Mr. Engel. Ambassador, may I ask you one quick question? Do 
you agree with my premise that if the United States exported 
more oil, it would help to wean Europe off of Russian energy?
    Ambassador Gandalovic. Congressman, I cannot assure you 
that in the Czech Republic refineries would start buying 
American crude oil once you possibly lift the ban, but the mere 
possibility that there is an alternative from the deliveries 
from the East would definitely strengthen our security and not 
only the Czech Republic but the entire Europe.
    Mr. Engel. I know other countries agree with you and the 
Czech Republic about these things. Mr. Barton, we will continue 
to have conversation. Thank you.
    Mr. Barton. We appreciate your testimony and your 
attendance. Last but not least, the longsuffering gentleman 
from North Dakota, Mr. Cramer, is recognized for 5 minutes.
    Mr. Cramer. Thank you, Mr. Chairman, and thank you for 
introducing the bill and thanks to all of you for your patience 
because you have been here and you haven't even left. And I 
have been able to go up and get out a couple of times.
    I want to hone in on this issue of the impact of a free 
market on everybody because we sort of pick where we want to 
pick and pick situations. I mean for one of the examples, 
Commander, you have referenced Asia a number of times. It might 
surprise people to know that in 2013 the United States exported 
nearly 50 million barrels of refined petroleum products to 
China. I don't find that offensive any more than I would find 
selling oil to China offensive.
    But my understanding of a free and open market and its 
impact on security in the world is you have used the word--
Commander, you have used the word energy independence many 
times in the context of national security. I frankly think that 
that is only half of the formula. I think energy security is 
different than energy independence.
    For example, and Mr. Mullin raised the point, I think we 
have established that we import roughly 27 percent of the oil 
that we refine in the United States. He raised the point that 
30 percent of our refining capacity is foreign owned, largely 
by the people that are exporting or we are importing the oil 
from. I don't see a lot of incentive for them to change their 
refining and retooling their refining to take our oil when the 
whole reason they own those refineries is to import their own 
oil.
    So we export a lot of things out on the Atlantic Ocean that 
we import back on the Pacific Ocean other than oil. We do that 
regularly in agriculture products. We have pasta plants in 
North Dakota that buy low-cost durum from Canada, and our 
farmers sell higher-priced durum to producers in Minnesota. I 
mean, that is how a free market works to the benefit of 
everybody, and I think we are missing some of that.
    I would be interested to know--perhaps Mr. Montgomery, you 
can start--this issue of the 30 percent ownership, foreign 
ownership of our refineries, whether you find it offensive or 
not offensive. That is relevant, is it not, in the context of 
this discussion of energy security and energy independence?
    Mr. Montgomery. To me the importance of that is that those 
foreign owners are actually benefitting economically from 
having access to the U.S. market and are richer than they would 
be, and I think that if our enemies are poorer, that is better 
for the United States.
    But those assets are still in the United States. The fact 
that they might be owned by LUKOIL or by Venezuela doesn't make 
them not available to us should there be a national emergency 
or should we--if we went to war with Venezuela. It wouldn't 
change the operation of their refineries if we had to take the 
bullet.
    Mr. Cramer. And I would agree. I don't mean to imply that I 
am offended by it. I am not offended by it, but in the context 
of this discussion. Anybody else on that topic including you, 
Commander, since I am sort of jabbing you a little bit on the 
issue?
    Mr. Lippold. Well, yes. Thank you. It goes actually to the 
heart of what I have talked about which is when you look at 
energy independence and we look at developing as part of a 
national security strategy and having an energy policy, when 
you look at those refineries and 30 percent being owned by 
foreign interests, when you look at 30 percent of our oil or 27 
being imported into the United States, if you want to look at 
it at a free-market perspective, we don't have a free market. 
There are always going to be a certain degree of regulations on 
what we control, goes where, to whom, and under what 
conditions. That is part of what government's function is, to 
ensure that there is a certain degree of level playing field 
not only internally to the United States but externally to the 
United States.
    So I would look at it and I wouldn't necessarily be 
concerned about that 30 percent ownership and what they are 
doing. It is what is going to be available and what conditions 
are we creating for our people in the United States to perhaps 
push that 30 percent out and create those jobs for the United 
States and for the money to end up here in the United States--
--
    Mr. Cramer. But I guess I see in this case the regulation 
creating an uneven playing field to the disadvantage of the 
American producer. And that is sort of the whole point in the 
whole issue.
    I want to ask, Mr. Ambassador, you have said a couple times 
or referenced this. I want to ask it in a real specific 
question. Do you believe, representing just your country, that 
the world would be safer if the United States was a force or a 
player in the global marketplace, being the stable, reliable 
provider of crude oil?
    Ambassador Gandalovic. Yes, I do believe that, and I have 
tried to prove that in my testimony.
    Mr. Cramer. You have done very well. Let me ask quickly, 
Commander, since I have a couple seconds. Do you think that 
displacing heavy sour crude from Venezuela with heavy sour 
crude from Alberta, Canada, would be better and more in the 
national interest than--would it make it safer?
    Mr. Lippold. If importing it----
    Mr. Cramer. From Canada rather than Venezuela?
    Mr. Lippold. I think any time we are taking something not 
from Venezuela it is for our best interests.
    Mr. Cramer. Thank you. I appreciate your support for the 
Keystone Pipeline. With that, I yield back, Mr. Barton.
    Mr. Barton. The gentleman's time has expired. That is all 
the members. No other members present to ask questions. We will 
keep the record open for the requisite number of days----
    Mr. Rush. Mr. Chairman, if you would, Mr. Chairman, before 
we----
    Mr. Barton. The gentleman from Illinois.
    Mr. Rush [continuing]. Conclude, the question that--I do 
have a question.
    Mr. Barton. Well, then we will recognize----
    Mr. Rush. One final question because I am interested in 
Commander Lippold's reference in his written statement where he 
said that Nigeria and the impact that lifting the ban would 
have on the Nigerian government and its fight against 
extremists. The impact, this impact on Nigeria, can you be more 
explicit about that? That is of concern to me.
    Mr. Lippold. Yes. What you are referring to is the fact 
that Nigeria produces, along with Azerbaijan, the same type of 
light sweet crude that we do. If the export ban is lifted, one 
of the second-order effects you will have is you are now 
introducing a larger quantity of that oil onto the world market 
that is going to affect their market share, potentially 
depressing prices. Clearly, Nigeria being as overly dependent 
upon oil to support their economy, it is going to have a ripple 
effect. If the price goes down, they are not going to be able 
to maintain the type of economy that they need to keep their 
nation functioning. They are clearly faced with a clear and 
present danger with the terrorist group Boko Haram. They would 
take advantage of potential economic instability to try and 
destabilize if not topple that government which would have 
ramifications. And this again, sir, goes back to the core of my 
argument. This is one of those second- and third-order effects. 
Before we precipitously just lift the ban and move forward, it 
has to be thought through.
    A point that was made a few minutes ago was that, let's 
lift the ban and we will deal with the bumps in the road. I 
too, many times in my military career, lived through the 
consequences of that happening with national leadership making 
those kinds of decisions. We need to be not reactive but 
instead plan ahead for what we are going to do. If we think 
through what the ban is going to do, there hopefully will come 
a day where we can lift it and do that. But today is not the 
day because we have not thought through those effects.
    Mr. Rush. Dr. Montgomery, do you have a counter to that 
argument? And Mr. Chairman, I want to thank you so much for 
your liberalism.
    Mr. Barton. Be careful how you use that word. But we will 
let Dr. Montgomery answer that question.
    Mr. Montgomery. Thank you, Mr. Rush. Two brief comments. 
One, to paraphrase, no economic plan survives contact with the 
market, and this notion that we can plan out all the 
consequences of a change in policy I think is a fantasy. What 
we have to do is look at the basic principles of free trade and 
the way in which our ability to buy and sell goods 
internationally has benefitted the economy for hundreds of 
years.
    As far as Nigeria goes, again, there are unintended 
consequences in every direction. We have frequently analyzed 
the consequence of lower world oil prices on different regions 
of the world. The fact is, most countries in Africa are oil 
importers rather than oil exporters. They are the poorest 
countries in the world. Anything that we do to reduce the world 
price of oil is going to benefit those poorest countries in the 
world because they need it and they will pay less for it if we 
put more oil on the market and make it cheaper.
    Mr. Rush. Thank you, Mr. Chairman.
    Mr. Barton. Thank you. I am so tempted using the power of 
the chair, which I currently have, to say that a quorum is 
present. I ask unanimous consent to move the bill as is, call 
for the ayes, the ayes have it, and the bill is reported out. 
But that would not be proper form.
    Mr. Rush. It sure wouldn't be, Mr. Chairman.
    Mr. Barton. I won't do that. I do want to first--I have 
some business. We would ask that three letters from the Energy 
Equipment and Infrastructure Alliance, the U.S. Chamber of 
Commerce, and America's Natural Gas Alliance be put into the 
record, without objection.
    Mr. Rush. No objection.
    Mr. Barton. OK.
    [The information appears at the conclusion of the hearing.]
    Mr. Barton. I would also ask to thank our panelists. And 
before we close this hearing, just put a little bit more 
context on this, we have had a good discussion today. We talked 
a lot about exports and imports. I want to put some information 
in the record from the Energy Information Agency, and we import 
about 9 million barrels of petroleum products a day, but we 
export about 4 million. So on a net basis, it is about 5 
million barrels per day of imports. Of those 5 million barrels, 
about 3.5 million come from Canada and Mexico who are 
geographically adjacent to the United States. In fact, Canada 
is the number one source of our oil imports. Number two is 
Saudi Arabia. It is a little over a million barrels a day. Last 
year, U.S. production increased over a million barrels a day, 
and if we were to repeal the ban on crude oil exports--now this 
is an opinion. This is not a fact. I believe that we could 
easily increase domestic production another million to 2 
million barrels a day in the next year or 2 years.
    So if you really think about it, we do have the ability to 
move from a time in the 1970s when we had to import oil from 
overseas. We have been as high as 74 percent of our oil coming 
from overseas. We now have the capability that the only oil we 
import is not by necessity but because of economic 
availability. That is a real possibility. That is not fantasy. 
And removing the ban on crude oil exports puts the market in 
play. I don't discount what Commander Lippold has said, but I 
do believe if you let markets operate and let the world's 
largest producer, which is the United States of America, let 
our producers have the choice to sell domestically to domestic 
refiners or to sell on the world market. They are going to 
produce more. And if they produce more, there is going to be 
more competition, there is going to be more stability, there is 
going to be less reliance on unstable sources or sources that 
are in unstable parts of the region.
    So we talk about imports and the Commander's facts are 
correct, but if you look at it from a net import basis and 
given the capability of our domestic producers to produce, we 
for all intents and purposes have the capability to be energy 
independent in the real near-term. And I think that is 
important in the debate.
    Chairman Whitfield has asked me to indicate and so has 
Chairman Upton that this is an issue that has got a real chance 
to be marked up. No decisions have been made yet obviously, but 
it is something that is under active consideration.
    With that, again, I want to thank the panelists, and this 
hearing is adjourned.
    [Whereupon, at 12:45 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]
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