[Senate Hearing 114-120]
[From the U.S. Government Publishing Office]





                                                        S. Hrg. 114-120


                    LIFTING THE CRUDE OIL EXPORT BAN

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                                   ON

     EXAMINING THE POSSIBILITY OF LIFTING THE CRUDE OIL EXPORT BAN

                               __________

                             JULY 28, 2015

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs



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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  RICHARD C. SHELBY, Alabama, Chairman

MICHAEL CRAPO, Idaho                 SHERROD BROWN, Ohio
BOB CORKER, Tennessee                JACK REED, Rhode Island
DAVID VITTER, Louisiana              CHARLES E. SCHUMER, New York
PATRICK J. TOOMEY, Pennsylvania      ROBERT MENENDEZ, New Jersey
MARK KIRK, Illinois                  JON TESTER, Montana
DEAN HELLER, Nevada                  MARK R. WARNER, Virginia
TIM SCOTT, South Carolina            JEFF MERKLEY, Oregon
BEN SASSE, Nebraska                  ELIZABETH WARREN, Massachusetts
TOM COTTON, Arkansas                 HEIDI HEITKAMP, North Dakota
MIKE ROUNDS, South Dakota            JOE DONNELLY, Indiana
JERRY MORAN, Kansas

           William D. Duhnke III, Staff Director and Counsel
                 Mark Powden, Democratic Staff Director
                    Dana Wade, Deputy Staff Director
    John V. O'Hara, Senior Counsel for Illicit Finance and National 
                            Security Policy

                  Jay Dunn, Professional Staff Member
                Shelby Begany, Professional Staff Member
            Laura Swanson, Democratic Deputy Staff Director
               Colin McGinnis, Democratic Policy Director
                Graham Steele, Democratic Chief Counsel
                       Dawn Ratliff, Chief Clerk
                      Troy Cornell, Hearing Clerk
                      Shelvin Simmons, IT Director
                          Jim Crowell, Editor

                                  (ii)




















                            C O N T E N T S

                              ----------                              

                         TUESDAY, JULY 28, 2015

                                                                   Page

Opening statement of Chairman Shelby.............................     1

Opening statements, comments, or prepared statements of:
    Senator Brown................................................     2

                               WITNESSES

Lisa Murkowski, U.S. Senator from the State of Alaska............     3
John Hoeven, U.S. Senator from the State of North Dakota.........     5

Michele Flournoy, Chief Executive Officer and Cofounder, Center 
  for a New American Security....................................     7
    Prepared statement...........................................    40
    Responses to written questions of:
        Senator Brown............................................    52
Richard Muncrief, President and Chief Executive Officer, WPX 
  Energy.........................................................     9
    Prepared statement...........................................    41
Benjamin Zycher, John G. Searle Scholar, American Enterprise 
  Institute......................................................    11
    Prepared statement...........................................    45
Leo W. Gerard, International President, United Steelworkers, and 
  Chair, AFL-CIO Legislation and Policy Committee................    12
    Prepared statement...........................................    47

              Additional Material Supplied for the Record

Letter from Edward Cross, President, Kansas Independent Oil and 
  Gas Association, submitted by Senator Moran....................    54

                                 (iii)

 
                    LIFTING THE CRUDE OIL EXPORT BAN

                              ----------                              


                         TUESDAY, JULY 28, 2015

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 9:36 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Richard C. Shelby, Chairman of the 
Committee, presiding.

        OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY

    Chairman Shelby. The hearing will come to order.
    The Committee convenes today to receive testimony regarding 
the prospect of lifting the ban on U.S. crude oil exports. 
Approximately 40 years ago, Congress imposed the oil export ban 
as part of a comprehensive set of price and export controls on 
a variety of industries. We learned in subsequent years that 
such anticompetitive policies hampered job creation and harmed 
American consumers.
    Despite long outliving its purpose, the ban on the export 
of crude oil remains in place today, with only a few 
exceptions. And due to the advancement of technology and other 
techniques that facilitate oil extraction, the U.S. has 
undergone an energy boom during the past several years. In 
fact, it has become the world's largest total producer of oil, 
according to the Energy Information Administration. And as a 
result, the oil and gas industry has added tens of thousands of 
jobs, with the potential to significantly bolster this number 
as production increases.
    As others have noted, there is often confusion about the 
impact that lifting the crude oil ban will have on gasoline 
prices at the pump. To be clear here, prices at the pump are 
largely determined by the world oil market, of which the U.S. 
is just one of many countries that participates.
    Studies from Columbia University, the Brookings 
Institution, and the Government Accountability Office, among 
others, cite that lifting the ban is likely to reduce the price 
of gasoline for American consumers by increasing the supply of 
crude oil available to the world market. Consumers, U.S. jobs, 
and economic growth could all benefit from an increase in the 
domestic production of oil. The export ban in place today is 
economically inefficient by artificially discouraging 
production.
    Lifting the ban could also benefit the geopolitical 
position of the U.S. and reduce worldwide reliance on OPEC 
Nations and Russia, not to mention Iran, which could be soon 
ramping up oil production under the terms of the 
Administration's nuclear deal.
    Today's hearing will discuss the impact of reversing the 
oil export ban, a policy within this Committee's jurisdiction. 
It is one that I believe has held back our economic potential 
for at least 10 years.
    Today we will welcome the testimony first of Senator 
Murkowski, who chairs the Energy and Natural Resources 
Committee, as well as the testimony of Senator Hoeven, who is a 
very valuable member of the Appropriations Committee. Both have 
advanced this issue in multiple ways and have valuable insights 
to share. Following their testimony, we will hear from a panel 
of academic and industry experts.
    I would also like to acknowledge our own Senator Heitkamp 
right here with us, who has worked tirelessly on this issue. 
Her efforts, along with our other colleagues, have led to 
increased public awareness of the facts and have inspired 
today's hearing.
    Before I turn to the distinguished Senators from Alaska and 
North Dakota for their testimony, I would like to recognize our 
Ranking Member, Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman, for holding today's 
hearing. Thank you to Senator Murkowski and Senator Hoeven for 
joining us. I look forward to hearing your testimony and other 
panelists today.
    We are before the Banking Committee to discuss oil exports 
because of our jurisdictional responsibility for export 
controls and export licensing. Oil exports is an important 
issue for consumers and manufacturers and workers in the oil-
refining, petrochemical, and transportation sectors. It is 
important for national security, for rail safety, for our 
environment, and for our long-term climate policy to get this 
right.
    Changes to this policy would affect different areas of the 
country very differently: more production in some areas, 
potentially negative impacts on refineries and their workers, 
and others. I have spoken with Senators Tester and Heitkamp 
about the tremendous impact fracking has had on their part of 
the country as it is beginning to have in parts of Ohio as 
well.
    Other Members come to this issue with different 
perspectives. Some may not think of Ohio as an energy-producing 
State, but by the 1880s, Cleveland's John D. Rockefeller had 
developed significant fields in Lima, Ohio, and Findlay, Ohio, 
and started a company called Standard Oil. What this has meant 
for Ohio manufacturers and consumers has been significantly 
lower natural gas prices, increasing competitiveness, and 
allowing families to stretch budgets further. Yet, in the 
opinion of some on the panel today, the crude oil export ban is 
a relic of price control policies of the past, which does not 
take into account the recent surge of domestic production that 
has led to a significant reduction in imported oil. This boom 
has, without a doubt, increased our Nation's energy security, a 
goal long sought by Congress and previous Administrations.
    It is my understanding that the recent production increase 
has resulted in billions of dollars of investments in our 
Nation's refineries and in the reduction of imports. Lower 
crude prices have benefited domestic refineries, and as a 
result, consumers are paying less at the gas pump.
    I want to hear from witnesses about the effect ending the 
export ban would have on prices, on domestic drilling, on 
greenhouse gas emissions, and whether it would increase 
pressure to drill on Federal lands or other environmentally 
sensitive areas of the country. While this is often described 
as an all-or-nothing proposition--ending the ban or maintaining 
the status quo--I would like to hear if there are alternatives.
    For example, should the Administration use its existing 
legal authorities to expand licensing? Doing so might give us 
more control over the process in the medium-to-long-term when 
some of the major shale plays currently in production tap out. 
This is similar to our current approach for certain types of 
condensates.
    Finally, over the past month, I have had occasion to visit 
several communities in Ohio that have expressed concern about 
the increasing number of crude-by-rail trains moving through 
their communities en route to refineries on the east coast. I 
introduced legislation last week to get the most dangerous cars 
off the tracks, get safer tankers on the tracks, and tanker 
cars, and provide funding to communities at risk for these 
disasters. I think that is part of the answer, but these 
firefighters, elected officials, and emergency management 
professionals are concerned about the high volume of crude oil 
moving through their communities, so often heavily populated 
areas, even with additional precautions.
    I look forward to hearing from my colleagues today. Thank 
you.
    Chairman Shelby. Thank you, Senator Brown.
    Senators Murkowski and Hoeven, I want to thank both of you 
for offering your time here today. I know that you both are 
going to have to go to other committees. Your written 
testimonies will be made part of the record.
    Senator Murkowski, you proceed first.

  STATEMENT OF LISA MURKOWSKI, U.S. SENATOR FROM THE STATE OF 
                             ALASKA

    Senator Murkowski. Thank you, Mr. Chairman. I appreciate 
the opportunity to be before the Banking Committee to talk 
about an issue that I think is long overdue here in the U.S. 
Senate. It is important to be in discussion about this 40-year-
old ban that we have had in place in this country that 
prohibits the export of crude oil from the United States.
    Keep in mind that it is perfectly legal, fair, legitimate, 
done every day, to send our refined products overseas. It is 
only the crude oil that we are limited. And I will just note 
for those that are interested in interesting factoids, there 
are three items that are on this short list for--that are 
prohibited from export within this country: one is crude oil; 
the other is horse meat for slaughter; and the third is the 
export of western red cedar.
    Now, we are not going to go into western red cedar or the 
slaughter of horse meat here this morning, but I think it is 
important to note that crude oil has been on that list now for 
some 40-odd years.
    I brought this issue up about a year-and-a-half ago before 
a group of energy experts around the world, and I called at 
that time for a lifting of this outdated ban. And rather than 
urging legislative action, I acknowledged that this was 
something that had been in place for decades, that not only 
Members of Congress needed to be educated on the issue, but 
people around the country needed to understand why the ban was 
put in place in the first place and why now 40 years later it 
is time to lift it.
    And so I called for 2014 to be the year of the report, and, 
boy, did they do the reports. Over a dozen reports have come 
out looking very critically at this issue, speaking to many of 
the points that Senator Brown has raised. Most pertinent is: 
What is this going to mean to me and the price that I am paying 
at the pump? That is what everybody really wants to know. We 
can talk about the high policy initiative, but at the end of 
the day, they wanted to know: Is it going to raise the price at 
the pump? And report after report, study after study, says no. 
So that is important for us as policymakers to understand. It 
is also important for people around the country to understand.
    As we have seen through this year of the report, oil 
exports is an opportunity--this is another particular, Mr. 
Chairman, to become an energy superpower, to send a signal to 
the world that we are ready to lead on issues of energy and the 
environment to empower our allies and to compete against our 
foes in a way that does not involve sending troops in; it does 
not involve the boots on the ground. It is effectively using 
our energy resources as a diplomatic tool, as a strategic 
asset, to help lift up our economy, create jobs, while at the 
same time lowering gasoline prices and increasing domestic 
energy production. And I say energy because it is not just oil. 
We know that oil and natural gas are linked as well.
    I am very pleased to be able to work with my colleagues 
from North Dakota. Senator Heitkamp and I have worked on this. 
She has introduced S. 1312, the Energy Supply and Distribution 
Act, and S. 1372, which is the American Crude Oil Export 
Equality Act, working with Senator Hoeven throughout the 
process on these issues. But both of these bills lift the ban 
on oil exports while at the same time preserving the energy 
authority of the President. I think that that is an important 
aspect of the legislation that you will consider.
    You are going to hear from good witnesses this morning, but 
let me just make two very quick points.
    The deal that the Administration has presented us 
concerning Iran's nuclear program will entail the lifting of 
sanctions against Iranian oil in the near future. And analysts 
can differ about the exact timing of when we may see the 
additional Iranian barrels entering the global market. The 
country already exports over a million barrels per day. But 
whether it is 6 months or whether it is 18 months, Iranian oil 
is returning as a result of this deal.
    So what does that mean to us in this country, a Nation that 
has been told, ``You cannot export''? We are going to let Iran 
go out onto the global market, engage in sales of their oil, 
allow them to amass resources and wealth as a benefit of this, 
while at the same time we are going to tell our U.S. oil 
producers, ``No, you may not''? We are effectively sanctioning 
U.S. oil producers if we lift the sanctions on Iranian oil and 
do not address our ability to compete in that global market 
here.
    American oil producers will be uniquely disadvantaged by 
this agreement. The antiquated ban on oil exports means that 
American workers will be unable to sell American oil to some of 
our closest oil allies. Right now, Japan is receiving oil from 
Iran. They would much rather be receiving oil from us. South 
Korea, the same. The Iranian Government is going to be able to 
sell its own oil to our friends, to our trading partners, and 
our companies have to sit with their hands behind their back.
    I am not even going to address the issue of what exactly 
Iran will be doing with its new-found revenues. I think we all 
have suspicions about that. That is a subject for another day. 
And I know that it is a subject that this Committee is going to 
be dealing with.
    Just very briefly, we all know what is going on on the 
floor with the Highway Trust Fund and the reauthorization. The 
proposal currently that is on the table is 101 million barrels 
sold from the Strategic Petroleum Reserve, which is offered as 
an offset to the 3-year extension. This oil is going to be 
dumped onto a saturated domestic market, and I know it does not 
happen all on that first day. It goes out over a period of 
years. But, again, Federal oil will be competing with American 
oil because American oil cannot be exported right now. I think 
that this is reckless. I do not think that this makes sense.
    So I think both the Strategic Petroleum Reserve and the 
Iranian sanctions issues are issues that really illustrate just 
how important it is that we lift this ban.
    So I thank the Committee for taking this issue up, know 
that in the Energy Committee we, too, are looking at it. But 
these are issues that are timely for this day, and I appreciate 
your focus.
    Chairman Shelby. Thank you, Senator.
    Senator Hoeven.

STATEMENT OF JOHN HOEVEN, U.S. SENATOR FROM THE STATE OF NORTH 
                             DAKOTA

    Senator Hoeven. Chairman Shelby, thank you for inviting me 
to be with you, Ranking Member Brown, good to be here with your 
Committee. I am also very pleased to be here with our Chairman 
on the Energy Committee. I serve on the Energy Committee with 
her, and she does a great job of leading our Energy Committee, 
and, obviously, this is both a very important issue and a very 
timely issue, so I am pleased that you are holding this hearing 
today.
    Why is it important that we lift the ban on exporting oil? 
Quite simply because it is good for our economy. It will create 
jobs. It is important for our national security by helping us 
achieve energy security. And it is good for the consumer at the 
pump.
    I repeat that: It benefits the consumer, it benefits 
families, it benefits small businesses across this Nation.
    There have been studies put out by the Energy Information 
Administration and many others that support that case. So I am 
very pleased to be a cosponsor with Senator Murkowski, Senator 
Heitkamp, and others on the Energy Supply and Distribution Act 
of 2015. And I know that you have jurisdiction on that bill. We 
have jurisdiction, obviously, on the Energy Committee, and we 
are working very hard to advance it, and we appreciate working 
with you, with your jurisdiction on the issue as well.
    So why is it good for the consumer at the pump? It might 
seem counterintuitive in some respects. But the reality is that 
gasoline moves off the Brent price. So North Sea oil is the 
Brent price, and that is the global price. Oil is a global 
commodity. So when Brent crude pricing moves up, gasoline 
prices at the pump move higher. When it moves down, they move 
lower.
    Well, what drives that? What drives that is global supply, 
supply and demand. More supply puts downward pressure on 
prices; more demand, less supply, prices go up.
    But we cannot compete in that global market in the same way 
as other countries because our companies are not allowed to 
export. So the benchmark price for our companies is West Texas 
Intermediate crude. That typically trades at anywhere from a $5 
to $10 discount to Brent crude from the North Sea.
    So think about that for a minute, Mr. Chairman. Let us say 
that you had the Shelby Retain Chain and----
    Chairman Shelby. I wish.
    Senator Hoeven. And maybe you do. I do not know.
    [Laughter.]
    Senator Hoeven. But let us say you had to compete against 
Walmart every day, and for every one of your products, you got 
$8, $10 less for every one of your products. How would you do 
in that competition? How long would you stay in business? Would 
you be a growing enterprise or a shrinking enterprise?
    And so that is the choice our industry faces. Are we going 
to help our industry grow? And understand that as we do, that 
creates more supply. Let me give you an example.
    When I started as Governor in North Dakota, in 2000, North 
Dakota produced less than 100,000 barrels of oil a day. But we 
worked to build the kind of climate where people would invest 
in our State, develop new technologies, make investment, hire 
people, and they developed the Bakken shale. You are going to 
hear today, I think, from some people like Harold Hamm and Rick 
Muncrief who are here, who have built large companies producing 
more energy in our State. We went from producing less than 
100,000 barrels a day; today we produce 1.2 million barrels a 
day--1.2 million barrels a day. That is part of the reason oil 
prices are going down because of this development in the Bakken 
shale in North Dakota and the development in the Eagle Ford in 
Texas.
    But the question, Mr. Chairman, is: Are we going to 
continue to produce more oil, more energy, more economic 
growth, more jobs, more national security through energy 
security in this country? Or are we going to go back to the 
days when OPEC commanded the market?
    Chairman Murkowski made a very important point. The 
President has put an agreement in front of this body right now 
that would lift the sanctions that were put in place by one of 
your Members here, Senator Menendez, along with Senator Kirk, 
and we passed that legislation as part of the Defense 
Authorization Act in 2011. At that time Iran was producing 2.6 
million barrels of oil a day and selling it. Today it is 1.1 
million barrels per day. Those sanctions have reduced Iran's 
oil exports on a daily basis from 2.6 million barrels a day to 
1.1 million barrels a day. That is hundreds of millions of 
dollars every week. That is billions of dollars a year, right?
    So at the same time, if that agreement is approved, that 
they are going to continue to produce more, are we going to 
make it harder for our industry to grow? Are we going to see 
our industry produce less?
    So this is a very important issue. This is a very timely 
issue. Studies have been done. The impacts are clear. Now we 
need to move forward because any way you look at it, at the end 
of the day, this is about more energy for this country. This is 
about economic growth for this country. This is about jobs for 
this country. And it will benefit the consumer at the pump and 
our small businesses because more supply will help keep that 
world price lower, and it will make sure that our gasoline 
prices are lower here and that we have the energy we need to 
continue to grow and prosper.
    Thanks, Mr. Chairman, for inviting me to be here with you. 
I appreciate it very much.
    Chairman Shelby. Thank you, Senator Hoeven. I want to thank 
both of you Senators for appearing with us today.
    Our witnesses on the second panel, I will call them up now:
    The Honorable Michele Flournoy, cofounder and chief 
executive officer, the Center for a New American Security;
    Mr. Richard Muncrief, president and chief executive 
officer, WPX Energy;
    Dr. Benjamin Zycher, John G. Searle Scholar, the American 
Enterprise Institute;
    And Mr. Leo Gerard, international president, United 
Steelworkers, and chair of the AFL-CIO Policy and Legislative 
Committee.
    All of your written testimony will be made part of the 
record, and if you could sum up your testimony, we have got a 
lot of people here, and we want to ask you a lot of questions 
today.
    We will start with you, Ms. Flournoy. Proceed.

  STATEMENT OF MICHELE FLOURNOY, CHIEF EXECUTIVE OFFICER AND 
         COFOUNDER, CENTER FOR A NEW AMERICAN SECURITY

    Ms. Flournoy. Senator Shelby, Ranking Member Brown, and 
Members of the Committee, thank you very much for inviting me 
here to participate in this hearing.
    I am not an energy expert or an economist, but I do know a 
lot about national security, and so my testimony today is 
really focused on the national security implications of the 
proposed lifting of the ban on crude exports.
    As you mentioned, Mr. Chairman, over the last several 
years, the unconventional energy revolution in the United 
States has brought us a new era of energy abundance, and you 
went through many of the measures of that, and so I will not 
repeat them at the moment. But, remarkably, after decades of 
concern about a situation of energy scarcity, we now find 
ourselves in an era of energy plenty.
    The American energy revolution has had profound and 
positive economic benefits for our country, as has been noted, 
increasing our GDP, helping to drive our economic recovery, 
improving our balance of trade, reinforcing the continued 
primacy of the U.S. dollar in global markets, and helping to 
stabilize the global energy market in a period of pretty 
unprecedented supply disruptions.
    But to date, again, as was mentioned, the United States has 
not chosen to become a major exporter of crude oil despite the 
potential and available supplies. The crude oil ban, the export 
ban, stems from antiquated laws and policies that were put in 
place back in the 1970s in a very different situation. Not only 
do those constraints make energy-driven economic growth less 
than what it could be in the United States, they also hamper 
the ability of U.S. national security leaders to fully leverage 
our new energy position and reap some of the strategic benefits 
presented by the American energy revolution. So today we really 
have an extraordinary opportunity to enhance both our economic 
vitality and our national security by lifting the ban.
    Lifting the ban would yield a variety of security 
dividends, in my view. First and foremost, it would strengthen 
our economy, as has been said by numerous studies. Our economy 
is the foundation of our national security, and that would 
strengthen our ability to play a much needed leadership role in 
both global security and global economic affairs.
    I think it cannot be underestimated the degree to which 
America's rise as a true energy power could impact perceptions 
of American global power and counteract what I think is an 
erroneous narrative of U.S. decline.
    Stimulating oil production growth could also expand our 
energy security by increasing oil supply to the global market 
from a reliable and stable producer. When more supply 
originates from producers who are not vulnerable to political 
instability or conflict or threats to their energy 
infrastructure, the overall market becomes more stable. Lifting 
the ban would also allow U.S. oil producers to be more 
responsive to market signals and give U.S. policymakers more 
options for using the Strategic Petroleum Reserve in ways that 
could counteract hostile attempts by foreign producers to 
manipulate prices. All in all, this would greatly benefit 
American consumers.
    In addition, allowing for U.S. oil exports would enhance 
the energy security of key partners, our allies ranging from 
Japan to India to many of our European partners. Indeed, many 
of our closest allies have called for, have asked for a lifting 
of the ban. Whether it is European countries who depend on 
Russia for 30 percent of their supplies--and Russia has clearly 
demonstrated its willingness to use energy as a coercive tool 
of its foreign policy--or Japan that relies on Middle Eastern 
oil, 80 percent of its supplies are from the volatile Middle 
East, these are allies whose security would be strengthened by 
diversifying the supply of oil from which they could draw on. 
And as their economic and energy security increases, they 
become more capable allies for us, more capable partners for us 
as we approach the full range of shared security challenges 
regionally and globally.
    Today I find it strange that the United States is the only 
advanced country that bans crude oil exports. I think at this 
point in time lifting the ban would also send a very powerful 
signal of the United States' commitment to free trade and open 
markets. This is particularly important when we are in the 
midst of putting the final touches on perhaps the most 
important trade negotiation of our generation, the Trans-
Pacific Partnership, which will have enormous economic and 
strategic implications for the United States and Asia.
    Lifting the ban would also provide us with greater 
flexibility to use sanctions as a tool of our statecraft in the 
future. Imposing sanctions that require taking oil off the 
market can be very effective, but it is very important to have 
adequate alternative oil supplies to ensure that our own 
interests and that of our allies are protected when those 
sanctions are used.
    So, in sum, let me just conclude by saying in addition to 
the economic impacts that so many have cited, I believe that 
lifting the ban on U.S. exports of crude oil could give us a 
real boost in terms of our national security, giving U.S. 
policymakers an extraordinary opportunity not only to enhance 
our economic vitality but also our national security and our 
geopolitical leverage with allies vis-a-vis adversaries and so 
forth.
    Let me just conclude by saying we should not consider this 
alone. This needs to be pursued alongside responsible policies 
to promote natural gas exports, greater energy efficiency, and 
low carbon fuel sources here at home and abroad. But in that 
broader context, this is a piece of the puzzle that definitely 
makes sense for us economically and strategically.
    Thank you, Mr. Chairman.
    Chairman Shelby. Mr. Muncrief.

 STATEMENT OF RICHARD MUNCRIEF, PRESIDENT AND CHIEF EXECUTIVE 
                      OFFICER, WPX ENERGY

    Mr. Muncrief. Chairman Richard Shelby, Ranking Member 
Brown, Members of the Committee, my name is Rick Muncrief. I am 
the president and CEO of WPX Energy. Thank you for the 
opportunity to speak to the Committee today. It is an absolute 
honor to be here.
    WPX Energy is an independent oil and gas producer based in 
Tulsa, Oklahoma, that employs roughly 1,000 people. Our teams 
are working across the West in some of America's most prolific 
basins in the States of North Dakota, New Mexico, and Colorado.
    WPX strongly supports ending the crude oil export ban. We 
encourage Congress to pass legislation to achieve this goal, 
and we fully support the efforts of Senator Heitkamp and 
Senator Murkowski.
    Today I will outline three main reasons why the crude oil 
export ban should be eliminated:
    First, allowing crude exports would have an important 
positive impact on economic development and job creation.
    Second, it would increase the supply of oil on the world 
oil markets, resulting in less volatility in those markets and 
ultimately lower prices at the pump for American consumers.
    Third, it will strengthen our Nation's national security.
    Let me take each one of these arguments in turn. Our 
industry has overcome virtually every technical challenge, 
allowing us to safely develop our energy resources. Today WPX 
is drilling 2 miles deep and up to 3 miles across, or 
laterally, to hit small targets. And in doing so, it greatly 
limits the activity or the impact on the surface of the land. 
In one of our basins, we were able to reduce the acreage that 
we need for drilling by 75 percent by drilling 20, and 
sometimes 30 wells from one single surface location. But our 
growth is being restricted by banning crude oil exports since 
WPX and companies just like ours are not able to compete in the 
global marketplace. This impacts energy producers along with 
all the other companies up and down the supply chain who 
provide goods and services.
    If the crude oil export ban were lifted, the positive 
economic development and job growth would be significant. The 
oil and gas industry has been an important economic driver and 
engine that has promoted opportunities for workers and small 
businesses, expanded revenue for State and local governments, 
and increased investments all around the country.
    During the recent economic downturn, the energy sector was 
continually identified as the ``one bright spot of the 
economy.'' We need to keep that bright spot shining by allowing 
U.S. companies access to world markets.
    WPX operates in Indian country, and as part of our supply 
chain, we hire Native American service contractors whenever 
possible. In North Dakota alone, we work with more than 450 
vendors and service providers, many of which are Native 
American owned or operated. We infuse $6.5 million into the 
statewide payroll and provide more than $150 million in 
royalties for oil production. That is real money, and it is 
only our company in one State.
    Lifting the ban would also reverse an existing quirk in the 
current law. Refined products like gasoline and diesel are 
already eligible for export while crude oil is not. Would we 
ever adopt a policy that allows American bakers to export bread 
but does not allow American farmers to export wheat? Of course 
not. And I am a western Oklahoma wheat farmer, too. But that is 
essentially our policy in the energy sector.
    Ending the crude oil export ban helps reverse this unfair 
policy while benefiting U.S. companies and American workers.
    Second, lifting the ban would help consumers. Numerous 
studies and countless economists have outlined how a free trade 
policy on crude oil would increase the global supply of oil, 
which would ultimately put downward pressure on prices of 
petroleum products that are refined here at home.
    Third, this policy would strengthen our national security. 
A robust domestic supply of energy based on free trade and an 
open market enhances our energy self-sufficiency, a critical 
component of economic and military strength during times of 
crisis.
    Beyond that, our ability to help our allies with their own 
energy security benefits our national security as well. Our 
closest allies are looking for diversification in their energy 
suppliers so that they are less reliant on unstable or 
unfriendly countries for their energy needs. The United States 
would be an attractive alternative to global oil exporters and 
would lower the economic risk that our friends face.
    For these reasons, WPX Energy supports efforts to lift the 
crude oil export ban. Taking action now is the right thing to 
do. It would bring to an end an energy policy that stifles job 
growth, punishes American workers and consumers, and puts our 
country at risk.
    I ask that my written testimony be submitted for the 
record, and I look forward to answering any questions you may 
have. Thank you very much.
    Chairman Shelby. Thank you.
    Dr. Zycher.

STATEMENT OF BENJAMIN ZYCHER, JOHN G. SEARLE SCHOLAR, AMERICAN 
                      ENTERPRISE INSTITUTE

    Mr. Zycher. Thank you, Mr. Chairman and distinguished 
Members of this Committee.
    The export ban on crude oil was justified on the basis of 
two fallacies: first, that the 1973 oil embargo was the cause 
of the higher oil prices and market disruptions experienced in 
the early 1970s; second, that a ban on exports of crude oil 
would insulate the U.S. economy from the effects of 
international supply disruptions. Those assumptions are 
inconsistent with the basic economic truth. There can be only 
one price for oil in the world market. That is why the 1973 
embargo had no effect at all, notwithstanding conventional 
wisdom.
    Since there can be only one price in the world oil market, 
the attempt by Arab OPEC to impose a higher price on the U.S. 
and a few others did not succeed. Market forces reallocated oil 
so that international prices were equal everywhere. The actual 
cause of the worldwide price increase was the production 
cutback in the Persian Gulf.
    Similarly, the gasoline lines and market disruptions were 
the result of the price and allocation controls imposed upon 
the domestic market. They were not caused by the embargo. 
Notice that there was no embargo in 1979, but there was a 
production cutback in the Persian Gulf as a result of the 
overthrow of the Shah of Iran. And, again, there were price and 
allocation controls, and, again, there were gasoline lines and 
market chaos.
    In short, the argument that the export ban insulates the 
U.S. economy from the effects of supply disruptions was and 
remains fundamentally flawed. Accordingly, the intellectual and 
policy justifications for the export ban remain bankrupt to 
this day.
    If the export ban were to be removed, domestic crude oil 
prices would increase very modestly, by approximately $2 to $3 
per barrel. That would be a straightforward supply-and-demand 
effect reducing the difference between the prices for crudes 
produced domestically and overseas. An obvious example is the 
price difference between West Texas Intermediate and Brent 
crudes, about $6 per barrel as of this morning, a difference 
made artificially larger by the export ban.
    There is the further matter that an increase in crude 
exports would have the effect of strengthening the dollar. 
However difficult to measure, that effect is real, and it would 
put some downward pressure on the dollar prices of crude oil 
internationally, thus offsetting to some degree the supply 
demand effect that I have just mentioned. And that stronger 
dollar would increase the aggregate size of the U.S. economy, 
an effect that would take the form of a reduction in the 
overall price of the domestic basket of goods and services.
    Given so small an oil price effect of ending the export 
ban, it is not plausible that the narrow employment effects in 
refining and related sectors would be significant. Indeed, 
those impacts would be difficult to measure given the normal 
fluctuations of such employment on an annual basis. But in any 
event, those employment effects would be offset by increased 
employment in other sectors and by the positive aggregate 
employment effects of a larger economy and the increased labor 
demand resulting from it.
    Because gasoline and other refined products are not 
included in the export ban and, thus, are traded freely in the 
international market, it is difficult to see how a repeal of 
the export ban on crude oil could increase product prices. 
Instead, ending the export ban actually would put downward 
pressure on product prices for two reasons:
    First, the increase in the international supply of crude 
oil created by increased U.S. exports would reduce both crude 
and product prices overseas. Accordingly, product prices in the 
U.S. would be reduced because, again, products are traded more 
or less freely in the world market, creating the one-price 
outcome.
    Second, the export ban has distorted the allocation of 
differing types of crude oil among refineries. An end to the 
export ban would improve the alignment of refinery and crude 
oil characteristics, particularly in the U.S., thus reducing 
the cost of producing refined products. As an aside, this 
effect clearly would be one of the hidden benefits of the 
Keystone XL pipeline were it to be constructed.
    Let me make two final points.
    First, the reduction in international crude prices would 
have beneficial effects in terms of reducing foreign exchange 
earnings by several unsavory regimes, the Iranian and Russian 
ones in particular. Among other impacts, that would be likely 
to yield an increase in energy security in Europe.
    Second, the defense of free trade is a crucial component of 
the larger defense of capitalism and freedom. The export ban on 
crude oil was from the very beginning a deeply perverse policy 
implemented in a futile attempt to mitigate the adverse effects 
of other Government policies. Ending the ban would be an 
important component of a larger reform agenda for this 
Congress.
    I thank you again, Mr. Chairman. I would be very pleased to 
address any questions that you or other Members of this 
Committee might have.
    Chairman Shelby. Thank you.
    Mr. Gerard.

  STATEMENT OF LEO W. GERARD, INTERNATIONAL PRESIDENT, UNITED 
    STEELWORKERS, AND CHAIR, AFL-CIO LEGISLATION AND POLICY 
                           COMMITTEE

    Mr. Gerard. Thank you very much, Chairman Shelby, Ranking 
Member Brown, and Members of the Committee. I want to thank you 
for inviting me to testify today on the critical issue of crude 
oil exports.
    My name is Leo Gerard. I am the international president of 
the Steelworkers Union. We have 850,000 members in our union, 
more than 30,000 of them working in the refining industry. 
While I will focus on the fact that the USW represents workers 
in 63 refineries in the country, which amounts to two-thirds of 
domestic refining capacity, I also want to make the point that 
more than 10,000 of those workers have either signed a petition 
or written a letter urging the continuation of the crude export 
ban.
    I cannot stress enough what this does. Although I talk 
about the 63 refineries, there is no doubt about it whatsoever 
that our industrial base would be affected by the removal of 
the export ban. The increase in the cost of energy for American 
manufacturers in almost every major sector of the economy, 
whether that is tire and rubber, whether that is paper, whether 
that is steel, they are energy dependent, and that the rise in 
the cost by us exporting our crude oil rather than refining it 
at home would not only affect our refineries, but also would 
affect our manufacturing base.
    In 2014, 27 percent of the petroleum consumed in the United 
States was imported from foreign countries. Our Nation is not 
self-sufficient in oil as 44 percent of the crude oil processed 
in U.S. refineries is imported.
    Secretary Moniz, appearing before the House Energy and 
Power Subcommittee, pointed out that for every barrel of crude 
oil that we would export, we would have to import another 
barrel. The fact is that not all crude oil is the same. By 
keeping oil produced in the U.S. here at home for refining, 
refiners have been able to realign their processes to 
specialize in the types of crudes that are produced here. That 
allows for greater refining efficiency and increased 
production.
    For example, just in 1 year, American refineries through 
streamlining their processes have been able to increase 
production by 100,000 barrels a day so that if we think about 
exporting our crude oil, what we are, in fact, doing is 
exporting the raw material. There is nothing wrong--this union 
is not opposed to exports. What we are opposed to is exporting 
the raw material that would allow other Nations to refine that 
crude and then sell it back to us, which, quite frankly, does 
not make sense.
    To give you an example, in 2012, members at key refineries 
in the Philadelphia area were facing layoffs and permanent 
closures of their refineries. The east coast was facing a loss 
of over half its domestic refining capacity. An economic 
analysis about the loss of the east coast refining in the 
Philadelphia area showed an impact of 36,000 jobs, direct and 
indirect, would be lost and over $550 million in lost revenue 
for State and local entities. In spite of supplies at home, 
heating oil and regional were also being put at risk. 
Thankfully, our union, working with the Federal, State, and 
local officials, found buyers for two of the three refineries. 
Therefore, moving Bakken fuel from North Dakota to the east 
coast and decreased crude oil imported from Nigeria, an OPEC 
Nation, by over 90 percent. In addition, refined products 
imported into the east coast also decreased from 1.5 million 
barrels in 2010 to just over 1 million barrels in 2013, making 
the point that we can keep the crude oil at home, realign our 
refineries, process it here, from raw material create a new 
commodity, and either use that commodity at home to keep lower-
cost energy so that our manufacturers can have a competitive 
advantage, or we can sell it offshore and let the Chinese get 
that competitive advantage, then use their position to again 
undermine our industrial base in this country.
    Our refineries are also exporting more value-added refined 
product than ever before. Our members are not only producing 
most of the oil for domestic consumption; they are expanding 
into the global market because of the crude oil export ban.
    Let me just say this: I was shocked to hear one of the 
previous speakers talk about what was going on in North Dakota. 
The Census Bureau has said that in the period between 2011 and 
2012, 75 workers have died in North Dakota working in the oil 
industry. They would not want to lift the export ban.
    Chairman Shelby. Thank you.
    Dr. Zycher, I will start with you. You have testified that 
removing the oil export ban is likely to raise the domestic 
price of crude oil, but lower the price of gasoline in the U.S. 
I think it is important for the Committee and the American 
people to understand these effects.
    Building on your testimony, can you explain how and why 
that would occur?
    Mr. Zycher. Yes, indeed. As I discussed in my oral 
testimony and in some greater detail in my testimony submitted 
for the record, an end to the export ban would produce a 
greater alignment of domestic crude oil prices, international 
crude oil prices, thereby narrowing the difference between, 
again, for example, the prices of West Texas Intermediate and 
Brent crudes. And so that difference is roughly $5 to $6 
barrel, depending on which day you look at the data, and my 
estimate is that the difference would be reduced by something 
on the order of $2 to $3 per barrel. That would account for the 
increase in domestic crude oil prices.
    Somewhat counterintuitively, domestic product prices--
gasoline, diesel fuel, and the rest--would go down for two 
reasons:
    First, the increase in the international supply of crude 
oil that would be one effect of ending the export ban on U.S. 
crude would reduce crude prices internationally and would 
thereby reduce product prices internationally. And because 
product prices are traded freely, there is no export ban on 
U.S. products, product prices in the U.S. have to be equal, 
adjusting for transport costs and all the rest. With product 
prices overseas, the reduction in product prices overseas would 
yield a reduction in product prices in the U.S.
    Second, because the export ban on U.S. crude oil introduces 
a distortion between refinery characteristics and the 
characteristics of crude oil, an end to the export ban would 
reduce the cost--by reducing that distortion or eliminating it 
would reduce the cost of producing products domestically, 
thereby also yielding a reduction in product prices.
    The point is that the export ban introduces a distortion in 
the market both on the crude oil side and on the product side, 
and both of those distortions have the effect of increasing 
product prices to U.S. consumers.
    Chairman Shelby. Thank you.
    Mr. Muncrief, the world, as you have pointed out and we all 
know, is currently experiencing a global low price environment 
on crude oil at a time when the U.S. can and has recently 
expanded its crude oil production. Could you discuss here this 
morning the production capacity that is held back from keeping 
the ban in place?
    Mr. Muncrief. Yes, sir, Mr. Chairman. You know, if you look 
at the growth that we have seen here in the U.S., it has been 
simply staggering. We think that crude oil production could 
increase another 4 to 5 million barrels a day here in the lower 
48 if we had the refining capacity domestically and the export 
capability.
    Chairman Shelby. Dr. Zycher, in your testimony you 
highlight how the export ban, and I will quote you again, ``has 
distorted the allocation of differing types of crude oil among 
the refineries.'' Could you elaborate here on the different 
capabilities of refineries throughout the U.S., including the 
types of oil they are designed to process? And how would ending 
the export ban help to fix the misalignment of different types 
of crude oil and the U.S. refineries available to process it? I 
think that is an important distinction that we need to get into 
here.
    Mr. Zycher. Right. At least traditionally, the gulf coast 
refineries have been specialized or more specialized in the 
processing of heavier, more sour or higher sulphur type crude 
oils, while the east coast refineries have been somewhat more 
specialized in the use of lighter and less sulphurous crude 
oils.
    The export ban combined, with various transportation 
bottlenecks and all the rest, has the effect of forcing 
refineries to make investments to use crudes that they would 
not otherwise use in the absence of the export ban. In 
particular, the gulf coast refineries have been forced to make 
investments to use crude oils less heavy and less sulphurous 
than otherwise would be the case.
    The point is that the export ban, again, by distorting the 
market has increased the cost of refining for the U.S. domestic 
market as a whole and thereby increasing the cost of producing 
refined products.
    Chairman Shelby. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman.
    Mr. Muncrief just said that there is insufficient refining 
capacity for light crude oil. Mr. Gerard, I would like to ask 
you about this, and this has resulted in a surplus of their 
product, if you will. It is my understanding that refineries 
are, in fact, investing in converting facilities to process an 
additional 720,000 barrels of light tight oil per day. Speak, 
if you would, Mr. Gerard, to those investments going on at 
refineries around the country.
    Mr. Gerard. Right now, the refineries around the country 
are, in fact, committing, to investing somewhere between $8 to 
$9 billion in both modernization and efficiency. That 
additional investment will allow them over that period of time 
to be able to process an additional 4 million barrels per day 
of value-added exports.
    The issue for us is not whether or not we should export. 
The issue is that we should be exporting finished products, and 
we should be making those finished products in our refineries. 
And right now our refineries--and we represent 63 of them and 
over 30,000 workers--have a plan to align their refineries with 
the kind of crudes that are being developed and being extracted 
now. Those crudes may not have been the same crudes that were 
extracted 20 or 30 years ago. So as I said earlier, they are 
aligning their refineries for in 1 year just 100,000 barrels 
just for some of the refineries. So they have got a long-term 
plan of 8.7 billion. That creates us an opportunity to have a 
low-cost energy economy that also helps our refining industry 
but, in particular, also helps our manufacturing within energy-
intensive industries such as paper, rubber, steel, many of them 
in your areas.
    Senator Brown. So, Mr. Muncrief, what is your perspective 
on those investments being made in the refining industry?
    Mr. Muncrief. Well, we applaud that the investments are 
finally being made. The fact of the matter is that a new 
refinery has not been built in the United States in the last 35 
years, and that is sad.
    Now, while we applaud these incremental investments, that 
pales in comparison, to the capital investment, the job 
creation, the opportunity that we have in the upstream sector. 
And so I do not think it is enough fast enough.
    Mr. Gerard. There is a greenfield refinery being planned, 
Senator Brown. There is a greenfield refinery being planned 
that is going to be built in North Dakota, as we understand it. 
So there may be by 2025 a brand-new refinery.
    Senator Brown. Thank you, Mr. Muncrief.
    Mr. Gerard, you point out that if the export ban is lifted, 
a substantial portion of the crude we would export would go to 
countries without strong environmental or labor or health and 
safety standards to be refined and then returned to the U.S. as 
finished product, if you will.
    Since refining is a dangerous occupation, talk to us about 
the implications of this for U.S. workers and consumers and for 
foreign workers.
    Mr. Gerard. Well, for those of you who followed this 
spring's negotiations in the oil industry, we actually ended up 
in a substantial labor dispute over health and safety 
conditions. The industry was experiencing an explosion or a 
fire on average of once a week, and we have tackled that. I 
made the comments about the fatalities in North Dakota. The 
reality for us is that we are going to export crude; it is 
going to go offshore, and I will give you one example of a 
refinery that is being put together in India in what is called 
Jamnagar--Jamnagar Oil Refinery in India. And they boast on 
their system that what they are going to produce is going to be 
directed to the U.S. So if we put our crude on the market, you 
know who is going to get it. It is going to be China and India 
and those countries that are going to go after it. They are 
going to want to have the lower-cost energy that they can get 
from that. And then they are going to attack not just our 
refining capacity, but they are going to attack our 
manufacturing base.
    We have an opportunity, because of the amount of energy 
that we can generate, to have a lower-cost energy economy and 
to translate that not just into more jobs in the refining 
sector, but to have more jobs in the manufacturing sector that 
are energy-intensive, and by shipping the crude there and 
bringing it back, we are increasing the carbon footprint of a 
sector of the economy that is already unfairly under attack.
    Senator Brown. Mr. Gerard, in your testimony you noted that 
U.S. consumers currently benefit from lower oil prices caused 
by OPEC's ongoing efforts to manage global prices. These 
savings are substantial, you say, with estimates of $209 
billion per year in consumer savings. Your economists have said 
that translates into $1,064 per driver, $2,100 per family.
    Describe to the Committee how your economist came to those 
numbers and whether you think that administrative steps short 
of lifting the ban--for example, allowing expanded licenses to 
certain targeted countries or for a certain limited period--
might mitigate those effects?
    Mr. Gerard. Well, the Energy Information Administration had 
been reporting that households on average are saving $700 per 
year in lower fuel costs. That is only the fuel for 
automobiles. If we look at home heating oil, if we look at all 
those other sectors, and you add them up, it comes to a fairly 
substantial average saving for the average family. And that was 
done by the Energy Information Administration, not by the--I 
wish the Steelworkers would have done it, but we did not have 
access to the kind of information they had.
    Senator Brown. Thank you.
    Thanks, Mr. Chairman.
    Chairman Shelby. Senator Rounds.
    Senator Rounds. Thank you, Mr. Chairman.
    Dr. Zycher, I am just curious. In your estimate, what is 
the anticipated need for crude oil, the world supply--or the 
world demand for crude oil versus supply over the next decade?
    Mr. Zycher. Well, I usually take these forecasted market 
numbers with a huge grain of salt, to be honest about it. You 
know, the world market now is roughly 90 or 95 million barrels 
per day. Projecting crude oil demand and supply dynamics even 
over a year or two, let alone a decade, is a very difficult 
endeavor. It depends on economic growth, differential economic 
growth in different regions, and I really, with all due 
respect, am a bit reluctant to throw out numbers in which I do 
not have a lot of confidence.
    One would expect, if you assume world economic growth at 
something on the order of 1 or 1.5 percent per year, then using 
standard estimates of what we call the ``elasticity of oil 
demand'' with respect to economic growth, you would expect 
something on the order that oil demand or crude oil demand 
would grow roughly proportionally with world GDP growth. And my 
view of the production side of the world market is such that it 
would basically keep up with demand growth worldwide.
    And so if you believe that over the next decade world oil 
demand, world GDP will grow at something on the order of 10 
percent, it is not unreasonable to assume simply for discussion 
purposes that oil demand and production will grow also roughly 
10 percent or so. But, again, I would not bet too much money on 
the accuracy of these kinds of forecasts.
    Senator Rounds. Suggesting that the prices that we see 
today would be similar perhaps in the future, or are we seeing 
a glut----
    Mr. Zycher. Well, the best prediction of the price of--if 
you think about oil as a good that is substitutable over time 
in terms of consumption, you can consume--it is not like cut 
flowers. You can consume it today, or you can consume it 
tomorrow. And so prices are driven by interest rates over time. 
Then the best predictor of the price tomorrow is actually the 
price today. And so the best estimate of the price of oil 
tomorrow or next year is the price this year, abstracting from 
unexpected events, events that markets really are not very good 
at predicting, like wars and all the rest.
    Senator Rounds. Sure. Mr. Gerard----
    Mr. Gerard. Or what OPEC does.
    Senator Rounds. I am sorry?
    Mr. Gerard. Or what OPEC does.
    Senator Rounds. Yes. Mr. Gerard, I am just curious. The 
organizations which your members work for, the refineries that 
they work for, in many cases are--do they purchase the oil at 
basically the West Texas Intermediate price?
    Mr. Gerard. They do not tell me what price they purchase 
the oil at. But what they do tell me is one of their problems 
is not sufficient crude oil. It is the infrastructure to get 
the crude oil to them.
    Senator Rounds. Such as pipelines.
    Mr. Gerard. Pipelines, rail, whatever the circumstances.
    Senator Rounds. Your group is in favor of the Trans-Canada 
pipeline?
    Mr. Gerard. Our group is only in favor of the Trans-Canada 
pipeline if it is going to use domestically produced pipe. We 
are not in favor of using Indian pipe that is substandard to 
what we produce in America, which has been what the plan has 
been. So until they are prepared to use American-made pipe, we 
are not in favor. That does not mean we are not in favor of 
pipelines. I hope you get my point.
    Senator Rounds. Sure. In the case where you are looking at 
the pricing on--my understanding is that there is a difference 
between what the crude oil producers could get if they had an 
open market versus what they get right now, basically the $2 to 
$3----
    Mr. Gerard. I think that if you look at the coalition that 
has been created by the independent refiners, they are in favor 
of keeping the ban on, and part of the reason is that it is 
going to drive up their price.
    Senator Rounds. Sure.
    Mr. Gerard. If it is going to drive up their price, to 
extend it, then it is going to drive up the price to the 
consumers. And----
    Senator Rounds. But let me ask----
    Mr. Gerard. Let me finish----
    Senator Rounds. Well, no, let me--no, just wait----
    Mr. Gerard. I do not want to----
    Senator Rounds. Let me finish for just a second. Then I 
will let you come back in on this.
    Mr. Gerard. You have got 30 seconds.
    Senator Rounds. But I want to hit this particular point. I 
think the Chairman may give me some leeway on that. In this 
particular case, it is the difference in price that really is 
driving the need to try to keep the ban in place in terms of 
the reduced price----
    Mr. Gerard. No.
    Senator Rounds. You do not think it is the difference in 
the reduced price? So you would pay a higher price?
    Mr. Gerard. I am not going to say that.
    Senator Rounds. OK.
    Mr. Gerard. It is not just the price. It is the access to 
the crude that is going to allow them to do what they are 
doing, and now, as I said earlier in my testimony, they have 
realigned the refineries so that they can produce a greater 
amount without having to build a new refinery. So we have 
increased just in 1 year in a couple of small refineries 
100,000 additional barrels a day. But the investment of the 
$8.7 billion, they are talking about 4 million barrels of 
additional crude.
    Senator Rounds. Are there any of those organizations right 
now that are without crude to----
    Mr. Gerard. Well, let me say that a couple of them came 
close. That is why we had the closures of the east coast 
refineries, including Philadelphia Energy Solutions and Monroe 
Energy that we worked with to save those places. And once we 
were able to open the pathway to get the crude from the Bakken 
to the east coast, they are doing well now, and they have 
invested hundreds of millions of dollars in those refineries so 
that they can produce more crude, more finished product. And we 
are not against exporting finished product. We are against 
exporting the raw material and losing those jobs, and 
increasing the carbon footprint because we export, then we 
bring back.
    Senator Rounds. As long as the finished product is sold at 
the market price, the world market price.
    Mr. Gerard. Well, the world market price is going to 
obviously be set by Saudi Arabia, Kuwait, the UAE, Qatar, 
Bahrain, and Oman who have decided that they are going to 
increase production by 17 percent next year. That will 
definitely have an increase on price, a hell of a lot more than 
we are trying to do. So thank you.
    Senator Rounds. Thank you, Mr. Chairman.
    Chairman Shelby. Senator Reed.
    Senator Reed. Thank you very much.
    Dr. Zycher, to Mr. Gerard's point, OPEC's influence on 
world pricing is probably the most dominant effect in the world 
setting energy prices. Is that your view, too?
    Mr. Zycher. Well, it is certainly important, although I 
think that the ability of Saudi production policy to affect 
world prices is significantly reduced from what it was, let us 
say, back in the 1980s. The ability of Saudi Arabia to act as 
what used to be called the ``swing producer'' within OPEC and 
the willingness of the Saudi Government to do so are both 
substantially reduced from what was the case in the 1980s and 
1990s. As the Saudi share of world production has gone down, 
particularly in the face of the increase in U.S. production, 
attendant upon the expansion of fracking and horizontal 
drilling in the various shale basins in the U.S., I think there 
is a tendency to overstate, frankly, the ability and the 
willingness of the Saudis to drive pricing by changing their 
production policies.
    Really a better interpretation of Saudi production policy 
is to maintain production at more or less constant levels, 
allowing world market prices to fluctuate more than otherwise 
would be the case, and thereby increasing the risks to 
investors outside Saudi Arabia.
    I think many people do overstate the ability and the 
willingness of the Saudis to change their production policies 
in efforts to change prices.
    Senator Reed. It seems to me that over the last several 
years they have increased their production in a rather 
significant way, and prices at the pump today are $2.54 or so. 
And I remember being yelled at a couple years ago when the 
prices were much higher. And the one factor that many people 
point to is the Saudis for political reasons have decided that 
they do not want the Iranians to get access to any oil 
benefits.
    So I think you are sort of glossing over the impact that 
they have on the prices, together with the other OPEC 
countries.
    Mr. Zycher. Well, I did not say that Saudi production 
policy does not affect prices. It certainly does.
    Senator Reed. Let me put it this way: Do their production 
policies have much more impact on prices than lifting this ban 
on crude oil in the United States?
    Mr. Zycher. It depends on how much they would change their 
production. I have already argued that lifting the export ban 
would have a very modest impact, something on the order of $2 
to $3 a barrel. The Saudis certainly can affect prices more 
than that if they choose to do so.
    Senator Reed. I agree with you. Just one other final point. 
You have indicated that the price of crude going to American 
refineries would probably go up as this world recalibrates. How 
does a refinery whose major input goes up produce gasoline that 
is lower cost? Because I think your other conclusion is world 
gasoline prices will fall.
    Mr. Zycher. Right. For two reasons. One, the exports of 
U.S. crude will increase the supply of crude internationally, 
thereby reducing the prices of products internationally.
    Senator Reed. Internationally, but not the prices of 
products coming out of American refineries.
    Mr. Zycher. Well, no. The U.S. market--the product prices 
as a first approximation have to be equal everywhere in the 
world because there is one price for gasoline and one price for 
diesel, abstracting----
    Mr. Gerard. That is just not true.
    Senator Reed. Excuse me. I live up in Rhode Island, and I 
can tell you, the price of gasoline up there is more expensive 
than lots of places in the country, and that is just within the 
United States. So----
    Mr. Zycher. Yeah, and the price of gasoline in California 
is even higher than that, but that has got nothing to do with 
whether an end to the export ban would have an effect--would 
have the effect of increasing or----
    Senator Reed. I am just asking----
    Mr. Zycher. ----reducing product prices domestically.
    Senator Reed. How do you take an input price that goes up, 
essentially fixed costs, I am assuming, for other aspects of 
the refinery operation, and produce cheaper gasoline?
    Mr. Zycher. Right. For two reasons----
    Senator Reed. Now, I think what will happen is that you 
could have cheaper gasoline worldwide, but we would be 
producing at a loss in our refineries, and there would be 
pressure to close those refineries.
    Mr. Zycher. Well, refinery margins might go up or down. 
That is not really an issue for public policy. I mean, how 
markets affect prices, input and output prices is not really a 
policy question. The narrow economic question--well, it really 
is not if you believe in markets rather than Government as 
determinants of resource allocation.
    Senator Reed. This is an interesting argument because this 
whole market is based upon a monopoly of OPEC internationally. 
And if you do not recognize that----
    Mr. Zycher. OPEC is really not a monopoly. It is one big 
guy and a bunch of little fish who kind of go along for the 
ride, speaking----
    Senator Reed. Which is a pretty good definition of a 
monopoly.
    Mr. Zycher. Well, not really. But in any event, if the 
Saudis really were monopolists, prices I think would be a good 
deal higher than they are today. The point, to answer your 
question----
    Senator Reed. If they wanted the Iranians to----
    Mr. Zycher. Senator, if I could answer your question, 
please, I would really appreciate it. To answer your question, 
the effect of ending the crude oil export ban would reduce the 
supply of crude oil internationally, thereby reducing product 
prices internationally, also in the U.S., and also reducing the 
distortion in the allocation of various different types of 
crude oils across refineries in the U.S., thereby reducing the 
cost of producing gasoline and other refined products. There is 
simply no question that ending the export ban will increase 
very, very modestly the price of crude oil domestically and 
reduce, again modestly, the prices of refined products 
domestically, as counterintuitive as that may seem.
    Senator Reed. Thank you.
    Chairman Shelby. Senator Moran.
    Senator Moran. Mr. Chairman, thank you. Thank you for this 
hearing. I am reminded by this hearing, the amazing 
jurisdiction of this Committee, that we are talking about 
exports of crude oil.
    Let me preface my questions by saying I come from an oil-
producing State, just north of Oklahoma, and I notice that you 
did not say in your testimony any production in Kansas, but we 
would welcome your interest in our State. And I grew up with a 
father, a union member, who worked in the oil fields, and I 
remember our lives were dependent upon the price of crude. And 
I remember the conversations in our household about whether or 
not my dad would get bumped, moved someplace else, as a result 
of the fluctuating price of oil and the boom and bust of the 
oil economy.
    My question relates to the desire that I have--and I assume 
is beneficial to those in the industry, both executives who own 
companies and the workers who work for them--to have a more 
certain production and a less boom-and-bust cycle to oil and 
gas. Does the export of petroleum from the United States 
globally reduce the ups and downs, the price fluctuation that 
occurs, and the challenges that those in the oil industry then 
face in deciding whether to invest or to retreat? Is it more 
stable if we are exporting globally?
    Mr. Muncrief. Without a doubt, absolutely. I know that 
Senator Reed was talking about OPEC, but a lot of the U.S. 
production growth here has come from these resource plays, 
shale plays, tight reservoirs. We have known for generations 
that that resource was there, and it has been these 
technological advancements that we have been able to make with 
horizontal drilling and hydraulic fracturing that have 
absolutely changed the game for us.
    So from a certainty, exploration risk has been diminished 
drastically, and so now----
    Senator Moran. Because of technology.
    Mr. Muncrief. Because of technology. So it is absolutely 
now an economic decision with two primary factors: the price of 
the commodity that you are receiving, whether it is crude oil 
or natural gas, and then the cost of developing that resource. 
Industry has done a tremendous job in driving down cost, 
getting efficiency at all-time highs, and that is why these 
pullbacks can be so damaging to our industry. That is why we 
have lost over 100,000 jobs in the last 12 months. The last 12 
months. And I have spent 35 years in this business, offsetting 
production decline and hiring people and trying to manage 
growth.
    And so your point is spot on, that the ability to export 
crude oil will absolutely take away a lot of these swings that 
we have battled through your lifetime and mine.
    And one thing I would like to point out, too, is the 
worldwide demand of crude oil. My copanelist here mentioned 
that a while ago. The worldwide demand is over 90 million 
barrels a day. If you assume that 1-percent growth, that is a 
million barrels a day of growth that has to take place. 
Reservoirs decline naturally. The worldwide base decline is 
approximately 5 percent, and at 95 million barrels a day, we as 
an industry worldwide have to add on new supplies of 5 million 
barrels a day in a no-growth scenario. You add another 1 
million barrels a day due to growth, economic growth, now you 
are 6 million barrels a day that you have to offset.
    So when folks talk about Saudi Arabia or Iran, you hear 
that they will contribute an additional half-a-million barrels 
a day or a million barrels a day that falls way short. That 
falls way short of what the worldwide demand is going to be. 
The increased demand is year after year after year. It really 
has a cumulative effect. And so when you are not investing in 
E&P, exploration and production, you are going to have these 
cycles that you mentioned.
    U.S. producers are struggling right now because we don't 
have ability to export. U.S. producers are handicapped. We are 
hamstrung. We cannot get more of our products through 
refineries, and we cannot export it.
    Senator Moran. Mr. Muncrief, that is the conversations I 
have with people in my hometown, which is we have production, 
we need the markets. What is the relationship between the price 
of oil and the refining capacity in the United States? And what 
are the circumstances we face as a country in increasing 
refining capacity? What does it mean to the production side of 
the oil and gas industry?
    Mr. Muncrief. Well, I think the one thing we really need to 
note is that when you talk about the U.S. refining capacity, we 
have about 5 or 6 million barrels a day of U.S. sweet oil we 
can get through the refineries, and that is it. We are capped.
    Also, there is a foreign ownership component of U.S. 
refineries. In other words, there are countries around the 
world that have ownership in the U.S.-based refineries. And so 
they are going to preferentially make sure that their crude 
gets processed first. And so that is what we are up against, 
this limit of being able to get our crude oil refined.
    Senator Moran. Thank you very much.
    Mr. Chairman, I would ask unanimous consent to enter into 
the record a letter I have from Ed Cross, the president of the 
Kansas Independent Oil and Gas Association.
    Chairman Shelby. Without objection, it is so ordered. It 
will be made part of the record.
    Senator Moran. Thank you.
    Chairman Shelby. Senator Heitkamp.
    Senator Heitkamp. Mr. Chairman, thank you so much for 
holding this hearing. This is obviously an interesting topic 
and an issue that in many ways is new to the Congress, but not 
new to this industry. I could give you 50 ways that this policy 
is wrong on so many levels.
    I like to always start with it is wrong fundamentally 
because we believe commodities ought to find their market, and 
that is good for America; it is good for our balance of trade. 
It is good for stabilizing, as Ms. Flournoy has said, energy 
security throughout the world.
    But I want to talk about a couple key issues, and one of 
the things that gets forgotten because we are all patting 
ourselves on the back for this amazing energy renaissance that 
really has been driven by risk takers, like Harold Hamm, who is 
in this room, and your company, who are willing to make that 
investment and actually grow the American economy and grow the 
American energy development.
    Now, if your resource cannot find its market, its natural 
market, where do you typically put your investment? Someplace 
else. You are not going to stay investing, and so when people 
say this will affect national--doing nothing will affect our 
national security, will affect our national energy interests, 
and fundamentally is not fair. But I want to maybe point out a 
couple things, because I think we are getting one side of what 
happens with the workers who are organized in the refineries. 
But you also have workers who are organized in basically 
producing steel.
    Isn't it true, Mr. Gerard, that the American domestic 
energy industry is the number one consumer of steel in this 
country?
    Mr. Gerard. The auto industry is.
    Senator Heitkamp. No, I think--we would have to go back----
    Mr. Gerard. We can have a debate----
    Senator Heitkamp. ----and take a look.
    Mr. Gerard. We can have a debate about it, but, you know--
--
    Senator Heitkamp. But certainly during this time of 
tremendous growth in the oil industry, they are a huge consumer 
of steel.
    Mr. Gerard. Absolutely.
    Senator Heitkamp. I have seen pipes everywhere.
    Mr. Gerard. Absolutely. Let me----
    Senator Heitkamp. Isn't it true----
    Mr. Gerard. You asked me a question. Let me answer it.
    Senator Heitkamp. You did answer it. You said no, the auto 
industry is.
    My second question is how many jobs do you think 
steelworkers have lost as a result of the decline in energy 
drilling in this country?
    Mr. Gerard. What has happened in the last 15 months is a 
loss in the pipe and tube industry that we represent, in that 
part of the steel industry, probably about 2,000 jobs.
    Senator Heitkamp. 2,000 jobs, so----
    Mr. Gerard. Well, let me finish. Those jobs are not 
necessarily lost in the transmission. They are lost because 
there has been a decline in drilling.
    Senator Heitkamp. That is correct.
    Mr. Gerard. And the decline in drilling is not because we 
have not been able to export our crude. The decline in drilling 
has been because of the drop----
    Senator Heitkamp. I think there is where we end up with a 
fundamental difference. When your product----
    Mr. Gerard. Probably, but I am not finished answering.
    Senator Heitkamp. Right, right. When your product cannot 
find the market, obviously, and you are basically experiencing 
glut and storage of oil----
    Mr. Gerard. No, we are experiencing----
    Senator Heitkamp. I would just----
    Mr. Gerard. You know, you keep cutting me off. What we are 
experiencing is that there is an increase in imports into this 
country of 7 million barrels a day. There is a decrease in 
drilling because of the price----
    Senator Heitkamp. I only have so much time, and so----
    Mr. Gerard. So do I.
    Senator Heitkamp. ----the other point that I want to make--
and I guess it is not a question; it is going to be a comment--
is that when we look at the domestic refining industry that 
obviously is incurring a huge amount of, as you have said, 
capital development, a lot of that is being built on the backs 
perhaps of the consumers, because what we have is we have the 
refined product being established by an international price, 
but the import being a domestic price. And, obviously, we have 
seen margins--in fact, I think one BP refinery has actually 
increased their margins 75 percent. So let us not pretend that 
these are dollars that are basically--I think they are going 
into investment and that is good, but the consumer reaction is 
they are not getting the benefit of a West Texas Intermediate 
crude price. And so when we look at it, we need to understand 
that, with the exception of one economic report, pretty much 
every economist all up and down kind of the political spectrum, 
including the economist for the American Government at EIA 
agrees with Mr. Zycher about the importance of--and this kind 
of counterintuitive idea that lower--an increase in domestic 
prices will actually lower prices at the pump.
    But with the little bit of time that I have left, I really 
am--I think it is so critically important that we understand 
what this resource could mean to soft power, what this resource 
could mean to energy security among our allies, and basically 
getting to the domestic opportunity that we have here to use 
this resource to stabilize our----
    Mr. Gerard. You and I----
    Senator Heitkamp. ----the country for our economy. I would 
like to ask Ms. Flournoy if she could comment further.
    Mr. Gerard. You and I will have a fundamental disagreement 
on that because I want--you did not let me finish your earlier 
question----
    Senator Scott. Mr. Chairman? Mr. Chairman?
    Mr. Gerard. You know, the----
    Senator Scott. Excuse me, sir. Mr. Gerard? Mr. Gerard----
    Mr. Gerard. Well, I wanted----
    Senator Scott. I do not think she was talking to you, sir. 
I would like to hear the response----
    Mr. Gerard. I wanted to answer the question, and she did 
not let me answer.
    Senator Scott. ----from Ms. Flournoy.
    Senator Donnelly. Mr. Gerard, I will ask you a question 
when my time is here.
    Ms. Flournoy. So if I may, I do think that allowing the 
United States to be a full-fledged exporter of oil would 
increase our leverage on the global stage: first, in 
strengthening our economy, which is the foundation of our 
security; second, in giving us tools to be able to help our 
allies who are dependent on a number of countries--Russian, 
Iran, others--that may have interests counter to our own. Our 
ability to export will help them diversify their energy sources 
of supply. And it also, I think, gives us more tools to 
leverage in terms of dealing with others who may try to 
manipulate the market against our interests, and tools that 
would enable us to use sanctions effectively in future cases by 
ensuring that we could help ensure alternative sources of 
supply if we are imposing sanction on a Russia or an Iran in 
the future.
    Senator Heitkamp. Mr. Chairman, if I could just make one 
final point?
    Chairman Shelby. Go ahead.
    Senator Heitkamp. We have talked a lot about Saudi Arabia, 
but right now the United States of America, if you include 
natural gas liquids, is the number one producer of crude oil 
and natural gas liquids. And so as we look at Saudi Arabia and 
we think about the dominance that they have in the market, the 
Americans have a huge opportunity to be dominant in this market 
and stabilize prices and stabilize supply. And I think that is 
an excellent point for our allies, especially in the backdrop 
of what we are considering with Iran.
    Thank you, Mr. Chairman, for the extra time.
    Chairman Shelby. Senator Cotton.
    Senator Cotton. Thank you. Well, I agree with Senator 
Heitkamp that the oil and gas revolution in our country is a 
great testament to the American system of free people and free 
markets, individual freedom leading to amazing ingenuity and 
advances in the technology of hydraulic fracturing and 
directional drilling, as well as continued innovation in the 
face of adverse price declines.
    Second, our systems of capital markets which allow savers 
from the smallest pensioner to the biggest institutions to 
rapidly pull together capital to fund many of the most advanced 
but small fracking companies that are working throughout the 
country, a testament to the American worker, through the 
training, the skills, the adaptability of workers who have left 
one way of life as different parts of our economy have faded 
and the oil and gas sector has grown; a testament to our system 
of private property rights and the fact that people who own 
land have also the rights to what is underneath that land. In 
most places in the world, one of the worst things a farmer can 
hear is that there is oil underneath your farm, because that 
means the Government is going to come in and destroy your land 
and take it from you. In America, it can mean financial 
security not just for you and your generation but for 
generations in your family.
    And I think you can see just what a testament it is to our 
way of live here because so many other countries around the 
world who have as much or more shale, oil, and gas have not yet 
been able to harness it in the same way we can. I can see it 
personally. In the middle part of the last decade, in north-
central Arkansas, the Fayetteville Shale, which is a gas field, 
was one of the first shale production fields, and I spent much 
of that decade in the army, and I was deployed to Iraq and 
Afghanistan--or, even worse, in basic training--and I did not 
get home much. But it seemed like every time I came home, two 
or three times a year, not as much as I would have liked, I 
drove through Conway, Arkansas, and there was a new shopping 
mall going up or a new subdivision, a new auto dealership, 
because Conway is the kind of geographic center of the southern 
part of that shale, and the amount of opportunity for higher-
paying jobs with better benefits, better local schools, better 
services, not just in places like Conway but Greenbrier and 
Vilonia and Clinton and so many other communities, was amazing. 
So I think it is something of which we should be proud and 
something which we should try to promote and harness.
    Which brings me to the points that you were talking about 
earlier, Dr. Zycher, about Saudi Arabia and OPEC and Saudi 
Arabia being the swing producer. You said that it is not really 
the swing producer in the same kind of way it was, say, in the 
1980s. Could you elaborate on that a little bit, and also maybe 
touch on the market decisions they have made over the last 12 
to 14 months to keep output elevated despite declining prices?
    Mr. Zycher. Sure. If you reflect back on Saudi behavior in 
the 1980s, Saudi production capacity, if I remember the data 
correctly, was something on the order of 11 to 12 million 
barrels per day, and the effort to prop prices up around $36 in 
nominal dollars per barrel back then led the Saudis to almost 
monotonically during the first half of the 1980s reduce their 
production from something like 11 million barrels a day down to 
3.5 million barrels a day. This was the direct result of the 
Reagan administration decision to de-control domestic oil 
prices, thereby introducing competition, both domestically and 
internationally, into the world market.
    At the point when the Saudis discovered that the cost to 
them of maintaining a $36 price by reducing their own 
production down to 3.5 million barrels a day, they decided at 
that point--and I think it was 1986--to increase production and 
let prices find their market level. And prices, you may recall, 
collapsed in 1986, I believe it was, from something like $36 
per barrel to less than $10 per barrel over the course of 
something like 8 months. I cannot quite remember.
    Saudi behavior has never been the same since. They have 
been willing to prop up prices to a degree simply to maintain 
revenues. They do want to maintain their market shares. At the 
same time, Saudi incentives are to increase revenues but to 
reduce revenues to some of their rivals, the Iranians in 
particular, and those goals are inconsistent. And so Saudi 
policy since the 1980s, as it has evolved into the present day, 
has been somewhat schizophrenic. And even apart from that, the 
Saudi share of the market is a good deal smaller than it was in 
the 1980s, and their ability to control prices is a good deal 
more circumscribed than it was back then.
    Senator Cotton. And as they made the decision to keep 
output elevated over the last year, I think that is part 
because they realize they no longer have such total market 
control given the ingenuity of American oil and gas producers.
    Mr. Chairman, if I could just have one extra moment for Mr. 
Muncrief?
    Chairman Shelby. You go ahead.
    Senator Cotton. I hear what you say about job losses in the 
industry. We have seen it in Arkansas as well, both in the 
Fayetteville Shale and the Smackover field in south Arkansas. 
But at the same time, I have read repeated reports of the 
expected break-even price for many shale productions going from 
85 down to 70, in some places now it is even below 50. Can you 
tell us what your experience is on break-even prices in 
industry and also what you think the decision--the way that has 
played into the Saudis' decisions?
    Mr. Muncrief. I do think you are seeing a reduction in the 
break-even prices, and it is driven by several things.
    Number one is it is a supply chain. With this drop of a 
thousand rigs, that has been very, very impactful. But within 
the supply chain, you are seeing a lot of inefficiencies driven 
out, and you are also seeing renegotiations of costs of goods 
and services.
    The second thing is that most producers are now going to 
their very best acreage. They are going to the core of their 
acreage so that the can make every dollar of investment go 
further and can compete, and, live to fight another day. And I 
think that is the issue with most producers, and that is why 
you are seeing that break-even cost trickle down.
    Senator Cotton. And as American producers innovate, that 
means foreign producers have less and less control over the 
international markets.
    Mr. Muncrief. Well, we have talked about this additional 4 
to 5 million barrels a day that we have seen on the crude oil 
side over the last 5 or 6 years, and I do think that foreign 
influence has diminished some.
    The one thing that could be troublesome--it goes back to a 
question of Senator Moran's a while ago--is the stability in 
the world. You know, if you think about a worst-case scenario 
it would be where you have a supply disruption at the world 
level. It could be Saudi, it could be Russia, it could be one 
of the large producers. And suddenly we are short, and yet here 
is a U.S. producer: you are hamstrung because you cannot up 
your production because you cannot export and you cannot get 
any more through the refineries.
    Senator Cotton. Thank you all for the very informative 
testimony.
    Chairman Shelby. Senator Brown has a comment.
    Senator Brown. Mr. Chairman, just a real brief comment. In 
light of Mr. Gerard's trying to answer questions fully from 
Committee Members, I just want to point out that there have 
been five witnesses on one side of this issue, counting Senator 
Hoeven and Senator Murkowski, and one on the other. And I just 
would hope that our colleagues would show a little respect to 
Mr. Gerard and let him speak and get at least a little bit of 
the other side into this hearing.
    Senator Scott. I hope that is respect on both sides, from 
as well as to.
    Chairman Shelby. Thank you.
    Senator Menendez.
    Senator Menendez. Mr. Chairman, this hearing comes at an 
interesting time, during a week in Congress where it is 
considering a transportation bill on which we have gone to 
great pains to avoid a real conversation about user fees that 
traditionally pay for our infrastructure or long-term financing 
such as through getting foreign profits back to the United 
States with repatriation. So we would rather fund our highways 
and bridges with aviation security fees, with taxes on 
mortgages, with a fire sale on Strategic Petroleum Reserves, or 
hiring private sector mercenaries to shake down American 
citizens. Anything that would prevent a real conversation about 
long-term, sustainable infrastructure funding.
    But it seems to me that sensibility does not seem to extend 
to our crude oil export policy. You know, I hear different 
things here, but a study out yesterday indicated, predicted 
that U.S. consumers would see price increases of 8 to 14 cents 
per gallon if the export ban is ended. Now, that will not be in 
the form of user fees to repair bridges or roads. Those are 
going to be dollars and cents coming out of pockets of 
taxpayers in this country into some of the most profitable 
corporations on the planet.
    And while some have argued to the contrary that ending the 
ban is going to decrease prices for consumers, I must say that 
in my 23 years in the Congress, this will be the first time 
that the oil industry will be lobbying for something that will 
ostensibly lower their prices and their profits. So that is a 
pretty interesting perspective as well.
    You know, I look at the American Petroleum Institute report 
that argued, ``Producing quality petroleum products and raw 
materials in America enhances our national energy and economic 
security,'' and I think that is the right approach, making 
investments here at home in our refineries and making sure that 
we hold the key to our own energy security rather than 
outsourcing it around the world.
    I have spent a lot of time when I am jogging on the 
treadmill--it does not look like it, but I actually do--looking 
at TV, and there are ads that keep coming on with this very 
nice young lady saying, ``Energy independence for America.''
    Well, the messaging to the average American is that energy 
independence for America suggests that we are using our natural 
resources, particularly those on Federal lands and waters, to 
benefit America, to produce energy for America so that we are 
not dependent for our energy needs on other countries. And 
there are millions of dollars being spent to send that message, 
but that belies the reality of certain things, so I want to get 
to that to understand some of this.
    Ms. Flournoy, isn't oil a global market?
    Ms. Flournoy. Yes, sir.
    Senator Menendez. OK. So if it is a global market, as most 
global markets work, basically let us assume that we lift the 
ban and American companies can sell oil abroad, both those 
created in Federal land and water, which is supposed to be for 
the Nation's patrimony and for which there is a big debate as 
to how much are actually paid for that patrimony, and those 
that are not on Federal land and water. Ultimately, that is 
going to go to whoever is willing to pay the highest price in 
the marketplace, isn't it?
    Ms. Flournoy. Well, it is a globally traded commodity, but 
I think our additional production could both help to reduce 
price and also create jobs here.
    Senator Menendez. But that oil is not going to stay here in 
the United States to help American consumers.
    Ms. Flournoy. It may or may not, depending on the market.
    Senator Menendez. Well, the reality is that there are 
voracious appetites in the world--and we have seen it in China, 
in Japan, in South Korea, and Iran has been raised here several 
times. The bottom line is that they want to get oil they need 
desperately.
    So I know of no national security policies, at least at 
this point in time, that directs specifically oil to a certain 
location, so the suggestion that national security is enhanced, 
there is a CRS report that just came out in May of this year, 
and it says, ``Since the decision to export U.S. crude oil will 
be based on commercial and economic considerations, not 
directed and controlled by the Federal Government, predicting 
and quantifying physical crude oil flows to a particular region 
in the world under a nonrestricted export scenario is difficult 
and subject to assumptions that may not be realized.''
    So we do not direct--because I oppose lifting the ban, but 
if you told me that as a national security opportunity, we 
could help our national security--let us say we wanted to keep 
the sanctions on Iran, and Japan and South Korea, our allies, 
needed oil, well, we could direct it to them, that might be an 
opportunity to consider. But that is not the marketplace as it 
is right now.
    Let me ask one final question. Mr. Gerard, I have seen a 
couple of--you represent, your union represents a large number 
of refineries in the country. I have seen a couple of 
refineries close in New Jersey, losing hundreds of jobs. Isn't 
it a fact that what we see is a constant reduction in refinery 
capacity versus creating the refinery capacity that could 
ultimately create greater assets here at home?
    Mr. Gerard. We have had a number of refinery closures, as I 
mentioned earlier, in the last several years. A large part of 
that was because of their inability to get access to the crude 
they needed for that refinery. While at the same time we have 
had other refineries, many of them on the east coast, who have 
rearranged their facilities so that they could process the 
crude more efficiently. And as a result of those refineries, we 
are now producing several millions of barrels more per day than 
we used to.
    The one point I was trying to make with Senator Heitkamp is 
that--two things: We are still importing 47 percent of our 
crude for this country from other countries. We are not energy 
self-sufficient yet. And that energy self-sufficiency, if we 
can get it the way you just talked about, that is going to 
reduce not just 7 or 8 or 10 or 12 cents per gallon for 
gasoline; that is going to reduce energy costs for energy-
intensive industries that are in the manufacturing sector, like 
tire, and rubber, like paper, like steel, like aluminum, and 
all those others. So it has a repercussion beyond the highway.
    And the issue of oil country tubular goods, part of what 
really frustrated me is that we have filed trade cases because 
of countries that are cheating on their exports of oil country 
tubular goods to America. We succeed in those cases, and a 
country like South Korea that does not sell one pound of oil 
country tubular goods in its own market is flooding our 
markets.
    So right now in the oil country tubular goods, because they 
play illegally--India, China, South Korea, and others--our 
domestic share of oil country tubular goods in the last 3 years 
has dropped down to 50 percent, which means the oil companies 
or the people selling the--wanting to buy the drill pipe do not 
give a damn if it is made in America or not, and as a result of 
that, we are losing our capacity. So we are not going to be 
able to have our national security if we cannot even generate 
the pipe that we need for pipelines or for oil country tubular 
drilling.
    So to answer your question, yes, refineries have closed, 
but it has not been because they are inefficient. It is because 
they could not access the crude they needed.
    Senator Menendez. Thank you, Mr. Chairman.
    Chairman Shelby. Thank you.
    Senator Scott.
    Senator Scott. Thank you, Mr. Chairman.
    Ms. Flournoy, like many Americans, I am deeply concerned 
about the recent nuclear weapons deal with Iran. There are a 
number of aspects of the deal that give me great concerns, from 
the embargo that is lifted on weapons in 5 years, the 
possibility of ballistic missiles in 8 years, the fact that at 
the end of the 10th year the build-out phase for a nuclear 
weapon is almost imminent and inevitable. The deal itself does 
very little to make me feel better that we are going in the 
right direction. But one specific area of the deal seems to be 
that we will allow Iran to sell around a million barrels of oil 
per day on the global market while the United States still has 
an export ban in place on our oil.
    This is particularly interesting when we see the fact that 
lifting Iran's oil export ban could produce as much as $25 
billion in revenue to Iran. Refusing to lift the U.S. crude 
export ban will continue to help prop up dangerous regimes 
around the world and stifle economic growth here at home.
    It is estimated that the lifting of the ban could add--our 
ban, that is--could add up to $1.8 trillion to the U.S. 
economy, lower gas prices by up to 12 cents per gallon, and 
support hundreds of thousands of good-paying jobs here at home.
    With this in mind, I have a couple questions. I will start 
with you, ma'am, and perhaps continue down the aisle here.
    How does Iran's ability to sell their oil in the global 
market harm America's strategic, diplomatic, and military 
efforts in places like Russia, Iraq, and Afghanistan?
    And the second question is: What terrorist organizations 
might Iran fund with these additional resources? And that 
second question I think is particularly important as we listen 
to the comments of the President's National Security Adviser, 
Susan Rice, when she was on Wolf Blitzer a few weeks ago. And 
to quote her, she said, ``We should expect that some portion of 
that money would go to the Iranian military and could 
potentially be used for the kinds of bad behavior that we have 
seen in the region up until now.''
    Ms. Flournoy. I think it is fair to say that as sanctions 
on Iran are lifted, the money that they are able to generate 
from oil sales and other economic activity internationally will 
go to both domestic needs and support for their military and 
their foreign policy goals around the region, many of which are 
at odds with our own. And so I think it is one of the reasons 
why it is very important to couple any pursuit of this deal 
with additional efforts to combat nefarious Iranian behavior, 
its destabilizing behavior around the region, and work closely 
with our Gulf allies and Israel to do that.
    But I think the broader issue is how much of the world's 
oil supply do we want to see coming from regimes that use 
energy as a weapon, like Russia, or have interests that are 
fundamentally counter to our own, like Iran. I think making 
sure that the U.S. can export its energy resources to be more 
of a player in the market to leverage our energy position in 
the pursuit of foreign policy, in pursuit of our national 
security objectives, is very important. Ensuring that other 
countries can diversify their sources of supply, particularly 
our allies, that Japan does not have to depend on Iran, that 
Europe does not have to depend on Russia, that will bolster our 
security long term, perhaps more than--as much or more than the 
notion of independence, which will be something that we can 
move toward, but likely never fully achieve.
    Senator Scott. Your comments seem to echo the comments when 
I was on the Energy Committee that we heard from the Minister 
of Energy for Lithuania, who suggested that just sending the 
signal that we were interested in exporting LNG could have a 
destabilizing effect around Europe, and Russia specifically, 
from an economic standpoint and provide real opportunities for 
us to move forward.
    Perhaps one question for Dr. Zycher. Does it make sense or 
any sense for the United States to continue to withhold our 
abundant oil resources from the global market which harms 
American job creation and economic growth while we lift 
sanctions on Iran to allow their economy access to the same 
global market?
    Mr. Zycher. Well, I have not thought through the link 
between allowing Iranian exports of crude oil while preventing 
U.S. exports of crude oil. It does seem quite counterintuitive. 
I think there are good reasons to reverse that juxtaposition.
    But there is no sound policy argument that I have ever 
heard or can conceive that would support the continuation of 
the export ban on U.S. crude oil. It is simply a distortion in 
the market that has the effect of reducing crude oil production 
here, increasing product prices for U.S. consumers, and to some 
degree that cannot be measured in advance, weakening the dollar 
and, therefore, making the U.S. economy in the aggregate 
smaller than otherwise would be the case.
    Senator Scott. Thank you.
    Thank you, Mr. Chairman.
    Chairman Shelby. Senator Donnelly.
    Senator Donnelly. Thank you, Mr. Chairman.
    You know, here is the conundrum: I am a strong supporter of 
American energy independence, of, Mr. Hamm, your efforts, and, 
Mr. Muncrief, your efforts. And I am a strong supporter of the 
refinery workers who are working to try to make a living and 
trying to feed their families, just like the steelworkers in 
northwest Indiana do every single day. And I am a strong 
supporter of my families who have to make choices between 
buying a gallon of gas or buying some clothes for their kids.
    We have had times where we were awash in oil in Indiana, 
and my families were paying $4.25 a gallon because of 14 
different explanations I received, and every one pointed at the 
other person.
    And so the question is: I want to have more energy 
produced. How do we do this in a way that keeps our refinery 
workers working? Mr. Muncrief, any comment on that?
    Mr. Muncrief. Well, I think the refinery jobs are very 
stable jobs, quite honestly, and while my company represents 
the upstream industry, the exploration and production, and we 
would love more refinery workers. That means there is more 
refining capacity built here in the U.S. And those are stable 
jobs.
    I know that there have been some references to the 
Philadelphia refinery, and I recall the day that our company, 
when I was working at a different company, our company 
celebrated the success of keeping that Philadelphia refinery 
open because we were able to successfully get Bakken crude oil 
to that refinery.
    Senator Donnelly. Mr. Gerard, how do we----
    Mr. Gerard. You are welcome.
    Mr. Muncrief. You are as well.
    Senator Donnelly. How do we make sure we keep the refinery 
workers working, too? If we have all this product, it does not 
seem to make much sense to have it go everywhere else but into 
the American refineries.
    Mr. Gerard. I think the question that Senator Menendez 
asked and the point he made is really real. If you are in a so-
called open market, the country that is willing to pay the 
highest price is going to get the energy. And the reality is 
that we need to have low-cost energy in America. We are all for 
energy expansion. We are all for exporting raw materials. That 
is what we need. But our position is America first. And if we 
are going to have a strong industrial base in America--we seem 
to be always talking about number of cents per gallon to put in 
a car. That is important, and I do not minimize that in any 
way. But more important is the low-cost energy circumstance 
that America takes care of itself first, has low-cost energy to 
grow its manufacturing base, and to expand, because we have 
left in our country, we have got high-energy manufacturing--
steel, aluminum, copper, glass, paper, tire and rubber. They 
are all energy consumers.
    Senator Donnelly. My State was the number one manufacturing 
State per capita in the country.
    Mr. Gerard. So our position is we will export LNG--once we 
take care of America first. We will export finished materials--
once we take care of America first. We need to modernize our 
refineries. As I said in my testimony, we have got refineries 
that are realigning themselves for the kind of crude they can 
get. We need to expand the infrastructure to get crude to those 
refineries. We need to do it in a safe, responsible way. We 
need to do all of those things. If we want to export raw crude, 
we are going to add to the carbon footprint. If we are going to 
export raw crude, whoever is going to want to pay the highest 
price is going to get it, like Senator Menendez said.
    Our position has to be America first. And so I congratulate 
Mr. Muncrief for getting his Bakken crude to Philadelphia 
Energy Solutions. But you know what? At Philadelphia Energy 
Solutions, they spent $300 million already modernizing that 
refinery since they got it. Those are real jobs. Those are 
people that would have been out. They are now talking about an 
energy hub in the Philadelphia area, which before was unheard 
of.
    Senator Donnelly. Well, on my end, what I want to do is see 
when the mills in my State are making steel, that the energy it 
is made with is American energy.
    Mr. Gerard. Well, Senator, let me just say that one of the 
things, one of our real problems with this is for some reason 
there is an aversion to putting America first. The point that I 
made about oil country tubular goods, we filed a case against 
South Korea. We won that case. You know what South Korea did? 
The South Korean Government said, ``Do not worry about it.'' 
They have increased their exports after we won our trade case. 
Our mills are closed--not because there is lack of drilling, 
but because they cannot sell because the Indians and the South 
Koreans are dumping into our market. And it will take 3 more 
years of having to put up with that malarkey.
    So you want to talk about national security? National 
security in the raw material that we use to make the products 
that we need to be secure, if we start exporting raw crude, it 
will be too expensive, and we will lose that part of the 
industry as well.
    Senator Donnelly. Well, I would love to see American energy 
going everywhere in the world, but I want to make sure that our 
workers are working and that family that lives down the block 
from me has a chance--as I am sure you do, too, Mr. Muncrief--
to have a good job where they can get a good salary, that they 
can go into the mill and know that their product is the most 
competitive in the world, and that it is not being dumped 
against by every other country.
    Mr. Gerard. There is nothing wrong with putting America 
first on energy.
    Senator Donnelly. That is true.
    Thank you, Mr. Chairman.
    Chairman Shelby. Thank you.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    The ban on selling crude oil has been in place for more 
than four decades, so it is a big deal. So if we are going to 
change it, I want to know what effect it is going to have on 
jobs, on gas prices, and on the environment, both in 
Massachusetts and across the country.
    So, Mr. Gerard, if I could, I just want to start with the 
jobs question. You represent 30,000 U.S. workers in the oil 
sector who depend, whose jobs depend on crude oil that is kept 
within the country. What happens to those jobs if we lift this 
ban?
    Mr. Gerard. The largest refinery in America is not BP, it 
is not Shell, it is not Exxon. It is Valero. Valero is the 
largest refiner. They are an independent refiner. Many of their 
refineries would be put at risk if they had to compete with 
whoever was willing to pay the highest price for that fuel--
that crude, I should say. And we all know that who is going to 
want to pay the highest price is the South Koreans, the 
Indians, and the Chinese.
    Senator Warren. So what happens to those jobs?
    Mr. Gerard. They will be gone.
    Senator Warren. All right. So gas prices is the second 
question I want to ask about. There is a lot of mixed data 
about this. Senator Menendez started here. Some studies, 
particularly those that have been paid for by the oil industry, 
suggest that lifting the ban could reduce gas prices. But the 
Energy Information Administration, which puts out all the 
official energy data, says that 68 percent of a customer's cost 
of gasoline is directly attributable to the refiner's crude oil 
cost. So if the cost of crude goes up, gas prices I presume 
could go up, too.
    You know, we are not going to settle this question today, 
but, Mr. Gerard, considering how hard Congress is working to 
try to fund the highway construction bill without raising gas 
taxes by a single penny and to keep prices at the pump low, 
does it make sense for us to lift the ban without some 
contingency plan in place if prices should jump?
    Mr. Gerard. No, it does not make sense. The study that was 
just released yesterday by the CRUDE Coalition shows that, in 
some studies, people are underreporting what would happen with 
the cost of gasoline for automobiles. And, in fact, the agency 
says it would be closer to 13 to 14 cents a gallon.
    My concern, quite frankly, is I see the gas at the little 
pump not far from--I see it go up and down every couple of 
weeks or months. My concern is, yes, that is bad, and it is bad 
for families, and families over the long term are going to use 
their money, as Senator Donnelly said, for clothes or for 
gasoline in the car. But I am also concerned about what it does 
to our industrial manufacturing base.
    Senator Warren. I hear you. So we have got both. I just 
want to make sure I get all three of these covered. So we have 
got jobs; we have got price at the pump and the effect that has 
on the ability to make energy payments everywhere so that we 
can keep our manufacturing up here. But I also want to go to a 
third one, and that is, the Government Accountability Office 
has highlighted research estimating that lifting the ban would 
increase carbon dioxide emissions worldwide by almost 22 
million metric tons per year. So for anyone worried about 
climate change, that one seems like a big deal.
    Dr. Zycher, I presume, given your views on climate change, 
that you are not particularly concerned about this. I saw that 
in April of 2014 you said, and I want to quote here, 
``Temperatures have been warming in fits and starts since the 
end of the little ice age, and no one really knows the extent 
to which that long-term trend is caused by man. Policies 
designed to reduce emissions would have very little impact in 
this century.''
    I take it that is still your position?
    Mr. Zycher. Yeah, absolutely.
    Senator Warren. All right. Well, you know, it would be nice 
to be able to ask one of the many, many experts who actually do 
believe that manmade climate change is a problem about this, 
but, unfortunately, we do not have any of those people today on 
the panel. So if you think that climate change is real, is 
caused by humans, and that people can and should do something 
about it, then lifting this export ban without addressing these 
environmental consequences sounds pretty dangerous.
    You know, there is a lot of speculation about the impact of 
lifting the ban, but the most obvious effect would be to 
generate enormous profits for certain big oil companies, and 
that is a good reason to be skeptical of study after study and 
expert after expert who are funded by big oil to sell this 
deal. We may need changes in the oil export ban, but any 
changes we make should be based on independent data and should 
address legitimate economic and environmental concerns. Big oil 
may not like that, but the Massachusetts voters did not send me 
here to work for them.
    Thank you, Mr. Chairman.
    Mr. Gerard. Madam Senator----
    Chairman Shelby. Did you want to respond?
    Mr. Zycher. I did not really hear a question, Senator 
Warren, but----
    Senator Warren. The question was--I read a quote that you 
said before about your views about climate change. I asked if 
those are still your views. I do not understand why we do not 
have an expert here who believes that climate change is 
manmade. I think there are----
    Mr. Zycher. Well, I am not quite sure----
    Chairman Shelby. Senator Warren, thank you. I am going to--
--
    Mr. Zycher. I am not quite sure what you mean by that. If 
the question----
    Chairman Shelby. ----give Dr. Zycher a chance to respond.
    Mr. Zycher. I am sorry. If the question is do anthropogenic 
emissions of greenhouse gases have an effect greater than zero, 
the answer is yes. You had mentioned a number with respect to 
the export ban on crude oil--what was it?--22 million tons, 
metric tons.
    Senator Warren. The Government Accountability Office has 
highlighted research estimating that lifting the ban would 
increase carbon dioxide emissions worldwide by almost 22 
million metric tons per year.
    Mr. Zycher. All right. Very good. Twenty-two million metric 
tons a year. Global greenhouse gas emissions are about 38 
billion metric tons per year, CO2 equivalent. So we are talking 
here about an effect, if I can do the math in my head, of 
something like one one-thousandth of 1 percent. The effect on 
temperatures in the year 2100 of lifting the export ban on 
crude oil would be effectively zero. It would certainly not be 
measurable given the standard deviation of the surface 
temperature record, which is about a tenth of a degree per 
year.
    If you look more generally at the Obama administration 
Climate Action Plan of reducing U.S. emissions by 17 percent 
between now and the year 2020, add in the agreement--or the 
pseudo-agreement with the Chinese for another 10-percent cut in 
U.S. emissions by 2025, we are talking about fifteen-one-
thousandths of a degree. And so in the context of this hearing, 
Senator, the effect of, the impact of ending the export ban or 
eliminating the export ban on crude oil in terms of climate 
change issues, which is one of the issues that you have raised, 
is literally zero. And so I really would not emphasize that 
topic very much, and----
    Senator Warren. Mr. Zycher, I get that you would not 
emphasize that topic. I have seen your views on climate change. 
But I would like to hear from some other people who have other 
views about climate change and have them go over the data. I 
would like not to just have one expert who has said that he 
does not believe in climate change.
    Mr. Zycher. That is not what I said.
    Senator Warren. Well, I will read it again, that 
``Temperatures have been warming in fits and starts since the 
end of the little ice age, and no one really knows the extent 
to which that long-term trend is caused by man. Policies 
designed to reduce emissions would have very little impact in 
this century.''
    I would just like to hear from somebody else who also works 
in the climate area.
    Mr. Zycher. Next time you have EPA Administrator Gina 
McCarthy in front of you, ask her how much these policies would 
affect----
    Senator Warren. I would be glad to do that if we invited 
people to hearings on oil exports that also included people who 
are concerned about climate change.
    Chairman Shelby. Ms. Flournoy.
    Ms. Flournoy. Senator, if I may, I am someone who believes 
the overwhelming scientific evidence suggests that climate 
change is manmade. But I also believe that, you know, to the--
if we do lift the export ban on oil, that needs to be 
accompanied by a very serious set of policies that would more 
directly affect climate change, such as promoting natural gas 
usage and export, increasing our energy efficiency, investing 
in low carbon solutions to our energy needs at home and abroad. 
So I think this has to be nested in a broader set of policies 
that do address the issues that you are talking about.
    Chairman Shelby. Mr. Gerard, do you have a comment?
    Mr. Gerard. Very briefly. I am also one who believes that 
human activity has contributed to climate change, and I am not 
sure what Dr. Zycher is getting at. But, incrementally, keeping 
the crude oil here and doing it under our environmental 
standards is a guarantee that it is going to be better than 
exporting it overseas, that you have got to ship it over there, 
bring it back, and I can guarantee you that the standards in 
China, the standards in South Korea, the standards in Vietnam, 
the standards in India are not going to be American standards, 
and we are going to contribute more incrementally to the 
greenhouse gas problem, and it is going to, again, have an 
impact on manufacturing in this country, which needs to be 
propped up by good, sound energy policy.
    Chairman Shelby. Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chair, and thank 
you all for your testimony. I want to explore a different 
aspect of this.
    As oil has been produced in the Bakken area, we have had a 
lot of oil trains coming down the Columbia Gorge, both on the 
Washington side of the gorge and the Oregon side of the gorge. 
We have a lot of towns that are bisected by rail lines, a lot 
of concern about the possibility of explosions from oil trains. 
We have two substantial projects under consideration:
    One is Port Westward, which is where a lot of oil is going 
to right now, and then it is exported by barge both to Cherry 
Point up in the Puget Sound and down to the Bay area.
    We also have a proposal for Vancouver, Washington, which is 
across the river from the major city in Oregon--Portland, 
Oregon--that would basically be able to accommodate about four 
unit trains a day, 400 cars a day. That is 400 coming in and 
400 coming out. So a lot of concern there about the impact of 
this oil.
    Right now, this vision is all within getting oil to U.S. 
refineries and Canadian refineries, which are currently 
exempted, if you will, from the export ban. But what happens--
this is a question Oregonians would be very concerned about. 
What happens in a situation where the U.S. exports oil, lifting 
this ban? Would it be logical that there would be a massive--a 
further increase of oil being exported down through the 
Columbia Gorge? Anyone who feels like they have some insight on 
this is welcome to address it.
    Mr. Muncrief. You know, I do not think there is going to be 
a rapid increase through the Columbia Gorge of rail traffic 
carrying crude oil.
    Senator Merkley. And your thinking, your analysis? See, we 
have had a massive increase in recent years as Bakken has grown 
because it is the easiest way to get the oil to key refineries. 
So we have already seen a direct proportional relationship, and 
so if it is possible to export overseas as well as just to 
Puget Sound and the Bay area, the first impulse is thinking it 
would create a huge incentive to ship additional oil down the 
Columbia Gorge. But your thinking is different. Would you just 
explain it?
    Mr. Muncrief. Right. Senator, I think most of your export 
facilities will actually be located in the gulf coast region 
where you have more of your refining capacity there, as well as 
a greater network of pipelines.
    Senator Merkley. So one of the questions then becomes if 
the oil volume does not increase down the Columbia and that oil 
that does come down, some of it will be exported overseas in a 
global market, then that means, going to your point, Mr. 
Gerard, a challenge for the U.S. refineries in gaining access, 
if you will, to that oil.
    Mr. Gerard. It is clear that where the oil is being 
produced has to be transformed, transmitted to be transformed 
to the refineries that are going to transform it. And, again, 
if it is going to be easier for me to send Bakken crude at a 
higher price to China, then I am going to take it to some port 
and get it sent. And the transmission cost is going to be a 
heck of a lot cheaper than taking that Bakken crude and sending 
it to Philadelphia or sending it to a Valero refinery on the 
gulf coast. So those connections of the dots make us very 
concerned.
    I go back to the point I made when I started my testimony. 
Close to 10,000 workers, many of whom work in the refinery 
sector, have signed a letter or a petition to this Committee 
asking them not to lift the crude. In my view, the individual 
who knows most about how it is going to affect that refinery 
are the people working in it.
    Senator Merkley. I think there is a cautionary tale in 
looking at log exports from the United States. We used to have 
a structure of a vertically integrated industry from the 
timberlands to the sawmills, and the logs were essentially 
processed in the United States into lumber. That has changed. 
The whole structure of the market has changed, and some of the 
incentives that encouraged the old structure no longer have an 
impact. I will not go into all those details.
    But I was just looking at a statistic that over a 3-year 
period from 2007 to 2010, log exports to China increased 23-
fold. And if you go down the Columbia River and you look at the 
log decks or you go over the Oregon coast and you look at the 
log decks in Coos Bay, they are massive. We are exporting an 
incredible number of raw logs, and kind of think what this does 
to the U.S. That means we are Third World Nation. We are 
exporting the raw resources overseas to be manufactured and 
then imported back, and that means far fewer jobs in the United 
States.
    I just think we should ponder that a little bit as we 
wrestle with this issue as to whether the same thing could 
happen to our refineries.
    Mr. Gerard. Senator Merkley, I am absolutely confident that 
I could come back here in a few years, and you will be right. 
The fact is that if we are exporting the raw material, we are 
going to then import the finished product. And we have seen 
what that has done in our lumber industry. We export raw logs, 
and we bring back plywood from China that we are not sure how 
it has been glued together. And someone earlier made the 
comment--I missed commenting on it--about bread and wheat. We 
are not going to export all of our wheat so that we cannot 
afford our bread. We are going to export enough wheat that we 
can afford bread. So the same thing should apply with logs; the 
same thing should apply with crude oil. Take care of our 
industries first, make sure that we have a low-cost energy 
economy, a low-carbon energy economy, and then what we can 
spare, we can spare. We can export finished product and bring 
value-added back and create jobs and, again, strengthen our 
manufacturing base. We represent 63 refineries and 30,000 
workers, and more than 10,000 of them have said, ``Do not 
export our crude. You are putting our jobs at risk.'' That is 
the strongest voice in my head.
    Senator Merkley. Thank you.
    Thank you, Mr. Chairman.
    Chairman Shelby. I want to just thank the panel for 
participating here today. This is a very important hearing. We 
have not had one like this in a long, long time. And if you 
believe in markets--you either do or you do not. I do. And let 
us----
    Mr. Gerard. I go to the farmers' market. That is where I 
trust them.
    Chairman Shelby. Well, I think you have to think of all 
markets. Oil and gas is a market in the world. But thank you 
very much.
    [Whereupon, at 11:40 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
                 PREPARED STATEMENT OF MICHELE FLOURNOY
   Chief Executive Officer and Cofounder, Center for a New American 
                                Security
                             July 28, 2015
    Over the last several years, the unconventional energy revolution 
in the United States has brought about a new era of energy abundance in 
our country. Since 2008, the United States has expanded its oil 
production by almost 90 percent--from 5 million barrels per day in 2008 
to over 9 million barrels per day today. In 2013, the United States 
surpassed Saudi Arabia to become the largest producer of petroleum 
liquids, which includes crude oil, in the world, and the United States 
is expected to be the greatest source of global oil supply growth 
through 2020. At the same time, our net oil imports fell from 60 
percent to 26 percent of supply over the last decade, and are estimated 
to fall to 21 percent by next year.
    Remarkably, after decades of concern about the scarcity of American 
energy supplies, we now find ourselves in an era of energy plenty. This 
has enabled us to become a major exporter of refined petroleum products 
and a powerhouse in the production of energy-intensive petrochemicals 
and in industrial manufacturing. And we are now on the cusp of 
exporting liquefied natural gas.
    This American energy revolution has had profound and positive 
economic benefits for our country, increasing our GDP, helping to drive 
our economic recovery, improving our balance of trade, reinforcing the 
continued primacy of the U.S. dollar, and helping to stabilize the 
global energy market in a period of unprecedented supply disruptions.
    To date, however, United States has not become a major exporter of 
crude oil. This is not for Jack of potential and available supplies. 
Rather, it is due to antiquated laws that restrict the export of this 
commodity-laws that were put in place in response to the OPEC oil 
embargo of the 1970s. Today, these crude oil export restrictions create 
distortions in the domestic oil market and constrain U.S. oil 
production growth. Not only do they make energy-driven economic growth 
less than what it could be, they also hamper the ability of U.S. 
national security leaders to reap some of the strategic benefits 
presented by the American energy revolution. Today, we have an 
extraordinary opportunity to enhance both our economic vitality and our 
national security by lifting the ban on American crude oil exports.
National Security Implications of Lifting the Crude Oil Export Ban
    Lifting oil export restrictions will yield a variety of security 
dividends to the United States. First and foremost, allowing crude 
exports would further strengthen our economy--the foundation of our 
national security. Lifting the ban would result in an increase in U.S. 
oil production (from approximately 110,000 barrels per day to 2.8 
million barrels per day by 2020), a decrease in domestic refined 
product prices, further growth in our GDP, and an improved trade 
balance. Shoring up the United States' economic position would, in 
turn, strengthen our ability to play a much needed leadership role in 
international security and economic affairs. And we should not 
underestimate the degree to which becoming an oil exporter could impact 
perceptions of the United States as a vital global power, helping to 
discredit erroneous narratives of U.S. decline.
    Stimulating U.S. oil production growth also expands energy security 
by increasing oil supply to the global market from a reliable, stable 
producer. When more supply originates from producers who are not 
vulnerable to political instability, conflict, or threats to their 
energy infrastructure, the overall market becomes more stable. In 
addition, oil supplies coming from the United States would not have to 
transit vulnerable choke points like the Strait of Hormuz or maritime 
hot spots like the East and South China Seas. Lifting the ban would 
also enable U.S. oil producers to be more responsive to market signals 
and would give U.S. policymakers more options to use the Strategic 
Petroleum Reserve in ways that could counteract hostile attempts by 
foreign producers to manipulate prices. All in all, this would reduce 
risk to American consumers.
    In addition, allowing U.S. oil exports would enhance the energy 
security of key U.S. partners, from Poland to India to Japan. Indeed, 
our closest allies in Europe and Northeast Asia would welcome--and have 
asked for--the unrestricted export of U.S. crude oil. European 
countries depend on Russia, which has amply demonstrated its 
willingness to use energy flows as a tool of coercion, for nearly 30 
percent of their oil supplies, and they are eager to diversify their 
sources of supply. Similarly, East Asian allies like Japan, which 
imports more than 80 percent of its oil from the volatile Middle East, 
would welcome other, more stable sources of supply. U.S. oil exports 
would enhance their energy security by expanding the diversity of their 
oil supply pool and contributing to more efficient global oil markets. 
This is good for their economic growth as well as our own. And when our 
closest allies are stronger economically, they are more able to partner 
with us to address shared security threats and challenges regionally 
and globally.
    Today, the United States is the only advanced country that bans 
crude oil exports. Lifting the oil export ban will send the right 
signal to international trading partners that the United States is 
strongly committed to free trade. This would be in keeping with our WTO 
commitments and would also support our ability to win any future trade 
dispute with another Nation that may withhold its natural resources 
from the market. Shunning protectionism is a particularly important 
message to send at time when U.S. negotiators are putting the final 
touches on the Trans-Pacific Partnership--the most consequential free 
trade deal for the United States in a generation--and exploring a 
similar free trade agreement (TTIP) with our European allies.
    Another significant security benefit associated with lifting oil 
export restrictions is the greater flexibility this will give us to 
impose or expand energy sanctions in the future. Sanctions are a 
critical national security tool alongside diplomacy and military 
measures in dealing with many of the major security challenges that 
confront the United States today, from Iran's illicit nuclear 
enrichment to Russia's destabilization of eastern Ukraine. But imposing 
sanctions that take oil off the market is a viable policy only if there 
are adequate alternative oil supplies. The United States should 
encourage new supplies of oil to enter the market if it wants to 
sustain and enhance the ability to use oil sanctions as an element of 
statecraft in the future. Removing the ban on U.S. oil exports will 
help to accomplish just that by stimulating additional oil supplies.
    In sum, by lifting the ban on U.S. exports of crude oil, U.S. 
policymakers have an extraordinary opportunity to enhance not only our 
economic vitality but also our national security. We can reap 
substantial geopolitical advantages by playing a larger role in the 
global energy market and directly supporting the energy security of our 
allies. Enabling U.S. oil exports would strengthen our geopolitical 
influence, leadership, and leverage with allies and adversaries alike. 
It would help create a more stable and flexible global energy market 
that would reduce price volatility and thereby support our own economic 
growth and that of our most important trading partners. And it would 
bolster U.S. credibility and leadership in the pursuit of free trade 
and open markets around the world. Pursued alongside responsible 
policies to promote natural gas exports, greater energy efficiency, and 
low-carbon fuel sources at home and abroad, lifting the crude oil 
export ban simply makes sense economically and strategically.
                                 ______
                                 
                 PREPARED STATEMENT OF RICHARD MUNCRIEF
           President and Chief Executive Officer, WPX Energy
                             July 28, 2015
    Chairman Richard Shelby, Ranking Member Brown, and Members of the 
Committee, my name is Rick Muncrief. I am the president and CEO of WPX 
Energy. Thank you for the opportunity to appear for the Committee 
today. It is an absolute honor to be here.
    WPX Energy is a domestic oil and gas producer based in Tulsa, 
Oklahoma. We employ approximately 1,000 people across our operations. I 
joined the company a little more than a year ago. By way of background, 
I am a petroleum engineer and have worked in the Midcontinent and Rocky 
Mountain regions for most of my career, including 27 years with 
ConocoPhillips, Burlington Resources, and their predecessors. Before 
joining WPX, I was at Continental Resources, where I served as senior 
vice president of operations and resource development.
    Four generations of my family have been involved in oil and gas 
production, including my children. I have worked and lived in towns 
such as Elk City, Oklahoma; Farmington, New Mexico; Amarillo, Texas; 
and Billings, Montana. I know firsthand that these communities are the 
backbone of our Nation's energy engine.
    WPX holds premier positions in the western United States. We 
currently operate in North Dakota's Williston Basin, Colorado's 
Piceance Basin, and New Mexico's San Juan Basin. When our company 
closes on a recently announced $2.75 billion acquisition, we will also 
operate in Texas in the oil-rich Permian Basin.
    At WPX, we have a tremendous economic impact in the communities 
where we operate. We:

    Contract with more than 1,400 vendors and service providers

    Generated $124 million last year in tax revenue for State 
        and local governments

    Invest more than $700 million in local drilling and 
        development
Why We Support Lifting the Crude Oil Export Ban
    WPX Energy strongly supports lifting the crude oil export ban, and 
applauds the leadership and legislative efforts of Senators Murkowski 
and Heitkamp to do so. The American Crude Oil Export Equality Act (S. 
1372) and the Energy Supply and Distribution Act (S. 1312) would 
provide improved access to world markets for energy producers.
    Today I will lay out three primary reasons our company advocates 
lifting the crude export ban: First, lifting the ban would have an 
important positive impact on economic development and job growth. 
Second, given the structure of world energy markets, this policy change 
would increase the supply of oil on world markets resulting in less 
volatility in those markets and, ultimately, lower prices at the pump 
for American consumers. And third, our country's national security 
would be bolstered and our ties to our allies would be strengthened if 
crude oil exports were permitted.
Increasing Employment and Expanding Economic Development
    If the crude oil export ban were lifted, the positive impact of 
economic development and job growth would be significant. In fact, the 
oil and gas industry supports 9.8 million jobs in the U.S. alone with a 
ripple effect across the economy. \1\ For every new oil and gas job 
created, three jobs are created in the supply chain and six are created 
economywide. \2\ This ripple effect impacts gross domestic product 
(GDP) as well. Every dollar created in our sector generates two dollars 
in the supply chain; overall our industry represents 8 percent of our 
GDP. \3\
---------------------------------------------------------------------------
     \1\ Price Waterhouse Cooper, ``Economic Impacts of the Oil and 
Natural Gas Industry on the U.S. Economy in 2011'', pp.6-7, (2013) at 
http://www.api.org//media/Files/Policy/Jobs/
Economic_impacts_Ong_2011.pdf.
     \2\ IHS Inc., ``U.S. Crude Oil Export Decision: Assessing the 
Impact of the Export Ban and Free Trade on the U.S. Economy'', in IHS 
Energy/Economic Report, KF-1 (2014) at https://www.ihs.com/info/0514/
crude-oil.html (last visited Mar. 16, 2015) [hereinafter IHS study], 
p.5.
     \3\ Price Waterhouse Cooper, ``Economic Impacts of the Oil and 
Natural Gas Industry on the U.S. Economy in 2011'', pp.6-7, (2013) at 
http://www.api.org//media/Files/Policy/Jobs/
Economic_impacts_Ong_2011.pdf.
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    We believe strongly that American energy companies should have the 
opportunity to compete in global markets--just as thousands of other 
companies do in every other sector of our economy. The current policy 
handicaps American companies and consumers by limiting markets and 
stifling opportunities.
    I have personally witnessed the booms and busts in our industry. I 
have also seen monumental advances in technology that are allowing us 
to accomplish more now than I ever would have imagined in my career.
    This restrictive energy policy that is tied to the past worked back 
in the 1970s but it doesn't work now. This is a critical hour where we 
have the opportunity to change the policy so that it matches America's 
power, capacity, and capability to produce record-setting levels of 
energy.
    Our industry has overcome virtually every technical challenge, 
allowing us to safely develop our Nation's energy resources. Today, WPX 
is drilling two miles deep and then up to three miles across to limit 
our activity on the surface of the land. In one of our basins, we have 
been able to reduce the acreage we need for drilling by 75 percent by 
drilling 20--or 30 wells--from the same pad. We also recycle water in 
many of our operations by re-using it again and again to drill and 
complete new wells. We have re-used some water for as long as 5 years.
    For WPX, and many of our counterparts, our growth is restricted by 
the ban on crude oil exports. Restricting domestic energy producers 
like WPX from competing in the global market is restricting jobs and 
economic growth that goes far beyond our own industry. As global 
markets put a stranglehold on domestic production, many energy 
producers have no choice but to reduce their rig count.
    Consider these facts:

    The U.S. rig count has dropped by 56 percent just since 
        last November. \4\
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     \4\ Baker Hughes Rig Count Overview and Summary Count, Comparing 
Rig Count From November 21, 2014, to July 10, 2015. See also http://
phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview.

    Taking just one rig off-line results in the loss of 120 
        direct and indirect jobs. \5\
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     \5\ Estimate by the Domestic Energy Producers Alliance.

    Nearly 60 percent of WPX's operations are on federally owned or 
tribal lands. In 2014 and so far in 2015, WPX has reported and paid 
more than $202 million to tribal entities for oil and gas royalties. 
The communities where we operate rely on the energy industry to support 
their local infrastructure, education, social and medical programs and 
the decreased rig counts have very real impacts on these areas.
    Because companies like ours are such economic engines, lifting the 
ban on crude oil exports is not just a matter for the energy industry; 
the current restriction is a barrier to economic development in 
communities across our country. For WPX, it is an issue that directly 
affects many tribal communities. Increased oil and gas production in 
these communities where WPX and other energy companies operate can 
increase funding for critically important programs in these 
traditionally economically depressed areas.
    Lifting the oil export ban would create new markets for us and 
unleash a new engine of growth so that our company--and other companies 
like ours--can continue to ramp up investment and create new jobs. 
During the recent economic downturn, the one bright spot in our lagging 
economy was the energy sector. Access to areas previously thought 
impossible to reach were opened and the oil and gas sector was actually 
hiring and paying strong wages to our employees.
    It is this prospect of new, high-paying jobs that has generated 
broad support for lifting the export ban. A diverse group of think 
tanks, editorial boards, thought leaders, and former Government 
officials across the ideological spectrum has highlighted the many 
benefits of lifting the export ban, including the potential employment 
gains that would result. \6\
---------------------------------------------------------------------------
     \6\ For a representative list, see http://oilexports.com/experts-
agree.
---------------------------------------------------------------------------
    While some labor unions have opposed the policy change, the 
Laborers International Union of North American (LIUNA) and the 
International Union of Operating Engineers have both come out in favor 
of lifting the crude oil export ban because of the positive impact that 
it would have for workers. In a letter to Congressman Joe Barton, these 
unions said, ``Opening global markets to U.S. producers will support 
added domestic production that will create hundreds of thousands of new 
jobs and contribute tens of billions of GDP dollars in the supply chain 
within the next few years. At the same time, we will put downward 
pressure on domestic fuel prices, while we provide our allies and 
trading partners with an alternative to sourcing energy from unfriendly 
and unstable sources.'' Expanded markets in the energy sector mean new, 
good paying jobs. \7\
---------------------------------------------------------------------------
     \7\ IHS Energy/IHS Economics, ``Unleashing the Supply Chain: 
Assessing the Economic Impact of a U.S. Crude Oil Free Trade Policy'', 
March 2015.
---------------------------------------------------------------------------
    We have already seen this in many communities--including Native 
American communities--in the country. As I mentioned, WPX Energy has 
operations on Indian land in both North Dakota and New Mexico. We have 
created thousands of jobs in Indian Country. We have put dollars into 
the pockets of thousands of workers, and provided important economic 
activity that has resulted in improved schools and public services, and 
spurred new economic development opportunities on the Reservation.
    We are proud of the relationships that we have developed with our 
tribal partners. Whenever possible, we hire Native American service 
companies, small businesses that create potent ripple effects in these 
communities. And this impact would only expand if the export ban was 
lifted.
    In North Dakota alone, we work with more than 450 vendors and 
service providers--many of which are Native American owned or operated. 
We also infuse $6.5 million into the statewide payroll and provide more 
than $150 million in royalties for oil production. These are real 
dollars going into the hands of real people. Barriers to the energy 
industry mean barriers to their economic development.
    One additional point: As you know, refined products like gasoline 
are already eligible for export. This is a quirk of the current 
situation: Would we ever adopt a policy that allows American bakeries 
to export bread but that does not allow American farmers to export 
wheat? No, of course not. But that is essentially our policy in the 
energy sector. Consequently, many refiners have opposed expanded export 
markets for crude oil because refiners currently have access to 
American oil supplies at a discounted price because those supplies 
cannot be sold in the world market.
    However, a meaningful shift is happening here as well. Just last 
week, four major refiners announced their support for lifting the 
export ban, recognizing the significant economic benefits of expanding 
the markets for U.S. companies and creating a more resilient world oil 
market. On July 20, 2015, their letter to the Senate Energy and Natural 
Resources Committee stated, ``[Lifting the ban] will allow for a 
healthy and vibrant global oil market which will not only benefit our 
refining sector but aid our economy, keep our skilled workers going 
strong, and add to our tax revenues . . . . We urge policymakers to 
consider our views as refiners and consumers of crude oil, and take 
action to enable the export of domestic crude oil.''
Benefits for Consumers
    Clearly, the impact on jobs and the expansion of economic 
opportunities would be substantial if the oil export ban were lifted. 
But many consumers and businesses are worried there is a potential 
downside to expanding these markets--specifically, they worry that 
lifting the export ban will increase the price at the pump or their 
cost of doing business. But the reality is that this policy change 
would not harm consumers and businesses because a more robust energy 
economy will actually lower prices.
    The economic experts have weighed in and concluded that lifting the 
export ban will not raise gasoline prices for consumers. The Aspen 
Institute stated that ending the export ban would not raise the price 
of gasoline, but instead, would put ``downward pressure on these 
prices.'' \8\ The Brookings Institute said, ``The increase in U.S. oil 
production makes world oil prices fall. Accordingly, so do U.S. 
gasoline and diesel prices, at least temporarily. This lowers the costs 
of production for all kinds of businesses and makes households better 
off.'' \9\ And the General Accounting Office (GAO) concluded that, 
``Consumer fuel prices . . . could decrease as a result of removing 
crude oil export restrictions.'' \10\
---------------------------------------------------------------------------
     \8\ ``Manufacturing and Society in the 21st Century'', Aspen 
Institute, Lifting the Crude Oil Export Ban: The Impact on U.S. 
Manufacturing, by Thomas J. Duesterberg, Donald A. Norman, Jeffrey F. 
Werling, October 2014.
     \9\ ``Energy Security Initiative, Brookings Institute'', Changing 
Markets: Economic Opportunities From Lifting the U.S. Ban on Crude Oil 
Exports, by Charles Ebinger and Heather Greenley, September 2014 
(Policy Brief 14-02).
     \10\ Government Accountability Office, ``Changing Crude Oil 
Markets: Allowing Exports Could Reduce Fuel Prices'', and ``The Size of 
the Strategic Reserves Should Be Examined'', September 2014 (GAO 14-
809).
---------------------------------------------------------------------------
    More than a dozen studies and analyses from a wide range of 
credible sources have shown that lifting the oil export ban would 
increase the supply of oil on the world market, which would ultimately 
reduce the price of gasoline. \11\ This reflects a fundamental economic 
principle: Supply goes up and price goes down. Expanded markets provide 
more diversity for oil companies and this provides increased stability 
in both production and price.
---------------------------------------------------------------------------
     \11\ A representative list can be found at http://oilexports.com/
wp-content/uploads/2015/02/Factsheet-WTAS_1.pdf.
---------------------------------------------------------------------------
    Furthermore, on the legislative front, safety nets have been 
included on this issue of price. Should the export of crude oil result 
in shortages in the U.S. or domestic oil prices that are significantly 
above the world price, a reporting and recommendation requirement is 
triggered that ultimately allows the President to suspend oil exports. 
We do not believe that this provision will ever be needed, but to the 
extent that consumers are concerned about potential price impacts, the 
legislation provides a reassuring exit ramp.
Strengthening Our National Security
    Finally, I want to highlight the national security benefits of 
lifting the oil export ban. One of the best ways to improve and 
strengthen our national security is through energy self-sufficiency. A 
robust domestic supply of energy based on free trade and open markets 
also helps to establish energy independence which is a critical 
component of economic and military strength in time of crisis.
    Beyond that, our ability to help our allies with their own energy 
security bolsters our own national security. Currently the largest 
world oil exporters are Saudi Arabia and Russia followed by many other 
countries in the Middle East like Iraq. Perhaps someday soon, Iran will 
rejoin that list. Many of our most important allies are highly 
dependent on these countries to supply their energy needs. These allies 
are eager to diversify their energy suppliers and the United States 
would be an attractive, reliable alternative for them. This 
diversification benefits our security too, because it limits the 
ability of other, less friendly Nations to disrupt the energy supplies 
of our allies and provides more economic stability in the Nations that 
are important partners with the United States.
    Additionally, the United States would have more credibility in 
efforts to impose energy sanctions in the future if it can act as an 
alternative supplier. To the extent our political leaders want to use 
sanctions--or the threat of sanctions--against hostile Nations, lifting 
the crude oil export ban improves our diplomatic clout.
Conclusion
    WPX is proud of its record of responsible energy development. We 
have more than 30 years of industry experience along with 40 local, 
State, and Federal awards for efficiency, innovation and corporate 
social responsibility. We have served as an important economic engine 
in many communities, including Tribal Reservations. We can expand our 
employment rolls and generate new investments, if markets around the 
globe are open to us.
    Our request is a reasonable one. We are not seeking Government 
money. We are not looking for tariffs on foreign imports. What we seek 
is a reversal of a policy from the 1970s that just does not fit in 
today's energy reality in America. Congress should lift the ban on 
crude oil exports so we can freely compete in the global marketplace. 
As recently as 2005, with U.S. energy dependence at its all-time high 
of 60 percent, very few envisioned a world where we would be on a path 
to energy self-sufficiency and even fewer believed American innovation 
and ingenuity would take us to where we are today: poised to become a 
powerhouse in the global oil market. Congress needs to take the 
sanctions off of its own country. And we need to do it now.
    Taking action now is the right thing to do. Lifting the export ban 
would bring to an end an energy policy that stifles growth, punishes 
American workers and consumers and puts at risk our national security.
    Thank you for the opportunity to testify today and I look forward 
to answering any questions that you may have.
                                 ______
                                 
                 PREPARED STATEMENT OF BENJAMIN ZYCHER
         John G. Searle Scholar, American Enterprise Institute
                             July 28, 2015
    Thank you, Mr. Chairman and distinguished Members of this 
Committee, for this opportunity to offer my views on lifting the export 
ban on crude oil. Ending this ban would be an important dimension of:
---------------------------------------------------------------------------
    The views expressed in this testimony are those of the author alone 
and do not necessarily represent those of the American Enterprise 
Institute.

---------------------------------------------------------------------------
    A rationalization of U.S. energy policy narrowly;

    A reform of misguided policies from the past as they have 
        evolved in the face of political and bureaucratic objectives 
        shaped by interest group pressures;

    An ongoing effort to inform the public debate on such 
        important related issues as the construction of the Keystone XL 
        pipeline and the prospects for the export of liquefied natural 
        gas;

    A more general need to increase the importance of economic 
        markets and the overall expansion of free trade as determinants 
        of resource use and as vehicles with which to increase 
        aggregate wealth and individual economic opportunity and well 
        being; and

    A larger defense of individual freedom and competitive 
        capitalism from the cronyism, favoritism, and wasteful 
        subsidies emerging from the politicized allocation of resources 
        that is the inexorable result of a substitution of competition 
        by politics in place of market forces.

    The current export ban on crude oil was enacted as part of the 1975 
Energy Policy and Conservation Act, and was justified on the basis of 
two fallacies. First: That the 1973 Arab OPEC oil ``embargo'' was the 
cause of the higher oil prices and the gasoline lines and other market 
disruptions experienced in the early 1970s. Second: That a ban on 
exports of crude oil would insulate the U.S. economy from the effects 
of international supply disruptions.
    A straightforward economic truth can be stated simply: Abstracting 
from such minor factors as differential transport costs and the varying 
characteristics of different types of crude oil, there can be only one 
price for oil in the world market. A higher price in one region would 
attract sellers, reducing the price there so as to equalize it with 
prices everywhere else.
    And that is why the 1973 embargo, directed at the U.S., the 
Netherlands, and some other allies of Israel, had no effect at all. 
Since there can be only one price in the world oil market, that attempt 
by Arab OPEC to impose a higher price on those Nations did not succeed; 
market forces resulted in the reallocation of oil so that prices were 
equal everywhere. Despite conventional wisdom on this issue, the U.S. 
faced the same higher international prices as everyone else.
    The actual source of the worldwide price increase was not the 
embargo; it was for the most part the production cutback by Arab OPEC. 
Persian Gulf production fell from an average of about 20.7 million 
barrels per day in 1973 to about 18.9 million barrels per day by 1975. 
\1\ That represented a decline in world production of about 3.4 percent 
by 1975. \2\ A far less important factor was the weakening of the 
dollar related to the collapse of the Bretton Woods exchange rate 
system and the decision by the Nixon administration to close the gold 
window.
---------------------------------------------------------------------------
     \1\ See the U.S. Energy Information Administration at http://
www.eia.gov/totalenergy/data/monthly/pdf/sec11_5.pdf.
     \2\ That percent decline might seem small, but given low demand 
elasticities for crude oil in the short run, it yielded large price 
increases, from $56.07 in 1973 to $104.19 in 1975, in year 2014 
dollars. Source: author computations from data reported by the U.S. 
Energy Information Administration at http://www.eia.gov/totalenergy/
data/annual/showtext.cfm?t=ptb0521, and by the Council of Economic 
Advisers at https://www.whitehouse.gov/sites/default/files/docs/
2015_erp_appendix_b.pdf, Table B-3.
---------------------------------------------------------------------------
    Similarly, the gasoline lines and market disruptions were the 
result of the price and allocation controls imposed upon the domestic 
market for crude oil and refined products. They were not caused by the 
embargo: Notice that there was no embargo in 1979, but there was a 
production cutback in the Persian Gulf as a result of the overthrow of 
the Shah of Iran, from the 18.9 million barrels per day in 1975 noted 
above to less than 18 million barrels per day in 1980. But: There was a 
newly invigorated system of price and allocation controls, and there 
were once again gasoline lines and market chaos.
    This straightforward economic analysis means that the justification 
for the export ban as a tool with which to insulate the U.S. economy 
from the effects of supply disruptions and other factors affecting 
prices was and remains fundamentally flawed. Accordingly: The 
intellectual and policy justifications for the export ban were bankrupt 
then and remain so today.
    Suppose now that the current export ban were to be removed. With 
respect to the domestic prices of crude oil, I believe that a repeal of 
the export ban would increase those prices very modestly, by an 
approximate amount of $2-3 per barrel. This would be a straightforward 
supply-and-demand effect reducing the difference between the spot 
prices for crudes produced domestically and overseas. An obvious 
example is the price difference between West Texas Intermediate and 
Brent crudes, about $5.50 per barrel ($48.14 v. $54.62) as of the 
morning of July 27. \3\ That difference is very likely to have been 
made artificially larger by the export ban.
---------------------------------------------------------------------------
     \3\ See the daily price data reported at http://www.oil-
price.net/.
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    There is the further matter that an increase in crude exports would 
have the effect of strengthening the dollar, the magnitude of which is 
very difficult to estimate among all the many factors influencing the 
dollar exchange rate. But however difficult to measure, this effect is 
real, and it would put some downward pressure on the dollar prices of 
crude oil internationally, thus offsetting to some degree the supply/
demand effect that I have just mentioned. And that stronger dollar 
would increase aggregate wealth in the U.S., which in principle would 
take the form of a reduction in the overall price of the U.S. basket of 
goods and services, an effect that again is difficult to measure in 
isolation.
    Given the small price effect of ending the export ban, it is 
difficult to believe that the narrow employment effects in specific 
economic sectors would be significant, and it is likely to be the case 
that those impacts would not be measurable given the normal 
fluctuations of such employment on an annual basis. But in a larger 
context, those employment effects would be offset over time by 
increased employment in other sectors--in particular, import sectors 
and sectors complementary with them--and by the positive aggregate 
employment effects of a stronger dollar and the larger economy and 
increased employment demand resulting from it.
    With respect to the U.S. prices of such refined products as 
gasoline and diesel fuel: Because refined products are not included in 
the export ban, and thus are traded freely in the international market, 
it is difficult to see how a repeal of the export ban on crude oil 
could increase product prices. Instead, ending the export ban actually 
would put downward pressure on product prices for two reasons.
    First: The increase in the international supply of crude oil 
created by increased U.S. exports would reduce both crude and product 
prices overseas. Accordingly, product prices in the U.S. would be lower 
than otherwise would be the case because, again, products are traded 
more-or-less freely in the world market, creating the one-price 
outcome.
    Second: Both internationally and domestically, the export ban has 
distorted the allocation of differing types of crude oil among 
refineries, which are designed in various ways to refine particular 
crude oil types more efficiently than others. An end to the export ban 
would improve the alignment of refinery and crude oil characteristics, 
particularly in the U.S. and particularly over the medium- and longer 
terms, thus reducing the cost of refining crude oil generally, and 
therefore of producing refined products. As an aside, this effect 
clearly would be one of the hidden benefits of the Keystone XL pipeline 
were it to be constructed.
    Let me make two final points in passing. First: The reduction in 
international crude prices would have salutary effects in terms of 
reducing foreign exchange earnings by several unsavory regimes, the 
Iranian and Russian ones in particular. That impact might be modest; 
but as far as I am concerned, every bit helps, particularly in terms of 
increasing energy security in Europe.
    Second: The defense of free trade is a crucial component of the 
larger defense of capitalism and freedom, with important implications 
for such other specific issues as the prospects for the export of 
liquefied natural gas. The export ban on crude oil was from the very 
beginning a deeply perverse policy implemented in a futile attempt to 
mitigate the perverse effects of other Government policies. Ending the 
ban would be an important component of a larger reform agenda for this 
Congress.
    I thank you again, Mr. Chairman and distinguished Members of this 
Committee, and I would be very pleased to address any questions that 
you may have.
                                 ______
                                 
                  PREPARED STATEMENT OF LEO W. GERARD
   International President, United Steelworkers, and Chair, AFL-CIO 
                    Legislation and Policy Committee
                             July 28, 2015
    Chairman Shelby, Ranking Member Brown, Members of the Committee. I 
want to thank you for inviting me to testify today on the critical 
issue of crude oil exports.
    My name is Leo Gerard and I am the International President of the 
United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied 
Industrial and Service Workers International Union--the Steelworkers or 
USW for short. I am also a sitting Vice-President on the AFL-CIO 
Executive Council and cochair of their Legislation and Policy 
Committee. There are 850,000 members of our union--more than 30,000 of 
whom are employed in the domestic oil and refining industry--and we are 
the largest industrial union in North America.
    While I will focus on the fact that USW represents workers at 
sixty-three (63) of the Nation's refineries, which accounts for two-
thirds of domestic refining capacity across the country, I can 
guarantee that over 99 percent of our membership has a stake in the 
crude oil export ban. Congress cannot overlook the negative impact 
lifting the crude oil ban will have on fuel prices, economic security, 
and jobs.
The Background
    Many arguments in favor of lifting U.S. export controls are based 
on free market ideology in a world where the largest proven oil 
reserves are controlled by countries that use an international cartel 
to influence prices for political reasons. The Organization of the 
Petroleum Exporting Countries (OPEC) significantly influences oil 
prices and has used that power to adversely impact U.S. producers and 
consumers. U.S. export controls were put in place because of actions 
taken by OPEC Nations when they embargoed oil exports to the United 
States. Forty years later the Saudi Arabians, who hold the whip hand at 
OPEC, feeling threatened by shale oil production, got the cartel to 
agree to pump crude oil into the market to drop crude oil prices--which 
have fallen by over 57 percent in the last year. \1\ It should be noted 
that Iran is part of this cartel to influence crude prices. Whether 
Congress approves the Iran deal or not, OPEC will continue to influence 
global oil prices. Our response should not be to give away the 
strategic advantage our country has, with its world-leading refining 
complex.
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     \1\ http://www.vox.com/2014/12/16/7401705/oil-prices-falling
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    United States oil production increased 46 percent between 2011 and 
2014. There has not been a 3-year increase that large since before the 
Depression. The United States is producing more oil today than at any 
point in the past 20 years. \2\ Even so the United States remains by 
far the world's largest importer of crude oil, with over 7.9 million 
barrels per day of crude imported in the third week of this month. \3\
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     \2\ http://www.nytimes.com/2014/01/25/business/us-oil-production-
keeps-rising-beyond-the-forecasts.html?_r=0
     \3\ http://www.eia.gov/dnav/pet/pet_movewkly_dc_NUS-
Z00_mbblpd_w.htm
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    The increased extraction of crude oil has led to a significant 
decrease in imports of oil products into the U.S. as refiners use 
domestic crude. A 19 percent decrease in crude oil imported into the 
U.S. occurred between 2009 and 2014.


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    Growing domestic oil production is providing the United States with 
a significant economic boost and a measurable reduction in our Nation's 
dependence on foreign oil. In 2014, about 27 percent of the petroleum 
consumed by the United States was imported from foreign countries, the 
lowest level since 1985. \4\
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     \4\ http://www.eia.gov/tools/faqs/faq.cfm?id=32&t=6
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    However the U.S. is still nowhere near self-sufficient in oil. In 
fact, Secretary of Energy Moniz recently stated that the U.S. imports 
seven million barrels of crude oil per day to meet domestic demand, an 
amount that is again on the increase. That is more oil imported today 
than when the export ban was enacted in 1975. Secretary Moniz also 
noted at a recent House Energy and Power Subcommittee hearing that for 
every barrel of oil the U.S. would export, we would have to import a 
barrel to replace it. Meaning, an increase in crude oil exports could 
lead to another increase in crude oil imports.
Consumers Will Suffer if the Crude Oil Export Ban Is Lifted
    U.S. Consumers currently benefit from the lower oil prices caused 
by OPEC's efforts to control global prices. These savings are 
substantial with estimates of about $209 billion per year in consumer 
savings. This translates to $1,064 per driver and $2,182 per family.
    As for domestic production, lifting the crude oil export ban will 
not only hurt refiners and refinery jobs, lifting the ban will impact 
prices at the pump and eliminate the discount American consumers 
currently enjoy because of the crude oil export ban. The penalty for 
the consumer as a result of lifting the export ban would add up to $25 
billion per year, or $125.00 per driver and $257.00 per family. In 
extreme cases it could cause U.S. refineries to close, which could 
endanger supplies of other refined products such as home heating oil in 
the Northeast.
    Our Nation's oil refineries not only are a vital source for the 
fuel needed by America's consumers, they also supply necessary fuel and 
raw materials to America's industries, including chemicals, plastics, 
and tires; industries that are crucial to the U.S. economy and in which 
the USW alone represents about 100,000 members.
    The public understands this. Hart Research polling conducted in 
December of 2014 shows that after hearing both sides of the debate, 
seven (7) in ten (10) voters prefer investing in refinery capacity at 
home over lifting restriction on the export of domestic oil. In 
addition, 82 percent of voters support a proposal that would require 
oil companies to use oil that is produced in the U.S. from public lands 
and offshore to meet energy needs here at home instead of exporting 
U.S. oil to foreign countries. \5\ Over the last month, more than 
10,000 USW members have signed petitions or have written letters to 
their members of Congress urging the United States to retain the export 
ban.
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     \5\ http://crudecoalition.org/app/uploads/2015/02/HART-POLL-
me11457_cap_us_oil.pdf
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Refinery Investments Mean Jobs
    The growth in domestic crude isn't moving global benchmark prices, 
but it has been keeping U.S. gasoline prices down slightly, as new U.S. 
capacity means it is possible for U.S. refiners to access U.S. 
landlocked crude. This has fostered significant development and 
investment across our Nation's refining sector.
    For example in the 2012, USW members at key refineries in the 
Philadelphia area were facing layoffs and permanent closures of their 
refineries. The east coast was facing a loss of over half of its 
domestic refining capacity. An economic analysis on the loss of east 
coast refining in the Philadelphia area showed an impact of more than 
36,000 jobs (direct and indirect) and over $550 million in lost revenue 
for State and local entities. In addition, supplies of vital home 
heating oil to the region were put at risk.
    Thankfully our union--working with Federal, State, and local 
officials--found buyers for two of the three refineries. The Carlyle 
group invested hundreds of millions of dollars into a rapid tank car 
unloading facility at the former Sunoco refinery in Philadelphia. 
Moving Bakken fuel from North Dakota to the east coast decreased crude 
oil imported from Nigeria, an OPEC Nation, by over 90 percent. In 
addition refined products imported into the east coast also decreased 
from 1.5 million barrels in 2010 to just over 1 million barrels in 2013 
as the refineries ramped up to full production. \6\ The export ban kept 
thousands of workers employed in the region and backed out not just 
OPEC crude oil but also ensured that more refined product would be made 
on our shores.
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     \6\ http://blogs.platts.com/2013/05/17/us-east-coast-oil-
refineries-enjoy-a-stirring-comeback/
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    U.S. refiners are making investments to realign their processes to 
specialize in the lighter domestic crudes that are produced here from 
shale formations. This realignment will allow for greater refining 
efficiency and increased production. For example, U.S. refiners have 
added 100,000 additional barrels per day of capacity just in the last 
year. A recent analysis, based on a survey of refiners indicates that 
the industry plans to step up its consumption of light domestic crude 
by more than 730,000 barrels per day over the next 2 years. \7\
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     \7\ http://fuelfix.com/blog/2015/03/18/report-refiners-can-handle-
the-flood-of-light-u-s-crude/
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    What does this refinery investment look like? If the crude export 
ban stays in place, refinery investments of about $8.7 billion over a 
10-year period are forecast to bring in some $14.6 billion of 
additional revenues. These projects are located in multiple States from 
Texas to Montana to California to West Virginia. \8\
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     \8\ http://www.bakerobrien.com/bakerobrien2/assets/File/
B&OB%20LTO%20Capacity%20Study.pdf
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    What does this investment and annual refining look like in terms of 
employment and wages for refining work? According to the 2012 Economic 
Census performed by the Census Bureau, the average job in the refining 
sector paid over $100,000 per year, supported by $1.8 million in value-
added per employee.
    According to the Economic Census, while the industry paid its 
employees $9.7 billion in total compensation, it also spent $8.9 
billion on professional services, repair and maintenance services, and 
leased employees, which among others includes a significant number of 
workers in building and construction trades occupations.
Value-Added Product
    U.S. refineries are exporting more value-added refined product now 
than ever before. Our members are not only producing most of the oil 
for domestic consumers but are expanding into the global market because 
of the crude oil export ban. This has meant increased domestic refinery 
investment, increased employment, and higher utilization rates at 
refineries.
    For example, U.S. exports of refined petroleum products to Latin 
America have soared over the past decade as strong economic growth in 
the region boosted demand while inadequate refinery investment limited 
supply. Mexico, a country which I'm tired of seeing U.S. jobs move to, 
is the biggest buyer of U.S. oil products importing 646,000 bpd in the 
first 4 months of this year, up 25 percent from 2014. Brazil, the 
second-biggest buyer of U.S. petroleum products, increased its 
purchases by one percent to 220,000 bpd in the first 4 months of the 
year. The U.S. exported 153,000 barrels per day to Columbia in the 
January--April 2015 period. \9\
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     \9\ http://in.reuters.com/article/2015/07/17/oil-latam-imports-
idINL1N0ZI2K520150717
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    We should not trade this strategic manufacturing advantage for 
short term producer gains.
Lifting the Crude Oil Export Ban Means More Refined Oil Imported Into 
        the U.S.
    Let's be clear, exporting a natural resource to have it refined 
overseas and imported back into the U.S. is a net job loser for 
America. One only has to look at the world's largest oil-refining hub 
project, the Jamnagar Oil Refinery in India, which boasts on the 
company's Web site that the gasoline produced at the facility is ``for 
export, primarily to the United States and Europe'' to get a sense on 
where U.S. refining jobs will go if we lift the export ban. \10\
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     \10\ http://www.bechtel.com/projects/jamnagar-oil-refinery/
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    In addition Saudi Arabia, Kuwait, the U.A.E., Qatar, Bahrain, and 
Oman will raise their combined refining capacity to 5.4 million barrels 
per day this year, an increase of 17 percent from 2014, according to 
Vienna-based JBC Energy GmbH. These Persian Gulf countries will be able 
to process six million barrels per day by 2020, according to reliable 
estimates. \11\
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     \11\ http://www.bloomberg.com/news/articles/2015-03-16/saudi-
arabia-will-need-more-oil-to-feed-local-refinery-expansion
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    Digging into the archives of some of the organizations that want to 
lift the ban, we find they have given very good reason why the ban 
should not be lifted. The American Petroleum Institute had this to say 
in 2011, at a time when it was making the case for domestic refining:

        The United States will depend on refining petroleum-based 
        products for much of its energy needs for decades to come. And, 
        domestic refineries are competing directly with petroleum 
        product imports. Because the refining industry operates on a 
        global basis, America faces the choice of either manufacturing 
        these products at home or importing them from other countries.

        U.S. refinery closures would result in domestic job losses and 
        lower Government revenue in the form of taxes. It would also 
        result in a greater reliance on foreign refineries, such as 
        those being developed in the Middle East and India.'' \12\
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     \12\ http://democrats.energycommerce.house.gov/sites/default/
files/documents/Testimony-Markell-EP-Energy-Markets-2015-3-3.pdf
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Domestic Refining With U.S. Labor, Environmental, and Health and Safety 
        Laws Not Qatar's
    Oil refining is dangerous work. In the last round of bargaining 
with refiners, our union fought successfully to increase health and 
safety standards and safety training programs at U.S. refining 
facilities. We fought to better manage fatigue standards and for a fair 
return on the work our members provide for the refining industry. Over 
the past 5 years, twenty-seven (27) USW members in the domestic 
refining sector have died. \13\ As a union, we do everything we can in 
the way of training our members and consistently pushing for stronger 
health and safety standards to prevent these needless deaths. 
Unfortunately, the strong standards governing occupational health and 
safety the U.S. requires of industries like refining are not universal 
across the globe.
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     \13\ http://www.usw.org/blog/2015/the-words-of-dead-workers
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    Lifting the crude oil export ban will send crude oil into countries 
that do not sustain the same environmental, labor, health and safety 
standards that we strive for and require as a Nation. I know how many 
workers died refining the products U.S. consumers used because of OSHA 
reporting requirements. Do we really want American crude, already 
extracted at a heavy cost to workers lives, to be refined in places 
like Qatar? A report by Qatar's Government found 964 deaths of migrant 
workers from just India, Nepal, and Bangladesh in 2012 and 2013 but the 
press has been unable to verify those accounts and they are likely 
higher. The International Trade Union Confederation has called the 
State ``a country without a conscience.'' \14\ Which country would you 
rather have the gas in your car come from?
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     \14\ http://www.washingtonpost.com/blogs/wonkblog/wp/2015/05/27/a-
body-count-in-qatar-illustrates-the-consequences-of-fifa-corruption/
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Other Developments
    It will also take some time to sort out the effects of the 
Department of Commerce's ``clarification'' of policies regarding 
processed condensate. Robust exports of condensate are possible, and 
reports of both condensate exports and investments in condensate 
splitters highlight significant domestic investment. While condensate 
exports represent volumes of oil that could otherwise have been 
processed into completed fuels in the United States, the investments in 
splitters are not small projects. For example, Magellan Midstream 
Partners LP has invested $400 million in a 100,000 bpd condensate 
splitter to fall under the Department of Commerce's guidelines. \15\
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     \15\ http://www.ogj.com/articles/2014/12/epa-approves-magellan-s-
corpus-christi-splitter-project.html
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    Refiners face the implementation of a number of regulatory 
standards in the near future which will require facility investments; 
Tier 3 automotive and fuel standards, the Renewable Fuels Standard 
(RFS), EPA State implementation plans, and other regulations will 
require significant but attainable modernization efforts. The domestic 
crude export ban continues to provide independent refiners with a 
significant cost advantage to allow modernization that will ensure the 
long-term viability of U.S. refineries and jobs.
Federal Investment in Infrastructure Could Increase Efficiency
    Our members want to take U.S. crude, refine it for U.S. 
consumption, and create value-added products for the U.S. market and 
for export. However, to do so, investment in improving and repairing 
our transportation and energy infrastructure, which includes pipelines, 
needs to be a priority. Refiners say their biggest constraints aren't 
at their facilities but in the infrastructure that delivers crude to 
them. A recent report on the U.S. refinery system done by the American 
Fuel and Petrochemical Manufacturers highlights that U.S. refining is 
not a bottleneck to producing and using more very light U.S. crude oil 
over the next few years. Instead the report highlights an ``inadequate 
delivery infrastructure [that] has delayed U.S. refinery access to the 
new production.''
    Before we explore shipping domestic extracted crude overseas, we 
should be looking at how to better foster oil pipeline infrastructure, 
and increase the close to $14 billion in investments that took place 
last year. \16\ Improving the paths for domestic crude to reach U.S. 
coastal markets will further advantage U.S. refining, and make much 
more sense than allowing crude exports.
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     \16\ http://www.ogj.com/articles/print/volume-112/issue-9/special-
report-pipeline-economics/crude-oil-pipeline-growth-revenues-surge-
construction-costs-mount.html
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Steel Products Not Impacted From Lifting the Crude Oil Export Ban
    As the largest union in not just the oil industry but also the 
largest union in paper, rubber, chemicals, glass, and steel, we had to 
carefully weigh our position on the impacts of lifting the crude oil 
export ban. We are currently in bargaining for new labor agreements in 
steel. The global overcapacity in steel manufacturing has hammered the 
U.S. industry. Many of you supported our Oil Country Tubular Good 
(OCTG) trade case and I want to address why we believe lifting the 
crude oil export ban is no quick fix for the U.S. steel industry. First 
lifting the ban provides no guarantee that domestic steel companies 
will manufacture the OCTG that goes into shale production. At the 
height of OCTG demand, domestic steel producers filed a trade case and 
the International Trade Commission found that the domestic industry's 
market share decreased from 53.7 percent in 2010 to 50 percent in 2012. 
This decline was even more remarkable given the increase in domestic 
production capacity during this period. \17\
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     \17\ http://www.kslaw.com/imageserver/KSPublic/library/
publication/2014articles/3-26-14_Law360.pdf
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    Steel pipe inventories were already at astronomical levels prior to 
the OPEC caused oil crash, as importers brought in large amounts of 
pipe to avoid OCTG tariffs. \18\ This has created a glut from which we 
have yet to recover and more importers continue to enter the market.
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     \18\ http://www.metalbulletinresearch.com/Article/3319862/
Inventory-overhang-prevents-OCTG-price-increases-Americas-Market-
Analysis.html
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    Lifting the crude oil export ban will mean that crude oil will go 
to countries such as China. This will only provide an added benefit to 
a Nation that consistently engages in trade practices that undermine 
U.S. jobs and manufacturing and currently has over 600 million tons of 
excess steel capacity. \19\
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     \19\ http://crudecoalition.org/us-crude-oils-next-stop-china/
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Who Is on the Side of Workers and Consumers?
    For too long I've seen our country trade away USW jobs with 
unbalanced trade agreements, inadequate enforcement of our trade laws, 
and lack of real investment in our infrastructure, workers, and 
industries. Unintentionally, Congress created an industrial policy with 
the crude oil export ban and by Congress lifting that ban, working 
families will see increased gas prices at the pump, layoffs at 
refineries, and economic devastation in refinery communities.
    In July 2014, the AFL-CIO Executive Council unanimously passed a 
policy statement opposing lifting the existing restrictions on crude 
oil exports, titled ``America Should Exploit the Advantages of Domestic 
Oil Production, Not Give Them Away''. A copy of the policy statement is 
attached to my written remarks [Ed.--See link in Note 20.] but the last 
sentence sums up our position on why the crude oil export ban needs to 
stay in place. ``American ingenuity and hard work have put the United 
States in the fortunate position of being the world's top oil producer 
and far and away the world's top oil refiner, and has given the America 
people more energy security than we have had in decades. The AFL-CIO 
believes the Nation should build on this success to create prosperity 
and restore the middle class.'' \20\
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     \20\ http://www.aflcio.org/About/Exec-Council/EC-Statements/
America-Should-Exploit-the-Advantages-of-Domestic-Oil-Production-Not-
Give-Them-Away
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    Thank you for your time and I look forward to any questions you may 
have.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                     FROM MICHELE FLOURNOY

Q.1. In your testimony, you noted that ``enabling U.S. oil 
exports would strengthen our geopolitical influence, 
leadership, and leverage with allies and adversaries alike.'' 
However, the Center for a New American Security, in a 2010 
publication, ``recognize[d] that global climate change is a 
matter of national security.''

A.1. Indeed, climate change is a matter of national security. 
In prior research and publications at CNAS, my colleagues have 
highlighted the impacts of a changing climate on U.S. security 
and our military, including planning and operations. For 
instance, many military bases are vulnerable to sea level rise 
and extreme weather related events. Military planners must 
consider how their operating environments will change as a 
result of climate change and the implications this will have 
for force posture and equipment. Moreover, climate change can 
exacerbate existing weaknesses and vulnerabilities in fragile 
countries. The increased likelihood for instability and perhaps 
conflict in such areas may have repercussions for the United 
States and our security requirements.
    Now, in a period marked by war fatigue, limited economic 
resources, and an expanding number of national security 
concerns, the United States would benefit from an addition to 
its national security toolkit that leverages its resources 
rather than strains them. Our energy assets can be a positive 
contributor to U.S. geopolitical influence, international 
leadership capacity, and our relations with allies and 
adversaries. By allowing oil exports, the United States will 
enhance stability and reliability in the international market 
for oil, a critical commodity for the global economy, which is 
paramount for our security and that of our allies. In turn, 
this will make us better able to counter instability and 
threats to our security when they occur.

Q.2. How would you reconcile leveraging our Nation's 
geopolitical influence from enabling U.S. oil export with the 
Nation's responsibility to be a leader in reducing emissions 
and mitigating climate change?

A.2. Open energy trade and combatting climate change are both 
matters of national security, but they are not mutually 
exclusive. The United States can lead on both by choosing the 
appropriate mix of policy actions.

Q.3. Is the national security of the U.S. compromised by 
increasing global availability of fossil fuels, and emitting 
more greenhouse gases? If so, what do you think should be done, 
as a policy matter, to mitigate that concern?

A.3. An increase in emissions of greenhouse gases, caused by 
increased use of fossil fuels, can contribute to climate 
change, the environmental effects of which are a national 
security and global challenge for the United States and other 
countries alike. However, maintaining current restrictions on 
U.S. oil exports in order to achieve environmental goals is not 
an effective approach and overlooks a wide variety of more 
efficient, direct, and worthy policy initiatives that could 
meaningfully curb emissions in the United States and elsewhere. 
Oil is fundamentally a global commodity. Oil production and 
consumption will grow in the United States and in countries 
around the world regardless of export decisions made in the 
United States. The United States must do its part to curb 
emissions in the United States, at the consumer level, and also 
through careful regulation to ensure that energy is produced 
and transported in the United States with de minimus levels of 
emissions. Such efforts to reduce carbon emissions must be 
pursued on a priority basis at the local, State, and Federal 
levels, and accompanied by parallel measures in other 
countries. Effective emissions mitigation policies include 
raising standards for vehicle fuel economy, including heavy-
duty vehicles, toughening limits on emissions from existing 
power plants and industrial facilities, and implementing 
regulations to limit emissions in the production of energy, 
including efforts to curb flaring of natural gas. Additionally, 
through international forums, such as the United Nations and 
multilateral development institutions, the United States can 
play a leading role in urging foreign countries to curb their 
own emissions, and improve resiliency and adaptation measures 
to manage their unique national security challenges posed by 
climate change.

Q.4. Would you couple a policy favoring export of U.S. crude 
oil with a national effort to reduce overall carbon emissions? 
If so, what would such a combined policy look like, from your 
perspective?

A.4. Yes. A national effort to reduce carbon emissions must be 
a necessary complement to a policy to encourage the responsible 
production and free export of U.S. energy resources. Such a 
policy approach would include restrictions lifted on the export 
of crude oil along with many of the energy efficiency and 
demand constraint policies outlined in the previous question.

Q.5. Could the goal be accomplished with increased 
administrative licensing, instead of a complete legislative 
lifting of the ban? Why or why not?

A.5. An Administration approach to lifting the oil ban could be 
a successful mechanism to allow for the unencumbered export of 
crude oil from the United States. Action by Congress to lift 
the ban would provide a more permanent solution, however, and 
would express a broadly shared view on U.S. energy policy that 
will constitute a clear and helpful signal to our allies, 
adversaries, and to potential investors in the sector.
              Additional Material Supplied for the Record
              
              
              
  LETTER FROM EDWARD CROSS, PRESIDENT, KANSAS INDEPENDENT OIL AND GAS 
                ASSOCIATION, SUBMITTED BY SENATOR MORAN
                
                
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