[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




 
                 ENERGY OPPORTUNITIES IN NORTH AMERICA

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         THE WESTERN HEMISPHERE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 7, 2017

                               __________

                           Serial No. 115-48

                               __________

        Printed for the use of the Committee on Foreign Affairs
        
        
        
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                      COMMITTEE ON FOREIGN AFFAIRS

                 EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
TED POE, Texas                       KAREN BASS, California
DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina          AMI BERA, California
MO BROOKS, Alabama                   LOIS FRANKEL, Florida
PAUL COOK, California                TULSI GABBARD, Hawaii
SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
RON DeSANTIS, Florida                ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina         BRENDAN F. BOYLE, Pennsylvania
TED S. YOHO, Florida                 DINA TITUS, Nevada
ADAM KINZINGER, Illinois             NORMA J. TORRES, California
LEE M. ZELDIN, New York              BRADLEY SCOTT SCHNEIDER, Illinois
DANIEL M. DONOVAN, Jr., New York     THOMAS R. SUOZZI, New York
F. JAMES SENSENBRENNER, Jr.,         ADRIANO ESPAILLAT, New York
    Wisconsin                        TED LIEU, California
ANN WAGNER, Missouri
BRIAN J. MAST, Florida
FRANCIS ROONEY, Florida
BRIAN K. FITZPATRICK, Pennsylvania
THOMAS A. GARRETT, Jr., Virginia

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

               Jason Steinbaum, Democratic Staff Director
                                 ------                                

                 Subcommittee on the Western Hemisphere

                 JEFF DUNCAN, South Carolina, Chairman
CHRISTOPHER H. SMITH, New Jersey     ALBIO SIRES, New Jersey
ILEANA ROS-LEHTINEN, Florida         JOAQUIN CASTRO, Texas
MICHAEL T. McCAUL, Texas             ROBIN L. KELLY, Illinois
MO BROOKS, Alabama                   NORMA J. TORRES, California
RON DeSANTIS, Florida                ADRIANO ESPAILLAT, New York
TED S. YOHO, Florida                 GREGORY W. MEEKS, New York
FRANCIS ROONEY, Florida

                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Ms. Sarah Ladislaw, director and senior fellow, Energy and 
  National Security Program, Center for Strategic and 
  International Studies..........................................     9
Aaron Padilla, Ph.D., senior advisor, International Policy, 
  American Petroleum Institute...................................    17
Duncan Wood, Ph.D., director, Mexico Institute, Woodrow Wilson 
  International Center for Scholars..............................    28

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Jeff Duncan, a Representative in Congress from the 
  State of South Carolina, and chairman, Subcommittee on the 
  Western Hemisphere: Prepared statement.........................     4
Ms. Sarah Ladislaw: Prepared statement...........................    12
Aaron Padilla, Ph.D.: Prepared statement.........................    19
Duncan Wood, Ph.D.: Prepared statement...........................    30

                                APPENDIX

Hearing notice...................................................    60
Hearing minutes..................................................    61
Questions submitted for the record by the Honorable Jeff Duncan, 
  a Representative in Congress from the State of South Carolina, 
  and chairman, Subcommittee on the Western Hemisphere, and the 
  Honorable Norma J. Torres, a Representative in Congress from 
  the State of California, and written responses from:
  Ms. Sarah Ladislaw.............................................    62
  Aaron Padilla, Ph.D............................................    65
  Duncan Wood, Ph.D..............................................    72


                 ENERGY OPPORTUNITIES IN NORTH AMERICA

                              ----------                              


                        WEDNESDAY, JUNE 7, 2017

                       House of Representatives,

                Subcommittee on the Western Hemisphere,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 10:05 a.m., in 
room 2172, Rayburn House Office Building, Hon. Jeff Duncan 
(chairman of the subcommittee) presiding.
    Mr. Duncan. A quorum being present, the subcommittee will 
come to order.
    Before we get started, first off, let me apologize to my 
subcommittee for the markup last week or 2 weeks ago and the 
snafu with me getting here. I am glad we got the markup 
finished. But Ileana actually chaired it for me, so I apologize 
to the subcommittee.
    We also have some staff changes on the majority side. We 
have promoted Rebecca Ulrich to staff director, and we also 
have a professional staff member, Juan Carlos Monje here. So 
there are new additions on our side. And we are losing, Ron 
Criscuolo, he is headed to the Department of Homeland Security. 
So we have got some changes on the subcommittee on the 
Republican side. I just wanted to let y'all know about those. 
So you can welcome them to the staff.
    Anyway, so we will go ahead and get started.
    Over the past few years, this subcommittee has prioritized 
the issue of energy very intentionally. Not only is it in my 
wheelhouse, but we have taken time to examine opportunities in 
the region and consider how the U.S. can increase energy 
cooperation with our neighbors to pursue greater economic 
growth, create jobs, lower gas prices, and increase our energy 
security.
    Today's hearing on North American energy opportunities 
follows legislation that I authored in the 113th Congress to 
approve the U.S.-Mexico Transboundary Hydrocarbon Agreement. 
The Agreement was negotiated with Secretary Clinton, and we had 
to provide the implementing language. And it was actually 
included in the CR/Omnibus, but became law and opened up about 
1\1/2\ million acres in the western Gulf of Mexico. In the last 
Congress, we had numerous subcommittee energy hearings; a 
Government Accountability study on North American energy that 
Ranking Member Sires and I requested, which is currently 
ongoing; a hearing on South American energy potential was held 
last month.
    In my view, energy holds a very important key to unlocking 
untapped potential for the hemisphere. That potential is both 
energy potential but also ways that we can collectively work 
together for energy independence.
    And I believe the Trump administration has an incredible 
opportunity now to increase U.S. energy engagement in the 
region to the benefit of U.S. interests, as well as those of 
the region as a whole. After all, the United States is the 
largest energy producer in the Western Hemisphere, producing 
over 12 million barrels of oil, 27 trillion cubic feet of dry 
natural gas per day. Collectively, as of 2015, North America 
accounted for 72 percent of Western Hemisphere oil production, 
85 percent of natural gas production. As tight oil and shale 
gas in the United States, Canada's oil sands, and Mexico's 
energy reforms and offshore oil prospects create circumstances 
for a far more highly integrated and interdependent North 
American energy market.
    A stronger North American energy partnership would expand 
the size of our energy market, lead to more jobs, reduce costs 
for consumers, and enhance North American energy security and 
independence. Of course, global oil prices will continue to 
impact U.S. energy interests. However, the U.S. would likely 
experience less impact from the volatility in the Middle East, 
attempts by OPEC to regulate energy output and prices, and even 
Venezuela's energy production free fall if we relied less on 
these sources of energy and instead built a stronger North 
American energy market to lower our risks and meet our needs 
more effectively.
    I have long talked about American energy independence and 
North American energy independence. I have broadened that to a 
hemispheric energy independence, which is a little broader than 
today's hearing. But if we think hemispherically, the 
opportunities are boundless.
    Consequently, I believe the Trump administration has an 
excellent opportunity now in efforts to improve NAFTA, to 
include energy issues in any future deal. The energy landscape 
has changed substantially since NAFTA was first negotiated and 
thus warrants closer examination and potential inclusion, in my 
view. I hope to work with USTR on that issue as well as the 
Trump administration.
    In addition, the Trump administration has another 
opportunity with the recently concluded negotiation of the 
U.S.-Mexico Section 123 agreement to consider how U.S. nuclear 
exports to Mexico might assist our southern neighbor with its 
stated objectives to reduce the use of fossil fuels and carbon 
emissions through nuclear power. This agreement awaits White 
House consideration and submission to Congress for review.
    According to U.S. industry, if this Section 123 agreement 
moves forward, Mexico plans to construct two new nuclear 
plants, which could potentially generate more than $2 billion 
in direct U.S. exports and support more than 10,000 jobs in 
more than 20 U.S. States if U.S. firms end up constructing 
those new power plants.
    Let's consider for a moment the recent energy developments 
in North America that have brought us here today. The U.S. has 
experienced the greatest natural gas supply transformation of 
any country in the world in recent years due to shale. Today, 
Canada's the fifth largest energy producer in the world and our 
largest foreign supplier of energy. It also has the world's 
third largest proved oil reserves and is one of the largest 
producers of dry natural gas.
    Likewise, Mexico is a major producer of petroleum in the 
world. It is the fourth largest in the Americas. Several recent 
discoveries of oil and natural gas in Mexico, the development 
of unconventional resources, and considerable shale resources 
near the U.S.-Mexico border offer additional promising 
opportunities. Furthermore, Canada's privatized oil sector and 
Mexico's 2013 reforms opening its energy sector to private 
investments make further energy cooperation with these non-OPEC 
members more critical to U.S. national interests.
    We have a slide on the board today from API which shows the 
trilateral trade and energy across our northern and southern 
border with Mexico and Canada. I would ask everyone to take a 
look at that. It is available for all the members on our 
screens.
    In conclusion, the collected value of the energy trade 
between U.S. and Canada and Mexico exceeded $140 billion in 
2015. More can be done, and President Trump's America First 
energy plan is an important blueprint for achieving greater 
U.S. energy security and independence. However, I believe that 
in order for that plan to maximize its potential, we need to 
expand North American energy cooperation. Currently, our 
trilateral trade in crude oil, natural gas, refined products, 
and electricity is joint and integrated in many ways.
    Our neighbors are major buyers of petroleum products 
refined here in our country, and energy products cross our 
borders multiple times. Natural gas originating in Canada is 
often exported to the United States in one part of the country 
and then reexported back into Canada in another part just due 
to the logistics.
    Over 50 natural gas pipelines link North American energy 
markets, 6 oil pipeline systems link the U.S. and Canada, and 
over 30 major electricity transmissions connect the U.S. and 
Canada. Yet while we have substantial room to improve and grow 
our energy partnership, especially with Mexico, I look forward 
to hearing from our witnesses on how the U.S. can work with our 
neighbors to build a stronger North America.
    I would now turn to the ranking member Sires for his 
opening remarks.
    [The prepared statement of Mr. Duncan follows:]
    
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    Mr. Sires. Good morning. Congratulations, Rebecca and 
Carlos. Welcome on board.
    Good morning to everyone. And thank you, Chairman Duncan, 
for holding this hearing.
    Today's hearing will focus on the relationship, prospective 
opportunities, and upcoming challenges in energy cooperation 
between the United States and our close neighbors and allies, 
Mexico and Canada.
    The energy market in North America has become large and 
integrated. Because of this, North America must take particular 
steps to ensure that our energy cooperation remains beneficial 
to all parties. The current relationship between the U.S. and 
its North American partners is strong.
    For instance, Canada is currently the largest single 
supplier of crude oil to the U.S. Electricity trade between the 
U.S. and Canada has increased 230 percent between 2006 and 
2015, and Mexico is the largest customer of U.S. natural gas. 
Mexico and the U.S. have exponentially increased the amount of 
pipelines between the countries to expand on its ability for 
future trade. While our current integration is stronger than 
ever, there are opportunities in the future to have an even 
more robust relationship.
    With large potential in solar, wind, and hydropower, I 
believe that working toward further integration within the 
renewable energy industry is in the national interest of the 
U.S. Countries all over the world are already seeing that 
investing in renewable energy sources is driving their 
economies into the future and producing jobs for the next 
generation. We must work with our allies to make sure the U.S. 
isn't just a part of this trend, but one of the leaders.
    Unfortunately, President Trump's decision to pull out of 
the Paris climate agreement leaves the U.S. out in the cold, 
joined by only Syria and Nicaragua, the only two other nations 
not party to the agreement. I am heartened by the response of 
many American cities and companies to state their commitment to 
energy diversity and making sure the American people have 
access to the jobs and stability that comes with a more 
efficient and independent energy matrix.
    These challenges present unique circumstances for North 
America to strengthen its commitment to energy integration. The 
U.S. needs to reassure its southern and northern neighbors that 
we are dedicated to energy integration and will help where 
possible to pursue this interest. However, this requires 
dedication and cooperation on all fronts. I am confident that 
the U.S. will continue to develop an official energy policy 
with its neighbors.
    I look forward to hearing from our panelists how we can 
address the challenges and where the future of North America 
and energy industry lies. Thank you.
    Mr. Duncan. The gentlelady from New Jersey is recognized--I 
am sorry, New York. Ms. Kelly is recognized.
    Ms. Kelly. Thank you, Mr. Chairman.
    I was disappointed by the Trump administration's recent 
decision to withdraw from the Paris Agreement and retreat into 
diplomatic isolation. This decision not only endangers our 
planet, but also hurts America's credibility abroad. And let us 
not forget that President Trump has already strained our 
relationships with Mexico following degrading remarks about 
Mexican citizens and threats to slap a 20 percent tariff on 
imports. This threatens our position as Mexico's largest 
trading partner and foreign supplier of natural gas.
    How do these actions add to U.S. energy security? How do 
they promote U.S. interests? It is my hope that this hearing 
will shed light on the path forward to promote general economic 
growth and job creation that is as mutually beneficial as 
possible. The future of North American energy is changing as 
renewable energy becomes cheaper and electric grids become more 
efficient. Supporting these different technologies will promote 
not only a clean environment, but also decrease our reliance on 
foreign energy.
    I look forward to hearing from the witnesses on charting a 
responsible path forward for North American energy policy. And 
I thank you, Mr. Chair.
    Mr. Duncan. I thank the gentlelady.
    The chair will go to the gentleman from Florida for a brief 
opening statement.
    Mr. Yoho. Thank you, Mr. Chairman. I appreciate you 
convening this meeting. And I think this is very important that 
we have this meeting today.
    You know, with the abundance that America and North America 
has been blessed with, as far as natural resources, and with 
our Caribbean Basin and our South American basin, our neighbors 
so close that we have so much energy that we utilize that to 
bolster the security, especially of the Caribbean islands.
    You know, if you look at Puerto Rico, the majority of their 
oil or energy production is from heavy oil that comes from 
Venezuela. If you look at the U.S. Virgin Islands, they have an 
energy shortage. That region pays the most for electricity than 
anybody else when you look at the Continental United States. 
And so exporting LNG out of North America makes sense to bring 
clean energy to those areas, in addition to national security. 
You know, to have a steady supply from an ally to U.S. 
territories, versus getting it from Venezuela just makes sense. 
And this is something I look forward to hearing your 
testimonies on.
    And I just have to say, Mr. Chairman, about President Trump 
pulling out of the Paris accord, I think it was the right thing 
to do. I think that tied our hands as Americans. It indebted 
this country to paying and transferring wealth from this 
country to other countries, and it wasn't going to really 
change anything. He has said he is going to renegotiate this. 
And it is not that he doesn't want clean air or clean energy. 
He wants to do it where it is best for this country. And if it 
is best for this country, it is going to be better for the 
people that we work with.
    I yield back.
    Mr. Duncan. I thank the gentleman.
    Mr. Espaillat.
    Mr. Espaillat. Thank you, Mr. Chairman. Ranking Member 
Sires, thank you for putting together this hearing on the 
energy opportunities in North America.
    Certainly, this is an opportune time to discuss this 
particular issue as we see the impact of the collapse of the 
oil industry and how it has impacted the Caribbean and central 
South America from Venezuela. And we saw for many years how the 
Petrocaribe initiative was used as a political tool in that 
region. Now, many of those countries in the Caribbean are 
either facing extremely high rates of electrical costs or have 
spotty energy supplies, leading to their economic development 
to be delayed, if not stifled.
    But for the longest time, Canada and Mexico have been the 
United States' allies in matters of energies, commodities and 
vice versa. There has been an active and increased energy trade 
between our countries where Canada and Mexico have each 
represented a crucial part in the United States' energy 
independence and security. Unfortunately, this economic 
relationship risks disruption due to the actions taken by the 
current administration, most notably the withdrawal from the 
Paris climate accord, which even North Korea has signed onto 
and stayed there.
    So when we hear that Syria and Nicaragua are the only two 
that have opted out, we also should look at the ones, the 
countries that are still in the agreement. And even North Korea 
is still in the agreement. And, of course, the President's 
talks on building the wall has strained relationships with 
Mexico. So all these actions may clearly put at risk our lives 
with Canada and Mexico to continue to excel in topics related 
to energy. I hope that your testimony will shed some light on 
some of these issues. Thank you.
    Thank you, Mr. Chairman.
    Mr. Duncan. You are welcome.
    Mrs. Torres, do you have an opening statement, briefly?
    Mrs. Torres. No, thank you.
    Mr. Duncan. All right. So we will turn to the testimony 
from our witnesses. We thank you for being here today.
    Before we get started, you will notice some lights in front 
of you: Green, yellow, and red. We are going to operate on a 5-
minute timeframe. As it gets close to the end of your time, it 
will start going to yellow. When it gets to red, your time is 
up, and you can just wrap up. Try to stay on time. Many members 
have other meetings today, but we want to get to as much as 
possible.
    So at this time, I will recognize Ms. Ladislaw for 5 
minutes.

 STATEMENT OF MS. SARAH LADISLAW, DIRECTOR AND SENIOR FELLOW, 
ENERGY AND NATIONAL SECURITY PROGRAM, CENTER FOR STRATEGIC AND 
                     INTERNATIONAL STUDIES

    Ms. Ladislaw. Thank you very much.
    Good morning, Chairman Duncan, Ranking Member Sires, and 
members of the committee. It is my pleasure to be here today to 
speak with you about energy opportunities in North America. My 
name is Sarah Ladislaw, and I direct the Energy and National 
Security Program at the Center for Strategic and International 
Studies. We are a bipartisan, nonprofit organization 
headquartered in Washington, DC, and we provide strategic 
insights and sound policy guidance on matters relating to 
energy. My remarks and written testimony today represent my 
views and not the views of my colleagues or the institution 
that I represent.
    One thing that Democrat and Republican candidates had in 
common during our last round of elections is that they 
recognized the United States has amazing energy resources. And 
these resources can play an important role in sealing our 
economy, creating jobs, and advancing our foreign policy 
objectives.
    This newfound energy confidence is a shift from the 
sentiment of years past when growing energy import dependence 
and high prices left the United States feeling vulnerable to 
global market disruptions and searching for secure 
alternatives.
    For decades, as part of this quest for greater energy 
security, the United States worked with its neighbors Canada 
and Mexico to cultivate the kind of economic and security 
advantages that come with an integrated, close proximity market 
in energy trade. We signed trade arrangements, fostered cross-
border infrastructure, and met regularly to discuss energy 
policy and regulatory issues. And we even sought to harmonize 
standards relating to electric reliability, offshore drilling 
safety, and a host of other issues.
    Because of those efforts, North America is now one of the 
most energy advantaged continents on the planet with ample oil, 
natural gas, coal, nuclear, solar, biomass, wind, and 
hydropower resources. Even beyond its basic resource base, 
North America has attributes that make it additionally 
advantaged. As one longtime energy executive once told me, 
resources alone are not enough. To make an energy project work, 
you must have the critical math: A market for these resources; 
access to financing and technology and skilled labor; 
infrastructure; a sound political, legal, and commercial 
environment; and a proper return on investment. And North 
America has this critical math.
    Because of this energy advantage and the slowing of our 
energy demand growth, North America is coming close to 
achieving energy self-sufficiency. According to the 2017 BP 
energy outlook, North America is projected to be energy self-
sufficient by 2020.
    So does self-sufficiency mean that we have achieved all the 
promises of energy independence? Definitely not. North America 
will need access to markets to sell its energy resources in 
technologies. We will also need our energy trading partners 
within the hemisphere and around the world to achieve economic 
and security advantages that come from building trade 
relationships.
    Even with all these energy advantages, North America still 
faces energy-related challenges, many related to the important 
changes taking place in the energy sectors of our respective 
economies. Over a period of two decades, as many of you have 
noted, North America's low production landscape has undergone 
some profound changes that have altered the oil delivery 
infrastructure on the continent, led us to lift a decades long 
oil export ban in the United States, to historically 
significant changes in the Mexican Constitution allowing for 
private investment.
    Similarly, dramatic shifts are taking place in natural gas 
supply and delivery in North America, with the United States 
now serving as an LNG exporter and a major supplier of gas to 
Mexico; and, in the electric power sector, where shifts in 
consumer preferences, available technologies, the cost of 
renewable energy, and preferences for low-carbon energy sources 
are challenging the existing systems and creating new 
opportunities in electric power markets throughout the 
continent.
    Indeed, these are exciting and complex times for the North 
American energy landscape. So what should North America do with 
its energy advantage? In my view, we should foster it by 
promoting much of what has made it successful thus far: Working 
toward greater integration and shared priorities.
    In order to make the most of these energy advantages, 
Canada, Mexico, and the United States should continue to 
prioritize high-level energy policy dialogues that have proven 
very successful in the past, modernize NAFTA to reflect 
progress that has been made and to prepare for future energy 
challenges, adopt a regional approach to energy infrastructure 
discussions, and assess and address our shared vulnerabilities.
    In closing, I want to thank the committee for taking on 
this important topic, and I look forward to the discussion.
    [The prepared statement of Ms. Ladislaw follows:]
    
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    Mr. Duncan. Thank you.
    The chair will now recognize Mr. Padilla.

      STATEMENT OF AARON PADILLA, PH.D., SENIOR ADVISOR, 
       INTERNATIONAL POLICY, AMERICAN PETROLEUM INSTITUTE

    Mr. Padilla. Chairman Duncan, Ranking Member Sires, and 
members of the subcommittee, thank you for the opportunity to 
speak with you today. My name is Aaron Padilla, and I am a 
senior advisor for international policy at the American 
Petroleum Institute, which represents all facets of U.S. oil 
and natural gas industry.
    Today's North American energy market, including oil and 
natural gas, is highly integrated and interdependent. A 
critical component of the North American energy market is the 
U.S. energy renaissance. The U.S. is now the largest producer 
of oil and natural gas. According to the EIA, the U.S. is 
projected to surpass the historical 1970 peak in crude oil 
production by 2018. Since 2005, natural gas production in the 
U.S. has increased by 47 percent.
    In recent years, U.S. companies have also experienced 
unprecedented productivity gains, enhancing the ability of U.S. 
producers to quickly increase production in response to 
changing global market demand. For example, in 2011, a typical 
rig operating in the Bakken basin in North Dakota or Montana 
would create 234 barrels per day of new oil production in a 
month. Today, Bakken rigs are nearly five times more 
productive, generating over 1,100 barrels per day of new oil 
production every month.
    Greater export market opportunities also have emerged for 
U.S. energy. In 2016, the U.S. exported more than 190 million 
barrels of crude oil to 26 countries, including 11 in the 
Western Hemisphere. That same year, the U.S. began shipments of 
liquified natural gas from the lower 48 States. And since 
February 2016 through March 2017, the U.S. exported 331 billion 
cubic feet of LNG to 21 countries, including six in the Western 
Hemisphere.
    Looking closer at North America, the U.S., Canada, and 
Mexico together form a unique global energy center. According 
to the EIA, North America is on the verge of achieving energy 
self-sufficiency, as Sarah mentioned, when you consider the 
consumption of liquid fuels production against the production 
of liquid fuels and that we are on the verge of meeting that as 
soon as 2020.
    Energy flows between the U.S., Canada, and Mexico are 
multidirectional, as depicted on the map from the graphic that 
we produced that the chairman mentioned at the beginning of his 
remarks.
    Canada is the top export market for U.S. crude oil, motor 
gasoline blending components, and kerosene type jet fuel. 
Mexico is the largest export market for U.S. pipeline natural 
gas, total refined products, finished motor gasoline, and 
distillate fuel oil. In addition, significant U.S. crude oil 
imports from Mexico are manufactured in the U.S. into the 
refined products that are exported back to Mexico.
    As for natural gas in 2016, the U.S. exported 2.1 trillion 
cubic feet of natural gas by pipeline to Canada and Mexico.
    The U.S. pipeline capacity for natural gas exports to 
Mexico have rapidly expanded in the past few years, and they 
are expected to nearly double in the next 3 years. Mexico is 
also a new market for U.S. LNG, receiving 67 billion cubic feet 
of natural gas shipped since February 2016.
    U.S. refineries also receive crude oil from Canada and 
Mexico, which all supports U.S. jobs. In 2016, 69 U.S. 
refineries, primarily in the Midwest, processed heavy sour 
crude oil from Canada. Also in 2016, 12 U.S. refineries along 
the Gulf Coast imported crude oil from Mexico, producing 
refined products for both the U.S. and Mexican markets. And 
since 2000, Mexico's net imports of gasoline and diesel have 
tripled, most of which are supplied by refineries here in the 
U.S.
    Canada and Mexico are also significant markets for U.S. 
investment in oil and natural gas. Mexico's hydrocarbon sector 
is just now opening to foreign investment for the first time in 
nearly a century. In Mexico's December 2016 bid round of 
deepwater blocks, U.S. companies were successful in capturing 
five of the eight blocks awarded.
    The North American region has a strong and vibrant energy 
market. It is imperative that U.S. policy continues to 
facilitate our energy renaissance here at home, allowing for 
responsible domestic oil and natural gas development, and 
continuing to foster the dynamic energy flows in the region. We 
also need sufficient infrastructure to ensure additional energy 
supplies can reach U.S. consumers and international markets.
    In addition, as the President and Congress begin to 
consider potential changes to NAFTA, we urge them to keep in 
mind the important role this agreement has played in the North 
American energy market. NAFTA has eliminated tariffs for oil 
and natural gas products, liberalized natural gas exports to 
Canada and Mexico, and provided strong investment protections 
which are consistent with U.S. law and that are essential for 
U.S. oil and natural gas investments in the region.
    In conclusion, we have a robust and dynamic regional market 
that supports U.S. jobs and U.S. consumers with access to 
affordable energy. We look forward to working with Congress and 
the administration to continue the U.S. energy renaissance, 
energy linkages to North America, to the rest of the Western 
Hemisphere, and to the world.
    Thank you, and I look forward to answering your questions.
    [The prepared statement of Mr. Padilla follows:]
    
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    Mr. Duncan. Dr. Padilla, thank you. I like the words 
``North American energy renaissance''; great for saying that.
    Dr. Wood, you are recognized for 5 minutes. Welcome back.

 STATEMENT OF DUNCAN WOOD, PH.D., DIRECTOR, MEXICO INSTITUTE, 
        WOODROW WILSON INTERNATIONAL CENTER FOR SCHOLARS

    Mr. Wood. It is a great pleasure to be here.
    Mr. Duncan. Is your mike on? There you go.
    Mr. Wood. Now I am on.
    Thank you very much, Chairman Duncan, Ranking Member Sires, 
committee members. It is a great pleasure to be here.
    I have been studying Mexican energy for more than a decade 
and been studying U.S.-Mexico energy relations throughout all 
of that period. I now have the privilege directing the Mexico 
Institute at the Woodrow Wilson Center, and a lot of my time is 
actually spent trying to understand the reforms that have taken 
place in Mexico and the path forward. And I will be talking 
about those in my comments.
    There are three things that I want to get across to you 
today. One is the transformation of the government-to-
government energy relationship that we have seen over the past 
3 years. The second is the areas for collaboration that I see 
looking ahead that would be most productive for both sides. And 
thirdly, that question of political change in Mexico.
    Throughout all of these points, I think that it is 
important to emphasize that dialogue and institutional 
cooperation are fundamental elements to preserve the prosperity 
and interests of both the United States and Mexico.
    Let me begin by talking about the transformation of that 
government-to-government relationship. The Mexican energy 
reform of 2013 is a watershed moment in Mexican history 
because, of course, it pushes the possibility of Mexican 
cooperation with other countries and allowing for an 
investment.
    We have seen, since 2014, regular meetings between the 
energy ministers of the countries of North America. And those 
meetings of the energy ministers have been enormously 
productive, bringing forth the North American Cooperation on 
Energy Information initiative, which produces maps of 
infrastructure and resources across the region, which allow us 
to understand the real potential of North America's energy 
markets. There has also been a process of harmonizing the 
statistical reporting from the three countries, which as nerdy 
as that sounds, is incredibly important in understanding how 
things can actually move forward.
    On climate change, from Felipe Calderon's government 
through the Pena Nieto government, we have actually seen Mexico 
being a leader amongst emerging markets for climate change 
action, in particular, their legislation which forces Mexico to 
reduce its carbon emissions by 50 percent by 2050. We have seen 
that play out on the North American stage with cooperation on 
reducing methane emissions from the oil and gas industry, the 
Ottawa accord of July of last year.
    When I looked forward to the future of energy cooperation 
between Mexico and the United States, I see that there are 
three main areas in which this can happen. The first is the 
energy trade, which my colleagues have already talked about, 
but let me point out one thing that hasn't been mentioned. 
There has been a complete reversal in that energy trade over 
the past 3 years. It used to be that Mexico had a significant 
surplus with the United States. The United States now has a 
very, very important surplus with Mexico. That is because of 
the decline of Mexican oil production, the drop in the price of 
crude oil and, of course, because Mexico is seeing soaring 
demand for refined products from the United States and for 
natural gas.
    The natural gas story is extraordinary. Because of the 
opening of Mexico's energy sector, in particular, electricity 
generation, we are seeing natural gas exports rising 
dramatically. They are currently, I think the numbers we have 
up on the board here, we have seen them peak at around 4.4 BCF. 
Some experts are predicting that within a few years they will 
get up to almost 10 BCF. That is predicted to be around 10 
percent of U.S. production. So you can imagine the impact of 
that on prices of natural gas here.
    Secondary for cooperation is regulatory cooperation. In 
particular, the question of regulatory simplification or 
efficient regulation. I know a theme which is dear to the heart 
of the current administration. Mexico desperately needs to 
eliminate repetitive paperwork. They need to improve 
interagency cooperation and they need to work on online 
compliance mechanisms. And these are things where the United 
States and Mexico can work together.
    Lastly, infrastructure. Of course, when we are talking 
about cross-border infrastructure, be it pipelines or 
transmission lines, Mexico and the United States have to sit 
down together and talk these things out. And that is why the 
institutional mechanisms matter.
    Let me say a few words about the future for Mexico. As most 
of you know, there is a Presidential election next year in 
Mexico. A lot of people are predicting that the far left 
candidate Andres Manuel Lopez Obrador will win. He has 
committed himself to repealing the energy reform that was 
passed in 2013. My own prediction on that is that if he does 
win, and that is far from guaranteed, but if he does win, he is 
going to face an incredibly tough time repealing the energy 
reform, because congress in Mexico will provide a barrier to 
doing that. He will not have the two-thirds majority that he 
needs in both chambers in order to revoke or repeal the energy 
reform of 2013.
    So let me just close there and emphasize once again that I 
think the institutional mechanisms that we have existing 
between the two countries are vitally important and we need to 
focus on how we can preserve those. Thank you.
    [The prepared statement of Mr. Wood follows:]
    
  
    
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    Mr. Duncan. Thank you, Dr. Wood.
    I will recognize myself for 5 minutes for questioning.
    And it is interesting that the events in Qatar, with what 
the other Arab nations have done to try to isolate Qatar to 
some degree, will have an impact on global natural gas 
primarily, but possibly global energy prices altogether. I say 
that because it is important and it shows the need for this 
trilateral cooperation between the North American countries and 
the energy sector to lessen the volatility of what goes on in 
the Middle East in so many other ways, other than just the 
Qatar happenings of this week.
    One other thing I want to mention before I get into 
questioning is, we talk about this trilateral opportunity and 
the energy sector. It is more than just the resources that are 
going back and forth, oil and gas; it is the technology. And we 
can learn from the Canadians from how they extract oil from the 
oil sands, the technology they are using there. The fracking 
technology that we have here, horizontal drilling as well.
    As Mexico tries to reengage and attract more private sector 
investment based on the 2013 energy reforms that Dr. Wood just 
mentioned, they are just opportunities for American businesses 
in the oil and gas industry to bring that technology to bear. 
And I think, you know, I am going to expand a little bit beyond 
the three countries here, but Venezuela, assuming the political 
situation down there changes, there is opportunity there for 
that technology to improve and bring in the 21st century the 
oil and gas sector there. I think this applies all across Latin 
America as well. People, jobs, and technology are a big 
component of what we are talking about here with the three 
countries.
    We have got opportunity abounds beyond Canada and Mexico. I 
think Mr. Yoho mentioned the Caribbean Basin. Relying on 
Venezuela right now, there is opportunity for American LNG to 
be exported from Florida into the Caribbean to lessen their 
dependence on the volatility of a country like Venezuela. There 
is opportunity there as well.
    I appreciate Dr. Wood mentioning Mexico. How effective do 
you think Mexico's energy reforms have been thus far? You 
touched on that a little bit. I watched that debate in the 
Mexican Congress. You know, people were stripping clothes off 
to make points. And that was a political debate unseen in 
Mexico or in congress in a very long time. I am not talking 
about stripping clothes off, but I am just talking about the 
heated debate that went on about what is the right role of the 
government in the nationalization of the energy sector or the 
privatization of the energy sector? What investment may or may 
not come, and what it meant for long-term viability of Mexico's 
energy sector in 2013. Then we saw the lease sale and the first 
one kind of stumble along. We have seen more robust lease sales 
after that.
    So I would like for you to just talk a little bit more 
about Mexico. You mentioned that they may try to reverse some 
of that. That is the first I have heard, honestly. So if you 
could just expand a little bit about that, Dr. Wood.
    Mr. Wood. Sure. Thank you for the question. The first thing 
is, is that nudity is a recognized form of political protest in 
Mexico, and most of the people who do it should never, ever be 
seen naked in public; I can say that.
    Secondly, that debate in Congress recognized the deep 
divides in Mexican society over a liberalization of the energy 
sector. And still today, the energy reform is deeply unpopular 
amongst the Mexican electorate. That is why the far left party 
has seized upon that issue for its campaign platform for 2018.
    Now, as I said, there is no guarantee that the--Andres 
Manuel Lopez Obrador, the leader of the Morena party, will win 
in December of next year. Currently, he is at the top of the 
polls, but not by very much. This is his third time running. In 
previous years, he has been out in front at this point in the 
campaign process by a much bigger margin. However, there was an 
election this weekend in the state of Mexico, and his candidate 
there failed to win, but came very, very close. And the Federal 
Government used a lot of resources to support their candidate 
in that state. So we are going to have to follow that over the 
next 12 months.
    If he does win office, though, as I said in my statement, 
it is basically an impossibility for him to repeal the energy 
reform through Congress because of the need for a two-thirds 
majority and the majority of the state legislatures. And his 
party will not have that. So his answer is actually to go to a 
national referendum. And based upon a political reform that 
took place a few years ago in Mexico, a referendum has the 
possibility of reversing or enacting new legislation. However, 
there is a caveat. Money bills are not included in that. And 
the constitution--the legal interpretation of the energy reform 
is that it affects Federal revenue because, of course, Pemex, 
the national oil company, and the oil royalties are directly 
affected by the energy reform.
    So constitutionally speaking, I don't think that referendum 
would actually be successful.
    The other part of the question, is this actually a 
successful energy reform? It is deeply successful, and the 
reason is because of the diversity of companies that have come 
in and invested, the amount of money that has come in, the 
resources that are going to be released on the oil and gas 
side, and secondly, on the electricity side. The electricity 
story is an extraordinary success. We have seen massive 
investment producing very, very low generation prices which 
will lower the cost for industry and for the Mexican consumer.
    Mr. Duncan. Thank you for that answer.
    I want to talk about Section 123 for just a minute. And 
before I do, let me preface it with South Carolina is one of 
the southeastern States that is expanding its nuclear power 
with the nuclear power plant in Jenkinsville on Lake 
Monticello, right in Fairfield County. And one of the main 
contractors to provide the reactor was Westinghouse. 
Westinghouse just filed bankruptcy and has basically put the 
completion of that project in jeopardy. Not only the site there 
in South Carolina, but Southern Power has a site just across 
the Savannah River in Georgia around the Augusta, Georgia area. 
They have got a little different contingency there, but 
Westinghouse bankruptcy could impact what we are talking about 
with Section 123.
    There are other vendors out there that can provide those 
components, but I am going to ask and, Ms. Ladislaw, if you 
could talk about Section 123 nuclear power in Mexico, 
possibility inject Westinghouse bankruptcy into this and what 
that means for U.S. contractors possibly providing components 
in the Mexican nuclear sector, and how that might affect 
competition of other international firms. So if you could touch 
base on 123, please.
    Ms. Ladislaw. Sure. I think the way that you have 
characterized it is really helpful, because I think one of the 
things we are looking for in the global nuclear energy market 
is more markets where nuclear can succeed. And one of the real 
difficulties that we keep experiencing is if you don't have 
regulated guaranteed return on electricity prices, plus some 
financing, it is really hard to make nuclear work. There are 
some markets where it is working, there are some markets where, 
like the U.K., where they are really trying to create new 
nuclear opportunities. But as we are seeing in a wide variety 
of instances in places where you don't have a guaranteed return 
on electricity pricing, where you don't have advantageous 
financing, a lot of the plans are still running over cost and 
over time. And that is not something that you can't work out of 
the system, but it is certainly something that is hurting sort 
of, you know, the environment around nuclear.
    I think it is one of those issues where it will actually be 
quite helpful for the North American dialogue to talk about 
nuclear and to talk about the opportunity of nuclear in Mexico. 
I will be honest, I do think, as you brightly pointed out, it 
does save some headwinds, not only in the sort of commercial 
industry infrastructure with the challenges that we really 
won't know where Westinghouse ends up until we understand where 
Toshiba stands as well. And so we have got to sort of let that 
process work its way out.
    But I think that when you look at everything that Mexico is 
doing to try and incentivize nuclear power, and then you look 
at all of the things that they are also doing to incentivize 
renewable energy, the fact that we are trying to sell a lot of 
U.S. low price gas into the Mexican electric power system, I 
think you set up a pretty competitive dynamic for nuclear power 
to succeed. And so if we are to really want to create a market 
for nuclear in the United States, we are going to have to 
understand what kind of support that is going to require in a 
North American basis, but also for the existing plants that we 
have in Illinois and New York and Pennsylvania, Three Mile 
Island didn't pass their capacity market bid round.
    So nuclear, even existing nuclear is being challenged by 
some of the changing electricity dynamics. I think the same 
thing will be true in Mexico, and so I think that the nuclear 
energy industry, quite frankly, globally has to think about how 
it is going to be more competitive. Is it through existing 
technology? Is it through a next version of nuclear energy 
technology, something smaller, more modular? Or do you just 
really have to make sure you have the system of financial 
incentives and the return on investment on a guaranteed rate 
for electricity prices that protects nuclear within your 
market? Because it does have advantages. It is base load. And 
it is really hard to envision a future where you don't have any 
nuclear power whatsoever. And so I think there is a lot to work 
out.
    Mr. Duncan. So I am glad you mentioned SMR, small modular 
reactors, and I think that is a viable option going forward. 
When I hear about nuclear energy in Mexico and expansion of 
nuclear power production there, one of my gut reactions is that 
we have seen nuclear components, whether it was low-level waste 
from a hospital or whatnot, disappear for a period of time, 
stolen, mishandled; they have had to find it, get it back in 
their possession. The possibility of proliferation, the 
possibility of terrorists getting their hands on that for a 
dirty bomb of some sort on a country that is on our southern 
border. They are very close to home. It is not like it is 
overseas. So that is a gut reaction I think a lot of my 
constituents would even have if they follow those type issues.
    So with that, I will turn to the ranking member for 5 
minutes.
    Mr. Sires. Thank you, Mr. Chairman.
    With the emergence of Lopez Obrador, obviously, he wants to 
revert to get rid of this 2013 agreement. So that makes him a 
little bit popular in Mexico.
    How about the rhetoric coming out of this country? How is 
that impacting also this emergence from this candidate?
    Mr. Wood. It is a very, very important question. And at the 
beginning of the year, it was clear that the breakdown in 
bilateral relations, the increased tension, the conflict, in 
particular the communications between the two Presidents, were 
causing a highly nationalistic reaction in Mexico. All 
politicians across all party lines were moving toward a more 
nationalistic perspective.
    In recent times, things have calmed down a great deal. And 
the reason for that, I would argue, is that the institutional 
mechanism between the two countries are working. Mexico has 
been very, very smart about how it has approached the United 
States, it has laid the entire relationship on the table, and 
said you need us for lots of reasons: For export markets, for 
integrated production, for security on your southern border, 
for controlling Central American migration. And, of course, the 
energy piece is there as well. Mexico has been putting that 
forward over and over again.
    But the effect of the election campaigns last year and the 
volatility of this year so far is having an effect on the 
Mexican election. It is not as dramatic as we feared it might 
be, but there is clearly an anti-Yankee sentiment among certain 
sectors of the Mexican electorate, and that will help Andres 
Manuel Lopez Obrador.
    Now, he is putting himself forward as a candidate who is 
much better equipped to negotiate with the United States than 
the current government. And he has said that if you really want 
to renegotiate NAFTA, if you really want to reestablish--or 
establish equality between Mexico and the United States at the 
diplomatic level, then he is your man. Mexicans are not 
completely convinced by this.
    So the energy reform process, as it stands right now, 
although it is unpopular, will begin to deliver a lot of the 
benefits in a couple of years' time, as oil production 
increases, as royalties start to come in, and as Mexicans begin 
to reap the benefits of having a liberalized downstream and 
retail market in Mexico. As you may have seen, a lot of U.S. 
firms are opening up gasoline stations in Mexico right now, and 
Mexicans are flocking to them because they recognize that, 
although the price is probably the same as they are going to 
pay at the Pemex station, the quality of the product and the 
fact that they are probably not going to get ripped off in 
terms of the amount of fuel that is being put into their gas 
tank is a big advantage.
    So we are actually seeing one gas station in the state of 
Mexico which was recently taken over by a U.S. firm saw its 
sales double the month after a U.S. firm took it over. This is 
a huge opportunity, and Mexicans are beginning to understand 
those consumer benefits of the reform.
    Mr. Sires. Thank you.
    Venezuela is obviously a disaster. And the political on 
Venezuela used to be oil. How do you see America playing a role 
in substituting Venezuela in the region, especially in the 
Caribbean? Dr. Padilla, can you talk to us about that? I know 
you mentioned a little bit about export to the Caribbean.
    Mr. Padilla. Yes, thank you. You are right to bring the 
conversation back to Venezuela. The conditions there are very 
unfortunate. I would say that the primary way in which the U.S. 
can continue to exert some influence with regards to global oil 
markets is through the energy renaissance here in the U.S. So 
our growing production of oil in the United States has had 
significant effects on global markets and driven down prices 
globally, which has had an impact on states in Venezuela that 
depend on oil revenue.
    So the primary way which we have already had an impact on 
Venezuela and its role in energy markets is through our 
increasing production here. We just had that effect on global 
energy markets.
    With regards to the Caribbean, the U.S. also stands ready 
with its increased production in natural gas to offer an 
alternative and more diversified supply to Caribbean countries 
that have previously relied on crude oil imports from 
Venezuela. So we already see U.S. LNG exports that are going 
from the lower 48 in the United States to the Dominican 
Republic. We see ISO container LNG exports that are going from 
Florida to Barbados.
    So these are examples of how the United States and its 
exports in oil and natural gas can have impacts on global 
markets that affect Venezuela and can have an effect on 
providing alternative sources of fuel to Caribbean nations that 
have previously depended upon Venezuela.
    Mr. Sires. Thank you.
    Would you like to add something to that?
    Ms. Ladislaw. You know, I agree with everything that Dr. 
Padilla just said. I would also say that we have a lot of 
renewable energy technologies that we, under the last 
administration, were also using within the region to--diversity 
is the source of security. And so really being able to try and 
help those countries attract those technologies as well so that 
they have a number of different energy resources to rely on as 
well.
    Mr. Sires. Thank you. I was going to go bring the renewable 
question up. With all this growth and all this different 
energy, how are we integrating in North America the renewable 
energy part? I mean, what part does it play?
    And since you brought up renewable energy, can you----
    Ms. Ladislaw. Well, it really is the funny thing about 
talking about energy in a continental basis is the continent is 
very big, and all different states and regions and provinces 
have different approaches. I think one of the things we have 
seen, and maybe Dr. Padilla wants to talk more on the renewable 
fuel side of the equation, but on the electric power side we 
are seeing markets all over the continent really grappling to 
deal with the fact that things like solar power, in particular 
things like wind, are not only competitive with conventional 
energy sources, but they have to figure out how to integrate 
them into their energy system in a way that utilities continue 
to make a return on the investment.
    People always will ask me, when will renewables pass a 
tipping point where they are actually competitive? I think we 
are well past that point. I think that when you look at places 
that have net metering policies or when you look at, even in 
Mexico, recently starting a lot of their renewable energy 
policies under their electricity reform and already having to 
ask themselves, how is our electric power system going to 
integrate more and more of these resources, not just from 
utility scale solar farms or wind farms, but also from people's 
homes through distributed energy resources?
    I think you are starting to see folks used to think that 
renewables would have to get to 30 to 40 percent penetration 
within the electric power mix for it to really start to cause 
some questions about how utilities make a return on their 
investment and how we manage those electric power systems, we 
think about things like reliability to realizing, no, that is 
actually here today.
    And so I think there is actually a renaissance going on in 
the electric power sector in North America that if you talk to 
anyone who is in a public utility commission at a State or 
regional or local level, they are grappling with each and every 
day. And when you add low natural gas prices onto that, for 
some regions of the country, it just becomes more and more 
profound. So I actually think we are in the midst of a 
transition from just trying to figure out how to build more 
renewable energy generation into the electric power mix to 
actually scaling those up to higher levels and figuring out 
what that mix looks like going forward.
    Mr. Sires. Thank you. Thank you, Chairman.
    Mr. Duncan. I thank the ranking member.
    And the chair will now go to the Republican side, to Mr. 
Yoho.
    Mr. Yoho. Thank you, Mr. Chairman. Sorry, I had to step 
out. We appreciate you guys being here.
    When you look at the situation, with our natural energies 
that we have here, the abundant resources, and I am 
particularly focused on LNG, when you look at the feasibility 
of exporting that, do you see any restrictions on that as far 
as the mobilization of that or the transportation of that to 
taking it down to the Caribbean and what we could do to 
expedite that?
    Mr. Padilla. Thank you, Congressman, for the question. LNG 
exports are a great potential for the U.S. with our rising 
natural gas production. I would underscore a couple of things, 
I think, that can help in terms of facilitating policy.
    The first is understanding the important role that free 
trade agreements play. Free trade agreements, when they are in 
place between the U.S. and another country, automatically 
liberalize LNG exports to that country by the provisions of the 
U.S. Natural Gas Act. So that is certainly a priority for the 
U.S. oil and natural gas industry, for example, with regards to 
NAFTA in the way that it provides that automatic liberalization 
of LNG exports and the growing market that Mexico represents.
    And then another policy priority for API member companies 
and natural gas producers is expedited approval of permitting 
and determinations by the Department of Energy with regards to 
nonforeign trade agreement partner countries. We welcome the 
most expedited process possible to approve those exports to 
non-NTA countries so that they too can enjoy the benefits of 
the abundance of natural gas production here that allows us to 
also export the LNG.
    Mr. Yoho. Okay. And does anybody else want to weigh in on 
that?
    Mr. Wood. The only thing I would like to point out here is 
that I think that very often we think too small about these 
issues. There are possibilities for exporting U.S. natural gas 
and LNG through Mexico. In many cases, it may be easier to 
build an LNG plant in Mexico than it is here in the United 
States, which will provide an outlet that would otherwise not 
be possible here in the United States because of zoning and 
permitting.
    In the same way, we need to think seriously about getting 
U.S. natural gas to Central America, which means working very 
closely with the Mexicans on building out that pipeline network 
in Mexico and making sure it gets southwards. I think that 
those are the ideas that we need to put forward on the table. 
And I would even stretch it further.
    I recognize your question is about gas, but think of the 
possibilities, and the Mexicans have begun to talk about this, 
of building transmission lines in Mexico to move U.S. electrons 
from one U.S. State to another; in other words, go south from 
Texas, along northern Mexico, back up into California where the 
demand is. It will be easier to do it that way than it is to do 
it in the United States.
    So I think we need to think bigger, we need to think much 
more outside of the box than we are doing at this point in 
time.
    Mr. Yoho. I assume you say that because it would be easier 
regulatorywise in Mexico than here.
    Mr. Wood. Yeah. And it is not because their regulations are 
more lax; it is because they have a unified regulatory system 
for zoning and permitting for these things. Whereas here in the 
United States, of course, you have to go through the Federal, 
the State, and the local.
    Mr. Yoho. Right. You know, I also have the honor and the 
privilege of being the chairman of the Asia Pacific 
Subcommittee on Foreign Affairs, and we hear probably weekly 
from Ambassadors from different countries around that region 
how they want to start importing LNG from the U.S. And this is 
something that it would be great for our economy, it would be 
great for using our natural resources, and it would be great 
for building that stability around the world. And we have got 
companies that can do this.
    And our focus in this hearing is obviously the Western 
Hemisphere. And my goal is for our own territories. You know, 
why should we be a U.S. territory buying oil from Venezuela 
that is bolstering up a regime that is not friendly to this 
country? So anything that you can do as far as ideas and how to 
expedite that and help the commercial companies in the islands, 
whether it is Puerto Rico or the U.S. Virgin Islands, how we 
can help transition them from using number 2 petrol to LNG?
    And I think Puerto Rico is in the process of doing some of 
that, but the U.S. Virgin Islands, we need to do that, and 
along with wind and solar, absolutely. And if there are any 
ideas that you have, we would sure love to hear them.
    Do you have any comments, Ms. Ladislaw?
    Ms. Ladislaw. Ladislaw, just like it is written.
    I think the only thing I would say is I think we in the 
U.S. are really taken by the fact that we have a lot of natural 
gas. But we have got to really watch out, because a lot of 
times the midstream infrastructure to get that gas to export, 
as we consider to do more of this, as we are attracting more 
petrochemical investments in certain regions, we are not immune 
to the sort of complications that come from growth. And I would 
just point to the recent experience in Australia. Australia 
built out a huge amount of LNG export capacity, and they didn't 
consider all the domestic politics and infrastructure around 
being able to make sure their own industrial consumers were 
paying a low enough price for the gas that they needed and they 
started to curtail their exports. I am not saying that is going 
to happen here, but I think that those are things that, as we 
think about building out all these opportunities, we have got 
to make sure we have got the midstream infrastructure.
    Mr. Yoho. That is why we depend on experts like you. Thank 
you guys.
    I yield back.
    Mr. Duncan. Thank you. We will now go to Ms. Torres for 5 
minutes.
    Mrs. Torres. Thank you, Mr. Chairman. I just got back from 
a trip to Mexico with an interparliamentarian group of 11 
members. Chairman McCaul was leading that delegation. And while 
I think it is true we found--I mean, we were there during the 
gubernatorial election on Sunday. We actually landed on Sunday. 
It was very interesting to see how, just like what is happening 
here with a very populist agenda, the Morena party was able to 
garner a lot of support. However, they were still within three 
points behind and finished further than they expected.
    So I found that a little bit concerning, specifically as it 
relates to the comments that have been made by our President 
against Mexicans, against the Mexican people. They are 
certainly very angry about that. They are even more angry, or 
upset, that we have withdrawn from the Paris Agreement. They 
are feeling that they have been left out. America has, in the 
past, been a great leader to them, and they look to us for 
forward-thinking policy, so they are extremely disappointed.
    However, I heard something about an anti-American 
sentiment, and I did not find that, not within the people, not 
within the comments of their local media, and certainly, not 
from the representatives of both houses that we met with.
    On the issue of nuclear plants, I just want to caution you 
as your State looks at that. In California, we had to recently 
shut one down because we found an earthquake fault beneath 
that. So as you are looking to build out on nuclear facilities 
that we look at climate change and issues of tornadoes and 
earthquakes that are now not limited to the State of 
California.
    My question to Dr. Wood is following the withdrawal from 
the Paris Agreement, where do you think Mexico and Canada will 
look for leadership on climate change? California, for example, 
Governor Brown was just in China, and certainly, California, 
and other mayors and other governors across the U.S. are 
stepping up. What role can they play since the Federal 
Government has really left them behind?
    Mr. Wood. It is a terrific question, and we were discussing 
this actually just before we came into this room.
    Back in the period from 2000 to 2008, Mexico's Government 
began to collaborate increasingly with U.S. States on questions 
of climate and renewable energy, because there wasn't a great 
enthusiasm at the level of the Federal Government. That is 
where we are going to go back to, that is where we are going 
back to. Already we have seen extraordinary energy diplomacy 
from the States of California and Texas, interestingly enough, 
as well as some others who are--Arizona, for example, is 
engaging very, very actively with the State of Sonora. They are 
talking about an Arizona-Sonora megaregion.
    Mrs. Torres. Right.
    Mr. Wood. One of things--just a tangential point here--one 
of the things that is remarkable about this period of 
volatility is that people have realized how important, how 
vital Mexico is to the United States' national interest. 
Friends that we didn't know existed have come forward and said 
Mexico matters. Friends who didn't even know they were friends 
of Mexico have come forward and said, oh, my goodness, I have 
just realized that Mexico matters.
    Mrs. Torres. And they recognize that we recognize that.
    Mr. Wood. Absolutely and that is it. So I think what we are 
going to see is a lot more cooperation between Mexican Federal 
Government and Mexican states and cities and their counterparts 
here in the United States. Cities are going to matter more than 
ever, and as I said, there is a precedent for this happening, 
and I think it is going to be very, very productive.
    Mrs. Torres. Thank you. I have two more questions and very 
limited time, so I am going state them, and I hope you will 
have an opportunity to follow up with my office.
    Should renewable energy be included in the NAFTA agreement, 
and certainly, from their perspective, they absolutely believe 
that it should be part of what we discuss. And I want to 
further tease your intelligence on the issue of transportation 
as the Federal Government is looking at an infrastructure bill.
    In California, I have been talking to our State Department 
about a highway of things. Is this something that is possible 
as we look to continue to trade and expand our highways within 
Mexico, and as Mexico looks down to Central America for renewal 
energy? Is that something that could be possible, a highway of 
things, meaning fiber optics, gas pipes, in addition to vehicle 
traffic. And I understand I already extended my time, but I 
would love to hear your follow-up and ideas on how something 
like that could be possible?
    Mr. Duncan. I thank the gentlelady, and the chair will now 
go to Mr. Castro.
    Mr. Castro. I am fine.
    Mr. Duncan. No questions there. We can go through a second 
round if the ranking member would like.
    So there was an interesting article in The Wall Street 
Journal recently about peak demand, okay. So when I was growing 
up in the 1970s, we heard peak oil, that the world had found 
all the recoverable oil resources, and that we were going to 
see the amount of oil available for production decline. It has 
never done that. It has only gone up.
    But the article in The Wall Street Journal, was interesting 
because of peak demand, and focusing really on the U.S., and I 
don't disagree with the article that we may be at peak demand 
for fossil fuel usage, just to shift into renewables and that 
sort of thing. But I disagree with The Wall Street Journal in 
that peak demand has been met globally, because we have got a 
lot of countries around the world that are emerging, and they 
are going to use energy, energy for manufacturing, energy for 
heating and cooling homes. I am one that believes that energy 
is a great segue to improve the quality of lives of people all 
over the globe, especially in Third World countries where they 
can't keep food fresh for very long because they don't have 
electrical power, or even propane for refrigeration. You still 
have a huge threat of dengue, yellow fever, malaria, Zika and 
other mosquito-borne illnesses in areas of the world that don't 
have air-conditioning, because they don't have electrical power 
and they have to leave the windows open. There is just that 
sort of threat.
    You have got poor air quality in homes around the globe 
because no electricity. They are having to heat their homes 
with wood or charcoal. They are having to cook over wood and 
charcoal. There is just a lot of things that are putting 
particles in the area that folks are breathing. So electricity 
is a life changer for many people. You run into what is the 
source of electricity is a nuclear power hydro--there is this 
battle in Patagonia for more hydro. The environmentalists don't 
want that. Huge hydro area possibly, the potential there is 
immense. Africa, you just don't have a whole lot of hydro that 
hadn't already been put in place, and then you have a lot of 
logistics there for transmission lines and country boundaries 
and instability.
    And when you talk about nuclear power, then you have got 
proliferation issues, you have got nuclear waste issues, you 
have got a threat of terrorism. So when you talk about energy 
globally from the peak demand aspect, peak demand has not been 
met globally. There is opportunity globally. There is 
opportunity within Mexico. There is opportunity within North 
America in general, and Latin America. So I wanted to touch on 
that.
    We heard a lot in the last 4, 6, 8 years about Keystone 
Pipeline. Keystone Pipeline was a vital component to refining 
Canadian oil. And the argument was, well, they can ship that 
oil somewhere else. Well, you got logistics across the 
continent of Canada, but there was a reason that oil was slated 
to come to the United States. That oil is very similar to the 
oil coming out of the Middle East. Our refineries are set up to 
handle that type of oil.
    I have made or had the discussion with the energy sector 
about retooling America's refineries to meet the needs for 
American oil produced in the Bakken and the Permian Basin and 
other places, that is very costly. It is more attractive to 
U.S. energy producers to export that crude which is light sweet 
and bring in that heavier Canadian oil that resembles the oil 
coming from the Middle East that comes to U.S. refineries and 
is refined into all the different components that a barrel of 
hydrocarbon is refined into.
    So, that was never talked about enough, I don't think, in 
the whole Keystone Pipeline debate about why it made sense to 
bring that Canadian oil to U.S. refineries. At the same time, 
we were exporting American produced oil, crude oil, to other 
parts of the globe that were set up to refine that type of oil. 
So there is a lot of dynamics there.
    Let me get to a question real quick. We talked about 
Keystone, I did all the talking, but NAFTA, you know, President 
Trump has talked about a lot of terrorists and people in Mexico 
are concerned about a border wall and all this is going to be 
injected into the NAFTA debate as NAFTA is renegotiated, which 
I think it should, and I think the energy sector, as you heard 
in my opening comments, ought to be a big part of that NAFTA 
debate to bring NAFTA into the 21st century. We see on the 
chart the changes in energy trade. We are now importing less 
crude oil from Mexico, and we are exporting more refined 
products to Mexico, as I think one of the panelists mentioned.
    So let me just get your take, and we may have talked about 
that earlier, but your take on NAFTA, NAFTA renegotiation and 
energy in general in regard to that. You can talk about 
tariffs, you can talk about trade issue in general, but NAFTA, 
and I will just ask all three panelists, and then I will go to 
the ranking member. So, Ms. Ladislaw.
    Ms. Ladislaw. I think on NAFTA I think there is two 
approaches. One is do no harm. So NAFTA has done some great 
things for the energy sector without actually dealing with 
energy too terribly directly, right? So when we negotiated 
NAFTA, Mexico actually didn't insert much about energy because 
it wasn't able to do that. But the energy sector benefited from 
a lot of the trade protections that we talked about earlier and 
the other benefits that come with those sorts of trade 
agreements.
    And so, I think one of the big concerns in the energy 
sector is because everybody feels like the dynamic on energy 
has changed in North America, that within the context of NAFTA 
renegotiation, energy could be held hostage, right? If you 
don't like what you are getting back on lumber or autos or some 
other segment of the trade agreement, you can say, well, maybe 
I am going to treat my gas differently or maybe we will treat 
out oil trade differently. And I think we really have to be 
very careful to say we have had a really big boost from all of 
this energy trade in North America, we don't want to do any 
harm on that side of the equation.
    And the other part is modernization, right? Can you embed 
some of the progress that has been made in Mexico into the 
trade arrangement? Can you modernize it to reflect the kind of 
things that you might want in a trade agreement that is coming 
with an energy sector that is much more digitized, that is 
going to be automated, that is going to have these new sort of 
ideas and concepts that just didn't exist in 1994 in a way that 
you had to deal with. And so, I see it as first do no harm, 
second modernize to be able to prepare for the challenges of 
the future, and embed some of the progress we have made over 
the last several decades.
    Mr. Duncan. Mr. Padilla?
    Mr. Padilla. I think we can think of the benefits of NAFTA 
with regards to energy in a few key dimensions. The first is 
that NAFTA enhances energy security of the United States. So as 
the world's energy super power, we enjoy the benefits of that 
to an even greater degree due to the integration that we 
currently have with Canada and Mexico with regards to oil and 
natural gas markets.
    NAFTA also supports U.S. jobs and manufacturing here in the 
U.S. The examples that you were referencing around importing 
crude oil from Canada, which flows to refineries in the United 
States and supports the production of fuels that we use here 
and even in export, there are jobs that are produced at those 
69 refineries that import crude oil from Canada, those 12 
refineries that import crude oil from Mexico.
    And then NAFTA also helps to enhance the energy security 
and affordable energy for our allies. So the benefits that 
accrue to us here in the United States are the same for Canada 
and Mexico. So it is a classic case of mutual benefits. And 
then, also, NAFTA enables U.S. companies to compete and win in 
the oil and natural gas bid rounds in Mexico and increasingly, 
as they have undertaken investments in Canada as our markets 
have become more seamless and integrated.
    So there are a few key provisions in NAFTA that I think we 
would want to preserve in order to maintain the continuation of 
all these benefits. The first is euro tariffs on few key oil 
and natural gas products. The second is the automatic 
liberalization of natural gas exports, for example, that a free 
trade agreement affords. And then another is market access. The 
NAFTA agreement, while it originally excluded the Mexican 
hydrocarbon sector from investment by foreign investors, now 
the constitutional reforms that Mexico has undertaken on its 
own have triggered a ratchet clause in NAFTA which solidifies 
those and makes that part of the agreement and opens that up to 
U.S. investors.
    And then, finally, there is also investment protections in 
NAFTA that underscore U.S. firms' investments in Mexico and 
protect them from extreme cases of potential expropriation, and 
act as a deterrent for some of the fears that we have seen and 
the realities that we have seen of U.S. investments in oil and 
natural gas in other places people are. So all of those are the 
elements of NAFTA that have underscored the benefits that we 
get from the agreement.
    Mr. Duncan. Dr. Wood, quickly.
    Mr. Wood. Thank you, yes. Just on the question of peak 
demand, the most aggressive scenarios that I have seen suggest 
that demand may fall down to 75 million barrels a day by 2040. 
To maintain 75 million barrels a day is going to require many, 
many billions of dollars of investment just to keep that up. 
The oil industry is not going away any time soon. There is 
going to be a need for a lot of investment in a lot of jobs 
there.
    Secondly, on the question of refineries, we need to think 
about where we place refineries in North America, not just in 
the United States or in Mexico, because there are 
complementarities there, and we have already seen this. The 
case that you used, Canadian oil being refined in near the Gulf 
of Mexico in the United States, but there are Mexican 
refineries that are well-equipped to refine U.S. crude as well. 
We have to think about moving the product around a lot better.
    On NAFTA, all of the points that have been raised already, 
I absolutely agree with. The Mexican reform actually allowed 
for energy to be included under the existing NAFTA, because 
there is a clause in NAFTA which says any sector which is 
currently closed and excluded once it is opened will be covered 
by the provisions of NAFTA. That is where Chapter 11 comes in. 
And the crucial point, I think here, is that the last thing 
that any of us want to see is any kind of extra costs on cross-
border movements of energy in North America. It is a 
fundamental source of our competitiveness as a region.
    Mexico has become more competitive because of lower energy 
costs, which means that Mexican components that are part of the 
U.S. production process here that makes U.S. products 
competitive in global markets, all those prices have come down. 
We need to start thinking about this very much in regional 
terms, not in national terms.
    Mr. Duncan. I tend to agree with you, and that is one of 
the messages I will have with USTR. I hope they get it. We 
don't need to add more costs to this. It actually benefits all 
three countries, and I think that is one benefit of NAFTA in 
energy sector, and I look forward to how they negotiate that. I 
turn to the ranking member.
    Mr. Sires. Thank you, chairman. You know, so I hear all 
these tariffs. I think businesses in this country, they panic, 
because I don't think when you talk about these tariffs, I 
don't think people realize how much economic activity goes 
between Mexico and the United States, especially on the border, 
and the jobs that are created there on both sides of the 
border. So sometimes people speak without really knowing the 
facts.
    But if we do put a tariff, I think the energy sector in 
America is going to get hurt worse, because we are now 
currently exporting more into Mexico than we actually are 
importing. And if we put something on the imports from Mexico, 
you know that they are going to retaliate. You know that this 
is going to happen.
    So I hope that that goes away, quite frankly, and we just 
continue to promote this harmony between North America, quite 
frankly, because I think it is only to all our benefits, not 
just one country or the other.
    And, I was curious what you mentioned about we have to 
think about where we place our refineries. I couldn't agree 
with you more, coming from New Jersey. You know, the refineries 
were placed there years ago, and what has happened is people 
have moved all around it, so now it is like the railroads. The 
lines went through there, there was nobody there. Now people 
have moved all around it. So I think that is a very key 
question. If we are ever going to build new refineries, where 
are we going to place the refineries because we are growing and 
growing, and people are moving to these areas, and the first 
thing they want to do is get rid of these things. They were 
there before you got there. You know, the railroad lines were 
there before you got there. And I am constantly struggling 
with, you know, with this.
    You know, I represent Bayonne, New Jersey. They have a--it 
is not a refinery now, but it is a repository. I think they 
move up to like 50 million gallons of fuel a day. Luckily it is 
not refined there. It comes in already refined and it is moved, 
but even with the tanks, people are still saying, well, can we 
get rid of these tanks because they want a view of New York.
    So I couldn't agree with you more about where we have to--
we have to really think in terms of where we are going to place 
these refineries. And I really don't have a question. You 
answered most of my questions. Thank you, chairman.
    Mr. Duncan. Thank you, ranking member. I will now go to Mr. 
DeSantis from Florida.
    Mr. DeSantis. Thank you, Mr. Chairman. Thank you to the 
witnesses. The energy sector in Canada, oil, gas, electricity, 
the exports are 25 percent of Canada's exports of goods to the 
U.S. while agriculture is only about 7 percent, yet as I 
understand it, energy was excluded in the original NAFTA 
agreement. Since the north American energy market is so 
interconnected, do you think energy should be included in any 
renegotiation of NAFTA?
    Mr. Padilla. We believe that the integrated and 
interdependent markets of North America should be borne in mind 
by the negotiators as they seek to modernize NAFTA. The way in 
which you may do that in terms of the architecture of the 
agreement will be determined by the course of those 
negotiations, but all of the ways in which our markets are 
connected are really what is at stake when NAFTA is being 
modernized. And I think we want for there to be key aspects of 
a new NAFTA that preserve the provisions of the current NAFTA 
that have worked so well that underpin and underscore the ways 
in which our markets have become increasingly interdependent 
and integrated.
    One way to think of this is that when NAFTA----
    Mr. DeSantis. Well, before you do that, and I will let you 
finish, but so your concern is more renegotiation would hinder 
the interconnected markets, rather than facilitate it?
    Mr. Padilla. That is correct. And I was just going to say 
that in the last generation under the current NAFTA, the free 
market and free trade of trade and energy between the U.S. and 
Canada has really made that a very seamless and integrated 
market. We have the opportunity in the next generation to 
achieve that with Mexico.
    So by preserving what has worked so well in NAFTA to 
underscore that for the U.S. and Canada trade, we have that 
opportunity in this next generation to achieve that across all 
three countries.
    Mr. DeSantis. Anyone else?
    Mr. Wood. Yes, if I may. First of all, I would just like to 
emphasize the point that Ranking Member Sires made earlier on 
about the employment dimensions of this. A recent study that 
was produced in the Wilson Center showed that 4.9 million jobs 
in the United States depend upon that economic relationship 
with Mexico. It is partly the exports, but it is also the 
imports from Mexico that make U.S. industry more competitive.
    In terms of whether energy should be included in the 
negotiations, it is very clear that the Mexican Government has 
been very enthusiastic about putting energy on the table. One 
of the deep concerns that I have about that is that both 
governments are now talking about a very short timetable for 
getting the negotiations done. If they want to get this wrapped 
up by December of this year or January of next year, which is 
the kind of time frame they are talking about, then there is 
going to be very little time to talk through all of this.
    There also seems to be an emerging idea that they don't 
want to have to present this to their respective Congresses, 
which suggests that the changes they are going to make are 
minimal. Now, that is fine, but if you start talking about 
energy in there then you open up an entire can of worms, and 
that is going to be very, very complicated.
    So I actually think that the current existing NAFTA works 
incredibly well. One reason why the Mexicans are enthusiastic, 
however, is because of the prospect of electoral change next 
year, and they want to have an extra guarantee that the energy 
reform enacted in 2013 will be respected so that free energy 
markets become part of an international treaty that is 
enshrined in Mexican law.
    Mr. DeSantis. North America has become an energy super 
power accounting for 72 percent of Western Hemisphere oil 
production, and 85 percent of natural gas production in 2015. 
Both Canada and Mexico produce heavy crude oil, which is well 
suited for U.S. refineries. New technologies in the U.S. such 
as hydraulic fracturing and horizontal drilling, and in Canada, 
as well as Mexico's energy reforms, have enhanced opportunities 
for further trilateral trade and energy cooperation.
    Is North America-wide energy security and independence an 
achievable goal in your view, whoever wants to take that?
    Ms. Ladislaw. Yes, I will take it. I mean, I think as we 
noted, I think we are closer to self-sufficiency on a North 
American basis than we have ever been, and I think that that is 
wonderful, but I think we also have to recognize that that 
comes from open trading relationships with other countries 
around the world. And so even though we have this advantaged 
position, it has come from interdependence. We get a lot of 
economic efficiency and a lot of security from that.
    So I think that if we want to focus as a continent on 
growing those advantages to create more jobs and to create more 
economic growth and to insulate ourselves, I mean, the chairman 
brought up the incident in Qatar in the last several days. 
There is a period in time not too long ago where even small 
incidents like that would really cause us to be concerned, and 
we are not sweating it really hard on the energy side, right? 
So we are deriving some benefits in the fact that we have a 
little bit more strategic latitude in what we would like to do 
on energy, but we can't ever assume that that means we can be 
isolationists or it leads us to think that we are okay in and 
of ourselves. So I think, yes, we are in a much better 
position, but we have got to think about growing it.
    Mr. DeSantis. Can he answer my----
    Mr. Wood. Very, very quickly, I think there is something we 
often neglect, which is complementarity of resources. Many of 
you may know that Sweetwater, Texas has an extraordinary wind 
resource, but, of course, the wind only blows certain times of 
the day and not always when Texas needs that wind the most. In 
Tamaulipas, there is a very similar quality resource which 
blows at a different time of day. You think about linking those 
two resources together. You think about linking solar resources 
together across the width of the continent so you are actually 
able to overcome a lot of the intermittency problem, or even an 
easier example what already exists where wind power in the U.S. 
is used to pump water back up into Canadian hydroelectric dams 
at certain parts of the day, so you are essentially storing 
that energy.
    That interconnectedness, I think, is one way in which we 
are really going to achieve North American energy autonomy.
    Mr. DeSantis. Well, thank you. I yield back.
    Mr. Duncan. I thank the gentleman. You are right. I mean, 
one of the battery storage issues is--or solutions right now is 
to pump the water back up, use the water to generate 
electricity as a normal hydroelectric project and during peak 
wind or peak solar, use that energy to pump the water back up 
and just continue the cycle. We have something similar in South 
Carolina, although they use regular energy production, had a 
Bad Creek project, release water during peak demand and produce 
electricity, and then use reversal of the turbines, which are 
electric generated, to pump the water back up.
    They could use windmill or sun power for that, but that is 
one of the holdups, hangups for renewables is just holding that 
power to be used when it is necessary or needed. We don't have 
that capacity or capability right now to hold large amounts of 
energy for a long period of time to be used when the sun isn't 
shining or the wind isn't blowing. But reservoir storage is one 
battery, so to speak, capacity.
    So, Ms. Torres, if you have another question we will 
recognize you for 5 minutes.
    Mrs. Torres. Thank you, Mr. Chairman. I want to say that 
certainly from the Homeland Security perspective, the economic 
stability of our closest neighbors to the north and the south 
has to be a priority for U.S. policy, and I am not just 
speaking to Mexico, but, you know, within Central America, I 
think that those governments have worked very closely with us 
to ensure that the people that want to come through that 
migrant path to hurt us here in the U.S. are detained, and they 
have great partnerships with our law enforcement here in the 
U.S.
    I wonder if we can go back and maybe talk a little bit 
about the last question that I asked on this highway of things, 
how we can create those opportunities, and then on going back 
to the NAFTA agreement, I think you answered that question, 
that energy certainly has a role and could be integrated in a 
new, improved agreement.
    Where do tribal governments, and what sort of role could 
they play in that, not just in the U.S., but the indigenous 
populations within southern Mexico in looking at areas that 
have not been developed within Mexico?
    Mr. Wood. Thank you. It is an incredibly important 
question, simply because of the diversity of Mexico's 
indigenous peoples, and because there is a long tradition there 
of protesting any major infrastructure project. So the question 
of----
    Mrs. Torres. Because it has been at their cost, the cost of 
their natural resources.
    Mr. Wood. Absolutely. And the case that you mention of 
Southern Mexico, both in Oaxaca and in Chiapas, we have seen 
local communities including indigenous communities rise up 
against energy projects, and not just oil and gas, against 
renewal energy projects as well when they feel that they are 
not being treated with fairness.
    This is a learning process for the industry, I think, and I 
am actually very, very encouraged to see how seriously the 
industry is taking this in Mexico. They are required by the 
law, including the energy reform of 2013, is a need to do a 
social impact evaluation in any community, whether it is going 
to be in an energy project, in addition to an environmental 
evaluation. There is a booming industry right now in these kind 
of evaluations. But most importantly, the industry has 
recognized that it is in their long-term interest to actually 
carry out smart investment strategies to make sure that they 
are not going to run into problems down the road so they won't 
be able to open their energy projects when it comes out. They 
can build them, but they won't be able to actually open them. 
This is the case that we have seen in the state of Oaxaca.
    In the State of Chiapas, I think what we are going to see 
is that there are a lot of prospective oil resources there on 
land. It is a very divided political space already. Of course, 
we all know about the zapatistas who continue to play a big 
role there. But also, I think we have to see that this is an 
area which is desperate for development.
    And picking up on your point about Central America, we have 
to recognize that one of the best ways to get economic 
development to Southern Mexico and to Central America is to 
make sure that natural gas goes down there. Let's get that down 
there as a driver of economic growth, and hopefully that rising 
tide will lift everybody's boats.
    Mrs. Torres. So do you think that within a renewed NAFTA 
agreement, we can focus on areas of the U.S. such as the Rust 
Belt and areas of Southern Mexico where--these are areas that 
have not seen, and have, in some way, feel that they have been 
hurt by these trade agreements, and what sort of possibilities 
exist there, opportunities for us to do that?
    Mr. Wood. So first, if we don't focus on those areas which 
haven't benefited and feel as though they have been hurt by it, 
then in a few years' time we are going to have this 
conversation all over again. So this is fundamentally 
important, I think. And in terms of policy proposals, one of 
the things that we are working on right now at the Wilson 
Center is a proposal for workforce development at a North 
American level. We have to recognize that the economy is 
changing. It is actually not trade that is pushing people out 
of jobs, it is, of course, the economic transformation, the 
fourth industrial revolution, and we need to focus on the ways 
in which we can educate, train, and retrain the workforce. We 
need to focus on ongoing workforce development plans, and 
government needs to think about how it can actually help 
businesses to do that, whether it is through tax incentives or 
some other scheme. And doing this on a North American basis 
makes perfect sense. Because of the educational and training 
resources that exist in certain parts of the continent, and the 
demand for those skills in others, we need to think about how 
we can get workers to benefit from those things.
    Mrs. Torres. Thank you. My time has expired, but I do want 
to remind you, I would like to hear your opinions on this 
highway of things.
    Thank you. I yield back.
    Mr. Duncan. I want to thank the members' participation. I 
want to thank the panelists for their participation today. 
Excellent testimony. Excellent answers to the questions. I 
think we have just scratched the surface really in the 
potential for the three nations here in North America working 
together in the energy sector. We talked about technology. We 
talked about brain power. We talked about the resources 
themselves. We talked about some challenges. It is a changing 
world, and I think energy is going to be a big part of that 
change, the industrial revolution that you talked about. I 
think energy renaissance and what we do with manufacturing 
where products are manufactured, whether it is consumer goods 
or whether it is energy.
    So I thank you all for being here. I think it is great. And 
pursuant to Committee Rule 7, members of the subcommittee will 
be permitted to submit written statements be included in the 
official hearing record. Without objection the hearing record 
will remain open for 5 business days to allow statements, 
questions, extraneous materials subject to the length 
limitation in the rules.
    There being no further business, we will stand adjourned.
    [Whereupon, at 11:35 a.m., the subcommittee was adjourned.]

                                     

                                     

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