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

             THE IMPACTS AND FUTURE OF NORTH AMERICAN ENERGY TRADE

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON ENERGY

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                               DECEMBER 13, 2017

                                   __________

                               Serial No. 115-89

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Printed for the use of the Committee on Energy and Commerce
                            energycommerce.house.gov
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                        COMMITTEE ON ENERGY AND COMMERCE

                              GREG WALDEN, Oregon
                                     Chairman

    JOE BARTON, Texas                    FRANK PALLONE, Jr., New Jersey
      Vice Chairman                        Ranking Member
    FRED UPTON, Michigan                 BOBBY L. RUSH, Illinois
    JOHN SHIMKUS, Illinois               ANNA G. ESHOO, California
    MICHAEL C. BURGESS, Texas            ELIOT L. ENGEL, New York
    MARSHA BLACKBURN, Tennessee          GENE GREEN, Texas
    STEVE SCALISE, Louisiana             DIANA DeGETTE, Colorado
    ROBERT E. LATTA, Ohio                MICHAEL F. DOYLE, Pennsylvania
    CATHY McMORRIS RODGERS, Washington   JANICE D. SCHAKOWSKY, Illinois
    GREGG HARPER, Mississippi            G.K. BUTTERFIELD, North Carolina
    LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
    BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
    PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
    DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
    ADAM KINZINGER, Illinois             PETER WELCH, Vermont
    H. MORGAN GRIFFITH, Virginia         BEN RAY LUJAN, New Mexico
    GUS M. BILIRAKIS, Florida            PAUL TONKO, New York
    BILL JOHNSON, Ohio                   YVETTE D. CLARKE, New York
    BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
    LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
    BILL FLORES, Texas                   JOSEPH P. KENNEDY, III,
    SUSAN W. BROOKS, Indiana             Massachusetts
    MARKWAYNE MULLIN, Oklahoma           TONY CARDENAS, California
    RICHARD HUDSON, North Carolina       RAUL RUIZ, California
    CHRIS COLLINS, New York              SCOTT H. PETERS, California
    KEVIN CRAMER, North Dakota           DEBBIE DINGELL, Michigan7
    TIM WALBERG, Michigan
    MIMI WALTERS, California
    RYAN A. COSTELLO, Pennsylvania
    EARL L. ``BUDDY'' CARTER, Georgia
    JEFF DUNCAN, South Carolina

                             Subcommittee on Energy

                              FRED UPTON, Michigan
                                     Chairman
    PETE OLSON, Texas                    BOBBY L. RUSH, Illinois
      Vice Chairman                        Ranking Member
    JOE BARTON, Texas                    JERRY McNERNEY, California
    JOHN SHIMKUS, Illinois               SCOTT H. PETERS, California
    ROBERT E. LATTA, Ohio                GENE GREEN, Texas
    GREGG HARPER, Mississippi            MICHAEL F. DOYLE, Pennsylvania
    DAVID B. McKINLEY, West Virginia     KATHY CASTOR, Florida
    ADAM KINZINGER, Illinois             JOHN P. SARBANES, Maryland
    H. MORGAN GRIFFITH, Virginia         PETER WELCH, Vermont
    BILL JOHNSON, Ohio                   PAUL TONKO, New York
    BILLY LONG, Missouri                 DAVID LOEBSACK, Iowa
    LARRY BUCSHON, Indiana               KURT SCHRADER, Oregon
    BILL FLORES, Texas                   JOSEPH P. KENNEDY, III,
    MARKWAYNE MULLIN, Oklahoma               Massachusetts
    RICHARD HUDSON, North Carolina       G.K. BUTTERFIELD, North Carolina
    KEVIN CRAMER, North Dakota           FRANK PALLONE, Jr., New Jersey (ex
    TIM WALBERG, Michigan                    officio)
    JEFF DUNCAN, South Carolina
    GREG WALDEN, Oregon (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, opening statement....................................     1
        Prepared statement...........................................     3
    Hon. Bobby L. Rush, a Representative in Congress from the State
      of Illinois, opening statement.................................     3
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     5
        Prepared statement...........................................     5
    Hon. Greg Walden, a Representative in Congress from the State of
      Oregon, prepared statement.....................................    90

                                   Witnesses

    Karen A. Harbert, President and Chief Executive Officer, Global
      Energy Institute, U.S. Chamber of Commerce.....................     7
        Prepared statement...........................................    10
    Chet Thompson, President and Chief Executive Officer, American
      Fuel & Petrochemical Manufacturers.............................    24
        Prepared statement...........................................    26
    Alan Krupnick, Ph.D., Senior Fellow, Resources for the Future....    36
        Prepared statement...........................................    38
    Allen Burchett, Global Head of Strategic Projects, ABB, Inc., on
      Behalf of the National Association of Manufacturers............    50
        Prepared statement...........................................    52

             THE IMPACTS AND FUTURE OF NORTH AMERICAN ENERGY TRADE

                                  ----------

                          WEDNESDAY, DECEMBER 13, 2017

                      House of Representatives,
                                Subcommittee on Energy,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
         The subcommittee met, pursuant to call, at 10:17 a.m., in
    room 2322, Rayburn House Office Building, Hon. Fred Upton
    (chairman of the subcommittee) presiding.
        Members present: Representatives Upton, Olson, Barton,
    Shimkus, Latta, McKinley, Kinzinger, Griffith, Johnson, Flores,
    Mullin, Cramer, Walberg, Duncan, Rush, McNerney, Peters, Green,
    Welch, Tonko, Loebsack, and Pallone (ex officio).
        Staff present: Samantha Bopp, Staff Assistant; Allie Bury,
    Legislative Clerk, Energy/Environment; Wyatt Ellertson,
    Professional Staff Member, Energy/Environment; A.T. Johnston,
    Senior Policy Advisor, Energy; Ben Lieberman, Senior Counsel,
    Energy; Mary Martin, Chief Counsel, Energy/Environment; Brandon
    Mooney, Deputy Chief Counsel, Energy; Mark Ratner, Policy
    Coordinator; Annelise Rickert, Counsel, Energy; Dan Schneider,
    Press Secretary; Peter Spencer, Senior Professional Staff
    Member, Energy; Jason Stanek, Senior Counsel, Energy; Madeline
    Vey, Policy Coordinator, Digital Commerce and Consumer
    Protection; Priscilla Barbour, Minority Energy Fellow; Jeff
    Carroll, Minority Staff Director; Rick Kessler, Minority Senior
    Advisor and Staff Director, Energy and Environment; John
    Marshall, Minority Policy Coordinator; Alexander Ratner,
    Minority Policy Analyst; Tuley Wright, Minority Energy and
    Environment Policy Advisor; and C.J. Young, Minority Press
    Secretary.

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

        Mr. Upton. Good morning. Good morning, everybody, and
    welcome to everyone that's here. Appreciate you all taking time
    so close to the holiday season to be with us today. That's for
    certain. This hearing builds upon the Energy and Commerce
    Committee's impressive record of hearings on energy security,
    job creation, and infrastructure.
        One of the many things that I appreciate about this
    subcommittee is that we have members who represent both
    northern and southern border States.
        As a proud Michigander, I will be focusing my comments and
    questions more on our relationship with Canada, while I am sure
    my friends from Texas--it was a nice win by Michigan over Texas
    in basketball last night--will be focusing more on Mexico.
        But one thing I want to make clear, this hearing is about
    North American integration, specifically the impacts and future
    of North American energy trade.
        We want to examine how North American energy trade has
    strengthened all of our economies and our trading
    relationships.
        Nationally, 14 million jobs are tied to trade with Mexico
    and Canada. In Michigan, it is nearly 400,000. This trade makes
    us more competitive internationally and can prove to be the
    difference between creating or shedding jobs.
        Eighty-four percent of petroleum and coal products exported
    from Michigan go either to Mexico or Canada. The energy markets
    of Canada, Mexico, and the U.S. are becoming increasingly
    interdependent, thanks in large part to the free trade status
    of energy commodities.
        When we think about energy trade, we are including crude
    oil, refined petroleum products and other liquids, natural gas,
    and electricity.
        To sum it up, we have transmission lines that go across the
    border, we have got pipelines that go across or under the
    border, and we have goods and services that go across the
    border, as well.
        Energy trade is much more than just commodities. There is
    also a huge supply chain supporting everything. The multiplier
    effect of energy trade is great throughout our economy.
        Trilateral engagement is not just about trade, but also
    about information sharing. Just last month, the Energy
    Information Administration announced the launch of a website on
    North American Cooperation on Energy Information, or NACEI.
        This resource consolidates energy-related data, maps,
    references from the U.S., Canada, and Mexico. The current areas
    of focus include comparing, validating, and improving
    respective energy import and export information, sharing
    publicly available geospatial information related to energy
    infrastructure, and exchanging views and information on
    protection of cross-border energy flows with the harmonization
    terminology, concepts, and the definitions of energy products.
        This will allow each country to work together for the
    benefit of all three countries.
        The centerpiece of our trade relationship, of course, is
    NAFTA, which entered into force on January 1st, 1994. On May
    18th of this year, the Trump administration sent a 90-day
    notification to Congress of its intent to begin talks with
    Canada and Mexico to renegotiate NAFTA.
        Currently, negotiations are holding intersessional meetings
    in Washington through mid-December in advance of a sixth round
    of negotiations which are scheduled to be held from January
    23rd to the 28th in Montreal.
        My expectation is that today's hearing will provide some
    context for the NAFTA negotiations. I look forward to hearing
    the testimony of our witnesses and engaging in a conversation
    about the benefits of a robust North American energy sector.
        [The prepared statement of Mr. Upton follows:]

                        Prepared statement of Hon. Upton

        Good morning and welcome to all our witnesses. I appreciate
    you all taking time so close to the holiday season to be with
    us today. This hearing builds upon the Energy and Commerce
    Committee's impressive record of hearings on energy security,
    job creation and infrastructure.
        One of the many things I appreciate about our subcommittee
    is that we have Members who represent both northern and
    southern border States. As a proud Michigander, I will be
    focusing my comments and questions more on our relationship
    with Canada, while I am sure my friends from Texas will be
    focusing more on Mexico. But one thing I want to make clear:
    This hearing is about North American integration, specifically,
    the impacts and future of North American energy trade. We want
    to examine how North American energy trade has strengthened all
    our economies and our trading relationships. Nationally, 14
    million jobs are tied to trade with Mexico and Canada--in
    Michigan, it's nearly 400,000. This trade makes us more
    competitive internationally and can prove to be the difference
    between creating or shedding jobs. Eighty-four percent of
    petroleum and coal products exported from Michigan go to either
    Mexico or Canada.
        The energy markets of Canada, Mexico and the United States
    are becoming increasingly interdependent, thanks in large part
    to the free trade status of energy commodities. When we think
    about energy trade, we are including crude oil, refined
    petroleum products and other liquids, natural gas and
    electricity. To sum it up: we have transmission lines that go
    across the border; we have pipelines that go across or under
    the border; and we have goods and services that go across the
    border. Energy trade is much more than just commodities--there
    is also a huge supply chain supporting everything. The
    multiplier effect of energy trade is great throughout our
    economy.
        Trilateral engagement is not just about trade, but also
    about information sharing. Just last month, the Energy
    Information Administration announced the launch of a website on
    North American Cooperation on Energy Information or NACEI. This
    resource consolidates energy-related data, maps, and references
    from the US, Canada and Mexico. The current areas of focus
    include: comparing, validating, and improving respective energy
    import and export information; sharing publicly available
    geospatial information related to energy infrastructure;
    exchanging views and information on projections of cross-border
    energy flows, and harmonizing terminology, concepts, and
    definitions of energy products. This will allow each country to
    work together for the benefit of all three countries.
        The centerpiece of our trade relationship is the North
    American Free Trade Agreement or NAFTA, which entered into
    force on January 1, 1994. On May 18, 2017, the Trump
    administration sent a 90-day notification to Congress of its
    intent to begin talks with Canada and Mexico to renegotiate
    NAFTA. Currently, negotiators are holding intersessional
    meetings in Washington, DC though mid- December in advance of a
    sixth round of negotiations which are scheduled to be held from
    January 23-28, 2018 in Montreal, Canada.
        My expectation is that today's hearing will help provide
    some context for the NAFTA renegotiations. I look forward to
    hearing the testimony of our witnesses and engaging in a
    conversation about the benefits of a robust North American
    Energy sector.

        Mr. Upton. And with that, I yield to the ranking member of
    the subcommittee, Mr. Rush.

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

        Mr. Rush. I want to thank you, Mr. Chairman, for holding
    this important hearing on the impact and future of the North
    American energy and trade.
        Mr. Chairman, I have held several meetings with relevant
    stakeholders concerned with the Trump administration's ill-
    advised decision to try and unilaterally change or get rid of
    existing agreements, existing accords, and treaties.
        Unfortunately, Mr. Chairman, we have heard the President
    talk of reneging on a mass array of deals signed by the
    previous administration on everything from the Iran nuclear
    deal to the Paris agreement up to and including major trade
    agreements such as NAFTA.
        Personally, Mr. Chairman, while I did not vote for NAFTA
    when it came before the House, I do have concerns over the
    constitutionality of a President singlehandedly changing or
    overturning a trade agreement that was passed by Congress.
        Additionally, Mr. Chairman, and as importantly, I also have
    grave concerns over the global perception of the credibility of
    the United States when neither our friends or allies nor other
    foreign powers can depend on the sincerity of the U.S.
    Government if at any time a new President takes office, he or
    she chooses to reverse or renege on agreements signed under the
    previous administration.
        Unfortunately, Mr. Chairman, this appears to me a recurring
    theme of this President's chaotic governing philosophy, where
    no previous accord is ever safe from interference and any
    promise can be voided at any time, regardless if it is made to
    friend or foe.
        Mr. Chairman, based just on the merits, the Energy
    Information Administration estimates that energy trade between
    the North American countries exceeded $140 billion just in 2015
    alone, and with the U.S. importing an estimated $100 million
    and exporting over $40 million in energy products with Canada
    and Mexico.
        Additionally, Mr. Chairman, just last year, former
    President Obama signed the North American Climate, Clean
    Energy, and Environment Partnership along with his counterparts
    from Canada and Mexico.
        This important agreement established several objectives,
    Mr. Chairman, and benchmarks aimed at advancing clean energy
    and reducing climate change-inducing pollutants between all
    three countries with the goal of 50 percent clean power
    generation by the year 2025.
        Mr. Chairman, this pact would also help to develop cross-
    border transmission partners while improving and aligning
    appliance and equipment efficiency standards between all three
    partners.
        At a time when the U.S. has become more intertwined and
    interdependent in our dealings with other countries both
    economically as well as for national security purposes, we
    cannot expect to be seen as a credible leader within the global
    arena while at the very same time thumbing our nose at previous
    deals and agreements just because they were signed by a
    President from another party.
        Instead, we must show leadership in Congress to demonstrate
    to our friends and allies as well as to our foes and
    competitors that the U.S. will honor the deals that we signed
    and we will not renege on our promises.
        Mr. Chairman, I want to thank you. I look forward to
    hearing from our witnesses today and also want to at the same
    time welcome our witnesses.
        And I yield back the balance of my time.
        Mr. Upton. Ranking member yields back.
        I know the chairman of the full committee is on his way
    from the hearing that's downstairs. So, at this point, I'll
    yield 5 minutes to the ranking member of the full committee,
    Mr. Pallone.

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

        Mr. Pallone. Thank you, Mr. Chairman.
        Regardless of the outcome of the current NAFTA talks, the
    U.S. will continue to trade fossil fuel commodities with Canada
    and Mexico for years to come, and I'd like to see a change in
    our focus.
        Rather than focusing on trading fossil fuel commodities, we
    should prioritize expansion of renewable energy technologies
    and how they can benefit the North American electricity grid.
        According to the Energy Information Administration, more
    than half of new electricity-generating capacity added to the
    grid between 2014 and '16 came from renewable technologies, and
    we should look at expanding this technology so that we can make
    renewables a larger part of our electric exports.
        In 2009, the U.S.-Canada clean energy dialogue was launched
    to encourage clean energy technology development among our two
    nations. One key aspect of this collaboration focused on
    expanding and modernizing the North American transmission grid
    to facilitate movement of renewable power between the United
    States and Canada, and right now there are several large-scale
    transmission projects in the works to bring renewable power
    across the United States' borders with Canada and Mexico, and
    the modernization of the grid in order to facilitate these
    types of projects is critical to the overall future of energy
    development in North America.
        The United States has also forged a strong agreement with
    Canada and Mexico to address climate pollution and advance
    clean energy.
        In 2016, the countries established the North American
    Climate, Clean Energy, and Environment Partnership.
    Collectively, the partnership set a goal of 50 percent clean
    power generation and the more than 40 percent reduction on
    methane emissions by 2025.
        And the Trump administration has been silent on this
    commitment. But based on the President's foolish decision to
    walk away from the Paris climate agreement, I do not have high
    hopes that he will fulfill this commitment.
        It's unfortunate that the Republican majority has focused
    today's hearing primarily on fossil fuels. Instead, I believe
    it's even more important for us to focus on ways we can
    continue to work with our neighbors to reduce carbon emissions
    and expand trade and clean energy technologies. We have a
    knowledgeable panel of witnesses before us, and I look forward
    to hearing their testimony.
        [The prepared statement of Mr. Pallone follows:]

                 Prepared statement of Hon. Frank Pallone, Jr.

        Mr. Chairman, regardless of the outcome of the current
    NAFTA talks, the U.S. will continue to trade fossil fuel
    commodities with Canada and Mexico for years to come. I would
    like to see a change in our focus. Rather than focusing on
    trading fossil fuel commodities, we should prioritize expansion
    of renewable energy technologies and how they can benefit the
    North American electricity grid. According to the Energy
    Information Administration, more than half of new electricity
    generating capacity added to the grid between 2014 and 2016
    came from renewable technologies. We should look at expanding
    this technology so that we can make renewables a larger part of
    our electric exports.
        In 2009, the U.S.-Canada Clean Energy Dialogue was launched
    to encourage clean energy technology development among our two
    nations. One key aspect of this collaboration focused on
    expanding and modernizing the North American transmission grid
    to facilitate movement of renewable power between the U.S. and
    Canada. Right now there are several large-scale transmission
    projects in the works to bring renewable power across the U.S.
    borders with Canada and Mexico. The modernization of the grid
    in order to facilitate these type of projects is critical to
    the overall future of energy development in North America.
        The U.S. has also forged a strong agreement with Canada and
    Mexico to address climate pollution and advance clean energy.
    In 2016, the countries established the North American Climate,
    Clean Energy, and Environment Partnership. Collectively, the
    partnership set a goal of 50 percent clean power generation and
    a more than 40 percent reduction in methane emissions by 2025.
    The Trump administration has been silent on this commitment,
    but based on the President's foolish decision to walk away from
    the Paris Climate Agreement, I do not have high hopes that he
    will fulfill this commitment.
        It's unfortunate that the Republican majority has focused
    today's hearing primarily on fossil fuels. Instead, I believe
    it is even more important for us to focus on ways we can
    continue to work with our neighbors to reduce carbon emissions
    and expand trade in clean energy technologies.
        We have a knowledgeable panel of witnesses here before us,
    and I look forward to hearing their testimony on this timely
    issue. Thank you, Mr. Chairman, and I yield back the remainder
    of my time.

        Mr. Pallone. I don't know if anyone else wanted--yes, I
    yield the remainder of my time to Mr. Green.
        Mr. Green. Thank you, Ranking Member, for yielding to me.
        Energy trade between the U.S., Canada, and Mexico has been
    at an all-time high in recent years. Where the U.S. is the
    largest producer of crude oil on the continent, Canadian
    reserves far outstrip our own. Mexico also has significant
    discoveries of offshore sites in the Gulf over this summer.
        Many Texas refineries rely on Mexican imports for their
    source of crude oil. At the end of this year, Mexico has a
    demand of about 600,000 barrels a day of gasoline imports due
    to their lack of refining capacity.
        A huge percentage of this 600,000 barrels a day will come
    from the refinery complexes we have along the Texas Gulf Coast.
    While the U.S. and Canada have integrated our energy markets to
    a great degree post-NAFTA and with Mexico's recent reforms in
    the coming years, cooperation among the countries will only get
    stronger.
        NAFTA has been a success in many ways but did not contain
    many provisions on energy policy. Our first goal when
    discussing how to improve NAFTA should be closer ties and
    friendship among all three countries.
        Our second goal should be an integrated North American
    energy market. This is one reason I introduced our cross-border
    infrastructure bill with our colleague, Representative Mullin,
    earlier this year.
        There are 11 cross-border projects awaiting a decision by
    the Department of State in the present and including electric
    lines and water pipelines. It's Congress' responsibility to
    create the regulatory rules by which infrastructure is
    constructed.
        Our bill, H.R. 2883, which passed our committee on the
    floor of the House, would create a regulatory process at the
    Federal Energy Regulatory Commission, Department of State,
    Department of Energy to permit cross-border infrastructure by
    recognizing the energy trade between Mexico, Canada as in our
    national interest.
        It is my hope that the Senate will soon take up this
    language so we can continue building on that success, and we
    should embrace the changes taking place in North America and
    harmonize our policies with those of our neighbors to the north
    and the south.
        And again, thank you for the time by our ranking member.
        I yield back.
        Mr. Upton. The gentleman yields back.
        We are ready for the testimony. I want to appreciate our
    witnesses providing the testimony in advance. It'll be made
    part of the record.
        You will be given each the opportunity to take 5 minutes to
    summarize that statement, and then we will begin with
    questions.
        Our witnesses today: Karen Harbert, president and CEO,
    Global Energy Institute, U.S. Chamber of Commerce, and a former
    undersecretary from the Department of Energy--goes back a long
    ways; Chet Thompson, president of the American Fuel and
    Petrochemical Manufacturers; Allen Burchett, global head of
    strategic projects on behalf the National Association of
    Manufacturers; and Alan Krupnick, senior fellow for the
    Resources for the Future.
        Ms. Harbert, we will start with you. Welcome. Nice to see
    you.

     STATEMENTS OF KAREN A. HARBERT, PRESIDENT AND CHIEF EXECUTIVE
      OFFICER, GLOBAL ENERGY INSTITUTE, U.S. CHAMBER OF COMMERCE;
    CHET THOMPSON, PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN
       FUEL & PETROCHEMICAL MANUFACTURERS; ALAN KRUPNICK, PH.D.,
    SENIOR FELLOW, RESOURCES FOR THE FUTURE; ALLEN BURCHETT, GLOBAL
        HEAD OF STRATEGIC PROJECTS, ABB, INC., ON BEHALF OF THE
                 NATIONAL ASSOCIATION OF MANUFACTURERS

                     STATEMENT OF KAREN A. HARBERT

        Ms. Harbert. Nice to see you. Thank you, Mr. Chairman, and
    thank you, Ranking Member Rush, and all members of the
    committee.
        As the chairman said, I am Karen Harbert, president and CEO
    of the U.S. Chamber of Commerce's Global Energy Institute.
        As many of you have noted, the U.S., Canada, and Mexico
    have a long history of shared energy trade, but, for most of
    that time as a global economic leader and a large energy
    consumer, the U.S. has been purchasing large supplies of oil
    and natural gas from both nations.
        Today, the U.S. has the largest hydrocarbon resource base
    in the world plus very large nuclear and renewable bases in
    this country.
        The speed with which the U.S. has moved from energy
    scarcity to abundance has been nothing short of breathtaking.
    The U.S. is fortunate to have two neighboring countries--Canada
    and Mexico--that are also large energy producers. Canada ranks
    number 8 globally and Mexico 24th.
        Unthinkable 10 years ago today, North America's abundant
    energy resources are upending the global energy market.
    Combined production from the U.S., Canada, and Mexico accounts
    for 19 percent of all crude oil, 20 percent of natural gas, and
    12 percent of all coal output.
        Having a large share of world energy production in North
    America not only helps our own energy and national security, it
    also helps global energy security by diversifying supplies,
    ensuring that a large share of global output occurs in reliable
    countries.
        We have always had a very open trade relationship with
    Canada. While our trade relationship with Mexico has
    traditionally been strong, Mexico has long prohibited foreign
    investment in its hydrocarbon sector.
        But that all changed in 2013 when Mexico instituted
    constitutional reforms to put an end to the more-than-70-year
    monopoly enjoyed by state-owned oil company Pemex.
        Today, the U.S. is a net importer of crude oil from both
    Mexico and Canada. In 2016, the U.S. imported about 580,000
    barrels per day from Mexico and nearly 3 million barrels per
    day from Canada.
        Notably, the U.S. now imports more oil from Canada and
    Mexico than OPEC. That's very important to take note of.
        Since 2011, the U.S. has been a net exporter of refined
    products. There was lively trade in products among U.S.,
    Canada, and Mexico, and the trends now favor the United States,
    growing its share.
        Although the U.S. is a net importer of natural gas from
    Canada, that is not expected to remain much longer. The U.S.
    has been a net exporter of gas to Mexico since the mid-1980s,
    and exports are growing tremendously.
        As more infrastructure is added linking the U.S. and
    Canada, we welcome legislation to facilitate that. We expect
    that the U.S. will be a net exporter to both countries.
        In 2016, Mexico and Canada accounted for 13 percent of all
    U.S. net coal exports, which yielded a $440 million trade
    surplus.
        We expect the downward trend in coal exports to continue
    and exports to other countries to grow. We have a growing and
    integrated electricity market. There are 25 transmission
    crossings between the U.S. and Canada and 11 crossings between
    the United States and Mexico.
        So, in summary, for the last 6 years we have been running a
    trade surplus with Canada and Mexico in refined petroleum and
    coal, and while the trade deficit in oil and gas remains, it
    will be shrinking rapidly.
        The abundance of affordable energy in North America has
    given U.S. businesses a critical leg up. We pay about 2 to 4
    times less for natural gas, coal, and electricity than many of
    our competitors.
        But the benefits aren't limited to just industry. It's
    consumers, too. Over the last 6 years, average annual household
    energy expenditures declined by 14.1 percent.
        Now on to NAFTA. As these trends demonstrate, the U.S.
    energy economy has nothing to fear from NAFTA and a lot to
    gain. A modernized NAFTA could sustain advantages for North
    American industry and advance the market-based integration of
    our energy sectors.
        However, we are concerned that withdrawing from NAFTA would
    impose unacceptably high cost to the U.S. when we are engaged
    in historic tax reform and regulatory reform to get our economy
    growing above 3 percent.
        We are also worried about attempts to undermine the
    investor state dispute settlement protections in NAFTA, which
    are indispensable to maintaining our growing energy sector and
    provide neutral arbitration to ensure other countries treat our
    investors fairly.
        In short, the robust energy trade amongst the U.S., Canada,
    and Mexico would be threatened by a withdrawal from NAFTA.
    Given all of this, it is our strongest recommendation that, if
    NAFTA modernization cannot be reached, that the administration
    must retain its commitment to the current trade agreement.
        Today, the story of North American energy is one of
    increased economic, national, and energy security for all three
    countries.
        Thank you very much.
        [The statement of Ms. Harbert follows:]

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        Mr. Upton. Thank you.
        Mr. Thompson.

                       STATEMENT OF CHET THOMPSON

        Mr. Thompson. Good morning, everyone. Thank you, Chairman
    Upton, Ranking Member Rush, and the rest of the subcommittee
    members for the opportunity to testify today.
        My name is Chet Thompson. I am the president of American
    Fuel and Petrochemical Manufacturers. AFPM represents 97
    percent of the Nation's refining and petrochemical
    manufacturing capacity, including 118 refineries, 248
    petrochemical facilities in 33 States.
        We support more than 3 million jobs and add approximately
    $600 billion each year to the U.S. economy. Our members make
    the gasoline, the diesel, the jet fuel, and the petrochemicals
    that make our modern way of life possible.
        We are the world's largest refining industry today and a
    global leader in petrochemical production, making us the
    backbone of global manufacturing and transportation.
        Our energy trade relationships with Canada and Mexico are
    critical to enhancing our position. I would like to expand on
    only a few points in my written testimony.
        First, Canada and Mexico are helping us achieve North
    American energy security. Although U.S. crude production has
    increased dramatically over the last, you know, decade or so,
    our refineries still import on average 8 million barrels a day
    of crude.
        Canada and Mexico combined supply nearly half of this
    volume. In fact, Canada is the largest supplier of crude oil to
    the U.S., supplying more than 3 million barrels a day, or 41
    percent of all of our imports.
        We get more from Canada than all the other OPEC members
    combined. Mexico supplies 600,000 barrels a day. They're our
    fourth largest supplier, representing 7 percent. Not only do we
    import from our neighbors, but we also export a substantial
    amount of our energy, as well.
        The U.S. exports nearly 5 million barrels per day of
    petroleum products. About a third of that goes to Canada and
    Mexico each year. Mexico is our largest export market for U.S.-
    refined products.
        Last year, we exported approximately 14 billion gallons of
    petroleum products to Mexico. This helped meet more than half
    of their gasoline demand and contributed approximately $11
    billion of energy trade surplus--surplus--with Mexico.
        Likewise, we exported almost 9 billion gallons to Canada.
    Together, exports to Canada and Mexico have grown from
    essentially zero before NAFTA to more than 1.4 million barrels
    per day.
        That's about 7 percent of our total refining production and
    about a third of our exports just to those two countries alone.
        As a result of our increased energy production and the
    increasingly integrated North American energy market, the IEA
    now projects that North America will be energy secure by 2020.
        This is good for our country, and it's good for the
    American consumer. We also export a substantial volume of
    chemicals to both Mexico and Canada. Trade in all chemicals has
    more than tripled over the last two decades, from approximately
    $20 billion in 1994 to $63 billion in 2014.
        My second point: North American trade is growing our
    economy. Our relationships with Canada and Mexico have made our
    energy industry strong, and that strength has attracted more
    investment.
        Indeed, right now there is more than $185 billion in the
    queue for further investments in our refining and petrochemical
    industries.
        With that investment comes the need for more employment and
    a strong work force. Demand for skilled labor positions is
    expected to grow by 12 percent by 2024. We will hire additional
    skilled labor to work as welders, electricians, pipefitters,
    boilermakers, and many other positions.
        Changes in the global energy market, advances in
    technology, and legal reforms will provide further
    opportunities for U.S. companies. For example, the opening of
    the Mexican energy sector has allowed us to compete and sell
    our products in Mexico, leading to billions of dollars of
    investment by U.S. companies.
        My last point I would like to make is that AFPM fully
    supports NAFTA and believes it helps achieve energy security.
    North American energy security is the result of our plentiful
    natural resources that we are blessed with, the ingenuity of
    our energy sector, but also NAFTA. NAFTA has played a very
    important role in our growth.
        Thus, we support the continuation of NAFTA but think the
    agreement should be modernized. For example, NAFTA's investment
    protection should be strengthened consistent with other more
    recent U.S. free trade agreements, or at the very least,
    investor protections must be maintained.
        Second, NAFTA should help increase regulatory coordination
    in cross-border energy infrastructure.
        Finally, NAFTA customs procedures should be streamlined and
    modernized to reflect the way that energy and petrochemical
    trading occurs today across our borders.
        So, again, I appreciate the opportunity to be here and look
    forward to answering your questions.
        Thank you.
        [The statement of Mr. Thompson follows:]

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        Mr. Upton. Thank you.
        Dr. Krupnick.

                       STATEMENT OF ALAN KRUPNICK

        Dr. Krupnick. Mr. Chairman, Ranking Member, and other
    members of this subcommittee, thank you for inviting me to
    speak today about energy trade with our Mexican and Canadian
    neighbors.
        I come before you as an economist, a senior fellow, and
    leader of the North American Energy Initiative at Resources for
    the Future.
        RFF's mission is to improve environmental, energy, and
    natural resource decisions through impartial economic research
    and policy engagement. RFF is nonadvocacy and does not take
    positions on issues, so these opinions are mine.
        Today, I am here to advocate for greater harmonization and
    integration of energy markets and economic and environmental
    policies across the three countries, and I am very happy to
    hear the words today ``harmonization'' and ``integration''
    across the aisle at this hearing from the Members. That's
    great.
        So, with appropriate policies and agreements with our
    neighbors, North American can be the world's energy powerhouse.
    Free trade in energy and electricity promises greater economic
    prosperity, a cleaner environment, and greater energy security
    in all three countries.
        These countries have been moving towards harmonization in
    these sectors for years now. On the economic front, the Mexican
    energy reforms opened up oil and gas leasing and exploitation
    to U.S. companies. The reforms also expanded markets for our
    pipelines, generation technology, and natural gas.
        Mexico continues to greatly increase natural gas imports
    from the U.S. to replace oil fire generation. This development
    will reduce electricity generation costs, lower air pollution
    emissions from power plants, and increase energy security for
    Mexico, which is a good thing.
        And U.S. producers have access to a large market for their
    natural gas. If, however, NAFTA negotiations go badly or if
    political interference in this trade occurs, we could see
    increased costs and delays in exporting gas.
        We might even run the risk of Mexico eventually turning
    away from the U.S. as a supplier, and we certainly wouldn't
    want that for American producers or Mexican consumers.
        The electricity sector, likewise, can benefit from
    increased integration. We have found the cross-border
    interconnections and capacity planning occur less frequently
    than they should to maximize electricity reliability.
        On the environmental front, as was mentioned, during the
    Obama administration the U.S. became party to several
    tripartite agreements to improve energy efficiency, reduce
    methane emissions, work towards major CO2
    reductions.
        These gains are being reversed by the Trump administration
    even as Canada and Mexico continue to solidify their policies
    to reduce greenhouse gases.
        Canada has implemented a national carbon price for
    provinces that do not already have a price for trading system.
    Mexico, along with its limited carbon tax, is in the process of
    implementing a pilot cap and trade program, and joining
    California and some Canadian provinces in that.
        So, what can be done in general and specifically by
    Congress to realize the benefits of greater harmonization?
    First, the bill that you have introduced is a great start, and
    be vocal in supporting free energy trade and investment
    protections already in NAFTA. Be wary of unintended
    consequences of NAFTA failing.
        Second, remember that as the U.S. continues to roll back
    climate regulations such as its methane rules, our neighbors
    may grow increasingly concerned about competitiveness issues.
        Mexico and Canada may likewise become hesitant in efforts
    to align environmental policies in the future, limiting our
    opportunities that might improve environmental outcomes at
    lower cost to the private sector and consumers here in the
    United States.
        Third, Congress can support past and future efforts to
    align economic, environmental, and safety regulations for
    offshore drilling in the Gulf of Mexico. There is already an
    agreement to build upon, and DOI has worked closely with
    Mexican regulators to share best practices and align offshore
    safety regulations. Such work should continue so that we can
    ensure successful and responsible offshore drilling.
        Fourth, Congress can help promote, along with our
    neighbors' counterparts, the vision of renewable capacity
    growth in areas that capture their locational advantages--for
    instance, solar in Mexico, hydro in Canada--for selling into an
    integrated North American grid.
        Lastly, Congress can work to further improve the U.S.
    infrastructure siting and permitting process. Pipelines,
    transmission lines are needed to execute this vision of a North
    America system.
        Streamlining and strengthening this process can occur while
    improving environmental social outcomes, for example, by using
    cost benefit analysis in permitting decisions.
        As our two neighbors are likewise facing similar challenges
    in this area, we should aim to share best practice.
        So, ultimately, the fates of the Mexican-Canadian-U.S.
    energy sectors are intertwined. The interdependence actually
    benefits the three countries, increases our joint energy
    security.
        Congress can play an important role in seeing this vision
    become a reality.
        Thank you.
        [The statement of Dr. Krupnick follows:]

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        Mr. Upton. Thank you very much.
        Mr. Burchett.

                      STATEMENT OF ALLEN BURCHETT

        Mr. Burchett. Good morning, Chairman Upton, Ranking Member
    Rush, members of the subcommittee, and my fellow panelists.
    Thank you for the opportunity to testify. My name is Allen
    Burchett, and I am global head of strategic projects for ABB.
        I am testifying on behalf of the National Association of
    Manufacturers, which represents nearly 14,000 small, medium,
    and large manufacturers in every industrial sector and in all
    50 States.
        We are the number-one manufacturer of power grids in the
    world and a leader in industrial automation for the
    petrochemical industries. We are the number-one producer of
    electric motors and the second-largest producer of electric
    drives and industrial robots. We supply the energy, the
    electricity, and manufacturing sectors with enabling
    technologies that help them stay competitive.
        ABB has a strong and growing U.S. manufacturing footprint
    and is proud of our 20,000 employees across 50 manufacturing
    facilities, including those in Michigan, Texas, Oklahoma, Ohio,
    Virginia, and North Carolina, which is home to our U.S.
    headquarters.
        Over the past decade, we've invested over $11 billion in
    the United States, tripling our workforce. We have chosen to
    invest in the U.S. because it's our largest market worldwide
    and we believe in being close to our customer. We believe in
    the American worker.
        A strong North American supply chain has supported our
    domestic growth and investments, enabling ABB to competitively
    manufacture here.
        For manufacturers throughout the U.S., the North American
    commercial market is the most important market in the world.
    Over 60 percent of U.S. manufacturing output in 2016--$1.36
    trillion--was sold in the U.S., Canada, and Mexico.
        Canada and Mexico alone purchased one-fifth of all U.S.-
    manufactured goods in 2016, more than the next 10 U.S. trading
    partners combined. Eleven manufacturing sectors have
    experienced growth of more than 50 percent since 1993.
        Of particular interest to this subcommittee, energy
    products have led the pack, with over 250 percent growth. Most
    U.S. manufacturing sectors, 36 out of 42, count Canada or
    Mexico as their top foreign market.
        Despite growth in manufacturing, a changing energy
    landscape has created a major need for new and improved energy
    delivery infrastructure. Investor-owned utilities alone expect
    to invest more than $300 billion over the next 3 years.
        ABB has been a participant in this manufacturing boom and
    has developed an integrated North American supply chain that
    supports our domestic manufacturing capabilities and
    operations.
        While much of the manufacturing of these technologies
    happens domestically--many of our customers are domestic--
    certain parts of the manufacturing processes occur in Canada
    and Mexico, and many of the offerings produced in the U.S. are
    exported to customers in Canada and Mexico.
        I would like to provide a few examples. ABB is the largest
    producer of power transformers in the world. These transformers
    can be found at power plants, manufacturing facilities, and in
    neighborhoods across the U.S. We build transformers at plants
    in Mississippi, Virginia, Missouri, and Tennessee.
        Yet, the insulation materials used as inputs into these
    transformers are sourced from a Canadian company. In
    Bartlesville, Oklahoma, ABB manufactures measurement and
    analytics products for the oil and gas sector.
        Our factory imports metal housings from the supplier in
    Mexico and electronic circuit boards from an ABB plant in
    Canada, which are both then incorporated into the final
    products manufactured in Oklahoma.
        Many of our U.S. factories also export to Canada and
    Mexico. For example, 50 percent of high-voltage surge arresters
    manufactured in Mount Pleasant, Pennsylvania, are sold to
    Mexico and Canada.
        ABB's Sugarland, Texas facility supplies electric
    infrastructure control systems to Mexico's electric grid
    operator and Canadian power generation.
        Restrictions on trade or new barriers between the U.S.,
    Canada, and Mexico, including on data transfer and digital
    solutions, would put up barriers too large on markets in Canada
    and Mexico and could put upward price pressure on the U.S.-
    manufactured goods to all of our North American customers,
    potentially making U.S.-made products less competitive and
    adversely affecting our domestic factories.
        In conclusion, ABB believes the future of the U.S. economy
    is bright. This is particularly true on the energy sector. The
    integration of the three major North American economies has
    enhanced ABB's competitiveness, encouraged our investments in
    the United States.
        Building on the North American Free Trade Agreement's
    legacy of economic growth and job creation, we can set the
    stage for further gains in these areas by modernizing the
    agreement in ways that eliminate remaining distortions and
    barriers, raise standards, strengthen neutral enforcement
    mechanisms, and remove unnecessary red tape at the border.
        Thank you for the opportunity to testify before the
    subcommittee today, and I look forward to answering your
    questions.
        [The statement of Mr. Burchett follows:]

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        Mr. Upton. Well, thank you. Thank you all for
    participating, and at this point we'll start our questions.
        I have to say at the onset that, boy, if there's anything
    that our constituents understand, it's gas prices and, you
    know, back in 2008 the average gas at the pump was $3.84 a
    gallon. Today, or this last weekend I saw it for $2.24.
        I think maybe it's a little bit higher in some other areas
    of the country. But it's a pretty dramatic decline and, you
    know, as you think about what NAFTA has done and where we are,
    as you pointed out in your testimony, Ms. Harbert, that we've
    now been running a trade surplus with Canada and Mexico in
    refined petroleum and coal, and the trade deficit with these
    countries in oil and gas has been shrinking rapidly.
        It's in large part because we now really, truly have a
    North American energy independent plan that is coming to
    fruition, which is one of the reasons why these prices of
    energy have fallen, whether it be in LNG, whether it be with
    the gas at the pump, as well.
        You indicated at the end of your testimony that, if NAFTA
    was changed dramatically, it truly would threaten not only our
    energy security, but I have to presume it would also
    dramatically increase prices to consumers, as well.
        Can we explore that a little bit?
        Ms. Harbert. Certainly. We have benefited from increased
    trade in North America, and, by lifting the oil export ban and
    increasing our LNG exports around the world, the American
    consumer and the American industry has benefited tremendously.
        Consumer prices have gone down by about 14 percent, and if
    that were to change and for some way we would jeopardize either
    the certainty provided by NAFTA or the investor protections
    provided by NAFTA or even the reforms that have been undertaken
    in Mexico, that would threaten production in the United States
    because it could not find its natural markets.
        It would also undermine current investments planned for
    Mexico, which would then bottle in some of our domestic
    capacity. So it's a lose-lose if we undermine NAFTA in any way
    that has been the basis for an incredible energy integration
    effort that is providing tremendous benefits to industry,
    consumers, to our national security, as we are now getting more
    oil from them than from OPEC, and also, obviously, our energy
    security.
        Mr. Upton. Mr. Thompson, as we know, the Gulf Coast is home
    to the most technologically advanced refineries in the world.
    Many of us have been down there to see these advances.
        How has the North American energy integration benefited the
    consumers of these products, and how might we strengthen--as
    these negotiations are going on with the three countries--what
    might you suggest to actually improve our situation in regard
    to the technological improvements that could be done?
        Mr. Thompson. Thank you for the question.
        I will just add that we have sophisticated facilities in
    far more than just Texas. We have some in your fine State, and
    we have them in 33 States. So, you know, a strong energy sector
    helps out most of the country.
        As far as, you know, NAFTA goes, as we talked about it,
    it's pretty simple at its core. We got a lot of product from
    Canada, and we were able to sell a lot of finished goods to
    Mexico, and this is good for consumers.
        We get more than--you know, 40 percent of all of our
    imports come from Canada, and we get it duty free. So that
    means lower price for crude, which benefits the American
    consumer.
        As far as additional protections, we think that a more
    robust chapter in NAFTA dealing with energy, dealing with how
    it's developed and the modern way it's traded, would benefit
    all.
        We certainly believe that we would benefit from having the
    three countries work together on infrastructure so we can find
    the best ways to get crude to our refineries and products to
    consumers in the most efficient way.
        Mr. Upton. So, Ms. Harbert, you know, as we think back to
    where we were, back particularly in the '70s, I mean, we've got
    the new abundance that's there now--the developments in shale
    technology, all those different things.
        Many of the laws and regulations were written back in those
    days when we weren't exporters. What are some of the things
    that we could do to prevent us from being held back as it
    relates to energy exploration and increasing exports not only
    to these two countries, but the other countries around the
    world?
        Ms. Harbert. Well, first, I think it's ``do no harm.''
    Don't do anything to impair our ability to export to North
    America and beyond. Make sure that we can get those export
    facilities sited very quickly.
        We have to make sure that the regulatory process--and you
    guys have been working on this--is fair, transparent, and
    incorporates cost-benefit analyses.
        And last but not least, there is significant room for
    permitting reform, both within the country to move our products
    around more efficiently and also to export them to North
    America, both to Canada and to Mexico, and to import them as
    well.
        We've had a 7-year-waging war on importing more oil from
    Canada. But we shouldn't lose sight of the fact that we have a
    tremendous opportunity to export our own natural gas--clean-
    burning natural gas--to Mexico with some additional permitting
    reforms.
        So both, I think, a laserlike focus in the upcoming debate
    on infrastructure in the Congress, who really need to take a
    very hard look at continuing reg reform and certainly
    permitting reform.
        Mr. Upton. Thank you.
        Mr. Rush.
        Mr. Rush. I want to thank you, Mr. Chairman.
        Dr. Krupnick, in your written statement you ask the Members
    to envision a world where the three North American countries
    act as a free-trade energy bloc which could rival every other
    nation or bloc in its ability to influence world markets for
    oil and gas.
        If we were to continue along the path we are currently on,
    with no changes to NAFTA and additional coordination,
    harmonization, and integration between the U.S., Canada, and
    Mexico, how long do you envision it would take for North
    America to truly rival a competitor like OPEC?
        Dr. Krupnick. Well, this idea of a future energy bloc--the
    United States, Canada, and Mexico operating as a unit--is, I
    think, a useful exercise to think about an ideal situation from
    an energy perspective.
        We are, obviously, I don't think, ever going to head in
    that--we are heading in that direction, but we are never going
    to be there. We are not going to have an E.U.-type structure
    with Mexico, Canada, and the United States.
        But I think it's useful for thinking about how to realize
    as many gains from trade and as many--as lowest possible cost
    to industry of addressing environmental regulations, let's say,
    by harmonizing those regulations across countries so that
    there's sort of only one regulatory model that industry needs
    to address.
        So I think it's a useful paradigm. It's not something I see
    that's actually going to happen in my lifetime, anyway.
        Mr. Rush. Thank you.
        Mr. Thompson, in your testimony you noted that, in 2016
    alone, the U.S. exported $20.2 billion worth of energy products
    to Mexico and imported $8.7 billion worth of energy products.
        In terms of jobs, how many U.S. energy jobs would
    potentially be impacted if the administration were to
    unilaterally make changes to NAFTA in a way that might upset
    our two trading partners and possibly hurt the mutually
    beneficial energy trade that we all can agree is very notable
    and profitable for all three countries?
        Mr. Thompson. Thank you for the question.
        We are optimistic that we are going to come through with
    modernized NAFTA and these negotiations are going to stay on
    track.
        We certainly are proud of what our industry means from an
    employment perspective. As I said in my testimony, we support 3
    million jobs, and those jobs are there because of our strong
    energy sector and certainly are going to be strengthened the
    more we work with our neighbors to the north and the south.
        We believe that there's lots of opportunities in Mexico now
    that they have liberalized their energy network, and we already
    have a number of companies. We have Andeavor and Valero and
    ExxonMobil have entered the market--the downstream market in
    Mexico for the first time in many, many decades.
        We are supplying over half of their gasoline needs, and
    that's going to continue grow, and as that grows it's going to
    strengthen our need for employment.
        Mr. Rush. I want to just ask all the panelists, is there
    anyone on the panel who believes that our Nation would benefit
    if the administration unilaterally opened up negotiations on
    NAFTA and insists on establishing new terms that would be more
    beneficial to the U.S.?
        Mr. Thompson. Well, to be clear, we certainly believe that
    NAFTA would benefit by being modernized. So we do think, if
    modernized, it could benefit the energy industries we talked
    about.
        We believe that there could be a more robust chapter on
    energy in NAFTA. We believe that the United States should make
    sure that direct investors are protected, particularly now that
    Mexico has liberalized its energy system.
        We think that a modernized NAFTA could do that. We think
    that it could be enhanced to help us with regulatory
    cooperation with Mexico and Canada. So there are, Mr. Rush,
    lots of things that could be improved through NAFTA
    modernization.
        Ms. Harbert. We at the Chamber believe that withdrawal
    would be devastating to the U.S. economy. Modernization is
    preferable. First, do no harm and then make it better.
        That's what modernization means, and that includes, from
    American business perspective, making sure that we have those
    investment protections in place that ensure that we have an
    ability to adjudicate our disputes fairly.
        So we need to stay in this game. I think we've all laid
    out--all the panelists have laid out the stakes. They're high,
    and we need to find a way to get to yes.
        Mr. Rush. Thank you.
        Dr. Krupnick. I just want to raise, there's more going on
    than just NAFTA. So we shouldn't lose sight of these other
    agreements that the administration is giving short shrift to or
    even walking away from on the environmental side.
        Mr. Burchett. From a North American Manufacturers' and an
    ABB point of view. We support modernizing the agreement.
        Mr. Rush. Thank you.
        Mr. Chairman, I yield back.
        Mr. Upton. Thank you.
        Mr. Barton.
        Mr. Barton. Thank you, Mr. Chairman and Ranking Member
    Rush, for holding this hearing.
        Before I ask my questions, I want to thank Karen Harbert
    for her help in passing the repeal of the ban on crude oil
    exports.
        You and the Chamber were big helps in that, and we've
    exported as much as 2 million barrels a day in the last year,
    and I think we are about a million and a half barrels a day
    now. So thank you and your organization for that.
        I want to ask a little bit different question than Mr. Rush
    did, but it's basically the same thing. From reading your
    testimony and listening, my impression is that all of your
    organizations support staying in NAFTA in some way.
        Is that true? Is there anybody that advocates getting out
    of the NAFTA treaty?
        Everybody's shaking their head, so we'll say that that's a
    no. I will ask Mr. Thompson, will there ever be a day when the
    U.S. refineries, which had really configured their refineries
    to use the heavier Mexican and Canadian crudes, that they will
    reconfigure to focus on the lighter U.S. shale crudes?
        Mr. Thompson. Well, I certainly couldn't say there will
    never be a day, but right now I think they're configured in the
    most efficient way possible. As you know, oil is a global
    commodity, and the most efficient--you know, we are configured
    right now the most efficient that we can be. The heavier crudes
    that we are designed to handle we are handling, and the lighter
    stuff that can be better processed is being exported.
        And so can I say never? No. But I think right now we have a
    very efficient system that's operating the way the global
    market dictates.
        Mr. Barton. Well, if that's the case, then we almost have
    to maintain some sort of a NAFTA arrangement, because the
    Canadian and the Mexican crudes are the more sour, heavier
    crudes. Is that not correct?
        Mr. Thompson. That's correct. And, you know, I shook my
    head in agreement, but I will say it out loud: Yes, we
    certainly and wholeheartedly agree that we should stay in
    NAFTA.
        Mr. Barton. This is a little bit off the NAFTA issue, but
    in that happy day, if it ever were to occur that we would
    actually build a new U.S. refinery--and I know that's
    unlikely--I know we expand and modernize--but if were to
    actually from scratch build a new U.S. refinery, how would that
    refinery be configured?
        Would it still be configured for the heavier crudes that we
    import, or would it be configured to use the lighter crudes
    that apparently now we are exporting?
        Mr. Thompson. You know, frankly, I am not in the best
    position to answer that. I think people much smarter than me
    would design it in a way where they believe they'll have the
    best access to crude.
        Could it be configured to handle the lighter stuff? Sure.
    But there's arguments to handle the heavier stuff, as well.
        I will say on this point, we have adequate refining
    capacity today to meet our domestic needs. So right now there's
    no need to build an additional refinery.
        Mr. Barton. OK. I will ask Ms. Harbert, with the--I don't
    know how you exactly say it, but the Mexican legislature and
    president have changed their policy and changed their laws to
    allow international companies to own more and be more invested
    in Mexico. How is that going? Are they----
        Ms. Harbert. Well, and first, let me thank you for your
    support and leadership in lifting the oil export ban, which has
    done a tremendous benefit to the American economy, and the EIA
    estimated for 2018 we will produce more oil than ever before in
    our Nation's history, and obviously a lot of that will continue
    to be exports and particularly supplanting oil from other
    countries that don't like us so much.
        You know, in Mexico it's happening, and we have to
    congratulate the legislature and the president for being very
    courageous in doing something that took a long time to undo.
    And every major American company is down there with an office
    looking at how they can take advantage of this opportunity.
    Permits have been granted, infrastructure is being built, and
    to stop something right in the middle of its tracks of enjoying
    a boom of reinvesting back into Mexico would be tragic.
        There are companies that have a lot of pent-up energy and a
    lot of pent-up demand for realizing a better relationship with
    Mexico.
        So it's going great, but it can only get better, and what
    we have to worry about is that a change in NAFTA or a change in
    leadership in Mexico that would jeopardize any of that
    certainly, you know, we would have to take that with a grain of
    salt--a grain of caution.
        Mr. Barton. All right.
        Thank you, Mr. Chairman.
        Mr. Upton. Mr. McNerney.
        Mr. McNerney. I want to thank the chairman, thank the
    witnesses this morning. I will start with Mr. Thompson.
        You mentioned that North America will be energy secure by
    the year 2020. Could you explain what that means exactly? What
    does energy security mean to you?
        Mr. Thompson. Well, let me just say that that's not, you
    know, me saying it. That's the International Energy Agency--the
    IEA--that's saying it, and what that means is that we are
    producing a level of liquid fuels that satisfy our North
    American needs.
        So, basically, we are producing enough to satisfy our own
    needs and we are not relying on any other country for our
    energy needs.
        Mr. McNerney. So we'd cut OPEC off, basically, from
    American----
        Mr. Thompson. Well, we would have the potential to cut them
    off. Again, you know, whether the market would dictate that is
    another matter.
        But we could. We would be energy secure at that point.
        Mr. McNerney. Do you disagree, Doctor?
        Dr. Krupnick. I just wanted to mention that oil is a global
    market, and the price of oil is determined in a global market
    in the absence of, let's say, Saudi Arabia's cutting back its
    supply voluntarily or on its own to change price.
        So we can never really be independent of other countries,
    other producers, because we'll always be dependent through the
    price.
        But, obviously, as our oil demand falls and our domestic
    supply grows, it does give us a greater measure of energy
    security.
        Mr. McNerney. Well, you have been advocating for
    harmonization, Dr. Krupnick. But just yesterday we had a
    hearing on the CAFE standards--tremendously difficult to get
    harmonization within the United States itself. So is there a
    pathway for us to reach harmonization with the other countries?
        Dr. Krupnick. Well, initially, I would just hope that we
    could get behind the agreements that we already had with Canada
    and Mexico. The ones I mentioned were on environmental issues.
        There's an agreement with Mexico and the United States to
    jointly inspect facilities in the deep water of the Gulf of
    Mexico to make sure that they're living up to the safety
    standards that both countries are enforcing.
        So I think there's a lot that can be done bilaterally and
    trilaterally.
        Mr. McNerney. Well, you mentioned that pulling out of the
    Paris conference--I think I understood you to mention or imply
    that that hurt the confidence of investors. Could you expand
    that a little bit?
        Dr. Krupnick. I don't know if I exactly said it that way,
    but I think what we are seeing is that companies around the
    world and international companies that are located and based in
    the United States, plus companies in the United States, are
    already using what we would call as economists shadow prices of
    carbon--that is, internal prices of carbon to help in their
    investment planning.
        So whether we pull out of the Paris Accords or not,
    companies can't afford not to bet on a future without climate
    legislation in the United States. So they have to take the long
    view with investments, let's say, in pipelines lasting 40
    years.
        They've got to take the long view in their investment
    decisions about what's going to happen to climate policy in the
    future, in the U.S. and around the world, and they're doing
    that irrespective of whether we are currently in the Paris
    Accords or not.
        Mr. McNerney. One last question. You said that Congress
    could help promote renewable capacity using local resources.
    Could you expand on that a little bit as well?
        Dr. Krupnick. Yes. So, I am not in Congress. I don't know
    the levers that you all have to use. Some of it is just moral
    suasion, some of it is, as I am sure, is passing bills.
        But Mexico is blessed with very good solar energy, and
    Canada has a lot of unexploited hydro electric energy. So the
    United States could benefit, and Mexico and Canada could
    benefit, by taking advantage of these locational advantages
    that these countries have to have our electricity be cheaper
    for American consumers.
        Mr. McNerney. And these can be cost competitive with
    traditional fuels?
        Dr. Krupnick. Well, they can be, certainly in the hydro
    front they can be, and potentially in Mexico. Kind of better
    having solar in Mexico than having solar in New England.
        Mr. McNerney. Thank you. Mr. Chairman, I yield back.
        Mr. Upton. Mr. Olson.
        Mr. Olson. I thank the Chair, and welcome to our four
    witnesses with a special Texas welcome to Secretary Harbert.
        Ma'am, you and I share a common bond. We are both Rice
    Owls--Jones '85. Welcome. There we go. Well, Jones beats Hanson
    at all the sports that matter. So, again, welcome.
        Also welcome to Mr. Burchett. As you know, sir, ABB has a
    presence there in Sugarland, Texas, as you mentioned. Please
    come down and visit. You will love to see the facility. It's
    amazing.
        Also, right around the corner is a restaurant called the
    Live Oak--the best burgers in Fort Bend County, right there at
    Live Oak, right by ABB in Sugarland, Texas.
        And this is no news, but North America and energy trade is
    vital to the world's economy. Heavier crude from Canada is a
    critical part of the American refining space.
        We all know that the Eagle Ford shale does not stop at the
    Rio Grande waiting for a visa to cross, and we know that as
    Mexico improves its energy sector, our ties with that neighbor
    will only grow stronger.
        And make no mistake, we are on the verge of replacing OPEC
    with a de facto NAPEC--North American Petroleum Exporting
    Countries.
        And, of course, my own State of Texas' ties to Mexico are
    also important for electricity. They have been invaluable in
    our electricity market.
        For example, in August of 2011, my State was hit with a
    statewide heat wave--over 100 degrees on every square inch of
    our State the entire month of August.
        That put us in a situation of some rolling blackouts.
    Mexico sent power across the river to help us out. Over 200,000
    homes were powered by energy electricity from Mexico.
        It's an important relationship for Texas and America to
    have.
        My first question is for you, Mr. Burchett. In your written
    testimony, you talked about how, one, electric transformers
    come together from sites all across the North America, and
    that's a great example of how trade works in energy.
        Can you discuss how trade deals like NAFTA make that
    possible and what would happen if the global supply chain--if
    it spikes with terrorists?
        Mr. Burchett. Thank you, Congressman Olson. And, by the
    way, my office is in Houston, Texas, so I do get to Sugarland
    quite often. So----
        Mr. Olson. Remember, the Live Oak. Live Oak.
        Mr. Burchett. Live Oak. Got it.
        So ABB is a--you know, we are a multinational multibillion-
    dollar company, and we make investments all the time. What
    drives those investments is consistency, stability, low trade
    barriers.
        And so, when we think of NAFTA, that helps drive those
    types of investment, because we have the consistency and the
    stability that's provided there.
        Mr. Olson. OK.
        Ms. Harbert, a question for you and the U.S. Chamber of
    Commerce: You were pretty clear in your testimony that our
    Chamber never, ever wants to see America walk away from NAFTA.
        At our local five-star Chamber of Commerce in Sugarland,
    the Fort Bend Chamber of Commerce, led by Kerry Schmidt,
    repeats that message to me every single time we meet at home.
        With that said, are there items that could be included in
    negotiations which would hamstring the agreement even if we
    stay part of it?
        To put it here in DC terms, is there a poison pill that's
    possible that looks benign that could bring the whole structure
    down?
        Ms. Harbert. Well--and thank you for your kind comments,
    and I will try and get the Hanson Athletics to step it up a
    little bit.
        You know, I am glad to see that the echo chamber is
    working, because the business community is united in its
    support of NAFTA--modernization, not withdrawal, and protection
    of those parts of NAFTA that are very important to the business
    community, specifically investor protections that are in there.
        If those were taken out, I think American industry would
    have a very, very large problem in agreeing with the future
    terms of NAFTA. There are lots of things that can be done to
    improve it. But that would be one that would be very difficult,
    and if were to see that go away and then we would have steep
    tariffs, you can know what would happen to the American
    consumer here.
        So we have our eyes laserlike-focused on the investor
    protections to make sure they are included.
        Mr. Olson. I think I am out of time and, Mr. Chairman,
    again I thank the witnesses, and Merry Christmas.
        I yield back the balance of my time.
        Mr. Upton. Mr. Peters.
        Mr. Peters. Thank you, Mr. Chairman. Thanks to the
    witnesses for being here. Ms. Harbert, when we saw each other
    the last time, it was probably 80 degrees where we were. Not
    that way today.
        Thanks for being here. Just a couple observations. First of
    all, there's a lot to like about energy abundance for
    consumers, for manufacturing, and even if our friends to the
    north and the south--Mexico and Canada--even if we don't act
    like OPEC, it's still advantageous to have friendly countries
    to trade with for energy.
        Another observation: This really has been about petroleum
    and hydrocarbons, not all energy trade. We haven't talked about
    next-generation nuclear or renewables.
        That's also part of the discussion. But just focused on
    what we've covered here, it does strike me as, with all this
    abundance, an odd time to be opening up Alaska to offshore
    drilling.
        I don't see the need for that. It's part of a tax bill that
    didn't even ever discuss the $2 billion of subsidy we provide
    at a time of all this abundance, and then at the same time we
    are talking about depleting the strategic petroleum reserve at
    prices that almost couldn't be lower. It doesn't seem like it's
    very smart. I observe that as part of the context.
        Ms. Harbert, I am with you on regulatory reform and
    permitting reform. Actually, in my previous life I represented
    a lot of clients who tried to get through Government processes
    that could be very, very frustrating.
        I believe we can achieve high environmental standards with
    less drag on the economy. Would like to work with you on that.
        Along those lines, one thing I would point out is what's
    happening around methane right now. I saw today that the
    American Petroleum Institute--and this is great news--started
    its own business partnership to deal with reducing VOCs and
    methane.
        They are probably observing what I am observing, is that
    these rules are becoming politicized, and that's bad for
    business because what's going to happen is you get this back
    and forth. If the President wants to undo everything because
    it's got Obama's name on it, that's not good for business,
    either.
        So I congratulate the American Petroleum Institute. I know
    the Chamber is interested in certainty. We can have good
    methane rules that protect us and the environment and are
    certain for business. I would like to work with you on that.
        And I am with you on NAFTA. For me in San Diego, one of the
    most important parts of our economy is our trade with Mexico.
    Our relationship with Mexico is very important to us.
        I am a supporter of President Obama's TPP negotiations.
    Again, the business community seems united behind this. I can't
    speak for all the Democrats here, but I understand the need for
    dispute resolution that's free from some of the hometowning,
    particularly in developing nations. I think that makes a lot of
    sense.
        Maybe we should just rename it the Trump Pacific
    Partnership and be on with it. Maybe get a vote on it that way.
        But what I did want to just say, because a lot of this has
    been covered, I heard mostly discussion in terms of modernizing
    about leaving it the same, making sure that we preserve dispute
    resolution, making sure that we do no harm.
        I just wanted to give you an opportunity--I think we've
    been asked this before--are there any specific changes you'd
    like to see in terms of modernization that we should be asking
    for?
        And Mr. Burchett, I will start with you.
        Mr. Burchett. Thank you, Congressman.
        There are more experts than I on the NAFTA agreement. I
    know in my career,I remember when it started, and I was doing
    business in Mexico. It's been 23 years. So I would defer to the
    experts on NAFTA for the modernization.
        But it just seems to me that given the changes that've
    happened in the 23 years, given the shale gas revolution, given
    the high-tech things that we do now, like the refineries
    mentioned by Congressman Upton, which is ABB technology, and
    given the level of trade that I see with our 50 manufacturing
    plants and a nice footprint in Canada also of manufacturing and
    a nice footprint in Mexico, it seems time to modernize.
        Mr. Peters. Yes. Anything, Ms. Harbert?
        Ms. Harbert. I have a couple of very specific things: that
    a new NAFTA would ensure that the cross-border trade of crude
    oil and natural gas and refined product wouldn't be subject to
    any quantitative measures or tariffs; secondly, that we could
    more safely or more quickly develop safe cross-border
    interconnections of electricity and hydrocarbons; and lastly--
    there's two more--we really need to look at and prohibit local
    content rules that the industry could not meet, and we should
    take a hard look at some common standards and regulations.
        Not all--where it makes sense in the energy sector, so we
    can more harmonize, which is a scary word to our friends in the
    north, they don't like that word. But we could find some
    commonality.
        Mr. Peters. OK. That's very constructive.
        Dr. Krupnick, anything you want to add, briefly?
        Dr. Krupnick. No. I think this has been pretty well
    covered.
        Mr. Peters. OK. I really appreciate you--I look forward to
    working with you to see if we can't say what's good and make it
    better.
        And Mr. Chairman, I yield back.
        Mr. Upton. Mr. Shimkus.
        Mr. Shimkus. Thank you, Mr. Chairman. I appreciate my
    colleague from California's questions. I've got a--just a
    picture should go up on the screen, and I was trying to find
    another one but, really, that just gives you, you know, either
    pipelines, crude oil crossings, and sometimes they don't show
    going in to Mexico, but there's a little, like, a dot where the
    crossing location is for crude, for refined product, for
    hydrocarbon gas liquids, for natural gas, and for electric
    transmission.
        So I think what we struggle with is, those of us who have
    been on the committee, which is one of the reasons why I love
    the committee--we are interconnected. We are there. We've been
    there for a long time. We are going to continue to have this.
        So, why I think the hearing is important is--and Ms.
    Harbert, you just raised some of the issues of the concerns
    that, if there's a pullout of NAFTA, what damage do you do to
    that interconnected North American grid, or North American
    crude oil, or oil-refined product lines.
        Does anyone want to mention that real quick?
        Ms. Harbert. Looking at your map, if you can imagine in a
    world without NAFTA anything that would be coming into the--for
    example, to Texas, if, you know, electricity, if there was
    going to be a toll or a tariff put on there that we would have
    higher prices than we actually, you know, charge in America,
    that would be a huge disincentive for our energy security
    because we depend on this, as you well pointed out, and if we
    change that economic equation, that's going to raise prices
    here at home, and we are going to have to search for other
    suppliers.
        Mr. Shimkus. And right now there's uncertainty because of
    conflicting messages. So I am from southern Illinois. We are
    pork and beans and corn. NAFTA is very, very important for my
    commodity-based products.
        But we also have the fear--every small town in America
    really has that small manufacturing facility that's moved. So
    that's the conflict of NAFTA for members.
        In fact, not to point out ABB, but they announced a closure
    of the St. Louis plant--a transformer manufacturer. I don't
    know where it's going. But I do know--I drive by it every day
    when I go to the airport.
        So that's the struggle with how do you renegotiate while
    keeping the benefits of that, or for my corn to be sold, where
    you're ensuring that our manufacturing sector is equally
    treated, because we can't negotiate wages.
        We can't negotiate environmental standards. Well, maybe
    some people think we can but, historically, those are things
    left to the individual country to be able to do.
        Anyone want to comment on that? Those challenges?
        Dr. Krupnick. I could say something about the map and one
    thing that's not on the map. So there are a number of
    pipeline--there's a lot of plans to grow the number of
    pipelines coming into Mexico to meet that rising natural gas
    demand. So those could be put in jeopardy.
        And then, in the Gulf of Mexico, the lease sale, round one
    was completed. Two is almost completed. Three is supposedly
    going to get into deep water, and that could be held up.
        Mr. Shimkus. Right.
        Dr. Krupnick. So it could put us and, of course, indirectly
    the Mexicans, at risk, as well.
        Mr. Shimkus. And for those that have followed the committee
    and what I've done in public statements, comments, Keystone
    Pipeline, Keystone XL, which feeds right, obviously, from the
    oil sands all the way down to my district. There was a big
    terminal there, and then it spreads throughout all the Midwest.
    And we've seen not just an international negotiation, but we've
    seen, obviously, just internal politics delay pipeline
    construction.
        Mr. Thompson.
        Mr. Thompson. So let me just say, I can say with certainty
    that my refining facilities are the most efficient in the
    world, and we are not relocating anywhere, you know, under
    NAFTA. We are going to be there.
        But, you know, as our transportation demand for fuel
    flattens out, our facilities need export markets to continue to
    grow and prosper.
        Mr. Shimkus. Right. I think that's a good point, and I was
    going to jump on that with the last 40 seconds. Just for the
    liquid transportation fuels debate, we had that hearing
    yesterday on CAFE and greenhouse gas, and the debate of EV
    penetration.
        Now, it's not huge across the country, but electric vehicle
    penetration in California is noticeable, and international
    comments about, like, Norway and France who are trying to
    make--or China, that really could disrupt this market--crude
    oil and refined products, don't you think?
        Mr. Thompson. EV penetration could indeed, yes. It could be
    very disruptive.
        Mr. Shimkus. So we need to keep the liquid transportation
    market.
        Mr. Thompson. We need to keep the liquid transportation
    market strong.
        Mr. Shimkus. Thank you very much. I yield back.
        Mr. Upton. Mr. Loebsack. Oh, I am sorry. He left.
        Mr. Tonko.
        Mr. Tonko. Thank you, Mr. Chair. Welcome, witnesses.
        One area where our energy sector is undeniably and quite
    literally interconnected is the United States and Canadian
    electrical grid systems.
        In 2016, the U.S. imported 73.1 million megawatt hours of
    electricity from Canada, about a quarter of which went to New
    York State, my home State.
        Dr. Krupnick, do the interconnections between the United
    States' and Canadian power systems improve greater reliability
    on both sides of the border?
        Dr. Krupnick. Well, sure. The short answer to that is yes.
    To maximize the benefits of cross-border electricity trade--we
    have a report that talks about what to do. There are several
    margins to increase reliability, and one of them is to have
    capacity planning be a joint exercise between, let's say,
    control areas in the United States and in Canada.
        Mr. Tonko. Thank you.
        Dr. Krupnick. So that's not--there's a lot of things that
    we can do beyond what we are doing.
        Mr. Tonko. Thank you.
        And the Canadian hydropower is becoming increasingly
    important for New York State's plan to meet its clean energy
    targets.
        So I see big potential for increased renewable electricity
    trade, such as the importation of Canadian hydro, which will
    reduce emissions in our country.
        But these projects rely on cross-border transmission
    infrastructure. What unique challenges exist to siting,
    permitting, and constructing cross-border transmission compared
    to domestic transmission projects?
        Ms. Harbert. Well, I can take a stab at that.
        You're absolutely right. The provision of Canadian
    electricity to the Northeast more broadly is hugely important
    for grid reliability. The Northeast suffered a very devastating
    blackout in the early 2000s, and from that was established the
    Electricity Reliability Coordination Council, which seeks to
    look at these things and manage the grid up there more
    responsibly. And so that's an important new organization that
    helps us to do that.
        Cross-border is still hard, and it takes approvals from
    both sides of the border. Sometimes it takes State and local,
    because it's not just crossing the border, it's going through
    other municipalities and counties that might not be excited
    about having a new transmission line.
        So we really need to take a look at the redundancy of
    Federal, State, and local permitting so that we get things
    built in a predictable time frame.
        Mr. Tonko. Thank you. Anyone else want to respond to that?
    Yes.
        Mr. Burchett. Yes. So as ABB, we invented high-voltage DC
    transmission, which is the way you do a lot of these
    interconnections. So we do them all over the world. We are
    working on one with Denmark and U.K. now.
        One of the biggest ones is for New England, and it's to get
    the power from Canada there. So in talking to our customers, I
    have heard them describe the regulatory approval process as,
    quote, unquote, ``a game of Chutes and Ladders,'' and that can
    take 7 to 10 years. And so what they would--you know, they
    would like to see an expedited process, but the technology is
    there to get particularly hydroelectric power from Canada into
    New England.
        Mr. Tonko. Thank you.
        Yesterday marked the second anniversary of the Paris
    climate agreement. One hundred and ninety-seven parties have
    signed the Paris Agreement, and 170 parties have ratified it.
        The United States is the only country with the intention to
    withdraw. Progress in North American and global emissions
    reductions will be hindered by the absence of our leadership--
    United States leadership.
        But we have seen no indication that our neighbors intend to
    back away from their Paris commitments or their carbon pricing
    policies.
        So Dr. Krupnick, do you believe it will be more difficult
    for the United States, Canada, and Mexico to cooperate on
    cross-border energy and environmental policy harmonization if
    the United States continues to be disengaged on global action
    on climate change?
        Dr. Krupnick. The answer is yes, of course, it'll be more
    difficult, and as I've tried to indicate, there is still at a
    State level, at a regional level, there are still opportunities
    for that kind of engagement, let's say, that we are seeing from
    California with Quebec, Ontario, Manitoba, and so on in their
    CO2 trading program.
        So it's not like all these interactions are going to stop.
    But, of course, we'll be hurt in our ability to negotiate
    further.
        Mr. Tonko. Right. And so the consequences, I believe, are
    probably that we would be less likely to align their policies
    with ours, and are there limits then to opportunities to lower
    costs to business and consumers?
        Dr. Krupnick. Yes. Anytime you put barriers into a
    cooperation interaction, you're going to create increased costs
    somewhere along the line.
        Mr. Tonko. Yes. With that, I thank you and yield back.
        Mr. Olson. [presiding]. The gentleman yields back.
        The Chair now calls upon the gentleman from West Virginia,
    Mr. McKinley, for 5 minutes.
        Mr. McKinley. Thank you, Mr. Chairman.
        In our majority memorandum binder, I read that apparently
    we have 73 gigawatts of electricity are being imported from
    Canada currently. For everyone to understand, that's the
    equivalent of anywhere between 70 and 120 power plants.
        So I would like to focus on those implications, if I could,
    with this panel, because the first is currently under
    construction, is a Lake Erie connector. That's a thousand-
    megawatt, high-voltage underwater transmission line that would
    provide the first direct link between Ontario power generators
    and the America PJM.
        This Lake Erie connector will enable a subsidized Canadian
    power company to compete with American private-sector energy
    producers.
        Secondly, the Quebec electricity sector is dominated by
    Canada's largest utility, and it's a state-owned-and-operated
    monopoly which is heavily subsidized. According to CBC news
    reports, ``Canadian electricity producers are generating more
    power than they consume and sell off excess power to the United
    States at rates below the cost of production,'' closed quote.
        This unfair competition may result in lower utility bills
    for us in America, but this outsourcing of our electric
    generation costs American jobs and lost State and local tax
    revenue.
        Therefore, I am concerned that the U.S. markets are
    becoming the dumping ground for Canadian state-subsidized
    electricity, much like we've become the dumping ground for
    cheap, subsidized steel from China. Those are my concerns.
        The Canadian government subsidizes electric exports to the
    United States, the government dumps electricity at below rate,
    and it results in lost jobs and State revenue.
        So my question--perhaps it's to you, Ms. Harbert--should
    the new NAFTA negotiations--and I would encourage those
    negotiations to take place--address this unfair market
    distortion?
        Ms. Harbert. Sure, and one thing to point out, when we
    negotiated NAFTA the first time around, energy wasn't even part
    of the equation. We didn't know how much we had, Canada had,
    Mexico had. We didn't anticipate the fully integrated energy
    economy that we have today.
        So, you know, as we proceed in the fifth and sixth and,
    hopefully, conclusion of this, there are issues like that that
    should be discussed.
        But at the same time, we also have to realize that in the
    Pacific Northwest of our country, we are exporting a tremendous
    amount of hydropower up into Canada, and some of those are from
    Government-owned facilities as well--back to the, you know, the
    TVA days and all of that.
        So, you know, it's something that should be looked at. That
    is not particularly my exact area of expertise, but I think it
    should be talked about. But it probably floats on both sides of
    the border that we would have to consider that--the equation.
        Mr. McKinley. Anyone else on the panel have comments about
    the subsidized----
        Dr. Krupnick. Sure. I think subsidies to renewables,
    subsidies to fossil fuels--anywhere you see subsidies, there's
    a case for eliminating them. All that I think it's important is
    that, if we are eliminating subsidies on one type of fuel, we
    should eliminate them on others, as well.
        And so, if Canada is subsidizing their hydro, then that's
    an issue that should be taken up.
        Mr. McKinley. Mr. Thompson, anything? Any comments?
        Mr. Thompson. Well, this was certainly out of, you know, my
    area of expertise, but I will say this speaks more broadly to
    the reasons that we need a separate, more complex title than
    NAFTA dealing with the energy issues.
        As Karen said, we need to--at the time NAFTA--when it was
    originally developed, these issues weren't in front of us, and
    we need to because----
        Mr. McKinley. OK, because, according to these same reports,
    they're saying that we're ultimately going to be a net importer
    of electricity--the PJM from Canada.
        So I am interested to know whether or not something like
    this in a NAFTA agreement should allow for some kind of cost
    recovery or tariff, if I use the T word. Any thoughts?
        Mr. Burchett. As a final statement, from an ABB standpoint,
    we are a technology provider, so we do the high tech, and what
    I will tell you about those interconnects is the power can flow
    both ways.
        So I don't know what the potential there is in the future.
    From a subsidy standpoint, I have no point of view. But I know
    the technology can go both ways.
        Mr. McKinley. OK. I yield back.
        Mr. Olson. The gentleman yields back.
        The Chair now calls upon the gentleman from the same home
    State as our chairman, who wants me to say publicly I recognize
    that Michigan beat Texas in basketball yesterday, 57 to 52.
        Mr. Walberg, you have 5 minutes.
        Mr. Walberg. With that kind introduction, Mr. Chairman, I
    won't add anything to it. Great basketball game.
        Mr. Olson. Thank you.
        Mr. Walberg. Ms. Harbert, thank you for being here, and
    thanks to each of the panel members for being here.
        Many people think energy, and they think oil and gas. What
    other industries benefit from North American energy trade?
        Ms. Harbert. Well, I like to say that every one of our 50
    States is in the energy business. You may not be producing it,
    but you're in the supply chain, and obviously we are all
    consumers.
        So, with a more integrated North American energy market,
    all of our consumers--our families are benefiting, our
    industries are profiting--not profiting, but are benefiting
    from lower prices.
        And let's not forget that industries have moved back to
    America. The fertilizer industry is back, helping your pork and
    beans and et cetera, and corn. The petrochemical industry is
    back in the Gulf that used to be in the Middle East. The steel
    industry is back in some form or fashion in Pennsylvania and
    Ohio.
        So manufacturing is back, and critical inputs to our
    manufacturing are back. So it is an energy revolution in all 50
    States.
        Mr. Walberg. And I think that's important for us to get out
    very clearly. We often think of energy in combative terms at
    times--it's not in my back yard--and the impact is sometimes
    forgotten, as well.
        So, for us here in Congress, and policy to think along
    those lines, but also the industries, to make sure that we
    broadcast it, assist in the long haul.
        Ms. Harbert, the low cost of natural gas and electricity is
    driving a revival in U.S. manufacturing and providing our
    economy with a competitive advantage.
        However, free trade and market principles also allow
    producers of energy commodities such as natural gas and LNG to
    export their commodity abroad.
        How do we strike the right balance so that everybody,
    including U.S. consumers, can reap the positive economic
    benefits?
        Ms. Harbert. Well, natural gas is real great story for
    America. We are producing more natural gas than we can consume,
    and, in order to continue to produce at that level, they need
    export markets, and that's what guarantees lower prices in
    those industries that are coming back.
        We have additional capacity being planned into Mexico that
    will be good, because Mexico will then stimulate additional
    demand for our natural gas by developing new industries and new
    consumers.
        So having more than we consume is a good thing. They're not
    going to sell it at the expense of domestic industry. They're
    getting all that they need, but, in order to keep those prices
    low for that domestic industry, we want to be able to export.
        Mr. Walberg. OK. Not a zero sum game, then?
        Ms. Harbert. No.
        Mr. Walberg. OK. Dr. Krupnick.
        Dr. Krupnick. During the debate over LNG licensing for
    export, there were many studies done on what the effect of
    those exports of natural gas would be on U.S. domestic prices,
    and the best ones of those clearly said that there would be
    very little effect on prices.
        With the shale gas revolution, we have such rapid response
    ability now in the fields to even small changes in prices, with
    increased supply that we are in a new era, and I don't think we
    have to worry about increased exports of our natural gas.
        Mr. Walberg. Thank you.
        Mr. Thompson, what types of opportunities are opening up
    for American companies with Mexico's energy reforms?
        And we often talk about hydrocarbons, but what about
    electricity?
        Mr. Thompson. Well, I can't speak to electricity. That's
    not what my members do.
        But I can speak to, with the opening up--the liberalization
    of their downstream sector, we have a number of companies that
    are now entering the Mexican market.
        Andeavor has opened up the first Arco station in Mexico,
    and they're supplying fuel from their refinery in the State of
    Washington.
        Valero now has entered into agreements to provide
    products--ExxonMobil, BP, Chevron. So we have a lot of U.S.
    companies now that are entering Mexico to supply needed fuel to
    the Mexican economy.
        Mr. Walberg. Thank you, and Mr. Chairman, I yield back.
        Mr. Olson. The gentleman yields back.
        The Chair now calls upon the gentleman from Ohio, Mr.
    Latta, for 5 minutes.
        Mr. Latta. Well, thank you very much, Mr. Chairman, and
    thank you very much for our panel today.
        You know, if I could follow up from my friend from
    Michigan, Ms. Harbert, when we were talking about the shale
    revolution because, of course, in Ohio what we have seen happen
    on the eastern side of the State and also in western
    Pennsylvania, when you look at the Utica and the Marcellus
    Shale, it has created a revolution out there with wide-ranging
    benefits to the economy, and when you're looking at the
    creation of millions of jobs at a time when, you know, things
    are struggling out there.
        But overall, how has the consumer benefited from this
    revolution that we've seen out there, right here at home?
        Ms. Harbert. Well, it's an American supply chain that has
    jumped in and fulfilled, making new products to fuel that
    revolution, which means more jobs, and for the American
    consumer prices are--low natural gas prices here have saved the
    American family money.
        Over the last 6 years, prices have gone down by about 14
    percent for energy for a family, which provides additional
    purchasing power, which stimulates the economy.
        In addition, if we were able to get more pipeline capacity
    out of the Marcellus and into the Northeast, those consumers up
    there would benefit from low natural gas prices as well.
        So it's jobs, it's new industries, it's low prices, and we
    are being more competitive with our exports overseas because
    our prices are 2 to 4 times lower than they are in Europe,
    which is a good thing. So we are more competitive on the global
    stage because of these low prices.
        Mr. Latta. Yes. Well, thank you very much.
        And Mr. Burchett, our electrical systems are evolving
    rapidly with the technological innovation and regulatory
    policies that's driving the change. In your view what does the
    grid of the future need to look like in order to deliver
    electricity more efficiently and more cost effectively?
        Mr. Burchett. So, when we think of the future grid, as we
    are working with most of the investor-owned utilities and our
    customers, I mean, we know the words ``reliable'' are there. We
    know the words ``renewable'' are there.
        But we also, when we look at power generation, we view it
    as an all-of-the-above situation.
        Our future does have solar, wind, but also coal and
    nuclear--traditional generation. If you look at studies from
    EIA, out for the next 30, 40 years, you still see all the
    different fuel elements in play.
        With the technology in play, there's more around a
    distribution grid in the automation and being able to fully
    automate the grid so that, when an occurrence occurs you get--
    the interruption and restoration of power happens almost
    immediately.
        Mr. Latta. Thank you very much.
        Mr. Thompson, with the huge increase in domestic
    production, our imports have, you know, fallen dramatically, as
    is being discussed. We've cut OPEC imports in half in less than
    a decade. How has our energy security situation changed as a
    result of the North American energy trade?
        Mr. Thompson. Well, thank you for the question.
        So as you noted, our domestic production is near all-time
    highs, and so we are more energy secure than we have been in
    quite some time.
        Now, that certainly hasn't eliminated our need to import
    crude into our country, and that's more because our facilities
    are configured to handle the heavier crudes.
        So we are able to take our lighter crudes and export them
    to facilities that are better designed and equipped to handle
    those. But we've been able to get more of our crude from our
    friends up north in Canada, and 41 percent of all of our
    imports come from Canada, and that's a good thing.
        And as the IEA said, that we are all on track here as North
    America to be energy secure by 2020.
        Mr. Latta. Well, thank you very much.
        And Mr. Chairman, I yield back the balance of my time.
        Mr. Olson. The gentleman yields back.
        The Chair now calls upon the gentleman from Illinois, Mr.
    Kinzinger, for 5 minutes.
        Mr. Kinzinger. Well, thank you, Mr. Chairman, and I know
    there's--based off of the last question, I do want to make the
    point that I think energy security is essential, not just for
    our economy, which is great, obviously, and important, but also
    because a lot of foreign actors use energy as a weapon, and I
    think it's essential to note that, if the West is ever going to
    fight back against some of the policies of the East or Russia,
    it's essential that we have a very strong energy platform to do
    so, because the Russians in many cases use energy as a weapon
    to try to extract political favors from foreign actors and
    foreign governments, and I think that's an essential point to
    know.
        Ms. Harbert, since NAFTA was originally negotiated, Mexico
    has instituted a number of reforms, including opening its
    energy markets.
        What do these reforms mean for consumers in our country?
        Ms. Harbert. First of all, I just want to underscore what
    you just said, which is the national security dividend of our
    energy revolution is enormous--that we are able to provide
    exports to allies who have been forced into choosing a single
    source for their oil or for their natural gas. So providing
    that choice provides national security for them and for us,
    providing choice.
        The opening up of--the reform of the hydrocarbon sector in
    Mexico, which took a very long time and some courageous
    political actors to do, has been an open invitation for
    American companies, because they did the reform right and
    they're continuing to improve it.
        And so we've already had several lease sales there, and
    there's one that's going into deep water, and our companies
    that have the best technology around are going to be the ones
    bidding on it.
        So that, from an environmental standpoint, is very
    important. But also, as we have all of our resources flowing
    across borders in North America, which makes that energy market
    more efficient, it keeps prices low--electricity prices, fuel
    prices, natural gas prices--and it's stimulating that
    manufacturing revolution that's putting more Americans back to
    work.
        Mr. Kinzinger. And so you mentioned a little bit about
    future bids and technology. What are new opportunities that you
    see to engage Mexico's energy sector further?
        Ms. Harbert. Well, they're sort of threefold at the moment,
    and all of them are ongoing and in rapid fire, which is cross-
    border electricity, which has--we've had that for a while, but
    now there's a lot more demand on the Mexico side, so more
    interconnected electricity.
        Natural gas--we have a lot of American companies that are
    building pipeline right now, right at the border, waiting to go
    across, and that will stimulate more demand for our products
    under NAFTA because they will have a bigger middle class that
    can purchase our products.
        And then there's offshore, which I think, between the North
    Sea and the Gulf of Mexico, those are the most advanced
    companies ever. So we should take great comfort, and that is
    our companies that will be investing in the Gulf of Mexico and
    these tricky deep shore----
        Mr. Kinzinger. And what do we do to ensure that the
    renegotiations won't have adverse consequences on our energy
    industry?
        Ms. Harbert. Well, one of the most critical things that we
    are looking at is the investor protections that have been
    provided for and need to be maintained.
        So the Mexican energy economy is reformed--that's bright
    investment. Investment likes some certainty, and so two things
    could upend that, which would be a withdrawal from NAFTA or
    something that jeopardizes the--a NAFTA that does not have the
    investor protections.
        And so we as the business community are united, and those
    investor protections need to be maintained in any type of
    modernized NAFTA.
        Mr. Kinzinger. OK.
        Mr. Burchett, in your testimony you provide examples of how
    ABB's supply chain spans North America, including a supporting
    number of manufacturing sites in the U.S.
        As you say, the U.S., Canada, and Mexico do not simply
    trade with each other--we build things together and rely on
    each other's markets to support millions of jobs.
        How can we ensure that NAFTA renegotiations won't have
    adverse consequences on ABB and similar U.S. manufacturers that
    have robust trade cooperation through North America as a
    central part of their business?
        Mr. Burchett. Yes, that's from an ABB perspective. From the
    National Association of Manufacturers, we are also now talking
    14,000 small, medium, and large businesses that have similar
    levels of integration with Canada and Mexico, right.
        And quite simply, when we look at what needs to happen, for
    manufacturers we obviously do a lot of investment. So the
    consistency, the stability, the lack of volatility allows us to
    make those assessments, and these low trade barriers. So it's a
    pretty simple formula for us. Investment likes consistency.
        Mr. Kinzinger. Yes. And with my 20 seconds left, I yield
    back, Mr. Chairman. Thank you all for being here.
        Mr. Olson. The gentleman yields back.
        The Chair now calls upon the gentleman from South Carolina,
    Mr. Duncan, for 5 minutes.
        Mr. Duncan. My son tore an ACL on Sunday, Mr. Chairman, and
    he had a doctor's appointment so I've been Face Timing and
    trying to inform his wife on what's going on. So I appreciate
    it.
        As you can see, I am sitting down here. I've been in the
    Congress for 7 years, but I am the newest member on this
    committee.
        Before I came to the E and C, I chaired the Western
    Hemisphere Subcommittee, and I held numerous hearings on energy
    issues in the Western Hemisphere, specifically focusing on
    Canada and Mexico in a lot of those hearings.
        Yesterday, the House passed H.R. 357, reaffirming its
    strategic partnership with Canada, and when I think about the
    inner connectivity between Mexico and Canada--some of the
    testimony that's been given today--you know, Canadian oil
    coming to America refineries, producing petroleum products that
    are then exported from the U.S. back to Canada and Mexico, and
    really other parts of the world. It is a strategic alliance
    there.
        But when I think about Mexico, natural gas pipelines
    providing natural gas to Mexico, oil coming back to U.S.
    refineries, there is tremendous interconnectivity there.
        But it goes beyond North American strategic alliance. I
    used to talk about American energy independence. Then I talked
    about North American energy independence, and I really broaden
    that to hemispheric energy independence, because if you think
    about Canada and Mexico and you think about the energy
    renaissance in this country and our ability to export an
    abundant natural gas through LNG, then you think about the
    needs in this hemisphere.
        You think about the Caribbean nations that are relying on
    Venezuela and the Venezuelan situation. That's opportunity for
    Americans and American businesses and the oil and gas industry.
        But there are other opportunities where American technology
    can be exported. When we think about energy exports we just
    think about product.
        But we have fracking technology and other downhole
    technology that can be utilized offshore, say Guyana, which
    just discovered a tremendous oil field--32 trillion cubic feet
    of natural gas, not counting the oil.
        I don't have that number right off the top of my head. But
    it's an abundant find. American technology, both onshore and
    offshore, can be exported within this hemisphere.
        So I want to ask Ms. Harbert, because you seem to have a
    lot of knowledge about global energy initiatives, what are
    other opportunities that American industries can take advantage
    of? Because we are a leader in the energy area.
        Ms. Harbert. Well, you're absolutely right, and the
    countries in Latin America, save for Venezuela--Argentina,
    Peru, Brazil--they have welcomed American investment in the
    energy sector because they know we have the best technology and
    the best techniques available.
        We've been able to develop gas in Peru. We've been able to,
    with some hiccups along the way, be big investors in Argentina,
    and the demand in Latin America as a developing world is going
    to go up.
        And so the opportunities for us to invest in some of those
    repositories in Latin America but also to export from America
    is huge, just like it is in Africa.
        Africa is going to be an industrializing part of the world,
    and we want to be part of that industrialization through energy
    as a foundation for it. They don't have all the energy they
    need.
        So the opportunities, if you look at the International
    Energy Agency forecast, the demand for fossil fuels not only is
    constant but goes up, and we will provide fossil fuels. We'll
    provide 80 percent of all the world's energy resources in 2050.
    So huge opportunities to export, way beyond just North America.
        Mr. Duncan. Mr. Thompson, are our refining capacity and
    refineries ready to receive, say, Guyanan oil for refining, so
    that those products can be shipped around the globe?
        Mr. Thompson. Yes. We have the capability to take crude
    from all around the world, and most importantly we look forward
    to the opportunity to export products back to the rest of the
    world.
        You know, last year we exported 72 billion gallons, and
    with the U.S. transportation fuel demands staying relatively
    flat now, we need those export markets.
        Mr. Duncan. Right.
        Mr. Chairman, in the remaining time I want to point all the
    committee members and the panelists to a Wall Street Journal
    article today, I believe: ``Fracking Our Way to Mideast
    Peace.'' It's worth reading, and with that I yield back the
    balance.
        Mr. Olson. The Chair thanks the gentleman and yield back.
        The Chair now calls upon the gentleman from Texas, Mr.
    Flores, for 5 minutes.
        Mr. Flores. OK. Thank you, Mr. Chairman. I appreciate you
    holding this hearing, and I appreciate the panel for joining us
    today.
        When NAFTA was negotiated, Mexico's energy sector was
    largely closed to foreign investment. This is important to me
    because one of my firms did substantial energy activity in
    Mexico, and it was a very closed market. It was very arduous to
    deal in the energy space down there.
        But in recent years, as you have heard, I mean, Mexico has
    opened up their markets and they've shown real leadership, and
    we have substantial trade activities that opened up just in a
    short period of time.
        But in order for all of us--Canada, the United States, and
    Mexico--to take advantage of that market opening, U.S.
    companies need to have the certainty that their investments
    will be protected against government mistreatment.
        The NAFTA renegotiation presents an opportunity to
    recognize Mexico's energy reforms and to maintain and
    strengthen NAFTA's investment protections, and this is why it's
    important.
        Mexico is the number-one export destination for U.S. gas
    exports, making up 60 percent of Mexico's total gas supply.
    Most of that gas comes from my home State of Texas. Mexico is
    also the number-one export destination for U.S. petroleum
    products.
        Half the gasoline U.S. refineries exported this year went
    to Mexico, and energy and production activity off the shore of
    Mexico is just starting, as well, creating new opportunities
    for U.S. businesses--many folks that are friends of mine that I
    used to do business with when I was in the energy business.
        It's my understanding that the White House and the USTR are
    supportive of locking in these energy reforms, as is Mexico.
    Unfortunately, there are proposals in a NAFTA renegotiation
    that would undercut if not eviscerate important investment
    protections in NAFTA, typically via the well-recognized ISDS
    mechanism.
        So, in light of the foregoing, here are my questions. Ms.
    Harbert, I believe that you touched on the importance of
    investment protection via the ISDS mechanism in your written
    testimony.
        Will you please comment on the USTR's proposal to scale
    back investment protection, particularly the consequences for
    the energy sector? And Mr. Thompson, I will ask you the same
    thing.
        Ms. Harbert. Thank you for the opportunity.
        You're absolutely right. Anything from the U.S. side that
    would seek to upend the certainty that is necessary to continue
    the investments brought about by the reform are certainly
    unwelcome, and I think they would have the following
    repercussions.
        Number one, it would jeopardize that American investment,
    and that's what we are actually trying to protect. We would
    also jeopardize North American energy security.
        Without having that free cross-border trade, we wouldn't
    have the benefit of both the import and export of energy from
    both of our trading partners, which would be a big setback to
    energy security.
        We would also jeopardize North America becoming the center
    of gravity of the world's energy market, and that--we talked
    about OPEC here. I mean, we are going to just throw that away
    and let them become dominant again? That would be a huge
    national security issue for us.
        And last but not least, let's not lose the fact that this
    would raise costs on the consumer, because if we are forced to
    only consume our domestic resources from North America and our
    producers don't have export, they're going to start producing
    less, and that really is a lose-lose for the American economy.
        So, serious consequences. Those investor protections are
    fundamental, and they are present in all other trade
    agreements. I don't know why we'd want to make something new
    here.
        Mr. Flores. I agree. I agree.
        Mr. Thompson.
        Mr. Thompson. Yes. So I echo everything Ms. Harbert said.
    We have members that are investing at the moment hundreds of
    millions of dollars to enter the Mexican downstream market.
        If you take away ISDS protections, it's going to jeopardize
    that. We need to make sure that the Mexican market stays open.
    We need an agreement that locks that in, and we need to protect
    our investors. It's critical that the ISDS mechanisms remain in
    NAFTA.
        Mr. Flores. OK. So, I mean, just simply, I mean, to put it
    this way: On one hand the White House says, ``We believe in
    energy dominance for our country and for North America.'' On
    the other hand, the USTR is undercutting that by any
    conversation about getting rid of the ISDS mechanisms. Is that
    a simple way to put it?
        Ms. Harbert. And we hope through continued discussions that
    they can understand how important it is, for all the reasons I
    articulated.
        But at the end of the day, if we are trying to protect
    American investors, let's not take away the thing that protects
    American investment.
        Mr. Flores. Exactly. OK.
        Thank you, Mr. Chairman. I yield back the balance of my
    time.
        Mr. Olson. The gentleman yields back. The Chair now calls
    upon the gentleman from the Commonwealth of Virginia, Mr.
    Griffith, for 5 minutes.
        Mr. Griffith. Thank you very much, Mr. Chairman. Let me
    apologize to you and for the committee. I usually like to come
    and listen to everything, and today, because I've been in
    another committee hearing, I have been unable to do so. But
    your testimony is important, and we appreciate you being here
    today.
        So I have no problem with this trading with our friends,
    north and south. But there needs to be, I believe, a more
    balanced and fair deal between our respective countries.
        My district in southwest and south side Virginia was
    devastated by NAFTA, and we lost tens of thousands of jobs. You
    know, back when that was all going on, there would be a press
    conference and 3,000 people would be out of work.
        We didn't get those jobs back. That was textiles,
    predominantly. We also have a heavy dose of coal in my
    district, and it shows me part of the problem we have with
    NAFTA.
        A lot of the coal mining in Mexico--and we are not
    importing a lot, but we do some. But that's not the issue. The
    point is, they have coal mines there. But a large part of their
    coal industry is now controlled or managed by elements of their
    drug cartels, and the working conditions are horrible.
        But we are supposed to be considered equals, and the same
    problem happens with all industries. So what do we do in areas
    that have been devastated, like my district, where the jobs
    never came back? The help from the Federal Government was never
    there to rebuild our economy, and I am dealing with communities
    that have parts of their downtown that used to flourish,
    they're now--you know, there's a block I am thinking of in
    particular that's just empty.
        All of the stores are gone. It's not like a shell of
    itself. It's just not there. It's a ghost part of that
    community. Part of it's surviving, but just barely. Part of
    it's doing better.
        How do we solve that problem? As we look at making a better
    deal, how do we rectify when you have disparities in working
    conditions, disparities in regulations, that then make the
    American product uncompetitive against our colleagues and our
    friends in the south who don't have those rules?
        And some went to Canada, but they're more like us in the
    regard of their regulations and rules. Who wants to handle
    that?
        Ms. Harbert. Well, I will take a stab at one part of that--
    two parts of it.
        First, I do think it's important to recognize that coal
    exports are on the rise in America, and 13 percent of all of
    our coal exports are going to Canada and Mexico--predominantly
    Mexico, right. So they are a good and important and potentially
    growing destination for our coal exports.
        On the relocation of industries, I think that is why we
    find ourselves back at the table, that we want to update and
    modernize NAFTA from where it was 30-some-odd years ago and
    that there's an opportunity to open up some of these things and
    look at that, and it's complicated.
        And if you have ever been in a trade negotiation, if you
    come out with--the acronyms they use are mind boggling. And so
    I think that's the reason we are at the table. At the end of
    the day, there are going to be industries that choose to move
    for economic reasons. That has been the history of free
    enterprise and capital markets and free trade.
        But there are things that we are looking, you know, at the
    coal industry in particular. We have the Appalachian hub that's
    going to be built, a new ethylene storage hub in Appalachia
    that will take some of those coal miners and put them to work
    in something else.
        Mr. Griffith. Where in Appalachia is that going to be?
        Ms. Harbert. Well, that's a great question, and that's up
    for the industry to decide and those--and all of the States in
    Appalachia to say what makes the most sense. But at the end of
    the day, it will benefit that region and provide sort of a
    relief valve for some of the miners that lost their jobs.
        But it's not just NAFTA. I think we have to realize it's
    robotics. It's artificial intelligence. It's mega, you know,
    data. It's all kinds of things that 21st technology has brought
    us that make moving around a little bit easier.
        Mr. Griffith. Well, let me just say, I actually believe
    that, if we could get some of our textile industry back, it
    would mostly be robotics. But that would still be some good,
    high-paying jobs.
        But when we lost those jobs 20 years ago, 25 years ago, it
    was all based on regulations and wages, and it just
    disappeared. In a matter of a couple of years, we went from
    being vibrant to having been crushed. We made a bad deal. We
    got to fix it.
        Thank you. I yield back.
        Mr. Olson. The gentleman yields back.
        The Chair now calls upon the gentleman with the Bakken
    Shale Play in his home State of North Dakota, Mr. Cramer, for 5
    minutes.
        Mr. Cramer. Thank you. Thank you, Mr. Chairman. We are
    known for lots of other things, as well. A lot of food.
        First of all--and I am sorry I had to step out for a little
    bit--but this has been a really good hearing. All of you,
    tremendous job. Thank you. Very well done, and I share all of
    your concerns with what's going on with regard to NAFTA.
        And it's particularly in the energy area--and I am
    concerned about some other things, too, but the energy area
    being sort of new, if you will, since NAFTA was first passed to
    seek to present so many opportunities.
        But here's an opportunity I want to raise just sort of
    rhetorically and then get your responses to it. And, by the
    way, I am going to be sort of fuel agnostic on this.
        I really don't think the fuel matters. I think that what
    matters is whether it's intellectual, whether it's fossil,
    whether it's technology--just there's so much opportunity.
        But we talk a lot about trade with one another, you know,
    the big three of us, and we are all important to each other. As
    I like to tell my Canadian friends, however, ``As important as
    you are to us, we are critical to you. So we have a leverage
    that you don't, and always remember that.'' And our President
    understands that very well.
        So anyway, but here's what I think we miss so oftentimes in
    the discussion that I wish we could get to. Just as sure as all
    the statistics you have shared in terms of how much we trade
    with one another and what--a large percentage of our business
    with, you know, the other two--Mexico and Canada--I think
    somebody said that the next 10 added up, don't add up to what--
    in certain areas what Mexico and Canada add up to for us in
    terms of market.
        What I get enthused about is the opportunity as a bloc--as
    a seamless--and by the way, when I was sitting here earlier, I
    pulled up--one of my favourite maps in the world is the North
    American petroleum products pipeline map.
        It knows nothing of borders, and I remember the first time
    we reversed a pipeline in North Dakota, that instead of
    bringing, you know, Canadian crude down we went Bakken crude up
    on the very same line. Just not necessarily even to get it to
    Saskatchewan but perhaps to get it to the Gulf Coast. I mean,
    that's how important that infrastructure is. So I appreciate
    all the emphasis on infrastructure.
        But I would love to just hear some comments and maybe
    beginning with you, Ms. Harbert, and all of you could, if you
    have an opinion.
        But what's the potential opportunity from an economic
    security as well as a national and energy security opportunity?
    If we as a bloc get our act together, harmonize everything we
    are talking about, and then who needs OPEC, right? I mean,
    that's how I view it.
        So just open it up for discussion.
        Ms. Harbert. Absolutely. The national security dividend of
    this should not go unnoticed in the energy sector. First, from
    an American standpoint, we are importing more oil from Canada
    and Mexico than we are from OPEC, and so that's been a change
    in energy fortune, for sure.
        And the opportunity to fully develop the resources of
    Canada, the United States, and Mexico and become the center of
    the world's energy market, which would send shock waves into
    not just OPEC but Russia sort of warms my heart.
        Mr. Cramer. Yes.
        Ms. Harbert. So I think that we shouldn't lose--this is not
    just an economic negotiation. This is a national security
    negotiation, as well, because the stronger we are, the more
    competitive we are on the world's stage as a bloc, if you will,
    but also from an energy standpoint, the more energy secure we
    are, the more national secure we are, and that provides our
    allies with choices of where they can get their oil, their gas,
    their technology. They probably can't import their renewables,
    but there's growing renewables within our bloc, and it's a
    tremendous win-win.
        Mr. Cramer. Mr. Thompson.
        Mr. Thompson. Well, let me say without sounding too corny,
    I mean, I think it would give us lots of things. It would give
    us unprecedented freedom in North America--freedom, and to take
    away the leverage that the rest of the world or certain parts
    of the world has over us now.
        It will give us prosperity. Our nations will prosper. Our
    employees will prosper. Our consumers will prosper. We'll
    continue to benefit from low oil prices and low gasoline prices
    and good, high-paying jobs. We can become an energy-dominant
    region.
        I think the possibilities are endless. We should all be,
    you know, trying to get there.
        Mr. Cramer. Doctor?
        Dr. Krupnick. In our report to the Department of Energy on
    these issues, we call very strongly for thinking about ways of
    moving towards this bloc--a concept that you're talking about,
    and we talk about that, as well.
        So I think the way to move forward on this is to give DOE
    responsibility and the charge to develop pathways for the
    future. What are the current challenges? How deep do you have
    to go in environmental policy and tax policy to make all this a
    reality?
        You know, I am amazed at how much agreement there is about
    moving in this direction, and it's great. But someone needs to
    think through it carefully.
        Mr. Cramer. Thank you.
        Mr. Olson. The gentleman yields back. The Chair thanks him
    for bringing up the bloc we call NAPEC--North American
    Petroleum Exporting Countries.
        And seeing that there are no further Members who wish to
    ask question, I would like to thank all the witnesses for being
    here today.
        Merry Christmas. And pursuant to committee rules, I remind
    Members that they have 10 business days to submit additional
    questions for the record and ask that all witnesses submit
    their responses within 10 business days upon receipt of those
    questions.
        Without objection, this subcommittee is adjourned.
        [Whereupon, at 12:14 p.m., the committee was adjourned.]
        [Material submitted for inclusion in the record follows:]

                     Prepared statement of Hon. Greg Walden

        The United States' abundant energy resources are a major
    contributor to our Nation's continued economic growth and job
    creation. When it comes to cross border trade among the United
    States, Canada, and Mexico, energy is a key component, and I
    think we can all agree that ensuring the reliable supply of
    fuels and electricity is vital to our Nation's security,
    economy, and public health.
        In my home State of Oregon and across the country, our
    Nation's energy abundance enables every aspect of our daily
    lives, from telecommunications, to financial transactions, to
    powering the infrastructure that delivers our drinking water.
    Energy enables business and industry to make and provide the
    goods and services of our modern society. It powers our
    hospitals, our households.
        Advances in transportation, the growth of manufacturing,
    and technological innovation have opened the door for an
    integrated North American energy market, resulting in more
    dynamic and connected energy systems and more competitively
    priced energy for American consumers.
        Cross-border energy infrastructure--which includes
    pipelines for oil and natural gas and transmission lines for
    electricity--enables the movement of energy across the
    continent. These cross-border pipes, poles, and wires, are the
    super highway system for North America's fuels and electricity.
    Clearly, if we want robust energy trade with our neighbors then
    we must have the necessary infrastructure to support that
    trade, which is why this committee, and the House of
    Representatives, recently passed Mr. Mullin's bill, H.R. 2883,
    the Promoting Cross-Border Energy Infrastructure Act, which
    improves the permitting and siting process for all types of
    cross-border energy infrastructure. When it comes to North
    America's ``energy highway,'' I think it is safe to say that we
    want to add more lanes, not less, making it easier for the
    United States to engage in beneficial trade with Canada and
    Mexico.
        In addition to the infrastructure that enables trade, we of
    course must also have strong trade agreements in place to
    facilitate fair and favorable trade across North America. It is
    worth noting that this hearing we are holding today is
    especially timely, given the fact that the administration is
    currently in the midst of renegotiating the North American Free
    Trade Agreement, an agreement that has been critical to
    furthering and promoting energy trade between America and its
    neighbors.
        In terms of trade with our neighbor to the north, those of
    us in the Pacific Northwest are paying close attention to the
    upcoming renegotiation of the Columbia River Treaty. Just last
    week, the State Department and the Canadian government
    announced that both nations will meet early next year to hammer
    out the details of this river treaty, which has been in effect
    since 1964. With its headwaters in British Columbia, the
    Columbia River winds its way through Washington and Oregon
    before emptying into the Pacific. Along the way, this resource
    has a major effect on everything from fishing and flood
    protection, to power production and recreation--the importance
    of this Treaty cannot be understated in terms of commerce and
    trade. However, over the past 53 years, some of the provisions
    have become out of date particularly with respect to the
    electricity rates paid by consumers in the Pacific Northwest.
    That said, it will be important for both nations to reach an
    agreement to continue to share this valuable natural resource.
        I want to thank the witnesses for being here today to
    discuss the important topic of cross-border energy trade. This
    hearing will further inform the committee's ongoing oversight
    and legislation reforms that build on our Nation's energy
    abundance, modernize our energy infrastructure, and promote
    domestic manufacturing and job growth.

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