[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
                                   ______

                         U.S. GOVERNMENT PUBLISHING OFFICE 

29-353 PDF                     WASHINGTON : 2018 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001
 






























                    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:]
    
    
    
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
    
    
    
    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:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    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:]
    
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    
    
    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:]
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

       
    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.

                                 [all]