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


            GEOPOLITICS OF U.S. OIL AND GAS COMPETITIVENESS

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

                                HEARING

                               BEFORE THE

         SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 22, 2018

                               __________

                           Serial No. 115-132

                               __________

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

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

     Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

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

         Subcommittee on Terrorism, Nonproliferation, and Trade

                        TED POE, Texas, Chairman
JOE WILSON, South Carolina           WILLIAM R. KEATING, Massachusetts
DARRELL E. ISSA, California          LOIS FRANKEL, Florida
PAUL COOK, California                BRENDAN F. BOYLE, Pennsylvania
SCOTT PERRY, Pennsylvania            DINA TITUS, Nevada
LEE M. ZELDIN, New York              NORMA J. TORRES, California
BRIAN J. MAST, Florida               BRADLEY SCOTT SCHNEIDER, Illinois
THOMAS A. GARRETT, Jr., Virginia
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

Kenneth B. Medlock III, Ph.D., senior director, Center for Energy 
  Studies, Baker Institute for Public Policy, Rice University....     5
Mr. David Carroll, president and chief executive officer, Gas 
  Technology Institute...........................................    19
Ms. Sarah Ladislaw, director and senior fellow, Energy and 
  National Security Program, Center for Strategic and 
  International Studies..........................................    29
Ms. Samantha Gross, fellow, Cross-Brookings Initiative on Energy 
  and Climate, The Brookings Institution.........................    38

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Kenneth B. Medlock III, Ph.D.: Prepared statement................     8
Mr. David Carroll: Prepared statement............................    21
Ms. Sarah Ladislaw: Prepared statement...........................    32
Ms. Samantha Gross: Prepared statement...........................    40

                                APPENDIX

Hearing notice...................................................    54
Hearing minutes..................................................    55

 
            GEOPOLITICS OF U.S. OIL AND GAS COMPETITIVENESS

                              ----------                              


                         TUESDAY, MAY 22, 2018

                     House of Representatives,    

        Subcommittee on Terrorism, Nonproliferation, and Trade,

                     Committee on Foreign Affairs,

                            Washington, DC.

    The subcommittee met, pursuant to notice, at 2 o'clock 
p.m., in room 2200 Rayburn House Office Building, Hon. Ted Poe 
(chairman of the subcommittee) presiding.
    Mr. Poe. This is a rectangular gavel but it ought to work.
    The subcommittee will come to order. Without objection, all 
members will have 3 days--5 days, rather--to submit statements, 
questions, and extraneous materials for the record, subject to 
the length limitation in the rules.
    The U.S. oil and gas industry is a force multiplier for 
American influence around the world. For decades, many of the 
planet's great energy producers were regimes ruled by tyrants 
who leveraged their oil wealth to oppress their own people and 
pursue evil foreign policy.
    However, thanks to American know-how, the United States has 
unleashed its own energy potential, now becoming a major player 
in the global market--I should say, the major player.
    In large part, America's revival as an energy superpower is 
a result of the shale revolution. Through the process of 
hydraulic fracturing--or fracking, as it is called, which was 
invented in the '40s and expanded recently to be more 
efficient--we are now able to reach oil and gas deep within the 
earth, where they were previously unreachable.
    With this new technology, the U.S. has gone from the 
world's largest oil importer to one of the world's largest 
energy exporters. The United States primarily imports heavy 
crude oil and exports light crude--Texas sweet crude, as we 
call it.
    Just a decade ago, the U.S. was importing 12.5 million 
barrels per day of crude oil and fuel, and now it's just 4 
billion.
    Between 2010 and 2017, oil production rose from 5 million 
barrels per day to 10 million barrels a day, approaching a 
record last set in 1970.
    This has allowed for a dramatic reduction of our dependence 
on foreign oil, which ultimately strengthens our national 
security. The United States has been talking about being energy 
independent since I was born. I am glad to see that we are 
finally getting to that point.
    In the nearly 3 years since Congress ended restrictions on 
exporting crude oil, the U.S. has beat market expectations and 
surged its exports to a record 2.5 million barrels, and by 2022 
we will export more oil than we import.
    Some people wonder why we export and import both oils. The 
United States uses heavy crude in its refineries, and it's too 
expensive to switch from heavy crude to light crude.
    So we import our heavy crude and then we export the light 
crude that other nations use that we develop quite rapidly.
    Also, we have natural gas production that has been setting 
new records in every year since 2000 thanks to the innovations 
of liquefied natural gas----LNG, as we call it. We ship this 
growing resource anywhere in the world.
    Last year, we became a net exporter of natural gas for the 
first time in 60 years. In the coming years, it will only 
improve as the market of natural gas consumers grows and more 
exporting facilities come online.
    America's comeback as an energy superpower has wide-ranging 
geopolitical implications besides the economic benefits to the 
United States and other countries.
    Its obvious benefit for Americans and the U.S. economy is 
that it reduces our trade balance and creates new well-paying 
jobs and it also generates more revenue, making us a stronger 
nation.
    But it also means less money that is going into repressive 
regimes all over the world who were previously dependent--we 
were dependent on for oil, and since energy is more abundant, 
the price of oil is decreasing.
    Overall, the result is less money for Putin's Russia, the 
Ayatollah's Iran, and Maduro's Venezuela--all totalitarian 
regimes that oppress their people and make their living by 
selling oil and gas.
    With the low price of oil, international sanctions, and 
their own economic mismanagement, these regimes, who could rely 
on their oil wealth to fund their activities--their nefarious 
activities--are instead seeking their economic--or sinking in 
their economic tank.
    Now the people are on the streets demanding accountability, 
and Saudi Arabia and the Gulf States have long been important 
partners of the U.S. because we needed their oil and their 
leverage in stabilizing oil prices.
    Now we can redefine our relationship with those countries 
as well. This does not mean we should become isolationists or 
abandon our traditional partners. It just means we should work 
better.
    We have oil, we have natural gas, and we need to give the 
Europeans an alternative to the blackmail from Russia and 
Russia's natural gas, especially Eastern Europe.
    Several years ago, I was in Ukraine in the winter, and the 
Russians turned off the gas. It was dark, it was cold, and 
people died, and they did it for political reasons--to try to 
put their muscle on Ukraine, which they are still trying to do.
    But that's just one example of the way the Russians use 
natural gas as a way to force other countries to deal with them 
politically.
    U.S. oil and gas exports also reinforce the importance of 
free trade. I am a free trader. I think we should--that 
includes NAFTA but we need to make NAFTA fair and free trade as 
well, which talks are going on now.
    About 60 percent of U.S. gas exports go to Mexico, which 
provide a major boost to our trade balance, and Canada has also 
become a major importer of America-refined fuels.
    I have long thought that the United States--the four 
countries of Canada, United States, Texas, and Mexico--should 
work together to have a North American alliance on energy.
    We could become the energy major player in the world on all 
types of energy if we just worked a little bit more together to 
make sure that we can use that as an economic advantage but 
also as a geopolitical tool against these totalitarian regimes.
    So I am looking forward to hearing what our witnesses have 
to say on these issues, give us some insight, and also if there 
are things that Congress needs to do or not do to make sure 
that the United States continues its energy exploration.
    I will now turn to my friend from Massachusetts, Mr. 
Keating, for his opening statement and comments.
    Mr. Keating. Thank you, Mr. Chairman, and thank you for 
letting us all know your true beliefs that Texas is a sovereign 
country. It's something we suspected.
    Mr. Poe. You didn't know that? [Laughter.]
    Mr. Keating. Well, I do now. I know it now. So I'll bring 
that message back to Massachusetts.
    I would like to thank the chairman for convening today's 
hearing. This is an important topic because there are a lot of 
factors that make development efforts more effective and 
enhance our national and global security.
    However, there are fewer things that, without them, there 
simply cannot be development or economic growth and adequate 
levels of security would be really impossible to achieve and 
energy is one of those things.
    U.S. oil and gas exports--the topic of our hearing today--
are an interesting piece of the global energy puzzle and 
shouldn't be considered lightly--both in terms of the possible 
impact on our own energy policy and national security and also 
on those of many other countries as well.
    With the decision to export oil and natural gas, we also 
have the opportunity to be highly strategic in thinking about 
our energy export policies and the geopolitical context they 
create.
    For example, some European countries have considered 
importing U.S. LNG to reduce their reliance on Russia to meet 
their energy needs.
    While we are facing Russia's destabilizing interventions 
around the world, including our own democratic elections here 
in the United States, we have to pay attention to shifts like 
this that open up new opportunities to promote our own 
strategic interests abroad.
    In fact, energy was one sector proposed for inclusion in 
the now-stalled Transatlantic Trade and Investment Partnership 
with the E.U.--with the idea of bringing lower barriers to 
exporting U.S. oil and gas to our friends and allies in Europe.
    Additionally, two of our largest LNG customers are Canada 
and Mexico. If the President does in fact withdraw from NAFTA, 
that will have a big effect on the sector and on thousands of 
jobs that support this industry here in the United States.
    Even my own sovereign country, Massachusetts, which is not 
an oil or natural gas-producing state, supports--we support 
these industries with manufacturing and service sectors and 
contribute a significant percentage of labor income to the 
crude oil supply chain here in the United States.
    Our oil and gas export policy has the potential to shape 
the lives of countless Americans not only in daily economic 
terms here but also in how we are ultimately impacted--how we 
are impacted by the effects of our export policies abroad.
    Just as we cannot be blind to the countless economic and 
geopolitical implications of our U.S. oil and gas export 
policy, we must also be vigilant about putting this policy in 
context.
    In a post-Paris Climate Agreement world, there is a nearly 
universal commitment to addressing the impacts of climate 
change.
    Investments in clean energy and renewables will be a big 
part of that, not just for the U.S. and other countries but for 
developing economies as well.
    The effects of global markets for oil and gas should also 
be part of our conversation about the makeup of U.S. energy 
exports.
    What will be the breakdown of our energy exports? How much 
will oil and gas be a part of that? How much will renewable 
energy be part of that?
    We are already seeing the reverse of this here in the 
United States. In my district in New Bedford, Massachusetts, 
Danish companies are involved in the development of wind energy 
in what will be one of the biggest offshore wind energy 
projects in the country.
    Energy is a global issue. This could be a boon for American 
workers and American households and companies looking to have a 
consistent and affordable energy year round to heat and cool 
their homes and, importantly, to grow their businesses, or it 
could be a series of missed opportunities.
    Our conversation today highlights oil and gas. However, it 
would be a mistake to ignore how these different sources of 
energy fit together to provide security and reliable economic 
growth and to ignore the inevitable long-term trajectories of 
our energy policies.
    In choosing to export oil and gas, we have opened up a 
world of opportunities for interacting with other countries, 
global markets, conflicts, and even foreign policy 
considerations that go along with it.
    However, that still means we must evaluate this policy in 
the context of our own energy and economic priorities, our 
long-term security interests and the realities of the foreign 
policy challenges that we face.
    With that, Mr. Chairman, I will yield back.
    Mr. Poe. I thank the gentleman from Massachusetts.
    The chair recognizes the gentleman from California, Mr. 
Rohrabacher, for an opening comment.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman, and we 
note that energy and our ability to be self-sufficient at 
energy or how much energy we will have to feed our economy has 
been a major factor for decades, and we didn't quite realize 
that until America became a net importer of oil and gas a 
decade or several decades ago.
    Before that, I mean, we didn't give it much thought, and 
let's just note that once it was clear that America was headed 
toward a shortage of oil and gas, we still had people in our 
country who opposed the Alaskan Pipeline.
    Had they--had they been successful, Mr. Chairman, in 
preventing the Alaskan Pipeline because, I understand, caribou 
were--it was going to hurt the caribou and, of course, those 
predictions have proven exactly the opposite and we have more 
caribou.
    But that fanaticism that had them opposing the Alaskan 
Pipeline would have had a huge negative impact on our economy 
and also would have made us even more vulnerable during this 
time period when we have been importing oil.
    But we face the same kind of thing with fracking, where 
fanatics have opposed fracking but yet it has given us now a 
new self-sufficiency.
    All of these things have incredible foreign policy 
implications as well as economic implications for our country, 
and we need to understand them. Thank you for holding this 
hearing so we will have a better understanding.
    Mr. Poe. I thank the gentleman from California.
    I will introduce our witnesses and, without objection, all 
witnesses' prepared statements will be made part of the record.
    Please keep your comments and your presentation to no more 
than 5 minutes and I will--we will--have your presentation 
filed in the minutes of the hearing.
    Dr. Kenneth Medlock is the senior director of the Center of 
Energy Studies at Rice University's Baker Institute for Public 
Policy. Previously, he served as vice president for 
conferences, United States Association for Energy Economics.
    Dr. Medlock, thank you for being here and thank you for 
what you do at Rice University. Very good reputation.
    Mr. David Carroll is the president and CEO of Gas 
Technology Institute. Since 2015, Mr. Carroll has also been 
president of the International Gas Union, which is made up of 
150 member associations and corporations representing 97 
percent of the global gas market.
    Ms. Sarah Ladislaw is director of the Energy National 
Security Program at the Center for Strategic and International 
Studies. Previously, she worked in the Office of the Americas 
in the Department of Energy.
    And Samantha Gross is a fellow in foreign policy at the 
Brookings Institute and a fellow at the Cross-Brookings 
Initiative on Energy and Climate.
    Previously, she served as director of international climate 
and clean energy at the Department of Energy.
    Mr. Medlock, we will start with you. Thank you.

 STATEMENT OF KENNETH B. MEDLOCK III, PH.D., SENIOR DIRECTOR, 
 CENTER FOR ENERGY STUDIES, BAKER INSTITUTE FOR PUBLIC POLICY, 
                        RICE UNIVERSITY

    Mr. Medlock. Thank you, Mr. Chairman, Mr. Keating.
    I also want to thank the committee for accommodating me 
during the past week.
    I'll take a moment just to--my grandfather passed away. He 
was a World War II veteran of the Navy, a member of the Mighty 
Midgets. For those of you who don't know history, you can look 
it up. It's a pretty decorated group.
    He was very proud of his accomplishments but also very 
understated, which I think is a quality that I hope many others 
will emulate.
    Regarding this particular testimony, shale has been utterly 
transformative, and that's where I want to start, because if we 
are going to have a conversation about U.S. soft power and U.S. 
foreign policy prerogative related to oil and gas, we have to 
acknowledge what's happened domestically on the shale front.
    It has been transformative in more than just how most of us 
talk about it. Most of us talk about it as if there is a new 
source of supply that has emerged into the global market scene 
that's actually resulted in a reduction in import dependence in 
the United States.
    We have seen our crude oil imports drop dramatically. We 
are now net exporters of natural gas as well as petroleum 
products or refined products.
    But an important, I think, lesson in all of this, and this 
is really what plays into the broader discussion of what 
geopolitical ramifications are, if you go back to 2003, 2004, 
2005, 2006, the world was really looking at the U.S. as a 
declining oil and gas province--a province that ultimately 
would continue to see declines in production, growth in demand, 
and increasing import dependence.
    There were a lot of very significant investments made in a 
vertically integrated way to develop natural gas in remote 
parts of the world, move it through liquefaction facilities 
onto ships, and bring it to our shores.
    Back in 2003, there were 47 different terminals that had 
received certification to import liquefied natural gas. Now, 
all of those, of course, didn't get built, but it was certainly 
a signal.
    What drove that? Well, oftentimes we forget, and it's not 
that far long ago, but between 2003 and 2006, the price of 
natural gas in the United States was higher than anywhere else 
in the world.
    And, of course, when you start talking about trade, you 
start talking about impetus for investment. At the end of the 
day, it really is about moving product from a low price to a 
high price, and that's exactly what was happening.
    Of course, when you have high prices, it also stimulates 
other margins of response, and that's exactly what happened in 
the domestic upstream.
    It wasn't the vertically integrated measures. It was a lot 
of relatively small, sometimes referred to as mom and pops, but 
independents that really took entrepreneurial spirit to task in 
the upstream.
    In the Barnett Shale, for example, Mitchell Energy went in 
and actually started to try new things in the Fort Worth Basin, 
as it was previously known.
    You know, drilling some vertical wells, making contact with 
what was known to exist for a long time--geologists had been 
talking about shales for decades. This is not new to a 
geologist.
    But figuring out ways to make the resource both technically 
and commercially recoverable was really the big challenge. It 
was a challenge that was put on the table by policymakers in 
the late 1970s with the Eastern Gas Shales Project. It was 
taken onboard by various institutions including the Gas 
Technology Institute.
    But, ultimately, what happened is you saw these high prices 
that matriculated into the United States, as relative demand 
growth and declining production resulted in significant 
innovation.
    The key thing about the United States that I think is 
sometimes lost in the context of understanding what's happening 
domestically and what it means globally is that we enjoy a very 
unique set of regulatory and legal institutions in this country 
that have afforded us the ability to see our production grow.
    It actually fosters innovation. It fosters entrepreneurial 
activity, and when you have that kind of environment, the sky 
is the limit, quite frankly.
    What I just said is not unique to oil and gas, though. It's 
actually true across the energy value chain. So it is actually 
imperative that if the United States is going to continue to 
project its influence globally, one of the things that the U.S. 
Government continue to foster policies and environments that 
are conducive to entrepreneurial activity.
    A couple of final statements along those lines--gas--what's 
happened here, the Marcellus is to gas what the Permian is to 
oil. A lot of people, I don't think, have fully internalized 
that.
    But when we start talking about what's going to happen over 
the next decade in the oil space, there is--we have just begun 
to scratch the surface. The big issue right now is water and 
infrastructure.
    The same thing could have been said about the Marcellus, 
particularly with regard to infrastructure, not too long ago. 
So when we look at what the Marcellus has meant for the North 
American natural gas scene, it's important to recognize that 
the Permian is likely to unveil the same sort of dramatic 
transformation in not only the U.S. oil market but the global 
oil market.
    On the gas front, the U.S. now presents what we call a 
credible threat to Russian hegemonic intent in Europe. You've 
seen this in Lithuania with the construction of its natural gas 
import facility.
    Prices were instantly negotiated once that happened because 
now Russia realizes there is something out there that can 
actually take market, and that is something that is incredibly 
important when you start talking about foreign policy 
objectives and geopolitical influence.
    And the U.S. is on the cusp of actually having significant, 
significant impacts globally for the next several decades as a 
result of what's happened domestically.
    I'll stop there.
    [The prepared statement of Mr. Medlock follows:]
    
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    Mr. Poe. Thank you, Mr. Medlock.
    Mr. Carroll.

 STATEMENT OF MR. DAVID CARROLL, PRESIDENT AND CHIEF EXECUTIVE 
               OFFICER, GAS TECHNOLOGY INSTITUTE

    Mr. Carroll. Thank you.
    Chairman Poe, Ranking Member, Keating, members of the 
subcommittee, thanks for the opportunity to provide some 
testimony today.
    David Carroll, president of the Gas Technology Institute--a 
Chicago-based independent not-for-profit research organization 
that turns raw technology into meaningful high-impact energy 
solutions that benefit both the economy and the environment.
    And I have the current additional honor of serving as the 
president of the International Gas Union. My term wraps up next 
month as the U.S. prepares to host the World Gas Conference 
right here in Washington.
    As my colleague, Dr. Medlock, just indicated, while shale 
gas might seem like an overnight success to many, decades of 
research by GTI, the U.S. Department of Energy, and industry 
really provided the technical understanding needed to produce 
this abundant resource.
    And when GTI and Mitchell Energy back in 1991 completed the 
first horizontal well in the Barnett, the U.S. energy 
transformation had begun.
    So you fast forward to today, and oil and gas production 
from U.S. shale has become the world's swing supply, arguably 
the biggest energy breakthrough in the last 50 years.
    The oil and gas sector generates $1.2 trillion in GDP and 
over 9 million U.S. jobs. But a powerful impact of shale gas is 
the reduced prices to everyday consumers and families.
    Increased use of gas in electricity generation has reduced 
CO2 emissions from the power sector by 27 percent. U.S. net 
energy imports have decreased from 30 percent of our total 
energy needs in 2005 to about 7 percent last year.
    And with the expansion of domestic energy production from 
multiple sources including renewables in steady strides in 
energy efficiency, we are approaching energy independence.
    Shale gas has also enabled greater participation in the 
global gas market. Let me give you a few stats from IGU's 2018 
world LNG report, which is issuing next month.
    Global trade in LNG last year grew by 10 percent, or 35 
million tons, as projects in Australia and the United States 
came online.
    China alone represented one-half of the global growth in 
LNG last year, as it shifts its energy mix toward natural gas 
and away from coal in its effort to fight air pollution.
    Qatar remains the world's largest LNG exporter with about 
30 percent of the global market. Australia was second. The U.S. 
was sixth.
    There were over 90 million tons of liquefaction capacity 
that are under construction right now, but a third of that 
comes onstream this year in six countries, including Australia, 
the U.S., and Russia.
    So U.S. LNG now competes in a dynamic market with an 
increasing number of producers and consumers, and yes, we are 
now a major exporter.
    But our success is not assured. Our competitors are not 
standing still. They're investing. They're expanding. So we 
must make efforts to enhance productivity in upstream 
production and expand transportation networks and liquefaction 
processes to keep pace.
    A few comments about demand--about 70 percent of global 
demand in liquefied natural gas will occur in non-OECD 
countries. Let's take India, for example, which has an 
ambitious goal of increasing gas in its energy mix from 6 
percent today to 15 percent over the next 15 years.
    LNG imports are going to play a role, as will more domestic 
production, nationwide pipeline construction, and new city gas 
distribution networks. Helping India enhance its energy 
security, promoting its economic development, and improving the 
environment is in our interests as a country.
    Last June, President Trump and Prime Minister Modi 
announced the U.S.-India Strategic Energy Partnership, 
affirming the importance of our bilateral relationship.
    Secretary Perry recently travelled to New Delhi where he 
and Energy Minister Pradhan co-chaired the inaugural meeting of 
this partnership.
    As GTI's CEO, I've been in India over three times in the 
last 18 months and have executed MOUs with two institutions to 
train India's expanding energy workforce.
    So these are, indeed, exciting times for natural gas in 
India, to use them as an example, now the world's fourth 
largest importer of LNG.
    So, in conclusion, innovation in the natural gas sector 
affords opportunities to enhance our economy, create jobs, save 
consumers money, and engage in global trade. It's bolstered 
by--it has bolstered our energy security and really given us 
the flexibility in dealing with strategic partners around the 
world.
    It's important to remember that this success didn't happen 
overnight, and it didn't happen by accident. So sustaining our 
progress will require continued investments in research and 
infrastructure.
    Thank you for the opportunity to testify, and I look 
forward to your questions.
    [The prepared statement of Mr. Carroll follows:]
   
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    Mr. Poe. Thank you, Mr. Carroll.
    Ms. Ladislaw.

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

    Ms. Ladislaw. Thank you.
    Good afternoon, Chairman Poe, Ranking Member Keating, and 
members of the subcommittee. It's my pleasure to be here and to 
talk with you today about the geopolitics of U.S. oil and gas 
competitiveness.
    My remarks and testimony represent my views and not my 
colleagues and my institution.
    As has been stated, the United States has experienced an 
oil and natural gas production renaissance that has changed the 
domestic and global energy landscape in some really important 
ways.
    The most direct linkage between U.S. oil and gas 
competitiveness and geopolitics is the contribution it makes to 
global and U.S. energy security.
    First, it provides additional supply to a previously tight 
market; second, U.S. tight oil adds a new kind of supply to the 
market that takes months rather than years to ramp up and can 
serve as a relief valve when markets are tight; third, the new 
oil and gas supply source has added a sense of resource 
optimism to the market.
    Today, producers, consumers, and investors understand that 
given the right price environment and investment conditions, 
new oil and gas supplies can be brought to market.
    The U.S. oil and natural gas supply surge is also good for 
the U.S. economy and national security, as has also been 
mentioned.
    Oil and gas production in the United States is an important 
source of job creation, economic growth, has provided crucial 
stimulus to the economy during the post-Great Recession period, 
and improves our balance of trade.
    The benefits of U.S. oil and gas competitiveness should 
not, however, obscure the risks that still exist to U.S. energy 
security. Despite the rising level of exports, the United 
States still imports a good deal of oil and natural gas.
    As we approach a new hurricane season, it's important not 
to forget the oil, gas, and electricity supply disruptions that 
resulted from Hurricanes Harvey and Irma in 2017.
    Finally, even the abundant supply of domestic oil and 
natural gas is not a direct proxy for security. Delivery 
systems are needed to get resources from the point of 
production to the point of consumption, and in many cases, we 
experience bottlenecks in that part of the energy system.
    The U.S. oil and gas supply renaissance is also a good news 
story for the places where energy intersects with geopolitics.
    First, as I noted in my June 27 testimony to the House 
Foreign Affairs Subcommittee on the Western Hemisphere, North 
America is now one of the most energy-advantaged regions in the 
whole planet.
    The energy resources contained in Canada, Mexico, and the 
United States are second to none, and when combined with the 
region's stable legal system, liberalized trading environment, 
cross-border infrastructure, high-tech industries, and educated 
and competitive labor force, it's hard to match in terms of its 
potential.
    It's important to look at the U.S. relationship with Canada 
and Mexico as an opportunity to build on these natural 
advantages.
    Second, U.S. oil and gas can add to the diversity of supply 
available to other countries in helpful ways. One key example 
is the additional supplies made available to Europe.
    The availability of additional supply sources was part of 
the equation that led to the capture of--excuse me, the 
departure of oil index pricing and long-term gas contracts in 
Europe.
    As my colleague at CSIS has recently written, this does not 
mean Europe is less dependent on Russia for its gas supplies 
necessarily. In 2017, Europe actually increased gas imports 
from Russia, along with other countries.
    The additional import options and availability of global 
supplies are, of course, good for Europe's gas supply security, 
but, has not in reality lessened the energy ties between Europe 
and Russia, nor has it fundamentally changed the geopolitical 
dynamics within the region with regard to Ukraine.
    Third, major oil-producing economies like Saudi Arabia, 
Russia, and other members of the Organization of Petroleum 
Exporting Countries, or OPEC, have had to reevaluate a number 
of oil market and geopolitical factors as it relates to U.S. 
tight oil production.
    First, the oil price drop in 2014 that resulted from a 
variety of factors, including the rapid onset of U.S. oil 
supply growth and subsequent period of low prices caused OPEC 
to reevaluate its position within the market, both in 2014 and 
again in 2016.
    In order to be effective, Saudi Arabia, as the leader of 
OPEC, struck up an alliance with Russia and several other non-
OPEC countries to withhold oil supply from the market in order 
to stabilize prices until markets came to rebalance.
    It's unclear how deep and abiding the alliance between 
Russia and Saudi Arabia is beyond their current market 
management arrangement.
    But the relationship has been accompanied by a deepening of 
Russian diplomatic and investment activity throughout the 
Middle East.
    The second effect on major supplying countries is the area 
of economic planning and diversification. The most notable 
example of this is the economic and social reform plan launched 
in 2016 called Saudi Vision 2030.
    Through this plan, Saudi Arabia intends to revamp its 
domestic economy to rely less on oil and diversify its income 
sources.
    Leaving the challenges of implementing this vision aside, 
it's important to note that many countries that depend on oil-
derived revenue to fund their governments have taken steps to 
insulate their economies from periods of sustained low prices.
    This, of course, has been done in the face of low oil 
prices. So the sustainability of those reforms may be in 
question when prices rise again, but the reforms were a direct 
result of the oil price drop brought on by U.S. supply.
    Notably, countries like Venezuela, once among the largest 
and most successful oil-producing countries in the world, have 
suffered a great deal under the pressure of low oil prices 
after years of neglect and mismanagement under the current and 
previous leadership.
    One often hears it asserted that the increased production 
of U.S. oil and gas has served to lessen U.S. reliance or 
entanglement in the Middle East. In fact, this has hardly been 
the case.
    The perceived U.S. withdrawal from the Middle East was 
sparked by a desire to draw down in the wartime posture of the 
Middle East and shift the strategic focus to striking a 
security balance in Asia.
    The U.S. is no freer from entanglements in the Middle East 
than it was before the onset of U.S. oil and gas supply 
revolution, though it is less concerned about energy security 
thanks to the low oil price environment of the last several 
years.
    Following the release and announcement of the U.S. 
intention to withdraw from the Joint Comprehensive Plan of 
Action--the Iran agreement--the Trump administration showed 
that the U.S. still relies on Middle East oil supplies to help 
guarantee price stability in the region.
    As I have written in other publications, energy and foreign 
policy are often inextricably intertwined. But the ability for 
policymakers to use very--to use energy resources as tools of 
targeted foreign policy leverage or even energy dominance is 
misguided.
    I will be happy to take any questions.
    [The prepared statement of Ms. Ladislaw follows:]
  
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    Mr. Poe. Ms. Gross.

   STATEMENT OF MS. SAMANTHA GROSS, FELLOW, CROSS-BROOKINGS 
  INITIATIVE ON ENERGY AND CLIMATE, THE BROOKINGS INSTITUTION

    Ms. Gross. Thank you to Chairman Poe, to Ranking Member 
Keating, for the invitation to testify today. I am Samantha 
Gross.
    I am a fellow at the Brookings Institution in foreign 
policy, and my work focusses on energy and environmental 
geopolitics.
    As everyone here has said today, the renaissance in U.S. 
oil and natural gas production over the past decade has been 
nothing short of remarkable.
    Technological advances unlocked new resources and in 2013 
made the U.S. the world's leading producer of petroleum 
hydrocarbons.
    We talk now about peak oil demand, whereas not that long 
ago in my career we were all focussed on peak oil supply and 
whether we were going to run out of oil. A big part of that 
change in attitude has been the change in U.S. production.
    Nonetheless, we still import millions of barrels of oil 
each day at prices set on the global market based on global 
trends. The United States is not influenced by the ups and 
downs of global oil prices and how they react to world events.
    For example, today's prices at the pump reflect the 
upcoming reimposition of sanctions on Iran and also Venezuela's 
plummeting oil production.
    Even though we are still a significant net oil importer, 
growing U.S. oil production has changed the balance of power in 
the global oil market.
    For example, as others have talked about, crude oil prices 
took a nosedive in late 2014. The average oil price in 2015 and 
2016 was less than half of what it had been for the previous 4 
years.
    OPEC finally decided to act at the end of 2016 to reduce 
its production and try to push up prices. But in an 
unprecedented move, it teemed up with Russia to make this 
happen--a signal of OPEC's declining power and also of the 
supply glut that growing U.S. production had created.
    Unlike for oil, the U.S. is a net exporter of natural gas 
and has been the world's largest gas producer since 2009. A 
greater U.S. influence is really more likely to be a gas story 
than an oil story.
    For one reason, natural gas trade differs in important ways 
from trade in oil. Gas is more difficult to transport and to 
store, and so expensive infrastructure and long-term contracts 
also often tie buyers and sellers together.
    This less liquid market means that gas sometimes can be 
more political, as we see in Russian gas trade and the fact 
that they sometimes have Europe over a barrel with gas 
pipelines.
    Another important reason for the greater influence of gas 
is that the world is shifting toward natural gas as a preferred 
fuel. Natural gas has the lowest carbon emissions of any fossil 
fuel, creates much lower local air pollution than coal, and is 
a natural partner to renewables in power production since gas-
fired power can start up and ramp up and down very quickly in 
response to changes in renewable energy production and demand.
    This global shift toward gas plays into the U.S. strength 
in natural gas production and can also help move the world 
toward a lower carbon energy system.
    Mexico is, today, the largest consumer of U.S. natural gas 
and we now, as a result of this trade, have an energy trade 
surplus with Mexico.
    Last year, the value of energy exports to Mexico were more 
than twice the value of energy imports from Mexico.
    As others have mentioned, U.S. LNG is also a supply source 
that could somewhat reduce Europe's dependence on natural gas 
from Russia.
    Today, U.S. LNG supply is just getting warmed up, and 
exports to Europe right now are quite small. But the promise of 
more supply to come, not just from the United States but from 
others as well, gives Europe a bit more leverage with Russia in 
terms of natural gas supply.
    The U.S. is now a crucial source of global oil and gas 
supply. But in the middle of this talk about our energy 
influence, I want us to keep one important thing in mind, and 
that is that the U.S. energy industry is not structured to use 
its production toward geopolitical ends.
    Unlike the national companies, oil companies of OPEC, the 
U.S. industry is made up of dozens of companies that make 
individual investment and production decisions based on 
profits, not on policy.
    The U.S. supply of price-responsive nonpolitical oil and 
gas contributes to well-functioning global energy markets and 
reduces the influence of those who want to use their oil and 
gas supply toward political ends, and this provides a benefit 
to energy consumers everywhere.
    But oil and gas companies generally aren't tools of U.S. 
foreign policy. We also must remember that the Unites States is 
a major oil and gas consumer as well as a producer, 
particularly for oil.
    Our energy security depends on the global market. Supply 
disruptions, as Sarah pointed out, don't just happen abroad. 
Hurricanes and floods have brought serious disruptions in our 
domestic energy supply.
    Our interconnections with the world and our variety of 
suppliers are key to U.S. energy security, a source of strength 
and resilience rather than of weakness.
    This concludes my prepared remarks, but I look forward to 
your questions. Thank you.
    [The prepared statement of Ms. Gross follows:]
  
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    Mr. Poe. I thank all members of the panel. Without 
objection, the chair will recognize the gentleman from Florida 
first, Mr. Mast.
    Mr. Mast. Thank you, Chairman. I appreciate it.
    And Ms. Ladislaw, I wanted to hit you on this but I was 
also glad to hear you speak about this, Ms. Gross--and I was 
wondering if you could expand a little bit on what's going on 
not just with supply disruption--I think we are a little bit 
more familiar with what that can look like here in the United 
States of America, but when we branch out and we look at supply 
disruption in terms of what can happen in Qatar, in Australia, 
obviously, that you could be looping in the relationship with 
the proximity of Iran, when we are talking about Qatar but, 
more specifically, Australia and Russia: What are the natural 
disaster supply disruptions that we could see, you know, 
affecting the chains in those places?
    Ms. Ladislaw. I will start and then turn it to Sam.
    I mean, I think when you look at Australia, it's not a 
natural disaster supply disruption, but, you know, Australia 
has a really important example of a story that is meaningful to 
the U.S.
    It built out a huge amount of natural gas export capacity 
and then experienced a position where their domestic industries 
were paying prices that were higher than the export markets to 
which they were selling natural gas, and they had to threaten 
to curtail natural gas exports from Australia as a result.
    And that was just because they weren't able to, you know, 
expand supplies enough for their domestic market. It was 
something that took lots and lots of people by surprise. But it 
harkens back to that midstream infrastructure comment that I 
brought up before, which is if you have all the gas in the 
world but if it's in the ground and it can't get to the people 
that need it, it doesn't do anybody any good.
    And so, there's a lot of domestic politics in Australia 
right now that are really centered around this idea of we've 
got to make sure we make the domestic market whole as well as 
be able to, you know, meet our export arrangements.
    It's not geopolitical. It's not sexy. It's just business, 
right? And so I think we--it was probably one of the things 
that took the U.S. Government so long when it came to exporting 
LNG facilities here in the U.S. to getting those permits right.
    There was a concern here whether their domestic resource 
base would be adequate for us to support the export of gas and 
also meet those needs here.
    So kind of a wonky logistical issue; one that we seem to 
have gotten beyond. But Australia thought they got beyond it, 
too, and then it kind of hit them in the face unexpectedly.
    Ms. Gross. Just a brief comment to that, and that is that 
there was definitely concern when the Department of Energy was 
approving--was starting to approve LNG exports that it would 
push up domestic gas prices.
    We haven't seen that thus far. Granted, LNG is just getting 
warmed up here. But one thing that I think points to the fact 
that we may get this right is that you see a lot of industries 
coming back to the United States based on the promise of low 
gas prices.
    In particular, there's been a real renaissance in chemical 
industry here in the United States. And so they're making 
significant financial bets on the fact that gas prices in the 
U.S. will remain quite reasonable.
    And so, you know, we'll see what happens. But there's 
significant money betting that that will go right.
    Mr. Mast. Sticking with that same triangle of nations, 
could you point to any differences on the broad strokes in 
terms of what creates competitive advantages and disadvantages, 
based upon environmental regulation for the--for the refinement 
and the production of natural gas rather than mining? Thank 
you.
    Ms. Ladislaw. In those three countries?
    Mr. Mast. Yes. Australia, Russia----
    Ms. Ladislaw. So this is a good question. I am not sure 
I've got the best answer for what creates competitive 
advantages. All three economies function very differently in 
terms of how they pursue both domestic gas production, export, 
and investment for petrochemicals.
    I think one of the interesting things is for a long time 
both Russia and Qatar functioned as the least cost producers of 
gas with a readily available resource base and, therefore, they 
had a natural advantage to refining in petrochemical industries 
in terms of what they were able to invest.
    The U.S. has been able to do a heck of a lot more of that 
business in recent years as a result of that. In terms of 
environmental permitting, I really can't speak to that issue.
    Mr. Mast. Does anybody on the panel have anything to offer 
in terms of broad stroke differences between environmental 
permitting across those nations?
    I will take that. Yes, sir.
    Mr. Carroll. Yes. I would just say that in the case of 
Russia in particular, I think the lack of available data, 
especially with regard to environmental impact, methane 
emissions, and the like is a little more suspect and a little 
less available.
    That said, some of the major producers are working to 
mitigate those emissions is one example.
    Mr. Mast. Thank you.
    The chair will now yield back. Thanks for the time.
    Mr. Poe. I thank the gentleman from Florida.
    The chair recognizes the gentleman from the Republic of 
Massachusetts, Mr. Keating.
    Mr. Keating. Thank you, Mr. Chairman.
    I am sorry for your loss, Dr. Medlock.
    The overall rosy picture--before I get into international 
issues, a quick domestic question, though. The impression was 
the U.S. is going to be in a great position, flowing with 
cheaper, cleaner energy.
    But there are portions of the United States that may not 
have as rosy a forecast. Now, where I am in Massachusetts, 
sometimes the access issues become difficult, and we faced some 
problems there.
    Are there other parts of the country, and how does a place 
like that cope with those problems?
    Dr. Carroll, do you want to start?
    Mr. Carroll. The first thing you did this winter was get a 
ship of LNG in from Russia from the Amal plant, which helped 
deal with the--in order to keep your heat going and your power 
being generated there.
    That's, clearly, as I look across the United States, the 
biggest constraint in pipeline capacity is in that New England-
New York area, which constrains the flow of gas both into the 
northeastern U.S. and eastern Canada as well.
    And it's a shame, given the huge quantities of affordable 
gas that are located in Marcellus just a couple hundred miles 
away.
    So as I see it, that would be a critical--a critical 
opportunity to increase the infrastructure. That said, how do 
you get around it today? You could import, as you did with LNG 
through the Everett Terminal in Massachusetts.
    You can, of course, move more toward renewables as best you 
can to minimize the demand for fossil fuels. But as, again, I 
look across the country, that pinch point up there is probably 
the most acute.
    Mr. Keating. And they're closing--decommissioning a nuclear 
plant there, too.
    So anyone else have anything to add about the U.S. 
difficulties?
    Mr. Medlock. Thank you for the question, and I think this 
actually brings up a good opportunity to draw out a parallel 
that Sarah actually just raised with regard to Australia.
    The very high natural gas prices they experienced in the 
state of South Australia in Victoria were the result of a lack 
of sufficient pipeline capacity to move gas from where it's 
produced to where it was needed.
    That is something that will happen in perpetuity until 
either capacity is added or storage options are added in the 
region, and I've had some conversations with the foreign 
minister there about this. They're looking at all of those 
issues.
    The thing that they run into constantly, though, is local 
opposition to anything related to fossil fuels. And so they 
continue to push back on anything until the price jumps and 
then they realize, well, this isn't really a viable option, and 
it's led to some interest in developing floating re-gas 
capability to back door--the end of pipe constraint that exists 
to access those markets.
    In a lot of ways, that's what Everett serves currently in 
the New England market. It serves as a way to sort of back door 
that end of pipe market when you have demand rise because it 
gets very cold, for example.
    Interestingly, as was just pointed out, this past winter we 
saw a cargo of Russian LNG that was reloaded in the U.K. land 
in Boston and I know that got some people's hairs on edge, 
right?
    Mr. Keating. It didn't affect me, though. [Laughter.]
    Mr. Medlock. Well, no, but----
    Mr. Keating. But if I could--I am running out of time--just 
want to ask one international kind of question. We use 
sanctions a great deal in our country now with major oil and 
gas-producing countries like Iran, Russia, Venezuela.
    How is that working, and what are the effects of that? I 
know Ms. Ladislaw mentioned that, but particularly the other 
three panelists, or we can hear more from Ms. Ladislaw.
    Ms. Gross. It depends on which sanctions and where. I will 
say that the sanctions that we are putting back in place on 
Iran will be quite effective.
    The reason why these sanctions are so effective or will be 
so effective is that they're focused on the U.S. banking 
system, and so you can't clear Iranian oil or gas through the 
U.S. banking system.
    Given that--given that the dollar is the reserve currency--
that oil trade happens in dollars--that makes it extremely 
difficult for them to sell abroad.
    And so that sort of sanction is extremely difficult to get 
around. You may see it some, particularly with respect to the 
Chinese, who can do some trade without doing--without using 
dollars.
    But I think those sanctions will be incredibly effective in 
cutting exports from Iran.
    Ms. Ladislaw. I think financial and energy sector related 
sanctions have been very effective when they're implemented 
multilaterally because it doesn't just make the, you know, sort 
of air from this part of the balloon go to some other place, 
right, which happens with oil, quite typically.
    I think the longer-term issue is what's the long-term 
consequence for a intensely global industry that has to deal 
with--I don't know when Russian energy sanctions or financial 
sanctions will ever go away.
    I don't see an end to that. And so countries around the 
world are looking for ways to work around them and so it's 
creating a whole different sort of alternative in financing and 
technology and a whole bunch of other things for countries that 
would really just like to stay away from our ability to reach 
them.
    It's a long-term problem, but I do think it's one that 
we've got to keep on the horizon, particularly when we don't 
know when the sanctions will go away.
    Mr. Keating. My time has expired. I yield back.
    Mr. Poe. I thank the gentleman.
    Once again, I thank all of you for being here. I have the 
philosophy I am for everything below the ground and everything 
above the ground. I am for all of the above and below.
    We haven't talked about several of those, like renewables 
and wind power, solar energy. We'll do that at a later hearing.
    When I was in India and talked to the foreign minister 
there, the foreign minister kept saying 1,300,000,000 people, 
and finally it dawned on me that there's 1 billion more people 
in India than there are in the United States.
    That's a lot of folks, and I think I saw every one of them 
when I was over there. The conversation was about getting LNG 
from the United States to India.
    We can set an--and I agree with you, the United States 
looks at energy differently because these companies are all in 
the business to make a profit--capitalism, if we can use that 
word--as opposed to nationalized energy companies.
    But it does have the geopolitical effect, as well--as--
maybe not the primary objective, but it does have that 
objective.
    And so can you highlight for me selling natural gas where 
we are with India? My understanding is we can develop it, 
produce it, send it across the ocean, and sell it to them and 
they can buy it cheaper than they can drill it themselves, and 
we still make a profit.
    So where is that going? Dr. Medlock, do you want to comment 
on that?
    Mr. Medlock. I would be happy to. Thanks for the question.
    I think you're touching on something that's actually bigger 
than just India. Currently, when we have discussions about 
geopolitical influence of the U.S. energy renaissance, we tend 
to want to focus on what's happening in Europe with regard to 
Russia because that's sort of the thing that's hot button--
that's very relevant right now.
    But if we put a longer-term view on this, you quickly come 
to the realization that if I just put my hands on a map around 
China, India, and the ASEAN countries, that's 3 billion people 
in a part of the world that's growing at a clip of greater than 
5 percent a year.
    So for the next 20, 30, years, that is the engine that's 
going to drive the shape of the energy landscape globally. The 
better we could connect with rulers in that part of the world, 
with industries in that part of the world, with individuals in 
that part of the world, the more influence we'll actually be 
able to have over the--over how that sort of all those 
geopolitical relationships ultimately shake out.
    That will actually convey tremendous benefit to the U.S. 
Government and its people, quite frankly, as we go forward over 
the next two to three decades.
    Moving beyond that, we still haven't even touched on, if we 
are going to do the math, another 3.3 billion people that live 
in sub-Saharan Africa, Latin America, Central Asia, and the 
Middle East.
    You're talking about a massive number of people outside of 
where we conventionally talk about, or traditionally talk about 
trading oil and natural gas that we have the ability to reach 
and make contact with--again, to shape and influence 
discussions around energy, around foreign policy, et cetera.
    And energy is a great way to do that because energy is the 
go of things, to steal a quote. It is the thing that drives 
economic engines around the world and it will always be the 
case, regardless of the form of energy. It's always going to be 
important.
    Mr. Poe. I recently met with the Speakers of the House of 
Ukraine and Moldova and Georgia, and they are working together 
to move more to the West, to democracy, et cetera.
    What is--what is the United States doing energy wise for 
those three specific countries? Anything?
    Or are they developing their own resources? Are we selling 
them our fuel? Does anyone want to comment on those three 
specific countries?
    Ms. Ladislaw. I don't know each of them individually in a 
great deal of detail. My understanding is the strategy is 
threefold.
    One is to sort of help with the internal governance, 
particularly in Ukraine, of their domestic energy system, which 
has been sort of fraught with oh, gosh, a whole bunch of 
different problems.
    Two, is to make sure the interconnections in the market 
within Europe is as efficient as possible and can work those 
countries into the system, and then the third is dealing with 
Russia vis-a-vis energy supplies into Europe and making sure 
that they have sort of a level playing field for negotiating 
prices. I can't speak too much beyond that, though.
    Mr. Poe. Dr. Medlock.
    Mr. Medlock. Yes, let me add one thing to that.
    I think the strategy really has been one of trying to 
promote a different type of governance around markets that 
allow for more flexibility in the delivery of different types 
of supply.
    So this, ultimately, allows for this credible threat 
hypothesis that I mentioned earlier to be realized in Europe. 
So this gets to liberalization of markets--you know, actually 
seeing price signals that are transmitted across the European 
continent that allow for expansion of pipeline capacity, 
connecting different points of entry into the continent, 
allowing back haul services to move from Western to Central to 
Eastern Europe, which didn't exist really to any extent just a 
decade ago.
    All these sorts of things have actually allowed more 
flexibility and fungibility of gas molecules in the European 
market, and that's really the best you can do absent a direct 
point of contact.
    The Ukraine--there's no ability to import LNG into the 
Ukraine. So U.S. gas isn't going to land there unless it lands 
in India and moves via back haul by pipeline.
    Same thing with Moldova, Romania--you name all those 
countries that are sort of blocked, right. It's a similar sort 
of issue.
    So it really is about altering market structure and 
conveying the advantages that a different market structure will 
actually bring in terms of providing energy security, and this 
is fundamentally a trade question.
    Mr. Poe. The--I think Mexico and United States and Canada 
are intertwined dramatically in the energy field. Dr. Medlock, 
there's a small business guy in Houston that has all of--he's a 
manufacturer. He's an assembler.
    He has all those little parts made in Mexico that are 
brought in to his business in Houston. He assembles them, then 
he sends them out to the Houston ship channel. Of course, we 
get fuel from Canada as well.
    Let me hear just what all four of you think on this basic 
concept of--we can call it free trade--regarding energy and 
energy supply--this energy supply chain.
    Do you think it's a good idea? Do you think--what do we 
need to do to make it better for our economy?
    Each one of you can comment on it. All right. Mr. Carroll, 
we'll start with you.
    Mr. Carroll. I will just put it in perspective from the 
natural gas side throughout North America.
    If you look at it as a--as a unit, we get about seven--look 
at U.S. demand. About 7 percent of that is actually imported 
from Canada.
    There's a net on that in terms of we send them some, they 
send us some. And about 7 percent of our production goes to 
Mexico.
    So it's--you can look at it as 93 percent of what we 
produce, we consume. But there is some movement between the 
continents and, it's--the integrated North American market I 
can tell you is the envy of the world.
    So there's a--there's a lot of power and competitive 
advantage based on the way that mechanism works.
    Ms. Ladislaw. Yes, I think----
    Mr. Poe. Ms. Ladislaw.
    Ms. Ladislaw [continuing]. The super boring issue of sort 
of standards and policy harmonization, which has always been 
kind of boring for, you know, from a policy perspective. It's 
something we can continue to do, particularly as we are 
inventing new technologies and digitalization within the 
electric power sector.
    All of these things we have mechanisms--trilateral 
mechanisms between all three countries to be able to do that. I 
just think we need to continue to do those things.
    I see more threats to the integrated North American economy 
from the way that we are approaching the NAFTA trade 
arrangement right now but also from steel tariffs and other 
things that are, broadly, discouraging for companies that 
really would like to have a North American frame of mind.
    The other big threat is actually one that Representative 
Keating brought up, which is that infrastructure is challenging 
in all three countries right now. I think what we need to do is 
look at particular places like the Gulf Coast area or the 
Northeast or even, you know, the West Coast where we've got 
really big advantages from a resource space or from a 
technology and innovation standpoint and try and build kind of 
regional innovation hubs, regional energy hubs, where we 
understand how the infrastructure and the educational and 
university environment and the business environment all sort of 
paddle in the same direction toward really making the most of 
those advantages. I just don't think we've thought that way 
yet.
    Mr. Poe. Ms. Gross.
    Ms. Gross. I agree with everything the folks to the right--
to the right of me have said, but I will add just an additional 
point. It's really also a no-brainer.
    It's a no-brainer from a trade and economic perspective. 
It's also a no-brainer from an environmental perspective.
    Any time you're taking these products and shipping them to 
nearby markets, that's a real advantage. You're also allowing 
Mexico to take advantage of the significant natural gas 
reserves that we had here.
    The Mexican energy sector has significantly restructured 
recently and allowed much more outside participation. It's 
bringing more renewable energy, and the gas is a fantastic 
partner for that.
    And so not only is this good for the United States, good 
for--you know, good to have a regional energy system, it's also 
good from an environmental perspective. I think we can give it 
two thumbs up from any number of points of view.
    Mr. Poe. Dr. Medlock.
    Mr. Medlock. I think Sarah's points are fantastic, 
actually. The integrated nature of the North American market 
conveys massive amounts of opportunity both on the 
environmental front and the commercial front.
    Commercially, you connect markets, you connect consumers 
with producers, you actually make those transactions lower 
cost, which actually helps grown businesses. It does all sorts 
of things that are fabulous for job creation, wealth creation, 
et cetera, on both sides of the border.
    Environmentally, you have actually seen in Mexico--and Sam 
was just referring to this--you have seen in Mexico a reduction 
in fuel oil use in power generation.
    Why is that? Well, it's because you have got a low--you 
have got low cost natural gas that's being produced just north 
of the border and it's moving south and it's being put into 
natural gas-combined cycle generation facilities and it's 
allowing Mexicans to actually reap the benefits of the North 
American gas boom just like we do in Texas, just like we do in 
Massachusetts, just like we do anywhere.
    So those types of benefits actually when they're conveyed 
broadly as a result of trade that can actually occur unimpeded 
are tremendous on both commercial and environmental fronts.
    Mr. Poe. Well, thank you all. I appreciate your being here 
and also your expertise. It's fascinating to have all of you 
all here to enlighten us about the way things really are. So 
it's very good.
    Thank you, and this subcommittee is adjourned.
    Thank you.
    [Whereupon, at 3:04 p.m., the committee was adjourned.]

   
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