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[Senate Report 110-54]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 116
110th Congress                                                   Report
                                 SENATE
 1st Session                                                     110-54

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               ENERGY DIPLOMACY AND SECURITY ACT OF 2007

                                _______
                                

                 April 12, 2007.--Ordered to be printed

                                _______
                                

          Mr. Biden, from the Committee on Foreign Relations,
                        submitted the following

                              R E P O R T

                         [To accompany S. 193]

    The Committee on Foreign Relations, having had under 
consideration a bill to increase cooperation on energy issues 
between the United States Government and foreign governments 
and entities in order to secure the strategic and economic 
interests of the United States, and for other purposes, reports 
favorably thereon and recommends that the bill do pass.

                                CONTENTS

                                                                   Page
  I. Purpose..........................................................1
 II. Committee and Legislative History................................3
III. Committee Action.................................................5
 IV. Section-By-Section Analysis......................................5
  V. Cost Estimate....................................................7
 VI. Evaluation of Regulatory Impact..................................8
VII. Changes in Existing Law..........................................8

                               I. Purpose

    The Energy Diplomacy and Security Act of 2007 is intended 
to increase United States diplomatic attention and capacity in 
matters related to energy security. Through a series of 
hearings noted in Section III of this report, the committee 
established that the United States national security is 
threatened by its current reliance on energy imports, 
particularly oil, and this reliance is constraining foreign 
policy options. ``No one who is honestly assessing the decline 
of American leverage around the world due to our energy 
dependence can fail to see that energy is the albatross of U.S. 
national security,'' Senator Lugar said at The Brookings 
Institution on March 13, 2006. At the March 30, 2006 hearing, 
Senator Biden said, ``Our foreign policy has been distorted for 
over half a century by our dependence on oil from parts of the 
world with very different interests from our own.''
    Energy issues are central to contemporary global politics. 
Energy resources are more frequently being used for political 
gain. Foreign governments directly control more than three-
quarters of the world's oil supplies, and an increasing number 
of these governments are using their oil wealth to entrench 
corruption and authoritarianism, fund anti-American demagogic 
appeals, and support terrorism. By stunting development and 
increasing poverty, high world oil prices contribute to 
instability that can lead to internal civil strife and regional 
conflict. Likewise, the unclean use of fossil fuels is a major 
cause of global climate change, as confirmed by the most recent 
Intergovernmental Panel on Climate Change (IPCC) report on 
climate science. The most recent IPCC report on the effects of 
global warming predicts population movements, disease, drought, 
famine, and other events, which can threaten United States 
national security.
    The United States quest for energy security must include a 
vigorous global diplomatic component. The geopolitics of energy 
today require innovative international partnerships to blunt 
the ability of producer states to use energy as a weapon, to 
increase our own security of supply, and to reduce the 
vulnerability of our economy to high oil prices.
    S. 193 provides a framework to address the foreign policy 
implications of energy. The bill calls on the administration to 
invigorate existing bilateral energy partnerships and seek new 
ones with key producing and consuming countries, with a special 
emphasis on increasing the use of sustainable energy sources. 
The bill bolsters the State Department's capability to 
integrate energy security needs into our diplomatic activities. 
Although our ambassadors and top diplomats are factoring energy 
considerations into their work, responsibility for energy 
diplomacy is fragmented between several different offices. 
Despite the growing importance of energy to our overall 
diplomatic efforts, there is no Senate-confirmed official in 
the State Department (or even a deputy assistant secretary) 
whose sole responsibility is energy. To ensure that the State 
Department's energy diplomacy efforts have more robust 
coordination, S. 193 would create a Coordinator for 
International Energy Affairs within the Office of the Secretary 
of State.
    The bill also directs the administration to seek formal 
agreements with India and China that commit those countries to 
establish their own strategic petroleum reserves that are 
coordinated with other consumer nations. Such a move would give 
oil consuming nations more leverage and flexibility during 
international oil supply disruptions and help stabilize world 
oil markets. It also directs the President to seek ways to work 
with other nations to increase energy emergency preparedness. 
Finally, the bill calls on the administration to weave a more 
reliable energy security fabric within our own hemisphere, 
working more closely with Canada and Latin America on emergency 
preparedness, conservation, sustainable energy, and energy 
access for the poor.

                 II. Committee and Legislative History

    A previous version of S. 193 was introduced in the 109th 
Congress as S. 2435 by Senator Lugar on March 16, 2006. It was 
cosponsored by Senators Craig, Biden, Byrd, Salazar, DeWine, 
Dorgan, Lieberman, Snowe, Landrieu, Coleman, Harkin, Thune, 
Hagel, Rockefeller, and Obama.
    Energy security and its effects on United States foreign 
policy was a priority issue for committee activities in the 
109th Congress. The committee held the following full committee 
hearings:

          On July 26, 2005, the committee held a hearing 
        entitled ``Energy Trends in China and India'' to 
        examine the implications for the United States of 
        economic development and growing energy needs in China 
        and India. Testimony was provided by E. Anthony Wayne, 
        Interim Under Secretary for Economic, Business and 
        Agricultural Affairs, Department of State; David K. 
        Garman, Under Secretary for Science and Environment, 
        Department of Energy; Mikkal Herberg, Director, 
        Globalization & Asian Energy Security Program, The 
        National Bureau of Asian Research; Randall G. Schriver, 
        Partner, Armitage International; and Sumit Ganguly, 
        Director, Indian Studies Program, Indiana University.

          On November 16, 2005, the committee held a hearing 
        entitled ``High Costs of Crude: The New Currency of 
        Foreign Policy'' to examine the complexity of U.S. 
        reliance on imported energy sources, particularly oil. 
        Testimony was provided by James R. Schlesinger, Senior 
        Advisor, Lehman Brothers and R. James Woolsey, Vice 
        President, Booz Allen Hamilton.

          The committee held three public hearings to examine 
        U.S. cooperation with India on civilian nuclear energy. 
        On November 2, 2005, the committee held a hearing 
        entitled ``U.S.-Indian Nuclear Energy Cooperation: 
        Security and Nonproliferation Implications.'' Testimony 
        was provided by R. Nicholas Burns, Under Secretary for 
        Political Affairs, Department of State; Robert G. 
        Joseph, Under Secretary for Arms Control and 
        International Security, Department of State; Ronald F. 
        Lehman, II, Director, Center for Global Security 
        Research, Lawrence Livermore National Laboratory; 
        Ashton B. Carter, Co-Director, Preventive Defense 
        Project, Belfer Center for Science & International 
        Affairs, Harvard University; Henry D. Sokolski, 
        Executive Director, Nonproliferation Policy Education 
        Center; and Michael Krepon, Co-Founder and President 
        Emeritus, Henry L. Stimson Center. On April 5, 2006, 
        the committee held a hearing entitled ``U.S.-India 
        Atomic Energy Cooperation: The Indian Separation Plan 
        and the Administration's Legislative Proposal.'' 
        Testimony was provided by Secretary of State 
        Condoleezza Rice. On April 26, 2006, the committee held 
        a hearing entitled ``U.S.-India Atomic Energy 
        Cooperation: Strategic and Nonproliferation 
        Implications.'' Testimony was provided by William J. 
        Perry, Senior Fellow, Hoover Institution, Stanford 
        University; Robert L. Gallucci, Dean, Edmund A. Walsh 
        School of Foreign Service, Georgetown University; 
        Ashton B. Carter, Co-Director, Preventive Defense 
        Project, Belfer Center for Science & International 
        Affairs, Harvard University; Ashley J. Tellis, Senior 
        Associate, Carnegie Endowment for International Peace; 
        Ronald F. Lehman, II, Director, Center for Global 
        Security Research, Lawrence Livermore National 
        Laboratory; Robert J. Einhorn, Senior Adviser, 
        International Security Program, Center for Strategic 
        and International Studies, Gary Milhollin, Director, 
        Wisconsin Project on Nuclear Arms Control; and Stephen 
        P. Cohen, Senior Fellow, Foreign Policy Studies 
        Program, The Brookings Institution.

          On March 30, 2006, the committee held a hearing 
        entitled ``The Hidden Cost of Oil'' to examine costs 
        attributable to U.S. oil consumption that are not 
        accounted for in the market price, with particular 
        emphasis on the costs of imported oil. Testimony was 
        provided by Milton R. Copulos, President, National 
        Defense Council Foundation; Hillard Huntington, 
        Executive Director, Stanford University Energy Modeling 
        Forum; and Gary W. Yohe, John E. Andrus Professor of 
        Economics, Wesleyan University.

          On May 16, 2006, the committee held a hearing 
        entitled ``Energy Security and Oil Dependence'' to 
        examine strategies for reducing dependence on oil. 
        Testimony was provided by Vinod Khosla, Partner, Khosla 
        Ventures and Jason S. Grumet, Executive Director, 
        National Commission on Energy Policy.

          On June 7, 2006, the committee held a hearing 
        entitled ``Oil Dependence and Economic Risk'' to 
        consider the consequences of dependence on oil imports 
        for U.S. economic prosperity, with particular attention 
        to the economic risks to the United States and other 
        global economies stemming from oil dependence, the 
        potential of natural events and the investment 
        decisions of oil-rich governments to destabilize the 
        market price of oil, and the connections between oil 
        price and GDP growth in oil import dependent countries. 
        Testimony was Alan C. Greenspan, President, Greenspan 
        Associates LLC.

          On June 22, 2006, the committee held a hearing 
        entitled ``Energy Security in Latin America'' to 
        examine energy security and foreign policy implications 
        between the United States and Latin American countries. 
        Testimony was provided by Senator Larry E. Craig; 
        Senator Ken Salazar; Domingo Cavallo, Chairman and CEO 
        DFC Associates, LLC; Luis E. Giusti, Senior Adviser, 
        Center for Strategic and International Studies; Eduardo 
        Pereira de Carvalho, President, Brazilian Association 
        of Sugar Cane and Ethanol Producers; and David L. 
        Goldwyn, President, Goldwyn International Strategies, 
        LLC. Additional written testimony was submitted by Eric 
        Farnsworth, Vice President, Council of the Americas; 
        Stephan C. Johnson, Senior Policy Analyst for Latin 
        America, The Heritage Foundation; and Johanna 
        Mendelson-Forman, Senior Associate, Center for 
        Strategic and International Studies.

          On June 29, 2006, the committee held a hearing 
        entitled ``Russia: Back to the Future?'' to examine 
        Russia's recent energy policies and political trends. 
        Testimony was provided by Stephen Sestanovich, Senior 
        Fellow for Russian and Eurasian Studies, Council on 
        Foreign Relations; Dmitri Trenin, Deputy Director and 
        Program Co-chair, Foreign and Security Policy, Moscow 
        Center, Carnegie Endowment for International Peace; and 
        Amy Myers Jaffe, Fellow in Energy Studies and Associate 
        Director, Rice University Energy Program.

          In conjunction with a series of committee hearings 
        examining corruption and transparency issues related to 
        international financial institutions and multilateral 
        development banks, on July 12, 2006, the committee held 
        a hearing entitled ``Multilateral Development Banks: 
        Development Effectiveness of Infrastructure Projects'' 
        to consider the role of development banks in 
        infrastructure projects, and the ability of those 
        projects to improve economic and social development. 
        Testimony was provided by Clay Lowery, Assistant 
        Secretary for International Affairs, Department of the 
        Treasury; Jaime Quijandria, Executive Director for 
        Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay, 
        The World Bank; Carlos Herrera Descalzi, Vice-Dean, 
        National Engineers Association of Peru; Korinna Horta, 
        Senior Economist, Environmental Defense; and Manish 
        Bapna, Executive Director, Bank Information Center.

          In conjunction with a series of committee hearings on 
        developments in Iran and United States policy options, 
        on May 18, 2006, the committee held a hearing entitled 
        ``Iran's Political/Nuclear Ambitions and U.S. Policy 
        Options'' which included examination of the Iranian 
        energy industry. Testimony was provided by Frank G. 
        Wisner, Vice Chairman for External Affairs, American 
        International Group, Inc.; Vali R. Nasr, Professor of 
        National Security Affairs, Naval Postgraduate School; 
        Julia Nanay, Senior Director, PFC Energy; and James A. 
        Phillips, Research Fellow for Middle Eastern Affairs, 
        Douglas and Sarah Allison Center for Foreign Policy 
        Studies, The Heritage Foundation.

          In conjunction with a series of committee hearings on 
        the situation in Iraq, on July 20, 2005, the committee 
        held a hearing entitled ``Accelerating Economic 
        Progress in Iraq'' which gave particular attention to 
        development of the energy industry in Iraq. Testimony 
        was provided by Keith Crane, Senior Economist, RAND 
        Corporation; Fareed Mohamedi, Senior Director, Country 
        Strategies Group, PFC Energy; and Frederick D. Barton, 
        Senior Advisor, International Security Program, Center 
        for Strategic and International Studies.

                         III. Committee Action

    S. 193 was introduced by Senators Lugar, Biden, Craig, 
Salazar, Snowe, Landrieu, Coleman, Lieberman, and Hagel on 
January 4, 2007. It is also cosponsored by Senator Thune. On 
March 28, 2007, the committee ordered the bill reported 
favorably by voice vote.

                    IV. Section-By-Section Analysis

Section 1. Short Title.

    This section designates the short title of the bill.

Section 2. Definitions.

    This section provides definitions of certain terms in the 
bill.

Section 3. Sense of the Congress on Energy Diplomacy and Security.

    This section seeks to enhance recognition of the prominence 
of energy in U.S. foreign policy and national security, and to 
improve State Department capacity by:

   Calling for the creation of a Coordinator for 
        International Energy Affairs within the Office of the 
        Secretary of State, who will be charged with ensuring 
        energy security is integrated into State Department 
        activities and to liaise with other federal agencies;

   Calling for the President to ensure there is an 
        effective mechanism to focus and coordinate federal 
        agency international energy activities;

   Defining the policy goal of energy security as 
        reliable, affordable, clean, sufficient, and 
        sustainable energy sources.

Section 4. Strategic Energy Partnerships.

    This section seeks to promote energy security through 
international partnership by:

   Expanding international energy partnerships with 
        major energy producing and consuming countries, and 
        with other appropriate countries;

   Creation of new international partnerships, and 
        development of political backing and strengthen 
        strategic focus for existing activities. These 
        partnerships are meant to address a comprehensive array 
        of international energy activities under the umbrella 
        of energy security, with particular emphasis on 
        increased use of sustainable energy sources;

   Requiring reports on relevant international 
        activities of the U.S. Government and the actions of 
        foreign governments effecting U.S. energy security.

Section 5. International Energy Crisis Response Mechanisms.

    This section would expand international mechanisms that 
protect against petroleum supply disruption. It would:

   Prioritize extension of emergency coordination with 
        China and India through the International Energy 
        Program if possible, including future coordination 
        mechanisms for strategic petroleum reserve drawdown, 
        subject to the achievement by China and India of 
        reserve holding standards set by the Secretary of 
        Energy;

   Enhance emergency preparedness in the Western 
        Hemisphere through increased provision of technical 
        assistance and development of emergency response 
        information sharing and coordination mechanisms;

   Promote extension of emergency protection to non-
        OECD countries by calling on the President to have the 
        Governing Board of the International Energy Agency 
        examine establishment of an application procedure 
        through which non-member countries of the International 
        Energy Program could apply for allocation of petroleum 
        reserves in times of emergency.

Section 6. Hemisphere Energy Cooperation Forum.

    This section emphasizes the need for pro-active U.S. 
engagement within the Western Hemisphere on energy issues by:

   Establishment of a standing ministerial energy forum 
        to promote dialogue and partnerships, which would have 
        at least three working areas: preparedness for energy 
        crisis response; an energy sustainability initiative to 
        improve energy supply and efficiency; and a development 
        initiative to increase energy access for the poor in a 
        sustainable way;

   Creation of a Hemisphere Energy Industry Group to 
        improve conditions for private investment and public-
        private partnership.

Section 7. Appropriate Congressional Committees Defined.

    This section defines the term ``appropriate congressional 
committees.''

                            V. Cost Estimate

    Pursuant to Rule XXVI, paragraph 11(a) of the Standing 
Rules of the Senate, the following cost estimate has been 
provided by the Congressional Budget Office.

               CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

                                                    March 29, 2007.

                                 S. 193

               Energy Diplomacy and Security Act of 2007

  As ordered reported by the Senate Committee on Foreign Relations on 
                             March 28, 2007

    S. 193 would authorize the Secretary of State, in 
coordination with the Secretary of Energy, to foster greater 
global energy security by establishing and expanding strategic 
energy partnerships with countries that are major energy 
producers or consumers. In particular, the bill recommends that 
the Secretaries establish mechanisms within the Western 
Hemisphere, and with the governments of China and India, to 
respond to potential energy crises. Finally, the bill would 
require both departments to provide several reports to the 
Congress.
    Based on information from the State Department, CBO 
estimates that the department would require the equivalent of 
14 additional full-time employees to meet the requirements of 
the bill, at an annual cost of about $2 million (including 
travel costs), assuming appropriation of the estimated amounts. 
Enacting the bill would not affect direct spending or receipts.
    S. 193 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Sunita D'Monte, 
who can be reached at 226-2840. This estimate was approved by 
Peter H. Fontaine, Deputy Assistant Director for Budget 
Analysis.

                  VI. Evaluation of Regulatory Impact

    Pursuant to Rule XXVI, paragraph 11(b) of the Standing 
Rules of the Senate, the committee has determined that there is 
no regulatory impact as a result of this legislation.

                      VII. Changes in Existing Law

    In compliance with paragraph 12 of Rule XXVI of the 
Standing Rules of the Senate, the committee has determined that 
there are no changes in existing law made by the bill, as 
reported.
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