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94–051 2015

S. HRG. 114–17 

U.S. CRUDE OIL EXPORT POLICY 

HEARING 

BEFORE THE 

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MARCH 19, 2015 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 


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COMMITTEE ON ENERGY AND NATURAL RESOURCES 

LISA MURKOWSKI, Alaska, Chairman 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

MIKE LEE, Utah 

JEFF FLAKE, Arizona 

STEVE DAINES, Montana 

BILL CASSIDY, Louisiana 

CORY GARDNER, Colorado 

ROB PORTMAN, Ohio 

JOHN HOEVEN, North Dakota 

LAMAR ALEXANDER, Tennessee 

SHELLEY MOORE CAPITO, West Virginia 

MARIA CANTWELL, Washington 

RON WYDEN, Oregon 

BERNARD SANDERS, Vermont 

DEBBIE STABENOW, Michigan 

AL FRANKEN, Minnesota 

JOE MANCHIN III, West Virginia 

MARTIN HEINRICH, New Mexico 

MAZIE K. HIRONO, Hawaii 

ANGUS S. KING, JR., Maine 

ELIZABETH WARREN, Massachusetts 

KAREN K. BILLUPS, Staff Director 

PATRICK J. MCCORMICK III, Chief Counsel 

TRISTAN ABBEY, Professional Staff Member 

ANGELA BECKER-DIPPMANN, Democratic Staff Director 

SAM E. FOWLER, Democratic Chief Counsel 

TARA BILLINGSLEY, Democratic Senior Professional Staff Member 


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C O N T E N T S 

OPENING STATEMENTS 

Page 

Murkowski, Hon. Lisa, Chairman, and a U.S. Senator from Alaska .................. 1 

Cantwell, Hon. Maria, Ranking Member, and a U.S. Senator from 

Washington ........................................................................................................... 7 

WITNESSES 

Pascual, Carlos, Fellow, Center on Global Energy Policy, Columbia University 

and Senior Vice President, IHS .......................................................................... 9 

Lance, Ryan, Chairman and Chief Executive Officer, ConocoPhillips ................ 22 

Rosenberg, Elizabeth, Senior Fellow and Director, Energy, Economics and 

Security Program, Center for a New American Security .................................. 41 

Drevna, Charles T., President, American Fuel & Petrochemical Manufacturers .......................................................................................................................... 51 

Warmann, Jeffrey, Chief Executive Officer, Monroe Energy Inc ........................ 101 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED 

Association of American Railroads: 

Statement for the Record ................................................................................. 142 

Cantwell, Hon. Maria 

Opening Statement ........................................................................................... 7 

Drevna, Charles T. 

Opening Statement ........................................................................................... 51 

Written Testimony ............................................................................................ 53 

Flournoy, Michele 

Statement for the Record ................................................................................. 3 

Lance, Ryan 

Opening Statement ........................................................................................... 22 

Written Testimony ............................................................................................ 24 

Murkowski, Hon. Lisa 

Opening Statement ........................................................................................... 1 

Pascual, Carlos 

Opening Statement ........................................................................................... 9 

Written Testimony ............................................................................................ 13 

Responses to Questions for the Record ........................................................... 136 

Rosenberg, Elizabeth 

Opening Statement ........................................................................................... 41 

Written Testimony ............................................................................................ 43 

Warmann, Jeffrey 

Opening Statement ........................................................................................... 101 

Written Testimony ............................................................................................ 103 

Responses to Questions for the Record ........................................................... 138 

National Stripper Well Association: 

Statement for the Record ................................................................................. 145 


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U.S. CRUDE OIL EXPORT POLICY 

Thursday, March 19, 2015 

U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC. 

The Committee met, pursuant to notice, at 10:06 a.m. in room 

SD–366, Dirksen Senate Office Building, Hon. Lisa Murkowski, 

chairman of the Committee, presiding. 

OPENING STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA

The CHAIRMAN. Calling to order the Energy Committee meeting 

this morning. Welcome to members of the Committee. Welcome to 

our panelists and to those who have come to listen and hear the 

discussion on U.S. crude oil export policy. 

It’s good to have the discussion in front of this Committee. Clearly a very timely topic. 

More than a year has passed since January of ’14 when this 

Committee, then under Chairman Wyden, held its first hearing in 

over a full decade on crude oil exports. Since then the Congress has 

held an additional five hearings. That’s moving right along here 

which is good to know. 

Our hearing this morning is the seventh now that we have held 

in just over a year. This represents substantial progress on the 

education front. When I first had an opportunity to bring up the 

issue of oil exports and the need to reexamine our policy here in 

this country with the current export ban, it felt like I was a pretty 

lonely voice out in the wilderness. But I made a very clear effort, 

initially, to say that this was going to be about education. This was 

not about moving a legislation through that was not thoughtful and 

considered, but really this was about an education and an awareness effort. And we’ve seen just that. 

We’ve seen analysis from the Government Accountability Office, 

from the Brookings Institution, the Heritage Foundation, the Council on Foreign Relations, the Center for Strategic and International 

Studies, the Cato Institute, the Aspen Institute, the Center for 

American Progress, the Congressional Budget Office, Columbia 

University Center on Global Energy Policy, Resources for the Future, Center for a New American Security, Peterson Institute for 

International Economics, ICF International, IHS, NEARA and even 

more beyond that. 

The vast majority of this analysis ends up in the same place, and 

I think it’s important that we understand that. But we hear the 

other side. 


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The U.S. Energy Information Administration has also published 

three reports as part of the ‘‘dynamic and ongoing analysis’’ that 

I requested last year and is due to release some final pieces very 

soon. 

When I mentioned last year that 2014 would be the year of the 

report, it seems clear to me that it was exactly that. That these 

various institutions, these thought leaders engaged in that willingly and with a certain amount of energy which was good. 

But the year of the report is coming to an end. While I continue 

to believe that the Administration retains extensive authority explicitly delegated to it by previous Congresses in statute, it is also 

appropriate for us to consider our legislative options. So just stay 

tuned here. 

Before I turn to Ranking Member Cantwell, I would like to introduce into the record a statement that we received from Michele 

Flournoy, who is the former Under Secretary for Policy at the Department of Defense under President Obama from 2009 to 2012. 

Our schedule, unfortunately, did not permit her attendance, but 

there is one brief quotation from what, I think, is a very important 

statement. She states the following, ‘‘Lifting oil export restrictions 

will yield a variety of security dividends to the United States. Market conditions merit such a step and security dividends will not be 

fully realized without it.’’ She goes further into her statement to 

speak about the significant security benefits associated with lifting 

oil export restrictions and our flexibility then as a nation to impose 

energy sanctions into the future. 

Again, I will submit her statement in full as part of this Committee record. 

[The information referred to follows:] 


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The CHAIRMAN. The national security side of the equation will 

be, I think, a very extremely important part of this conversation 

going forward. I look forward to comments from our witnesses as 

you present this morning, not only in this area, but on other aspects of this policy consideration that we have in front of us. 

Again, I thank you all for being here. I look forward to your testimony. 

I will turn to Ranking Member Cantwell and then we’ll have an 

opportunity for each of you to present your statements and we will 

turn to questions for each of you. 

With that, Senator Cantwell. 

STATEMENT OF HON. MARIA CANTWELL, 

U.S. SENATOR FROM WASHINGTON

Senator CANTWELL. Thank you, Madam Chair. I too, want to welcome the witnesses and thank you for holding this hearing. 

This Committee last held a hearing on crude oil exports 14 

months ago. At that hearing many of my colleagues noted the historic nature of the subject. 

The U.S. Congress banned the export of crude oil in 1975 after 

oil exporting nations had used their export capacity as an economic 

weapon which caused serious damage to the U.S. and to the global 

economy. 

Since that time there has never been a reason to revisit the ban. 

For decades we, in Congress, have debated the best ways to deal 

with our country’s ever increasing dependence on imported foreign 

oil. Within the last decade we actually started to see that situation 

reverse as we started consuming less, producing more and importing less. 

Three major policy changes came together to change the U.S. Energy Security paradigm. We started using our transportation fuel 

more efficiently by increasing fuel efficiency requirements. We 

started to break the oil sector’s monopoly on gas tanks by replacing 

ten percent of our transportation fuel with ethanol and bio diesel 

and promoting electrification of vehicles. And our long term investments in the government-funded basic research on oil and gas production started to pay off. 

It’s the combination of all three of these policy measures that has 

brought us here today because not only are we now producing more 

oil than we ever anticipated, thanks to the good work of the Department of Energy and Sandia National Laboratory and the public 

and private sector partnerships it has created, but we’ve also 

stopped consuming more and more oil every year. 

Between 1982 and 2007 gasoline consumption in the United 

States grew every single year. It appears now that 2007 was the 

peak year for gasoline consumption. In 2007 we used 391,000,000 

gallons of gasoline in this country. In 2014 we used only 

374,000,000. 

If you count every year from 2008 through 2014 Americans have 

saved 119,000,000 gallons compared to 2007. 

Assuming three dollars per gallon, that’s $356 million that Americans spent on something other than gasoline between 2008 and 

2014. 


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I think it’s important for us to recognize that we have had success on both the supply side and the demand side of the equation 

in terms of reducing our dependence on imported oil. Now the oil 

industry is asking to repeal the export ban. 

As our oil industry producers produce more at home but our consumption stays relatively flat, our industry wants to sell American 

oil into the foreign markets where it can get a higher price. But 

let’s be clear about this. The United States is and will remain a net 

oil importer. 

As we talk about whether we should export oil, we need to keep 

in mind that for every barrel of oil we export we will be importing 

even more. 

The question before us today is whether this policy change will 

be in the interest of the American people. As policy makers our obligation is not to any particular industry nor to any particular economic theory. Our responsibility is to decide what policies provide 

the greatest good to the greatest number of people. 

As we consider these questions of whether this export ban is still 

the right policy for America, I think we should think about three 

variables. 

First, price. Economic effects of oil and gas prices ripple through 

our economy. Lower oil prices act like a tax cut for the vast majority of Americans. No one wants to see the price at the pump go up, 

not in my State of Washington or I’m sure throughout the country. 

In a published poll this week by Allstate in the National Journal 

Heartland Monitor, 79 percent of Americans said the current price 

drop has made a difference in their financial situation. The same 

percentage of respondents said they are using what they save at 

the pump daily for other necessities or paying down debt. 

I would rather have Americans get their own fiscal house in 

order verses more at the pump for their transportation needs. 

Second, safety. The oil is moving around our country in ways 

that we never anticipated, even just five years ago. Oil production 

has increased faster than the infrastructure needed to transport it 

in the safest ways. 

My state currently has tens of thousands of barreled oil traveling 

through every major population center of our state. And I want to 

be clear about this. We currently do not have the regulations on 

the books to safely transport this product. I am going to be working 

for further measures to make sure that we do get those standards 

in place. 

Third, energy security. No one consumes oil. We consume gasoline, diesel and other products that are made from oil. If we are 

sending oil abroad while some regions of our country then have to 

import gasoline, diesel and home heating oil, that were refined 

someplace else are we exporting our energy security and that we’ve 

all worked so hard on? 

These are some of the issues that I think we need to consider 

today. 

In a poll conducted in 2014 Hart Research found that 69 percent 

of Americans are opposed to lifting the export ban. Other polls find 

that the public is largely opposed. Labor unions, including the 

AFL–CIO and steel workers, are opposed. And I guarantee you if 


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we start talking about lifting the Jones Act as a requirement there 

will be many more that are opposed. 

In addition, my home state independent refiner, U.S. Oil in Tacoma, is also against lifting the ban. 

So we have a variety of opinions from people, public opinion, as 

well as from a variety of sources. 

I will just leave us with one quote that, I think, is a reminder 

about this debate from Teddy Roosevelt in his Administration Papers on Conservation of Minerals in 1909. Teddy Roosevelt’s Administration found, ‘‘The greatest waste of petroleum has been in 

exporting crude petroleum and petroleum products to foreign countries. The necessity for it has been due to the sudden increase of 

production due to the discovery and immediate development of 

large fields and only by this means has it been possible for the producers to continue to obtain a constant market for petroleum where 

ever produced. This immediate purchase of product has meant a 

gain of millions of dollars to the producers.’’ 

I think the same observation is relevant today, and I hope that 

as we’re considering this we’ll take into consideration the policy impacts to all of our economy. 

Again, I thank the witnesses for being here today, and thank 

you, Madam Chair, for calling this hearing. 

The CHAIRMAN. Thank you, Senator Cantwell. 

We will now go to our panelists. I will introduce each of you. We 

will start from my right here and go down the line. 

We first have Mr. Carlos Pascual, who is a Fellow at the Center 

on Global Energy Policy at Columbia University and the Senior 

Vice President at IHS. Welcome to the Committee. 

Following Mr. Pascual this morning will be Mr. Ryan Lance. Mr. 

Lance, thank you for agreeing to be before the Committee. He is 

the Chairman and the CEO of ConocoPhillips. Welcome. 

Next to Mr. Lance is Elizabeth Rosenberg, the Senior Fellow and 

Director for Energy, Economics and American Security at the Center for a New American Security. Thank you, and welcome back to 

the Committee. 

And Mr. Charles Drevna, we have opportunity to see Mr. Drevna 

before the Committee every now and again. He is the President of 

the American Fuel and Petrochemical Manufacturers. Good to have 

you back. 

At the end we have Mr. Jeff Warmann, who is the CEO of Monroe Energy. Welcome also to the Committee. 

With that, Mr. Pascual, if you would like to lead off with your 

five minutes. Your full testimony will be incorporated as part of the 

record. We’d ask you to try to adhere to the five minutes so we all 

have an opportunity to ask questions of you as well. 

Proceed. 

STATEMENT OF CARLOS PASCUAL, FELLOW, CENTER ON GLOBAL ENERGY POLICY, COLUMBIA UNIVERSITY, SENIOR VICE PRESIDENT, 

IHS 

Mr. PASCUAL. Thank you very much, Chairman Murkowski, 

Ranking Member Cantwell and members of the Committee. I appreciate the opportunity to testify before you on the topic of crude 

oil exports from the United States. 


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I want to address why eliminating the export ban on crude oil 

will create jobs, raise incomes, stimulate economic growth, lower 

gasoline prices and strengthen our national security and American 

influence in the world. 

I appear before you in my capacity as Senior Vice President for 

IHS. Just this week IHS issued an exhaustive new study on crude 

oil exports. I previously served as the Coordinator for International 

Energy Affairs and Special Envoy on Energy at the State Department. I’m associated with Columbia University as a Fellow at the 

Center on Global Energy Policy. 

Over the past year as Energy Envoy for the United States, I engaged in some of the toughest challenges at the intersection of energy and geopolitics from negotiating the implementation of energy 

sanctions of Iran to addressing the energy risks to Ukraine and Europe from Russia’s violation of Ukraine’s national sovereignty. 

From my experience I have seen that lifting the export ban would 

increase U.S. credibility and leverage in convincing international 

partners to adopt policies that mirror U.S. interests on Iran, Russia, free trade and even the environment. 

The ban on crude oil exports is an anachronism that grew out of 

a period of scarcity in the 1970s. The United States now has the 

fastest growing oil economy in the world. Since 2008 the U.S. crude 

oil output increased by 81 percent. This increase exceeds the combined production gains from the rest of the world. The conditions 

that justify the crude oil export ban in 1973 no longer apply. 

This new crude production, however, does not consistently match 

the processing capabilities of Gulf Coast refineries. Not all products 

can be produced to a finished state for sale. In some cases refinery 

capacity is reduced. To use light, tight oil many Gulf Coast refiners 

require a price discount that deters investment and oil production. 

The dramatic fall in oil prices since November makes this issue 

even more urgent. Over the past 30 days U.S. light crude oil has 

sold in the range of $45 a barrel compared to about $55 a barrel 

for the global price of Brent. That $10 difference will be crucial in 

determining the viability or not of many new investments in U.S. 

oil and gas production. The effects will be felt on jobs, the budgets 

of many states and in the supply chains that traverse non oil producing states as well. 

IHS estimated in 2014 that eliminating this price discount 

through exports would incentivize nearly $750 billion more in investment from 2016 to 2030, an increase in oil production by 1.2 

million barrels a day. 

The IHS report released this week, ‘‘Unleashing the Supply 

Chain,’’ documents these benefits across the economy from 2016 to 

2030. $86 billion in additional GDP. About 400,000 new jobs annually. 25 percent higher pay for workers in the energy industry supply chain. An additional $158 per household and $1.3 trillion in 

federal, state and municipal revenue from corporate and personal 

taxes. 

These benefits include sectors that cut across transportation, 

steel, professional and financial services across most of the United 

States. 


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The diesel engines, for example, driving the drilling rigs and hydraulic fracturing equipment are largely manufactured in the industrial heartland of Illinois, Indiana, Wisconsin and Michigan. 

Oil development in North Dakota relies on companies that provide banking and financial and insurance services in Chicago, New 

York, Dallas, San Francisco and Boston. 

Ohio, Michigan and Pennsylvania have large capital equipment 

manufacturing sectors which are supported by local materials and 

component suppliers. 

In Washington State the technology and manufacturing sectors 

are expected to grow rapidly. 

Perhaps surprisingly for some, the benefits also extend to lower 

gasoline prices allowing the export of U.S. light—tight, light oil 

would increase the supply of light crudes that establish the international Brent price benchmark pushing U.S. gasoline prices down 

by eight cents per gallon under our conservative assumptions between 2016 and 2030. 

The benefits for national security are extensive as well and let 

me cite a few examples. 

First, maintaining the export ban increasingly undercuts U.S. 

credibility and its three decades endeavor to persuade other nations to permit free flows of energy trade and not constrain trade 

in strategic commodities with political restrictions and resource nationalism. 

The United States, for instance, has launched numerous complaints in the GATT and WTO against China exactly because of 

these kinds of restrictions on natural resources. It would be against 

our interest to see Russia use such precedence today to curtail gas 

supplies to Europe. 

Second, the United States and all energy consumers benefit most 

when energy supply is diversified. As the U.S. has increased natural gas production by 35 percent since 2009, we have reduced our 

imports allowing about 75 billion cubic meters of gas once intended 

for the United States to be redirected globally, especially to Europe. 

Those changes created competition with Russia’s Gazprom to lower 

natural gas prices and create an internal gas market in Europe 

that has supplied gas to Ukraine through those flows. If we eliminate the crude oil export ban, the United States would similarly 

signal that it is committed to a globally competitive oil market that 

reduces and neutralizes regional dominance. 

Third, there are times when energy must be used as an instrument in foreign policy. In 2012 the United States and Europe imposed sanctions on Iran’s oil exports, and we asked China, India, 

Turkey, Japan, Korea and other major importers to act with us. As 

the person coordinating these negotiations I can assure the Committee, as a lead U.S. negotiator, that the U.S. negotiating position 

would have been far stronger if we were not protecting U.S. oil export restrictions when we are asking others to risk higher oil prices 

for international security. 

Finally, resource nationalism will be front and center. 

The CHAIRMAN. Mr. Pascual, we’re going to have to ask you to 

tie it up, please. Thank you. 

Mr. PASCUAL. Okay. Will be front and center in debate over climate change where again, one of the critical issues will be what 


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kind of sacrifices our country is willing to make to reduce carbon 

emissions. We will have much greater credibility if we are able to 

say that we do not have our own restrictions. 

With free trade, the U.S. benefits from higher prices for light 

tight oil, stronger domestic production incentives and the stream of 

economic and national security benefits are outlined in the testimony. Still Gulf Coast refiners can import and refine heavier 

crudes with stronger commercial results. 

I appreciate, Madam Chairman, your leadership and that of this 

Committee to assess this issue. The benefits that come with ending 

the crude oil export ban justify your efforts. 

Thank you for this opportunity to testify before your Committee, 

and I welcome the opportunity to respond to your questions. 

[The prepared statement of Mr. Pascual follows:] 


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The CHAIRMAN. Thank you, Mr. Pascual. Mr. Lance. 

STATEMENT OF RYAN LANCE, CHAIRMAN AND CEO, CONOCOPHILLIPS

Mr. LANCE. Thank you, Madam Chairman Murkowski, Ranking 

Member Cantwell and Committee members. I appreciate the opportunity to give you my perspectives on the need for oil exports. 

These perspectives are based on 35 years of experience in the industry. 

I started working in the drilling rigs in Montana. My family 

owned a wheat farm there. I put myself through college and obtained a petroleum engineering degree. 

When I graduated I went to work on Alaska’s North Slope, for 

14 years. I’d like to think I made sour dough status, but it depends 

on who you ask. Then from there to California and since then 

throughout the U.S. and around the world. 

I’ve seen industry booms and busts. I’ve seen projects that 

worked and ones that didn’t, but I’ve never seen anything quite 

like this energy renaissance we’re going through today. 

Today our country has access to a vast oil and gas resource base. 

Production and reserves are rising from unconventional sources 

like shale, and they’re exceeding our expectations. 

Consumers are saving at the utility meter and also at the gas 

pump. 

Oil and gas now supports 9.8 million U.S. jobs, and 40 percent 

of the U.S. GDP growth in recent years came from our industry. 

After decades of declining production our national fortunes are 

truly changing. This energy renaissance has benefitted our country 

both domestically and geopolitically. We really have shifted the oil 

market’s center of gravity away from unstable sources. Even as 

President Obama said, ‘‘America is number one in oil and gas.’’ 

We have a bright energy future. That’s a new concept for us. We 

did it through American-made technology and ingenuity, but there 

is a problem. We’re producing more oil than our refineries can process economically. 

With any other energy commodity we just export some to the 

global markets. We do that with refined products today including 

gasoline. In fact we had record exports of U.S. refined products last 

year. But crude oil is the only energy product banned for export 

and that needs to change. 

Most production from unconventional sources is tight oil. It 

doesn’t match our refineries that were built for heavy oil. To take 

more light oil the refineries have to run inefficiently or at lower 

rates. 

They could install new condensate splitters to process more light 

oil, but that could cost, on average, $400 million per refinery. Getting air permits, we think, is a problem. Meanwhile, refineries already face big investments to meet tougher gasoline standards. So 

they probably can’t expand as much as is needed. Instead to protect 

their economics refiners generally pay less for the oil. 

The world oil futures today sells around $53 a barrel, with American oil selling for $43. That’s a $9 to $10 discount, and that’s been 

typically running $5 to $10. This is having an impact on American 

producers, particularly in this low price environment we find ourselves today. 


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It disadvantages us against our competitor overseas, and every 

dollar discount is a dollar less invested in American production. 

Also, some of these light oil projects are uneconomic at prices below 

$70 a barrel and most of them are uneconomic at $40 a barrel. 

But we expect our light oil production to continue growing. And 

by 2020 our output capacity could be two million barrels a day over 

the capacity to refine it. Either that or our projects will be uneconomic due to low prices. 

So we need oil exports. Exports could incentivize three million 

barrels a day of new production, on average 400,000 to 800,000 

new jobs per year. We’d gain $86 to $170 billion in annual GDP. 

The trade balance would improve by $67 million annually, and as 

Carlos has said government would gain $1.3 trillion of additional 

royalty and tax revenue through 2030. And consumers will gain 

lower gasoline prices. 

Our exports would expand world oil supplies. That would drive 

gasoline prices down and the savings would be at least 7 to 12 

cents per gallon. But even with exports U.S. refiners will still have 

all the light oil they need. They will still have an advantage over 

our competitors elsewhere, and that’s due to shipping costs. 

So in closing, nature has blessed America with a huge new resource. Let’s make the most of it. We need crude oil exports. 

Thank you, and I’ll look forward to your questions. 

[The prepared statement of Mr. Lance follows:] 


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The CHAIRMAN. Thank you, Mr. Lance. We appreciate you being 

here. Ms. Rosenberg, welcome. 

STATEMENT OF ELIZABETH ROSENBERG, SENIOR FELLOW AND DIRECTOR, ENERGY, ECONOMICS AND SECURITY PROGRAM, CENTER FOR

A NEW AMERICAN SECURITY

Ms. ROSENBERG. Thank you. Chair Murkowski, Ranking Member 

Cantwell and members of the Committee, thank you for the opportunity to testify today on the issue of U.S. crude oil export policy. 

Recent dramatic increases in U.S. energy production have reshaped our oil industry in some of the ways that my fellow panelists have just described, our industrial output and many of our 

global trading relationships. This oil boom has improved our GDP 

and our balance of trade, and it has meaningfully advanced our energy and national security. These benefits, however, will be clipped 

if policy makers do not change the 1970s era crude export policies 

that prevent U.S. oil from moving to markets overseas. 

In today’s abundant oil market supply conditions with a problematic mismatch between the increasing new volumes of domestic 

light oil and a refining industry geared towards heavier oil. Export 

restrictions don’t make sense. They prevent U.S. producers from accessing international buyers able to process more light crude and 

who will pay international benchmark prices. This depresses domestic prices and distorts the market and in turn, this constraints 

the growth potential for domestic producers and the domestic economy more broadly. 

Only a subset of American refiners benefit from the depressed 

domestic oil prices, and these refiners do not pass on cost savings 

to consumers as gasoline prices are largely determined by global 

Brent benchmarks. Removing the oil exports ban will alleviate 

market distortions and it will improve productivity, efficiency and 

economic growth. 

One of the key economic benefits associated with lifting the ban 

is the stimulus this will provide for energy production growth 

which a variety of studies suggest will decrease domestic refined 

product prices and expand the GDP, strengthening our economy. 

The engine of our national security strengthens the United States 

to lead on international, economic, strategic and defense matters. 

In addition to benefitting U.S. interests at home, lifting the ban 

will support our foreign partners and our interests abroad. More 

U.S. crude shipped overseas will diversify the global supply pool 

and allow our trading counterparts abroad to achieve a more optimized mix of imported energy commodities. This will enhance their 

market efficiencies, lower costs for consumers and enhance economic growth. These factors make the United States a more important trading partner for economies abroad which will in turn expand U.S. soft power leverage in the conduct of our foreign affairs. 

Additionally, lifting the export restrictions will set the right antiprotectionist tone on trade. At a dynamic time in global energy 

markets and at a critical point in trade negotiations with our Atlantic and Pacific partners, the United States should affirm a commitment to free trade in energy and the expectation that trading 

partners will similarly adopt similar commitments. 


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Additionally, open energy trade is in line with our WTO commitments and will be indispensible in winning potential future natural 

resource trading disputes. 

Another important benefit of lifting the oil export ban is the contribution it will make to U.S. and international energy security. 

When more of the global oil supply pool comes from stable producers, the overall market is more stable. U.S. crude will be 

shipped via fewer maritime hot spots or choke points such as the 

Straits of Malacca and Hormuz and the South and East China 

Seas. 

Particularly in times of market crisis the unrestricted ability of 

U.S. producers to export will make them more responsive to market signals and better able to quickly adapt. This contributes to 

market conditions that can quickly resolve and possibly even deter 

actions by foreign producers to use oil as a strategic weapon. Lifting the export ban will also give the United States more flexibility 

to sustain and expand energy sanctions in the future. 

Allies of the United States, many of whom reluctantly participated in energy sanctions in the past, may prove unwilling to participate in further sanctions unless the United States makes a serious proactive effort to stimulate alternative oil supplies which will 

help to keep the market balanced and minimize price spikes. If the 

United States cannot convince allies to join on energy sanctions 

against adversaries in the future, the threat of new sanctions will 

not be credible and their effect will not be forceful. 

Washington has a unique window of opportunity to harvest dividends from abundant domestic energy. Policy makers should lift 

the oil export ban to promote economic growth and allow the 

United States to reap the geopolitical advantages of having a larger 

and more flexible role in the global oil market. 

Thank you and I look forward to your questions. 

[The prepared statement of Ms. Rosenberg follows:] 


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The CHAIRMAN. Thank you. Mr. Drevna, welcome. 

STATEMENT OF CHARLES T. DREVNA, PRESIDENT, AMERICAN FUEL

AND PETROCHEMICAL MANUFACTURERS

Mr. DREVNA. Madam Chair, Ranking Member Cantwell and 

members of the Committee, thank you for the opportunity for us 

to present AFPM’s views on the crude export ban. 

At the outset I’d like to underscore a couple of items. 

First, AFPM does not necessarily oppose the lifting of the crude 

export ban. We do represent more than 95 percent of the refining 

capacity here in the country; however, we do believe the free markets allow companies to compete and provide the highest quality 

goods at the lowest price. 

So it’s important to frame this discussion in two ways. 

First, please, Congress should not narrowly limit the scope of 

this debate to one issue. 

We’ve been lurching from energy crisis to energy crisis for as 

long as most of us can probably remember. Now we have an opportunity to change crisis into opportunity. And as a result there are 

a number of other free market, anti-free market, policies that if left 

unaddressed, when, if and when, the U.S. lifts the ban on exports, 

will make U.S. refineries less competitive than our global competitors. 

For instance, if we lift the oil export ban without addressing that 

famous Jones Act it will become more cost effective for a barrel of 

crude oil to be shipped from Houston to Europe, refined and 

shipped back to the U.S. East Coast as gasoline than it would be 

just to ship that barrel of crude from Houston to Philadelphia. This 

makes no sense and I would love to be at the next town hall where 

elected officials try to explain that we’re selling oil to our competitors cheaper than we sell it to ourselves. 

Surely if we’re discussing the shedding of the vestiges of the 

1970s energy policy we can discuss the shedding of the vestiges of 

a 1920 shipping policy. 

Second, this debate should be grounded in fact. To that point I’d 

like to describe a survey we released yesterday detailing the dynamic nature of the refining industry and the investments we’re 

making to absorb more light, sweet crude. There have been several 

studies of the benefits of allowing crude exports, you mentioned a 

lot of them, that perpetuate a tremendous understanding about 

U.S. refiner’s ability to keep up with increasingly amounts of very 

light crude oil is being produced. 

These studies focused on one part, the supply chain, of the supply chain crude production. And seemed to assume the rest of the 

chain distribution storage and refining has no dynamic response. 

We took another route. 

We simply asked our members what they are doing and what 

their plans are in the near term to deal with this new light crude 

oil. In other words, this survey is not based on modeling or hypothetical scenarios, but on actual refiner’s plans. 

Bottom line. The refiners plan to increase their use of their light, 

sweet crude by over 730,000 barrels a day from 2014 through ’16. 

This is more than EIA’s projected increase for that time frame. 


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The survey also pointed out the importance of being able to access the new production. For the refiners getting the crude has 

been much more of a bigger issue than refining it. If logistics were 

not an issue, respondents could process 1.5 billion barrels a day 

more crude in 2016 than they did in 2014 without any further investments than they already have in the works today. From 2013 through ’16 the respondents are investing over $5 billion to use more light, sweet crude. Now to put this is some sort 

of context. We, the refining sector, do it by $10 billion of capital investment each year. So in one year you can see that, $10 billion. 

In $5 billion over four years is perhaps about ten percent of their 

capital program. 

The survey asked about the logistic activities to get new production to refineries. Most crude delivery was actually from the 

Bakken region where, in North Dakota, not surprising since this 

was a new region never connected to the refining system. But old 

regions in the Permian and the Eagle Ford areas in Texas also had 

significant crude delivery activities. 

While these old regions had some delivery infrastructure problems, or infrastructure in place I should say, the reinvigorated production required some more infrastructure to get it to refiners. 

These results underscore, once again, that policies facilitating infrastructure development are vitally important. 

Now let me be again clear. We do not—we support free market, 

and we do not oppose the export, the lifting of the export ban. But 

let’s not be fooled into thinking that the restriction on crude exports is the only barrier to a free market. 

Refiners currently struggle with a number of barriers including 

the Jones Act and that infamous RFS that inhibit an energy policy 

that is based on truly, on a free market. The debate can’t happen 

in silos. We must take a holistic approach because you can’t change 

one policy without understanding the other, that it will impact 

other policies. We must consider the unintended consequences. 

Thank you very much. And I look forward to your questions. 

[The prepared statement of Mr. Drevna follows:] 


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The CHAIRMAN. Thank you, Mr. Drevna. And let’s finally hear 

from Mr. Warmann, welcome. 

STATEMENT OF JEFFREY WARMANN, CHIEF EXECUTIVE OFFICER, MONROE ENERGY INC. 

Mr. WARMANN. Thank you, Chairman Murkowski, Ranking 

Member Cantwell and the members of the Committee. Thank you 

for inviting me to testify. 

My name is Jeff Warmann. I’m the CEO and President of Monroe Energy. We own and operate a refinery in Trainer, Pennsylvania. I have 30 years of experience in the petroleum industry. I’m 

here to testify on behalf of Monroe Energy and the Crude Coalition. 

Current restrictions on exports of U.S. crude oil provide real economic benefit to U.S. consumers, businesses and protect our national energy’s independence and security. The repeal of this law 

would do great harm and lasting damage to these vital interests. 

I want to make five points this morning, very quickly. 

First, the export law benefits U.S. consumers and businesses. 

The impact of lower fuel costs to U.S. household income and consumer confidence can’t be understated. It’s dramatic. It’s 

measureable. It’s broad based and it’s real. 

The new Allstate national journal poll has confirmed that lower 

gasoline prices have made a huge difference in American families’ 

lives allowing them to spend more of their savings and money in 

ways that ripple throughout our economy. An average family saves 

over a thousand dollars from lower fuel prices right now. Do we 

really want consumers to lose this savings? 

Lower fuel prices also reduce the cost of doing business, especially in transportation, petrochemical, agricultural and manufacturing sectors. 

Second, there is no free trade in the international crude market. 

Let me be crystal clear about this point. I strongly support free 

trade, but the global crude market is neither open nor is it free. 

There is no inconsistency for free trade and against crude exports. Lifting our export restrictions would allow the transportation 

of U.S. crude outside of competitive American market into a less 

competitive global one that’s controlled by OPEC. OPEC is a cartel 

in every sense of the word and will continue to manipulate the 

world’s oil market to its desires. 

Third, removing the export restrictions would raise crude oil 

prices and cost American jobs. 

The shale oil revolution breathes new life into close refineries. 

We created thousands of refinery jobs for workers as well as supporting tens of thousands of additional jobs throughout the nation. 

Refining jobs have a huge multiplier effect. 

A study commissioned by the Commonwealth of Pennsylvania 

found that for each local refinery job it supports 61 jobs nationwide. That means one refinery employing a thousand workers supports 61,000 jobs nationwide. Repealing this law would benefit foreign refinery workers at the expense of all these thousands of 

American jobs. Our refineries would lie dormant again. 

Fourth, the U.S. refineries have plenty of capacity to process 

light crude, and I defer to the AFPM studies as well as the Baker 

O’Brien studies. Every one of the opposing studies, like my colVerDate Sep 11 2014 02:12 Jun 10, 2015 Jkt 094051 PO 00000 Frm 00105 Fmt 6633 Sfmt 6602 E:\HR\OC\A051.XXX A051

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league here Charles Drevna has said, look at it in a very static 

mood, not a dynamic mood—mode and we can accommodate the 

light, tight oil produced even under the most optimistic scenarios 

by the EIA. 

Fifth, the purpose the export law is as important today as when 

it was enacted. Despite the production renaissance of recent years 

our country still imports 35 percent of our total crude oil needs 

from OPEC countries, over three million barrels a day and three 

times as much oil from Saudi Arabia as we did at the time that 

the export law was put in place. 

Exporting U.S. crude means importing more oil from overseas 

and subjecting ourselves to the whims and the uncertainty of 

OPEC regimes. We are on the cusp of developing true energy independence where we can produce, refine and domestic oil virtually 

filling every petroleum need here at home. Allowing exports of 

American crude sabotages this goal which has been an important 

policy objective for over a generation. 

The issues surrounding exports of American crude oil are very 

complex. My company and my fellow crude coalition members 

strongly believe that allowing exports of crude will harm American 

households and businesses, the U.S. refining sectors and our nation’s energy security and independence. Prudence dictates that 

Congress refrain from making such drastic change to this long 

standing pillar of our energy policy and our national security. 

Thank you very much, and I look forward to answering any questions you may have. 

[The prepared statement of Mr. Warmann follows:] 


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The CHAIRMAN. Thank you, Mr. Warmann. I appreciate the testimony from each of you this morning. Now let’s begin our questions. 

I want to start with what Americans are talking about when 

they’re thinking about whether or not we should change a policy 

to allow for exports. I think you can tell from my opening statement and from comments that I’ve made over the past year that 

I think it is time to look at this policy and to repeal it for a lot 

of, what I consider to be, substantive policy reasons. But at the end 

of the day, the people I work for really don’t give a hoot about what 

the policy is. What they want to know is, is it going to cost me 

more money when I’m filling up, whether it’s filling up my car or 

my snow machine or my boat or home heating fuel? 

So the question that I would ask of you, Mr. Pascual and Ms. 

Rosenberg, you are the folks that are looking at these studies that 

are out there and the analysis and the critique as to what lifting 

the export ban would actually reveal in terms of pricing. Can you 

speak directly to that? And either one of you proceed. Mr. Pascual. 

Mr. PASCUAL. Thank you, Madam Chairman. I think you’re absolutely right. The critical focus on the part of Americans, and Senator Cantwell has indicated this as well, is that the critical issue 

is price. Every single study that has been done by a major institution has gotten to the same conclusion, lifting the export ban will 

reduce the price of gasoline in the United States. 

The reason for this is that the price of gasoline is tied to the 

Brent crude international benchmark price, not to WTI which is 

the benchmark price in the United States. If we are able to export 

light, tight oil from the United States, we add to the global supplies that contribute to that Brent crude benchmark. As a result 

of that we help drive down the international oil price that is fundamentally tied to the price of gasoline in the United States and 

around the world. 

If you look at the trends over time, if you look at it across the 

world, the same issue is true in every single market. The price of 

gasoline is linked and tied when there are open markets to the 

price of Brent crude. 

So the ability to export actually drives up international supply 

for the crude oil that’s necessary. It drives down the price of gasoline. And in addition to that it has a number of other benefits that 

we’ve laid out on this panel of increasing jobs, of increasing revenues to states, of increasing Gross Domestic Product and the product of individual states as well. 

The CHAIRMAN. Thank you. Ms. Rosenberg, do you care to add 

anything? 

Ms. ROSENBERG. I’d agree with everything that Carlos just said. 

I’ll just add that these studies that we’re talking about, they’re not 

only independent studies, some of them are industry sponsored, but 

also studies by the EIA, as you mentioned originally in your opening statement, have also made this point that the prices for gasoline for our consumers here in the United States are largely tied 

to the international benchmark price, to the Brent price. 

The CHAIRMAN. Let me ask a question to reinforce a point, and 

I think both of you spoke to it. The suggestion has been made that 

the reason we would even consider lifting this export ban is because this is something that the industry wants. 


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So I’m not going to ask Mr. Lance this because, as the CEO of 

ConocoPhillips, people would say, well, of course ConocoPhillips 

would like to see the export ban lifted. 

But what I think is important to understand, a little more clearly, is why it is important to other sectors. I think, Mr. Pascual, you 

mentioned it in the manufacturing sector, the banking sector, the 

financial sector, the benefits that we see when we allow for increased production. 

Ms. Rosenberg, you were focusing more on the benefits from a 

national security perspective. 

We have seen domestic production rising for years. We’re backing 

out imports there which, ultimately, have the same effect, pushing 

more oil out into the global market, to the extent that lifting the 

ban would boost production even further then. Have we seen national security benefits already because of what we have put out 

on that global market? 

Ms. ROSENBERG. I think we have, and there are a couple of key 

ones that we should bear in mind. 

The first is the economic benefit that this energy, larger energy 

production, has given to our country. And when our economy is 

stronger when we are less indebted which shows up in our balance 

of trade. 

When we capture more of the rents of our oil consumption here 

at home instead of sending those revenues to producers abroad that 

emboldens the United States. It gives it a stronger position to lead 

internationally. It makes us a stronger, more important trading 

partner and a strategic leader on international security issues. 

We’ve mentioned the significance for the United States in being 

able to move forward with tough energy sanctions on Iran, in particular, and also when thinking about Russia as well with our European counterparts coming from a position of strength as an energy producer and a strong economic base gives the United States 

that ability to lead forcefully on such international security issues. 

The CHAIRMAN. I’d like to ask you more on the sanctions piece 

of it and particularly with Russia, but I’m going to turn to my colleague and Ranking Member. 

Senator CANTWELL. Thank you, Madam Chair. I love this discussion about price since you and I are probably from the states with 

some of the highest gas prices or consistently highest gas prices. 

So, at least from my perspective, I’m always interested in learning 

how we’re going to lower gas prices. 

I love the confidence, Mr. Pascual, with which you predict that 

lifting this export ban will lower gas prices. I’ve spent much of my 

career trying to make sure that we protect consumers from high 

prices and enforce federal laws on price manipulation. 

For us on the West Coast, the question is how many trains a day 

are we going to have through our state, or is the oil just going to 

bypass us all together? How do we get gas lower prices? And that 

juxtaposed to the rest of the nation constantly eludes us. 

So I want to turn to the safety question for a second and Mr. 

Drevna or Mr. Warmann, about this issue of volatility. In fact, I 

even saw on one site somebody suggested we might be willing to 

do something about the volatility of the Bakken crude if we could 

just export it. Do we need to be shipping this much natural gas in 


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the product and isn’t there something that needs to be done about 

stabilizing that? 

Mr. DREVNA. Well, let me take it here first. Well, first of all we 

are really, as the industry, looking forward to the final rule coming 

out from DOT. My industry has spent over $4 billion investing in 

new tank cars, and we understand that’s not going to be enough. 

We understand that the new cars are going to come out, I mean, 

the new specs are going to come out on cars whether they are existing or new. We’re going to have to refurbish. We’re going to have 

to buy new. 

That being said, the cars on the tracks today, they are well, well, 

within the limits of the volatility of the crude. The problem, Senator, is not the cargo. The cargo can be shipped safely. 

There’s very little difference between 13.9 psi and 13.7 psi when 

you’re looking at shipping crude, and that’s the difference in the 

Bakken verses some others. The problem is that have we got so 

cavalier in this nation that it’s okay to have two to three 

derailments a day no matter what the commodity is? 

So when we’re looking at the PHMSA and the DOT proposal it’s 

fully, in our opinion, it’s fully focused on the tank cars. And we, 

as the industry, are going to be right in line supporting and getting 

those cars up to specification. 

But to cavalierly say we’ll accept two to three derailments because the railroads have done—— 

Senator CANTWELL. Just to be clear. I’m not—— 

Mr. DREVNA. I know, I know. 

Senator CANTWELL. I’m not going to accept that, and I’m calling 

for higher standards. I’d like for Mr. Warmann to also weigh in on 

this because I’m pretty sure your refiners don’t really want all that 

natural gas in the product. 

So why are we shipping this? I see headlines about bomb trains, 

and I’m not being cavalier about it. I’m calling for a higher standard. In fact, I want them to implement a rule at PHMSA to limit 

crude oil volatility in rail cars. Mr. Warmann. 

Mr. WARMANN. Yes, Senator, you’re correct. The refineries would 

like to have lower rvp crude oil. However transporting higher rvp 

materials we do every day. 

It can be done safely. I think Mr. Drevna in a recent statement 

said that there was 1,861 derailments, of which six were crude in 

2014. So it’s a more complex and holistic solution that we need to 

look at. 

The industry is looking at reducing the rvp doing some more stabilization of the product. We’re looking at reinforced rail cars. We 

don’t want the rail. We want crude in our refineries. 

Senator CANTWELL. Why does Eagle Ford come out more volatile 

and we make them reduce it, and then yet Bakken comes out and 

we don’t make them reduce it? So now every major metropolitan 

area across the country has to worry about this. 

Mr. WARMANN. There’s markets and there’s places to put the 

lighter ends in the Gulf Coast rather than in the Bakken. That’s 

one of the problems is the alternative is to flare it which there are 

flaring regulations that prevent you from flaring certain quantities, 

and that that forces us to try to deal with a commodity that we’re 

trying to logistically move somehow. 


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One of the things that I would take a look at though as we’re 

looking at this regulation is the condition and the inspection of the 

railroads. The industry is moving to much more sophisticated and 

robust rail cars, but there’s been nothing put onto the railroads for 

increased inspections, increased inspection of equipment, the condition of their tracks or anything else. 

So I think it’s a more holistic view that we have to take of this 

whole transportation situation. 

Senator CANTWELL. My time has expired, Madam Chair. But just 

to make a point, I believe in the holistic approach and the Reid 

vapor pressure should be examined as well and PHMSA should act 

on it. So thank you. 

The CHAIRMAN. Senator Cassidy. 

Senator CASSIDY. Mr. Drevna, I enjoyed your testimony, but let’s 

explore it a little bit. 

Now if there is currently capacity to take all this light, sweet or 

all this crude that’s domestically being produced, theoretically 

there would be no discount relative to Brent. The fact that there 

is discount, obviously, could be different factors. If we had the Keystone XL pipeline taking it out of the Bakken, obviously we would 

save lives and lower the cost. 

But if I look at Louisiana sweet, and we’re right there, my Gosh, 

in refinery heaven. I think I’ve got it right now. It’s almost too 

much to believe, an $11 discount relative to Brent. 

So if there was current capacity, why would there be any discount relative to Brent? 

Mr. DREVNA. Well, you know, Senator Cassidy, you’re right. But 

let’s not take a snap shot in time as we sometimes do and say, 

okay, now we’ve got to make our decisions right today on what’s 

happening. 

You know, over the past years, months, you’re seeing that Brent 

WTI discount shrink. As a matter of fact well not too long ago 

Brent was selling a little bit less than WTI in certain areas. So 

what we’re saying is that all we want you to do is make sure you 

understand. 

Senator CASSIDY. No, I’m sorry, let me just finish though. 

Mr. DREVNA. Yeah. 

Senator CASSIDY. Let’s explore this a little bit more. 

Mr. DREVNA. Yeah. 

Senator CASSIDY. Your survey on your members—— 

Mr. DREVNA. Right. 

Senator CASSIDY. And frankly it is in the interest of your members to reply that they have increased capacity. They know this debate is taking place, and they’d like to indicate that they can absorb the capacity and that shipping overseas is not required. 

Mr. DREVNA. Correct. 

Senator CASSIDY. So when you surveyed them did you get some 

sort of documentation of the amount of money that they are currently investing to expand capacity? Did they send you a list of the 

bonds that they put out, etcetera? 

Mr. DREVNA. We—as my testimony says, we—they are putting, you know, $5 billion into—— 

Senator CASSIDY. I accept that that is what they said. I’ve 

learned in this job to say what I’ve been told, not what I know. 


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Mr. DREVNA. Well—— 

Senator CASSIDY. The reason I say that is because, again, we 

have this discount. Bakken you could explain because we can’t get 

the Keystone passed. But when I look at the refinery capacity in 

the Midwest on oil, for example, which I think is the only place 

that can take that easily right now through pipeline, there’s still 

a discount there. 

Mr. DREVNA. Well, Senator, what’s happened though is you had 

that bottleneck over the past years right there at Cushing. We’ve 

got the southern leg though. You’re seeing day by day that bottleneck is—— 

Senator CASSIDY. That’s why I wanted to look at Louisiana light 

and Louisiana light in next to all those refineries still is selling at 

a discount relative to Brent. 

So that seems that that’s not so much infrastructure because 

we’ve got pipelines in Louisiana. I’ll stop there. 

Mr. DREVNA. Well, first of all I want to go back. You mentioned 

that the refiners who responded to the survey don’t want the crude 

export. That’s not correct, sir. The AFPM, all we’re saying is we 

don’t oppose it, understand all the parameters and—— 

Senator CASSIDY. I only have a little bit of time, I’m sorry. 

Ms. Rosenberg, I enjoyed your testimony. I saw Larry Summers 

and I’m saying this off the top of my head, but Larry Summers 

gave a talk where I think he said that we would increase GDP by 

one percent. So we have this anemic 2 point—your CBO is estimating that our GDP is going to grow by two percent over the next 

five or six years. It’s awful. Under Clinton and Reagan it grew by 

three and a half and under this it’s been two percent. But we can 

increase it by one percent just by allowing exports. Now I know 

there’s people in Louisiana that travel to North Dakota to work in 

the Bakken because there’s such a demand for labor, folks make 

good money by traveling there. 

Any thoughts upon Summers’ estimate of one percent growth in 

GDP by allowing exports, what that would mean in terms of jobs 

for working families because right now that’s what we’re struggling 

to create? 

Ms. ROSENBERG. I certainly think of his remarks as authoritative 

on such issues. There are other people who’ve made other particular estimates for the amount of increase that allowing crude exports would give to our GDP. There’s a range of estimates. 

But broadly there’s a belief amongst independent analysts and 

many stakeholders in this industry that, in fact, there would be 

quite a significant GDP bump associated with lifting the ban and 

therefore stimulating growth in the industry. 

Senator CASSIDY. I’m out of time. I’ll just say that, again, as far 

as principle challenge right now is creating jobs for blue collar 

workers because no industry better for creating blue collar jobs 

than that for the exploration and production of fossil fuels and is, 

by definition, domestic. So it cannot be shipped overseas although 

the product can. 

I would just say anything that could increase GDP by one percent is certainly something we should explore, because there’s some 

family out there whose livelihood depends upon us making a wise 

decision and the wiser the better in terms of domestic job growth. 


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Madam Chair, I yield back. 

The CHAIRMAN. Senator Cassidy, thank you. Senator Manchin. 

Senator MANCHIN. Thank you, Madam Chairman. Thank you for 

this hearing, and thank all of you for being here. 

Let me just say for those of us who can remember the 1974 embargo, we had to wait in line and then we had to have certain numbers on our license plates when we could go get gas, alternate. We 

remember those days. We don’t want those to happen again. 

And I think some decisions were made back because of that is 

where we are today. 

With that being said, in West Virginia, it would be hard for me 

to explain to the people to grasp the whole world market, if you 

will. But if we start unfettered export it would reduce the price of 

their gas. That’s a hard one. 

And if we did do that and the prices didn’t go down or would go 

up, we’d all be chastised for it. 

On the other hand, if it was tied to our foreign relations policy 

and I mean that, tied to the foreign relations policy and there 

would be a trigger on when we could export based on production, 

U.S. production. And that trigger would be based on do we have 

ample production if production decreased? And if it does—somehow 

there’s got to be a way that I can go home and explain to West Virginia, this is good for our country. 

We are defending our country. We are making our country more 

solid. We’re not buying and we’re not being drug into wars we 

shouldn’t be drug into. We’re helping prop up our native neighbors 

by having access to our abundance right now. 

I just think there’s a win/win here. We just got to find it, but 

there’s a win/win for all of us. 

We can protect the market. We can make it stronger overseas. 

We can protect our NATO allies, and it looks like we’re all going 

in two different directions, either we unfetter or nothing. 

Mr. Lance, you might want to comment on this even though you 

would be expected to be a self interest from Conoco, you’re still an 

American that cares about or the family cares about what we do. 

Mr. LANCE. Yeah, I do, Senator. Thank you. 

I think it is an important—the energy in the United States is at 

the juxtaposition of many issues, climate, energy security, and national security as well. So I take your point. 

I think I’m here to assure the group that from the ENP side from 

the independent producer side, this revolution is real. This revolution is long lasting. It’s going to create a dramatic surplus in light, 

sweet crude that the refiners cannot take. 

They are making investments. We will be sending crude to the 

refiners that have/make those investments to go do that, but we’re 

going to greatly exceed their capacity to take this crude. 

So we have to ship it overseas. We have to get it into the open 

market. When we do that, as others have testified, the global supply will increase. We’ll reduce the volatility. We’ll decrease the 

amount of gas price. 

We’ll be seeing this and there’s fact points today that’s going on 

today. The consumers are not winning from the fact that we have 

world oil prices exceeding U.S. prices. 


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Senator MANCHIN. As you all have observed sometimes we’re not 

always on the same page here as far as elected officials. We’re trying to get on the same page, a page that we can all work off of. 

Mr. Warmann, could you all accept a trigger? Basically if production was at a certain level, we had the excess and they’re producing 

and then the refiners. But that would give us the green light to go 

ahead and export. 

Mr. WARMANN. Senator, I would definitely say, I would focus 

more on what we’re importing. We’re still importing, you know, six, 

seven million barrels a day, two and a half million barrels of light 

crude a day. Basically, if you export the light crude we’re just going 

to bring in more light crude. 

And two, you’re offsetting points, it’s a matter of transportation. 

I can tell you specifically in Trainer, Pennsylvania, you have a 

benchmark of WTI crude in Cushing and it takes me $3 by pipeline 

and $5.50 by ship to get it to Trainer. So that’s WTI plus $8.50. Brent is in the North Sea. It takes $2 to get it to me. So if you take those there should be a $6.50 discount to WTI verses Brent 

just on a transportation basis. 

And of course, that floats with transportation variables as well 

as the availability barriers. 

Senator MANCHIN. Can anybody on the other side here explain 

why we’re still importing so much and how we would go home and 

explain to well, now we have to export? If we export why would we 

be importing if we can export now? Mr. Pascual. 

Mr. PASCUAL. Senator, thank you. I’d be glad to. One of the advantages that we have with our refinery system, and it is an advanced and sophisticated refinery system, is that it was focused 

and tooled on processing heavy crude oil. As a result of the efforts 

that we have made in the refinement of that system, we’re able to 

get the maximum number of products out of heavy crude oil and 

use them within the United States. 

The light, tight oil that is being produced now in the United 

States does not match the refinery configurations, and as a result 

of that you don’t get the maximum level of production. 

And I think Americans can understand that if you have one kind 

of product that has a higher international price, you sell that product. 

Senator MANCHIN. Are we bringing light in or bringing heavy in? 

Mr. PASCUAL. We’re bringing heavy in. 

Senator MANCHIN. Well I thought Venezuela was light? 

Mr. PASCUAL. No, Venezuela is heavy crude. And—— 

Senator MANCHIN. So we’re bringing both in, a little. 

Mr. PASCUAL. Right. We’re bringing in principally heavy. And 

one of the things that’s happened as a result of the production of 

light, tight oil in the United States is that we’ve radically reduced 

our imports of light, tight oil from both the Middle East and from 

Africa. The role that OPEC plays in exports to the United States 

is radically collapsed. Our imports have gone from 60 percent of 

our consumption to 27 percent of our consumption in just the last 

five years. 

That is a massive national security benefit, and the way to keep 

it is to maximize the incentive to producers to maintain and sustain our productive capacity. 


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And the best way to do that, I think we’ve heard from everybody 

on the panel, is to give American producers the widest market to 

be able to export their product. 

That’s what maximizes competition. That’s what brings the best 

prices back to the United States. That’s what generates jobs as a 

result of the supply chain. That’s what has the massive impact that 

we’ve documented in our study of 400,000 new jobs, economy wide, 

an increase of $86 billion annually in our GDP. 

Senator MANCHIN. Madam Chair, I’m sorry, but if we could have 

the Committee on both the Ranking side and the Majority side to 

work on getting us the facts, all members, the facts of what we’re 

importing, the amount that we’re importing, the type we would be 

exporting and if there’s a trigger mechanism on production. 

Because if there’s a trigger mechanism then the domestic retailers, the domestic customer, you and I, can still benefit from a lower 

price because of the heavy production. 

If the production drops and we’re still exporting, we’re going to 

pay a heavier price for that. Supply and demand. 

So if we could get that from our Committee. 

The CHAIRMAN. I appreciate the comments from the Senator from 

West Virginia. I think it should be pretty easy to get a better understanding. 

Senator MANCHIN. One is shaking their head no and the other 

is saying yes. 

The CHAIRMAN. Well, no, in terms of collecting the information 

that you’re requesting in terms of what we import, where we import, what type whether it’s heavy or light? We can make sure that 

we have that at our disposal. That’s why we have the benefit of a 

hearing like this is to educate one another. 

Let’s go to Senator Daines. 

Senator DAINES. Thank you, Madam Chair, and I’m glad that 

we’re having this thoughtful conversation. I look at this in the 

backdrop of we’re addressing a policy that’s 40 years old. I was a 

little kid then. I’m not sure Cory Gardner was even around during 

the oil crisis of ’73. And I remember the 55 mile an hour speed 

limit. [Laughter.] 

I set you up there, Cory. 

I remember the 55 mile an hour speed limit in Montana, you 

know, big, wide, open roads there and having to set that thing at 

double nickels and then followed by the oil export ban of ’75. 

For me, I think, the thoughtful conversation needs to revolve 

around what’s going to happen 30 to 40 years from now based on 

policy decisions that we make today. We’ve moved clearly from a 

scarcity type of environment to now one of abundance. And I think 

that’s why I’m glad to have this conversation today as we thoughtfully consider this policy. 

I too, am concerned about what’s going on on the national security on the challenge we face overseas. Looking around the world 

from Russia to Iran, many of the world’s energy resources are in 

unstable regions. They’re in oppressive dictatorships. I look at the 

top ten oil producers in the world, I should say, oil and liquids producers. It is great news that the U.S. is now number one surpassing Russia and Saudi Arabia. But you look at the list of the 

top ten, Russia, China, Iran, Iraq, then Saudi Arabia, UAE, KuVerDate Sep 11 2014 02:12 Jun 10, 2015 Jkt 094051 PO 00000 Frm 00120 Fmt 6633 Sfmt 6602 E:\HR\OC\A051.XXX A051

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wait. These are in unstable parts of the world. Some of these are 

run by dictators. 

I do believe the world should rely more on American-made energy instead of Russia and the Middle East. 

Ms. Rosenberg, a question for you. How will increasing flexibility 

for crude oil exports strengthen our position on the Iran sanctions? 

Ms. ROSENBERG. Well, thanks for the question. 

So, right now we’re actually at a critical moment in the negotiations, the P5+1 negotiations, with Iran and I believe some of your 

colleagues have heard testimony from Administration witnesses 

this morning in the Senate Foreign Relations Committee about the 

negotiations and the Iran sanctions. 

Being able to make sure that the oil market is well supplied 

gives the United States the leverage to be able to impose sanctions 

on Iran, energy sanctions on Iran, with our allies which remove 

their oil from the market. The energy sanctions that the United 

States and our European allies imposed in 2012, that Carlos mentioned, took about a million and a half barrels of Iranian oil off the 

market. 

The reason why that did not spike prices and politically and economically, the United States, our consumers and consumers globally and in our partner ally country nations were able to manage 

that was because the United States and Saudi Arabia as well were 

able to make a huge contribution in additional supply in order to 

keep the market relatively balanced at a period when there was 

really, historically high, and unprecedented levels of supply disruption in the market. 

If there is a political instance where there is a need to impose 

further sanctions on Iran then being able to make a credible threat 

that the United States and its allies can impose further sanctions 

then the United States will need to be in a position of stoking or 

stimulating supply to the market. Lifting the crude export ban will 

help to do that. 

Senator DAINES. Thank you. And, you know, it is a gift we’re 

leaving for our children, grandchildren right now, I think, is this 

ability for the U.S. to move to the top of that producing list for oil 

and liquids here in the world. This, I think, truly will contribute 

not only to our own national security but to the stability and security of the entire world. 

And it wasn’t because of Washington, DC policies. It’s the innovation. It’s the power of the free markets that now we are in this 

position and why we’re seeing gas at a lower level, saving the 

American average household $750 a year which I know a lot of 

Montanans are thankful for. 

Mr. Lance, I’m happy to hear about your Montana roots. It’s good 

to have another—you’re a petroleum engineer. I was a chemical engineer. You’re a Montana Tech. I’m an MSU Bobcat and thankful 

for your leadership on this important issue. 

I also think we need to have the humility here in Congress that 

we don’t understand all of the complexities of the supply chain, the 

light verses heavy, the production, the logistics in the delivery system as well as refining capacity. It’s a complex equation that, I 

think, none of us up here would think we can manage that from 


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DC. But the free markets will figure that out with an abundance 

of oil. 

I’d like to ask you how will increasing crude oil exports create 

more good paying jobs and decrease gas prices? 

Mr. LANCE. Yes, again, Senator, you know, it’s the basic premise 

that getting more crude oil into the open market will decrease the 

price of gasoline for our consumers. 

One just brief, fact point that—proof point, that describes that. 

Six weeks ago, many have said, and I think Mr. Drevna said that 

WTI and Brent were trading at the same price. I was buying gasoline in Houston for $1.80 a gallon. Since that time WTI price has 

increased $10 over U.S. prices. U.S. prices stayed the same, and 

now I’m paying $2.20 a gallon for gasoline in Houston, Texas. 

So the fact is the consumer didn’t win. The consumer saw the 

price of worldwide crude go up $10, and U.S. crude stayed exactly 

the same. You would have thought gasoline prices—if it was tied 

to U.S. prices would have stayed the same. They did not. Gasoline 

prices went up. 

You just have to look at the market today and understand you 

see it happening in the market today for the consumer. This export 

ban, lifting that export ban, is a pro consumer policy for the United 

States. And that’s how it reduces the gasoline price. And it’s happening today. It can happen today if we were to export crude. 

Senator DAINES. Right. thanks, Mr. Lance. I’m out of time. 

The CHAIRMAN. Thank you, Senator Daines. 

Senator Barrasso. 

Senator BARRASSO. Thank you, Madam Chairman. 

Mr. Lance, just following up on that because in your testimony 

you’re calling on all policymakers to lift the ban on exporting crude 

oil from the United States. Since the export ban was established, 

Democrats and Republican Administrations have taken steps to 

ease the export ban. 

I think in the 1980s Ronald Reagan issued determinations that 

crude oil exports to Canada for consumption in Canada are in our 

national interest. More recently the Obama Administration issued 

guidance that process condensate may be exported without a license. And last month, I along with Chairman Murkowski and others, called on the Administration to issue a determination that 

crude oil exports to Mexico for consumption in Mexico are in the 

national interest. 

So I question, what other steps can the Administration take to 

relax the ban on crude oil exports? 

Mr. LANCE. Yeah, thank you, Senator. I think, you know, certainly the Administration and the President could issue a national 

interest determination and eliminate the export ban for all of the 

domestic crude that we’re producing in the United States. And as 

you quote, there’s been recent examples of that, more recently 

President Clinton, who lifted the ban in Alaska. 

GAO has studied that over the last four to five years and have 

indicated there was no change in pricing of gasoline on the West 

Coast, the primary market for Alaskan crude. 

So yes, the Administration could do something to offset that. 

You mentioned a few things that are helping. Lifting—allowing 

some of the condensates to be produced, but that’s a very small 


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step in a large step that’s needed to take to fix the problem we see 

coming. 

Senator BARRASSO. So is there anything preventing the Administration from taking these steps today? 

Mr. LANCE. Not that I’m aware of. 

Senator BARRASSO. You were just talking a little bit with the previous question in terms of jobs and the economy. What kind of job 

losses would you expect to see if the Administration actually chooses to not act? 

Mr. LANCE. Well, today I’d say for our company and for our industry you just have to look at what’s happened since November 

as the price has fallen over 58, 60 percent. And it’s exasperated by 

the fact that WTI is trading or U.S. crude is trading below global 

crude prices. 

We’ve lost a thousand rigs in this business in the matter of three 

to four months. Each one of those rigs employs 150 to 180 people. 

And I think Senator Cassidy represented, you know, these are blue 

collar jobs. These are people coming out of high school that can get 

a $100,000 a year job. These are twice—they pay twice the average 

that the national—that the government looks at when they quote 

job figures. 

So it’s been real. It’s happening today, and it’s magnified by the 

fact that we can’t export crude today. 

Senator BARRASSO. Thanks. 

Ms. Rosenberg, in your testimony you just visited about it or 

talked a bit about Iran. I was just going to go in the same area. 

You had said that U.S. crude exports will have the effect of reinforcing pressure on Russia’s energy security, and it’s certainly in 

line with key U.S. national security goals. 

You go on to say that crude oil exports will also constitute an important strategic act of support for our allies in Europe who are 

more threatened by Russia and regional destabilization. 

So could you expand a bit on your comments for the Committee 

specifically in regard to that part of the world? 

Ms. ROSENBERG. Sure, thank you for the question. So if the 

United States is able to—policy makers lift the ban and the upstream industry produces more it claims a greater portion of the 

supply pool for the United States globally and will, as we’ve discussed, have an effect on pushing down the Brent price. 

That will force—that will cause greater competition in Europe, 

for example. Russia, that is to say, Russia will have to compete a 

little harder in Europe in order to sell its crude there. It sells quite 

a lot of crude there and will therefore collect somewhat less revenue. So that’s the revenue impact for them. 

It’s—I don’t want to over sell this. I think it is modest, but it is 

strategically quite meaningful. And it looks to Europe and to Russia and to the international community like a show of support for 

our key allies in Europe that feel very threatened and very vulnerable towards—in their position at the receiving end of energy from 

Russia that has proved in the past to be a coercive supplier. 

Senator BARRASSO. Mr. Pascual, would you like to weigh in on 

this at all? 

Mr. PASCUAL. Yes, thank you, Senator. 


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When we saw each other at the Munich Security Conference a 

couple of years ago one of the big issues that was the focus of attention there was competition in energy and in particular, natural 

gas. 

And the same analogy applies to crude oil. One of the most important things to eliminate regional monopolies and regional dominance is to give the assurance that consumers in any particular 

part of the world have access to global supplies and a competitive 

global market. 

We’ve made progress in that in oil, but we have a situation right 

now where ironically the United States is the major producer that 

claims an exception to participating freely in those global markets. 

If we signal that we will participate by putting our crude oil onto 

that global market as we have been with natural gas, we’re sending the signal to our allies, to our friends, to our customers, that 

we’re going to compete to support a competitive environment that 

gives consumers maximum choice that allows them to diversify 

their resources and eliminates the dominance that any one particular supplier can have because of a regional position that it has 

with its neighbors. 

Senator BARRASSO. Thank you. Thank you, Madam Chairman. 

The CHAIRMAN. Thank you, Senator Barrasso. Very interesting. 

Let’s see. Senator Gardner. 

Senator GARDNER. Thank you, Madam Chair for holding the 

hearing. Thanks to the witnesses for being here today. 

I think it’s important that we talk about the impact that this incredible energy revolution has had on our country. In Colorado 

alone that’s more than 200,000 jobs have been created that’s resulted in new roads and new schools. 30 percent of downtown Denver’s office space is a building that’s either owned or occupied or 

leased to by an energy company. And that’s an incredible, incredible opportunity that we’ve had economically in this recent energy 

boon. 

And so today’s questions, very basic questions of supply and demand. What happens when you have too much supply? What happens when you have decreasing demand or not enough demand to 

drive investments in those increases of supply? 

Those are all important economic questions. And I think Senator 

Daines said it well. Having to understand how that impacts our 

consumers is important. 

I guess this hearing and this debate boils down to a very simple 

question. Learning today and going forward, will allowing oil exports further increase our national security and increase the economic benefits to our communities? It’s a very simple question that 

we can boil this down to. Does it increase jobs both on and off the 

oil field? Does it impact price on and out of the oil industry? To 

consumers, what does it mean? And so it’s important. 

When we talk about increasing the Gross Domestic Product by 

one percent that’s an incredible opportunity for this country, one 

percent according to the President’s past budget documents, according to budget experts here in the Senate, a one percent increase in 

Gross Domestic Product could create one million jobs. That’s putting one million people to work. That is an amazing economic 

growth engine that we have to consider. 


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Secretary Moniz talked about, ‘‘There are a lot issues in the energy space that deserve some new analysis and examination in the 

context of what is now an energy world that is no longer like the 

1970s.’’ That’s a quote from Secretary Moniz. 

So a very important issue. And we’ve talked a lot about the benefits of what could happen with exporting. We’ve talked about concerns with exporting. 

But to Mr. Pascual, I guess the question I would have is what 

happens if we don’t change this policy of the 1970s? What happens 

to jobs? What happens to the economy? What happens to both industry and non industry if we don’t lift the policy? 

Mr. PASCUAL. Senator, thank you. As a company that is 

headquartered in Denver, a company you visited, you’ve come to 

understand, I think and know the independence of our analysis 

and the scrutiny that we give to the work that we do. I think this 

brings us down to a very fundamental point. If we do not eliminate 

these variables, we give up opportunities and job creation and income creation. And the figures are quite startling. 

In terms of the supply chain itself, under a very conservative 

base case analysis, the implication is that we lose 124,000 jobs in 

the supply chain. 

If we look at economy wide what are the impacts that we would 

see, again, under a conservative scenario, 400,000 jobs economy 

wide. 

If we look at the impact on GDP, the loss that we would see is 

$86 billion. 

If we look at revenue to federal, state and local level taxes, the 

loss that we would see, the opportunity we are missing, is $1.3 trillion over the period of 2016 to 2030. 

These are things that we have documented exhaustively. We 

were able to do it because we were also able to analyze, in detail, 

the productive capacity that’s created by relaxing prices or giving 

a greater price boost as a result of exports. 

We have the data that has allowed us to look at individual wells 

throughout the country to look at what the productive effect is. And 

just as importantly we have the input/output models that allows us 

to look at the entire impact through the supply chain. 

I think a critical thing for Americans to understand and to recognize is that this isn’t just about oil. It’s looking at the entire service 

sector and equipment sector. Who produces the engines? Who produces the steel? Where does the concrete come from? Who are the 

workers that are involved in that process? 

And that is not just an oil production issue. It’s something that 

cuts across the entire United States. I think it’s important that we 

have the opportunity to highlight that. So thank you for the opportunity to do so. 

Senator GARDNER. Thank you, Mr. Pascual. 

To Ms. Rosenberg, I think last year sitting on the House Energy 

and Commerce Committee we had testimony from one of Mr. 

Pascual’s colleagues at IHS, Daniel Yergin, a Nobel prize winning 

economist, excuse me, a Pulitzer prize winning economist. He 

talked about how the fact that oil production in the United States 

had kept the Iranian sanctions from failing, and that’s probably 

something that could be said of other instances. In your testimony 


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you talked about our foreign policy, how this could help our foreign 

policies. So I guess what I’m asking is this. We have been pushing 

forward on LNG export, expedited LNG export permits here. A lot 

of the significant reason behind that is to give our allies a chance 

to have an alternative to LNG other than Russian monopolies. 

Could the same be said of our petroleum exports? 

Ms. ROSENBERG. Thank you for the question. 

I—— 

Senator GARDNER. Crude oil, excuse me, crude oil exports. 

Ms. ROSENBERG. Right. I think it’s an analogous situation. 

They’re different markets. They’re of different sizes, different liquidity. They’re supplied in different ways, pipeline versus other— 

ship, waterborne transport, et cetera. 

But I think the analogy is right which is to say that the United 

States taking a greater share of the global supply pool, becoming 

a bigger exporter and also being a more important trading partner 

is beneficial for the markets, for efficiency, for pricing and also in 

sending a message of support on the importance of free trade and 

also the significance of our trading relationships, strategically with 

our partners, and what that means for our adversaries. 

Senator GARDNER. Thank you. Thank you, Madam Chair. 

The CHAIRMAN. Thank you, Senator Gardner. Senator Hoeven. 

Senator HOEVEN. Thank you, Madam Chairman. 

We’re in a global battle for market share as to who produces oil 

and gas in this country, and we’re duking it out with OPEC. And 

we’re duking it out with Russia and Venezuela and other parts of 

the world. 

We’re in that competition right now when the world benchmark price for oil is Brent crude and that’s $10 higher than the West 

Texas benchmark. So we, in essence, are fighting for market share 

here in America at a $10 disadvantage to our competitors. Anybody 

in any business could tell you that’s a real problem. 

And so, we’re at risk for growing our oil and gas industry, our 

energy industry, in this country versus having it shrink if we don’t 

address this oil export problem and soon. 

So, Mr. Lance, I’d like you to address that issue in terms of jobs 

and energy production and economic growth here at home. 

Mr.—could you pronounce your last name? I—— 

Mr. PASCUAL. Pascual. 

Senator HOEVEN. Mr. Pascual, could you talk about it in terms 

of the importance to consumers because we have to inform consumers that this is something that is important for their benefit. 

And then I’m going to turn to Mr.—and again I’m going to have 

to ask for pronunciation. Drevna? 

Mr. DREVNA. Yes, sir. 

Senator HOEVEN. What can we do, on the refining side, to better 

match up our domestic production of light and heavy so that you 

can process both and it works well for us in this country? 

So those would be my three questions starting with Mr. Lance. 

Mr. LANCE. Thank you, Senator. Yes, your basic premise around 

the competitive nature of the investment in this industry, given the 

fact that there today is a $10 differential between U.S. crude prices 

and global. It is correct. We are at a competitive disadvantage to 

our overseas competitors who are developing around the world at 


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higher prices than what we’re getting for the product, that is of 

similar quality around the world, here in the U.S. 

It’s an interesting fact, you know, five years ago most of the investment in cash flow off our companies was going to investment 

in international growth. In the last five years that’s completely 

turned around. Most of the investment in cash flow from international opportunities are coming back here to North America, 

back home for investment. 

And—but it’s being compounded by the fact that we have this 

differential and this competitive disadvantage with respect to the 

crude price that we’re getting for U.S. crude. 

The jobs that we will create, you’ve heard a number of quotes. 

I can give you one real quick, for every dollar difference we would 

reinvest that dollar back into this business. That dollar is about, 

you know, for an individual company, $100, $150 million. That’s 

one rig. That’s 180 to 200 jobs, just direct jobs. 

Carlos has talked about what the indirect benefit that has. It is 

significant. And again, I point out that these are blue collar jobs 

that are very high paying in our industry. We offer benefits, both 

health and welfare benefits, along with retirement benefits that are 

really leading in this business. It has a significant impact. 

Senator HOEVEN. So this is a major issue determining whether 

energy companies will invest billions here at home or overseas. Is 

that accurate? 

Mr. LANCE. That’s correct. If the difference continues you’ll want 

to make Brent-based investments rather than WTI investments. 

You’re seeing that today with the dropoff in the rates of the investment contraction that this industry has had over the last year. 

Senator HOEVEN. Mr. Pascual, our best case to the consumer 

why this is important and benefits the consumer? 

Mr. PASCUAL. Senator, I think it’s important to keep going after 

this issue as you’re doing. It’s been a consistent theme throughout 

this hearing, and the point that it fundamentally comes back to 

and the Chairman and Senator Cantwell put this on the table from 

the outset, is in the end consumers want to know what’s going to 

happen at the pump. 

At times it may seem counterintuitive that if you export a particular product it could actually contribute to a lower price of gasoline, but we’ve seen consistently that that’s the case. And the reason that that’s the case is the tie between international oil markets 

and how gasoline prices are determined. The key index is in the 

Brent crude price. 

Mr. Lance gave an excellent example of how, just recently, we 

saw a virtual equivalence of U.S. benchmark prices and international prices. Since then we’ve seen an increase of the international price by about $10 a barrel. U.S. prices for gasoline have 

increased as a result of that even though the U.S. benchmark price 

has stayed low. 

It’s a lesson that has taken us time to learn, but we have a particular opportunity now with the abundance in capacity that we 

have in the United States to take advantage of this moment, to be 

able to liberalize the export of that product. 

I would just say one final thing. If we look from the perspective 

of what sustains the benefits that we’ve had in the United States 


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from this energy abundance, and the reason we got here is because 

of investment, it’s that investment that created jobs. It’s that investment that created production. 

And if we want to get back to that investment as quickly as possible, especially at a time when capital expenditures in the United 

States energy industry have been cut by 35 percent, the best signal 

you can give is to those producers and those who are financing energy that the capacity to export is to the widest, most competitive 

market possible. That’s when it’s going to give them the best long 

term return. That’s what’s going to get the American energy industry back to the innovation and productivity the fastest possible, 

and that’s what’s also going to maintain our energy security over 

time. 

Senator HOEVEN. Thank you, Mr. Pascual. I’d like to commend 

you on your study. I think that was very helpful bringing this information out. But it is basic supply and demand, isn’t it? 

More investment generates more supply. More supply helps 

bring down Brent crude benchmark which is the world price. And 

again, that benefits our consumers. 

Mr. PASCUAL. The basic principles of supply and demand hold. 

And earlier the question was raised as what is the best thing that 

we can do for future policy? 

Well, we’ve learned over time. And here we have now hundreds 

of years of experience is that competition and markets is the best 

bet for our economic policy. It stimulates innovation. It stimulates 

productivity. It stimulates jobs. 

But it’s also the best thing for our national security because 

when you have companies in countries competing you avoid the 

kind of dominance that single players in that market can take. 

And we have a special opportunity today. OPEC has gone into 

hibernation. We saw that on November 27th of last year. OPEC essentially said, we can’t influence the international price of oil. 

We have a chance now out of the United States and if we look 

at what’s happening in Canada and the potential out of energy reform in Mexico, to see a North America that becomes a foundation 

for energy stability, globally. We have not had that opportunity. It 

is a historic moment that we have. 

Senator HOEVEN. Thank you, Mr. Pascual. 

I do have other questions, but I can come back, Madam Chairman, however you’d like to do it. 

The CHAIRMAN. We’re going to have one more quick round. 

Senator HOEVEN. Okay. 

The CHAIRMAN. So if you’d like to come back or stick around we’ll 

go for round two. I really appreciate the discussion that we’re having, particularly on the focus on national security. I think we all 

recognize that the world is a very, very volatile place right now. 

There is a lot of focus here in the Capitol on what is happening 

in Iran, and we’ve heard the discussion about the added oomph 

that sanctions are able to play when we’ve got more flexibility here. 

I had a meeting yesterday with General Breedlove, who is head 

of the European Command, and it was a discussion about Arctic 

issues and the role that my state plays in that from a military perspective. It was an interesting discussion in talking with him. We 


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had a map that was entitled, Russia’s Arctic Push. It details from 

a military perspective what we’re seeing coming out of Russia. 

And the conversation turned to some of the comments that have 

been coming out of late in Armed Services and Defense Appropriations about where the threats are right now. General Dempsey suggests that perhaps the biggest threat in front of us right now is not 

what we’re seeing out of Iran, but what is potentially coming from 

Russia with a threat to European security. 

It does cause us, I think, to look again, very critically, at how we 

deal with Mr. Putin. How we deal with these national security 

threats. We don’t have the resources, the men and women, to put 

the boots on the ground to be able to do what we would like to do 

from a defense perspective, so we have to look to what other tools 

we have. 

One of the tools that we have, clearly, is our resources. Our oil 

resources—it is such an important part of this discussion here. So 

again, I appreciate what we have heard there. 

Mr. Pascual, I want to ask you a question and this will probably 

take you back to your time when you were with the Energy Envoy 

and there at the State Department with the Bureau of Energy Resources. The question to you is whether or not you heard from 

other nations, requests to the United States to open up our oil markets to them? The reason I ask is there wasn’t too many years ago 

when we here in this country were crying foul when China was 

withholding critical minerals, rare Earth elements, that Japan, 

very desperately, wanted. And China in very much a power play 

said no, we’re not going to be sending anything your way. 

It causes me to wonder if other nations are viewing us that way 

that well, you’re okay in encouraging us to get our oil from a coercive supplier, like Russia, but why wouldn’t you be willing to help 

us out, United States? Can you lend me your experience in the position you were in whether you had any of those discussions with 

other countries? 

Mr. PASCUAL. Chairman, thank you. 

It was an issue that arose constantly. I’ll give you a couple of examples. 

In India when we were negotiating with India to diversify its energy resources to reduce its imports from Iran, one of the first 

questions they asked was where do I get the alternative supply? 

Where can I go? And why will not the United States put more oil 

on the international market and give us the opportunity to benefit 

from that? Or even if they aren’t importing oil from the United 

States directly, to have the supply impact that we might have had 

through our exports so that they might be able to buy more cheaply, oil more cheaply, elsewhere. 

In Turkey, again, very similar issues came up with the refiners. 

One of the questions they asked was where do we go for the alternative supply, and why are you putting us in a situation where 

we’re going to have to become more dependent on Russian oil? 

In Europe the issue consistently came up of why will not the 

United States open up its market for export and indeed it has become a central issue in the TTIP negotiations. 

With China, again, another major question and there was a certain irony here. Here the United States over three decades had 


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been after China to eliminate its restrictions on the export of resources including rare Earths and when they were looking for more 

supplies internationally we had to say, we had restrictions on critical commodities in the United States. 

It’s those kinds of restrictions that, in the end, affect American 

credibility, and in the moment when we have to put through an important policy makes it much more difficult to negotiate. 

We’re able to succeed in these cases because there was an opportunity to show countries why diversification of their imports away 

from Iran was in their national security interest. It was not an 

easy negotiation. We would have served our interest by having 

much more flexibility. 

The CHAIRMAN. Thank you. I appreciate the explanation there. 

Senator Cantwell. 

Senator CANTWELL. Thank you, Madam Chair. 

Let’s start with you, Mr. Warmann. As we discuss and look at 

oil exports I start thinking about how different parts of the country 

might be affected and whether the Pacific Northwest or New England, might become more dependent on imported oil or gasoline 

diesel or home heating oil if the exports were legal. Do you see that 

kind of shift? 

Mr. WARMANN. You do see some sort of shift. One of the questions that we come back to is the form of export. You can exert the 

same efforts and give the people what they want if you do it in a 

form of products, gasoline and diesel. If you do it in the form of the 

raw product you don’t capture that GDP, the jobs and the other 

things within America that we’re perfectly capable of. 

So you have the same leverage over the countries, and Europe 

needs the refined products. Other people need refined products. 

If you just export the crude, you lose all that value in the value 

chain. You lose those jobs. It goes overseas, and we’re talking about 

OPEC. The exports go into a market that is controlled by OPEC, 

and I disagree that OPEC is in hibernation. It’s their choice to 

open up the production. It’s their choice to lower their contract 

price in order to put pressure on Russia to bring other OPEC 

cheaters in line and you also have to pull in—put some rationalization on the unconventional exploration going on within the U.S. 

That is a choice they are making. That is the control they’re exerting on the market, and they continue to do that. 

Coming back to some of these issues about the pricing. One of 

the things that is depressing the spot price right now, making such 

a difference, is there’s a cotangoed plan of market. It’s a trader. 

You know, traders manipulate the market, to a certain extent. 

The price of oil in the futures market is higher than it is now. 

Even us, we have rented storage and are storing oil. With all this— 

oil the current spot price will go—is going down because of the 

amounts of oil. 

But if you look at the future, the Brent, WTI tightens back up 

to about $6, $7, and that is all in transportation. And it comes back 

to what you’re saying, location differential. 

The benchmark of WTI is in the middle of the continent. The 

benchmark of Brent is in the North Sea. You have transportation 

differentials so it means different things to different people. 


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On the East Coast there should be a six and a half cent—dollar 

per barrel differential. On the West Coast it has everything to do 

with being able to bring in foreign material verses the real cost 

from the Bakken and tying that together. And the thing about 

products is you actually are in a free market that’s not controlled 

by OPEC. It’s not controlled by anybody, and we can be more open 

to exert our influence in that form. 

Senator CANTWELL. I think we have three New Englanders on 

this Committee. We already know they pay outrageous home heating oil prices, so if we got into this situation where one part of the 

United States basically had to rely more on imports and the other 

part of the United States had that capacity to benefit, as you were 

saying, from the Gulf, then we would be in two different scenarios 

here. So I think it’s something to think about as we think about 

this policy. 

Thank you, Madam Chair. 

The CHAIRMAN. Senator Daines. 

Senator DAINES. Thank you, Madam Chair. 

Once upon a time I was a manufacturing guy. I ran operations 

for 12 years for Proctor and Gamble. There was an Israeli physicist 

named Eliyahu Moshe Goldratt who wrote a book called, ‘‘The 

Goal, Looking at the Theory of Constraints.’’ I think as we look at 

this very complicated equation from production to delivery, refining, and ultimately to the gas pump is something that probably 

none of us are qualified to probably make an assessment. None of 

us saw 40 years ago when these policies were put in place what 

would happen with this renaissance and revolution, certainly in the 

petroleum production industry. 

With that as a backdrop I want to look at this constraint right 

now on refining, and perhaps Mr. Drevna, looking at some of these 

regulations, for example, from the EPA. How are the EPA ozone 

national ambient air quality standards impacting your ability to 

expand capacity and/or operate? 

Mr. DREVNA. Well Senator, if you look at the proposal that EPA 

has out and the one we just commented on yesterday, I think it 

was yesterday we submitted our comments. If the current standard 

of 0.75 goes down to 0.6 or up to 0.7 what they were talking, what 

the proposals are. A lot of this conversation you’re hearing here 

today is moot because you’re not going to be able to burn it here. 

You’re not going to be able to develop it here. You’re not going to 

be able to transport it here. You’re not going to be able to fly an 

airplane out of a single engine fuel somewhere in Montana or Wyoming or North Dakota, because they’re going to be in non attainment. 

So if we want to talk about energy and national security and 

that’s a great thing, I can agree with about 75 percent of what 

Pascual has said. You’ve got to look at all the parameters that are 

involved in energy development and energy use and energy security. 

So, yes, the regulate—we have a built in regulatory kind of skein 

that we work with with the new system, we’re lowering sulfur and 

gasoline. We’re lowering this. We’re lowering that. We’re lowering 

CO2 emissions. 


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Pretty soon we keep lowering it and there’s going to be nothing 

left to lower. 

Senator DAINES. Well, project this for a moment. These regulations go in place. We continue this amazing renaissance revolution 

of American oil production. The world’s leading oil and liquids producer now in the world. 

We keep moving this up what happens now in this overall equation to refining capacity with these regulations? And what does 

that mean for the consumer? 

Mr. DREVNA. You know, we are right now one of—very globally 

competitive in the U.S. refining sector. We are the most sophisticated, advanced refinery system in the world. We’re able to take, 

you know, to do it very efficiently, do it very effectively with a lot 

of blue collar jobs that both Pascual and Jeff have talked about. 

It will put a grinding halt to it. We might as well export it because we can’t be—we won’t be able to use it here. 

And so it’s—this is what I said in my opening statement and our 

testimony. Can we, for once, look back at the 70s and say, okay? 

What was happening there? And what did we do to respond? 

You know, we took an Arab oil embargo which really, in essence, 

could have been just a nuisance. And what did we do, we put price 

controls on. We limited production, and we turned a nuisance into 

a dog gone near catastrophe. 

So then we, our energy policy was, the next time around, well oh, 

synthetic fuels corporation and don’t stock those Christmas lights 

up. 

For crying out loud, can we get an energy policy based upon the 

abundance that we have now but take in all the parameters whether it’s our environmental regulations, the Jones Act, renewable fuel 

standard? Look at them holistically and come up with something 

that makes sense, not only for the upstream producers—— 

Senator DAINES. Yeah—— 

Mr. DREVNA. But for the economy and for consumers. 

Senator DAINES. Again, we’re debating a policy that’s four decades old. Going forward 40 years, that’s what, ten Presidential elections away, 40 years from now what will we have to look at here 

as we look at this very complex supply chain? And you know, 

Washington DC is trying to figure out a way to manage that. 

Mr. DREVNA. Well, we—— 

Senator DAINES. I’ll put my bet on the free markets. 

Mr. DREVNA. That’s exactly my point. 

Senator DAINES. Yeah. 

Mr. DREVNA. Let’s look at the total free market. 

Senator DAINES. Right. 

Mr. DREVNA. And just not look at silos. We’re going to do a free 

market here, but we’re not going to do it over here. 

Senator DAINES. Well, one more question for Mr. Warmann. Does 

Monroe Energy plan to invest to expand your refinery to process 

more crude? 

Mr. WARMANN. We have been. We have invested well over $100 

million in being able to take in light oil as well as partnered with 

a group that has invested almost $200 million in getting the rail 

cars and unloading them. 


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And I agree, the transportation is one thing that we need to improve upon. Pipelines, things along those lines definitely make 

markets more efficient and take some of this discrepancy between 

pricing out and make heating, home heating oil, in one area more 

similarly priced to another. 

Right now we are trying to, whether we export it or whether we 

use it in refineries which is preferable. You still have some antiquated transportation systems that need improvement, and that 

goes back to what Mr. Drevna is saying, you have to look at the 

whole thing, holistically, the transportation, the supply, the displacements, where is the demand for it, the environmental regulations that go with it. 

One thing that keeps us from running the stabilizers with the 

producers, and Mr. Lance can speak to this. One thing that keeps 

us from running those stabilizers to reduce the rvp so much is 

there’s no place to go with that particular natural gas or product. 

There’s no way to export it so you have to burn it, but there’s limits 

on what you can burn. 

So you’re sitting here balanced trying to get production up, trying to get the rvp lower. But you’re also limited on this side by how 

much you can burn. So what do you do with that? What do you do 

with that product? 

You’ve got to get it out of there somehow, so you either have to 

transport it via railcar or you have to burn it and you’re limited 

on burnings. So we’re—— 

Senator DAINES. Thank you. Thanks, Madam Chair. 

Mr. WARMANN. Yeah. 

The CHAIRMAN. Thank you, Senator Daines. Senator Hirono. 

Senator HIRONO. Thank you, Madam Chair. 

I wanted to refer to some testimony that was provided to the 

Armed Services Committee just today by General Paul Selva, 

United States Air Force, who is the Commander of the United 

States Transportation Command, wherein he acknowledged once 

again the importance of the Jones Act. 

It is very clear as a member of the Armed Services Committee 

that keeping our ship building capacity strong is very important to 

our national security. That’s what it comes down to. So Mr. Devon, 

Devra? 

Mr. DREVNA. Drevna. 

Senator HIRONO. Drevna, sorry. You raised some concerns in 

your testimony about the Jones Act containing that it raises the 

price of shipping. But of course we all know that the Jones Act requires these U.S. ships to comply with safety, environmental and 

minimum wage rules that other countries do not impose. 

Knowing how our military views the Jones Act as part and parcel 

of keeping a strong shipbuilding capacity and industrial base and 

that arena and how important that is, I’d like to just ask if any 

of the rest of the panel members disagree with General Paul 

Selva’s statement wherein he said, ‘‘Without the contribution that 

the Jones Act brings to the support of our industry there is a direct 

threat to national defense.’’ Do any of you disagree with that statement? 


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Mr. DREVNA. I’m looking at the Jones Act in commerce, and we’re 

talking about national security. Here we’re talking about shipping 

product to foreign nations so they can be nationally secure. 

We, you know, I’m not going to disagree with the view of the 

military on what they believe they need, but there’s a major difference between the military and commerce. And in commerce, as 

the Chair person said earlier, we want to make sure and the Ranking Member. We want to make sure that what we do here, what 

you do here in the Senate and anywhere else, doesn’t negatively 

impact the consumer. I don’t think it has to be an all or nothing. 

You mentioned the fact that or you mentioned that we have 

strict shipping standards. Well, the U.S. Coast Guard is not about 

to let any ship come in from a foreign port that doesn’t meet our 

standards or leave our country shipping out oil but going to a foreign port that doesn’t meet our standards. 

So again, let’s look at the barriers to free trade. What we need 

to do for energy and national security. And it’s not ever, Senator, 

an either or an or. I think there’s enough of a, you know, there’s 

wiggle room in between the two and you can make policies that 

keep the policy, that keep the country safe, to keep the country 

strong and yet, doesn’t penalize the consumer or put refineries, 

some refineries out of business. 

Senator HIRONO. Well, I understand the argument that you’re 

making, but I represent a state that is 90 percent dependent on 

shipping and the Jones Act does provide us with that reliable service, not to mention that it is the Jones Act that makes sure that 

in times of national need that there are ships that are available to 

that, to meet that contingency. So I don’t think it’s that easy to 

separate out the commerce side and Jones Act. 

You do mention you believe the Jones Act does result in higher, 

probably result, in higher costs, and I would like to see some of the 

factual evidence of that because I do have familiarity with the arguments that the Jones Act makes consumer prices higher, and 

that has generally been not supported by evidence. 

Do any of the rest of you want to weigh in at all? I know that 

Mr. Drevna has concerns about the Jones Act, and I’m wondering 

whether the rest of you also see a connection between exporting 

crude oil and the Jones Act? 

Mr. WARMANN. I can tell you, Senator, from direct experience. 

When we receive a foreign cargo we have to have Homeland Security. It’s a point of import. We have to allow the foreign workers 

to offload. 

The other thing is if it’s from Africa I now have to put in medical 

protocols to prevent things like Ebola and other things from importing into the ports. 

So there’s a lot of effort that we have to go through in handling 

foreign ships verses American ships, and it comes back to American jobs. And I can personally tell you, having been in Philadelphia, the Philadelphia port was a ghost town until this renaissance. And now they have backlogs in supplies and jobs and demand for steel and everything else that—for years. They have five, 

six years of backlog as well as San Diego. You see ports in Mississippi and Alabama increasing their capacity as well as their 

backlogs. This is all American jobs all driven from this renaissance. 


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And another transportation issue that needs to collectively be 

looked at from a holistic standpoint when we look at energy policy. 

I totally agree with you. I think that the Jones Act provides us a 

lot of security benefits. 

I would hate to think of an Iranian ship that has LNG that’s sitting in the middle of St. Louis’ port, the port harbor there. The 

things that could be done with that are astronomical. To me, that 

should cause a great amount of national security issues. So that’s 

just some of the things that you can imagine. 

Senator HIRONO. Thank you, Madam Chair. 

The CHAIRMAN. Thank you. Senator Hoeven. 

Senator HOEVEN. Mr. Lance, would you like to respond to that 

last question? 

Mr. LANCE. I would, just quickly. We’re a large Jones Act shipper, so our Alaskan trade, our polar tanker trade, is a Jones Act 

shippers that goes to the West Coast and do supply your state in 

Hawaii with crude from Alaska. So we found that to be a very effective tool to continue to do that. 

And some of Senator Cantwell’s earlier concerns, when President 

Clinton lifted the export ban from Alaska, we were able to ship and 

the GAO has looked at that repeatedly and there has been no impact to West Coast gas prices, California, Washington and Oregon 

as we were shipping crude to other places outside of the United 

States. Another proof point relative to exporting does not increase 

gasoline prices for the consumer. We have a living example of that 

that’s been occurring since the 80s in the Alaskan trade. 

Senator HOEVEN. Thank you, Mr. Lance. 

Mr. Drevna, would you agree it’s better that we produce more energy in this country rather than less? It’s three questions for you. 

Would you agree that it’s better to produce more energy here at 

home rather than less? Would you agree that we have an imbalance between the amount of light and heavy crude that we produce 

and the amount of light and heavy our refineries can actually refine, refining capacity? And if you agree with both of those, which 

I think you probably will, but you can certainly say what you 

think. What can we do to match up our refining capacity? How can 

we help refiners better match the mix of light and heavy we 

produce here at home? 

What can we do to help you? I mean, regulation, transportation, 

investment incentives, what helps? 

Mr. DREVNA. Well the answer to your first question is an unequivocal, yes. 

Senator HOEVEN. Good. 

Mr. DREVNA. Absolutely. To answer your second question is between, as I said in my written and oral statement, between now 

and 2016 we, as refiners, can handle that additional 730 barrels a 

day with investments already being made and will have been 

made. 

Going forward, and again, as I said we’re not opposed as an association and as a total industry, we’re not opposed to the lifting of 

the ban. 

What can you do post say ’16? We’ve got a fairly good transportation delivery system going north/south in the country. We don’t 

have that good of a transportation system going east/west. This is 


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why the advent of the Bakken crude and shipping it via rail. But 

even going north/south—— 

Senator HOEVEN. So you’re saying we need pipelines? 

Mr. DREVNA. Yes, sir. 

Senator HOEVEN. And transportation. 

Mr. DREVNA. Yes, sir. 

Senator HOEVEN. I just want to make sure. More pipelines? 

Mr. DREVNA. Well, it’s the Keystone XL pipeline that has sort of 

become a metaphor for what we don’t have in this country. 

Senator HOEVEN. But would you say part of producing more energy in this country means we have to have the energy infrastructure to move it safely and dependably, meaning the right mix of 

pipeline, rail and roads? 

Mr. DREVNA. Absolutely, Senator, and that is something if you 

look at the vast increase in production that ConocoPhillips and others have done. It’s been done by American ingenuity. It hasn’t been 

done by government Fiat. 

Senator HOEVEN. Private investment. 

Mr. DREVNA. Turn us loose. Let us do the job environmentally 

safe and safety in all around. Just turn us loose. 

Senator HOEVEN. It sounds to me like you’re right on this, but 

what can we do to help the refineries do more in terms of investment at the refineries so they can process light or heavy? 

Mr. DREVNA. They’re doing it. They’re doing it. Again, it’s the 

free market, but we have to, again, I don’t want to be—— 

Senator HOEVEN. Well, you’re starting to get at it with the regulation. I’m just looking for any specifics that we can look at in 

terms of legislation, just like we’re working on oil export. 

Are there other specifics that we should be looking at in legislation? 

Mr. DREVNA. Well—— 

Senator HOEVEN. Transportation, obviously. 

Mr. DREVNA. Transportation is the big one. We’ve got to get rid 

of these bottlenecks. You’ve got to get these pipelines permitted. 

You’ve got, I mean, there’s a lot going on out there that folks 

don’t really understand or know about, about how the pipelines 

have done some great things over the past three, four, five years. 

We need to do more. We need to get the permitting done. We need 

access. 

If you want to increase energy security we need access on federal 

lands. Gee, think about what would have happened over the past 

four or five years if all of this stuff that we’ve been producing 

would have been on federal lands. We wouldn’t be producing it. We 

wouldn’t even be having this conversation. We’d be still worried 

about 1975. 

Senator HOEVEN. Thank you, Mr. Drevna. I really appreciate it. 

And of course, you remember, I’m sure of his association, Mr. 

Warmann, but I guess if there’s something else you’d want to add 

I should give you the chance. 

Mr. WARMANN. We are strangle held by the amount of transportation we’re currently trying to build out. Transportation projects 

usually take several years. 

We currently run about 60 percent domestic. We’d like to increase that even more so. The balance coming from some of our 


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neighbors to the north and the south, but that transportation is an 

issue both in the current reliability of the existing systems as well 

as the permitting of new systems. 

So that is one thing from a holistic standpoint we need to look 

at, and if in the national interest we need to put in pipelines, we 

need to put in pipelines. Everybody has a two inch pipeline hooked 

to their house if they have natural gas. There should be no problem 

just hold us accountable. We will build it. We will maintain it. 

There’s no incentive for us not to do it responsibly. 

The last thing I want to do is lose product out of a pipeline or 

out of my refinery. That’s lost profit. That’s lost money to me, and 

we’re working on very slim margins, a tenth of what our upstream 

friends are doing on a per barrel basis. So every little drop means 

everything to us. 

There’s no incentive for us to do anything other than what is perfectly, environmentally compliant and friendly and get the product 

from one place to another effectively. 

Senator HOEVEN. Thank you. I’d like to thank all of you, and I 

appreciate your responses. 

The CHAIRMAN. Thank you, Senator Hoeven. 

We have a vote that has been called. So you are spared from subsequent rounds. 

I’m going to ask one quick follow up question because I’ve seen 

this back and forth here where it’s been stated by the folks at this 

end of the table that we’ve got more oil than our refineries can accommodate, and this end of the table says, we can handle all of the 

capacity. 

So to you, Mr. Lance, I’m not going to ask for confidential business information here, but just generally as a producer, have you 

been in a situation where you’ve tried to sell light crude to a refiner and basically been turned away? 

Mr. LANCE. Yes, Senator. In fact just in the last month we’ve 

tendered cargoes to even Monroe Energy and have been told not 

only can we not take it, we’re unwilling to take it. We cannot take 

it. We cannot process the crude that you’ve put into the marketplace. 

So that’s happening today, and so I would dispute the fact that 

maybe the refineries will, over time, be able to make the investments to take this crude. The sure fact that we’re trading at a $10 

discount today demonstrates the fact that they cannot. Now they’re 

in refineries. They’re in turn around season. 

The CHAIRMAN. Right. 

Mr. LANCE. They’re doing some things today. This occurred before the contango in the curve started, so Cushing inventories were 

building before the traders got involved with the contango. This 

was an issue that started in the last part of last year. It has continued on through the first part of this year and has exaggerated the 

drop in the oil price. 

So yes, it’s happening today. Refineries cannot take the produce 

that we’re producing today, and in fact my company has tendered 

that and been told no. Not even will we take it at a steep discount, 

we are unable to take it completely. 

The CHAIRMAN. Well and I think this is where we sit with this 

conversation about alignment, and got into a lot of discussion when 


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we had the Keystone XL pipeline in front of us. The reason why 

it was necessary to have this pipeline coming down and just the 

alignment or misalignment of where we are right now with the 

product coming out of different parts of the country that is effectively different in terms of what our refineries can handle. 

So again, this has been a great conversation. I could spend the 

rest of the afternoon with you, but again, you’ve been saved by the 

vote. 

In addition to thanking you all for giving us your time here this 

morning, I want to thank you for continuing this conversation with 

us because I think, as a Committee, we are engaged to do just that. 

I thought that Senator Gardner summed it up in a pretty tight 

manner when he said what we’re trying to do here as a Committee 

is to focus on this as a policy and assess from a national security 

perspective which, I believe, is critical but at the same time making sure that we’re looking out for the economic well being of the 

people around the country. The economic well being is making sure 

that this resource is available to them at an affordable price, that 

the jobs that come with it across the country are there and recognized. 

But again, what we’ve heard today I think has been good. I think 

it’s been constructive and know that we will continue this discussion further. 

And with that I’d like to give my colleague the final word. 

Senator CANTWELL. I know we have a vote, so I’ll just be short. 

I would just sum up my thoughts on the last set of comments. If 

you want a pipeline, play by the rules. That is, adhere to the environmental laws that are on the books and don’t try to skirt around 

them. 

If you want to transport this on oil trains, make sure it’s safe. 

The issue about whether they have a place to strip out natural 

gas is not my problem. My obligation to the people in the State of 

Washington is to make sure they are safe and secure, and right 

now we don’t have enough standards in place to make sure that is 

happening. 

So if we want to continue this discussion of more oil trains than 

it better be about standards. I’ll look forward to my colleagues joining me on the Floor when they have a chance to vote for that kind 

of standard and see if they want to make trains more secure or not. 

Third, I think we probably will, at some point in time, get into 

the discussion about federal lands. I know, Mr. Drevna, you were 

saying let’s let them go and drill more on federal lands. 

The resource extraction from our federal lands is not paying their 

fair share to the American taxpayer, and you will hear more from 

us on that in the future. 

So, thank you, Madam Chair, and I do appreciate the broad discussion. I think it’s going to be great to have this debate, not just 

in this Committee, but on the Floor of the United States Senate. 

Thank you. 

The CHAIRMAN. I look forward to it. Thank you all. 

We stand adjourned. 

[Whereupon, at 12:13 p.m., the hearing was adjourned.] 


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