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20–379PDF 2016

THE IMPACT OF LOW OIL PRICES ON ENERGY

SECURITY IN THE AMERICAS

HEARING

BEFORE THE

SUBCOMMITTEE ON 

THE WESTERN HEMISPHERE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

SECOND SESSION

JUNE 9, 2016

Serial No. 114–214

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

DANIEL DONOVAN, New York 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON THE WESTERN HEMISPHERE

JEFF DUNCAN, South Carolina, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

MICHAEL T. MCCAUL, Texas 

MATT SALMON, Arizona 

RON DESANTIS, Florida 

TED S. YOHO, Florida 

DANIEL DONOVAN, New York 

ALBIO SIRES, New Jersey 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

GREGORY W. MEEKS, New York 

ALAN GRAYSON, Florida 

ALAN S. LOWENTHAL, California 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Adam Sieminski, Administrator, U.S. Energy Information Administration .......................................................................................................... 5

Mr. Amos Hochstein, Special Envoy and Coordinator for International Energy 

Affairs, Bureau of Energy Resources, U.S. Department of State ..................... 34

Ms. Melanie Kenderdine, Director, Office of Energy Policy and Systems Analysis, U.S. Department of Energy ........................................................................ 41

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Adam Sieminski: Prepared statement ......................................... 8

Mr. Amos Hochstein: Prepared statement ............................................................. 36

Ms. Melanie Kenderdine: Prepared statement ...................................................... 43

APPENDIX 

Hearing notice .......................................................................................................... 70

Hearing minutes ...................................................................................................... 71

The Honorable Jeff Duncan, a Representative in Congress from the State 

of South Carolina, and chairman, Subcommittee on the Western Hemisphere: Questions submitted for the record to the Honorable Adam 

Sieminski, Mr. Amos Hochstein, and Ms. Melanie Kenderdine ....................... 72

The Honorable Daniel Donovan, a Representative in Congress from the State 

of New York: Questions submitted for the record to Ms. Melanie 

Kenderdine ........................................................................................................... 75

Written responses from Mr. Amos Hochstein to questions submitted for the 

record by the Honorable Daniel Donovan .......................................................... 76

(1)

THE IMPACT OF LOW OIL PRICES ON 

ENERGY SECURITY IN THE AMERICAS 

THURSDAY, JUNE 9, 2016

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON THE WESTERN HEMISPHERE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 10:33 a.m., in room 

2172, Rayburn House Office Building, Hon. Jeff Duncan (chairman 

of the subcommittee) presiding. 

Mr. DUNCAN. A quorum being present, the subcommittee will 

come to order. I would now like to recognize myself for an opening 

statement. 

First off, let me just say that I am excited about today’s hearing. 

This is a very timely topic and I look forward to delving into it. I 

appreciate the witnesses being here. 

Today we meet to examine the impact of low oil prices and the 

impact that it has on the countries of the Western Hemisphere, 

and to consider how the United States, with our abundance of natural resources and technical expertise, can play a more effective 

role in supporting regional stability and strengthening energy security, especially for our friends in the Caribbean and in Central 

America. 

This is the third hearing on energy issues in the subcommittee 

in this Congress, because energy is a passion of mine, and I firmly 

believe that energy can be a transformational issue for the societies 

by providing security and independence, economic growth and jobs, 

and prosperity and empowerment for many people. 

In fact, this subcommittee’s first event of the 114th Congress included energy ministers who were in town for the 2015 Caribbean 

Energy Security Summit. We hosted a breakfast with conversation 

for Members of Congress and ministers to discuss how the U.S. and 

the Caribbean could build stronger energy collaboration. These conversations were very fruitful. And I am interested to hear from our 

witnesses today about the deliverables that resulted from last 

year’s summit and last month’s U.S.-Caribbean-Central American 

Energy Summit. 

Specifically, I am curious about post-summit actions to continue 

advancing efforts to achieve greater energy security through exporting U.S. liquefied natural gas, or LNG, assisting U.S. small 

businesses with entering the Caribbean and Central American 

markets, and considering ways to effectively provide technical asVerDate 0ct 09 2002 10:34 Sep 27, 2016 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\WORK\_WH\060916\20379 SHIRL
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sistance and assist with infrastructure and financing to achieve 

sustainable energy solutions. 

The Western Hemisphere contains abundant energy resources, 

with over a third of the world’s proven crude oil reserves and 10 

percent of the world’s natural gas resources. While the United 

States is the largest energy producer in the hemisphere, Venezuela 

accounts for 53 percent of the region’s crude oil reserves and 28 

percent of the natural gas reserves, with Argentina, Bolivia, Brazil, 

Colombia, Ecuador, Peru, and Trinidad and Tobago having significant oil and gas production. 

In addition, the Western Hemisphere also produces the world’s 

largest amount of hydroelectric power, Brazil and the United 

States are among the world’s leading ethanol producers, and Uruguay has the fastest growing wind market in the region as of 2014. 

Our hemisphere is greatly blessed with a diverse mix of energy resources. However, the drop in oil prices from nearly $114 a barrel 

in 2014 to below $30 a barrel earlier this year had a significant impact on the region. And although oil prices have increased over the 

past few months, since Latin America contains some of the world’s 

largest reserves of oil, the decline in oil prices results in economic, 

social, and even political consequences for many, primarily what we 

see in Venezuela. 

Last year, the region’s economy contracted 0.2 percent, entering 

recession for the first time since 2009. Many countries have experienced severe budget cuts due to the drop in oil prices, combined 

with low commodity prices. Mexico, which receives one-third of its 

budget from oil revenues, adopted a more austere 2016 budget, but 

then had to go on and cut spending by an additional $7 billion earlier this year. Similarly, Brazil’s state-run oil company, Petrobras, 

weighed down by the low oil prices and its corruption scandal, cut 

its planned investments for the next few years by nearly 25 percent. 

And most significantly, Venezuela has been hardest hit by the 

drop in oil prices. Its contracting economy projects a negative 8 percent growth in 2016, its projected year-end inflation is 720 percent, 

and its people are suffering a severe humanitarian crisis due to the 

government’s gross mismanagement of the economic situation, compounded by rampant corruption. I just got off the phone with our 

representative to the OAS today talking about some of these same 

issues. 

The United States stands with the people of Venezuela, who are 

the ones suffering most from this crisis, which includes electricity 

and water rationing, 9 out of 10 homes not having enough to eat, 

and hospitals lacking basic medicines and equipment. And I am 

deeply worried about the Venezuelan people, the unsustainability 

of Venezuela’s current trajectory, and the regional instability likely 

to result from any potential collapse of the country. 

Related to this subject of oil prices, I am also gravely concerned 

about the resounding impact to countries in the Caribbean and 

Central America who are currently dependent on Venezuela’s 

PetroCaribe program for energy. While former PetroCaribe clients 

Jamaica and Dominican Republic have paid off their debts to Venezuela at heavy discounts, more countries still remain reliant on 

PetroCaribe, which is in serious economic trouble. 

3

Small countries in the Caribbean need energy assistance, because they do not have local fossil fuel reserves, they have limited 

infrastructure for delivering energy, and their energy markets are 

not well integrated to attract investment and financing to establish 

pipelines and LNG infrastructure. Similarly, Central American 

countries depend on oil imports and hydropower, and while some 

commercial natural gas projects are under development, there are 

very few and they have a long way to go. Countries dependent on 

PetroCaribe urgently need greater U.S. engagement before the crisis reaches a tipping point. 

In view of the deteriorating situation in Venezuela, which may 

severely disrupt the region, the United States has a unique opportunity to use our strength—that is U.S. oil and gas, business expertise, technical expertise, market-oriented policies, et cetera—to 

begin exercising an effective disaster prevention response. 

So far, the U.S. Department of Energy has taken some encouraging steps to facilitate Caribbean access to natural gas liquids by 

processing small-scale export applications. Why not declare all 

projects of a certain size and selling to Caribbean nations to be 

deemed in the U.S. national and public interest and have DOE approve all of them expeditiously? 

The best example we have seen so far of a country successfully 

transitioning from PetroCaribe to energy independence is Jamaica, 

which has adopted LNG as an energy source. Other countries pursuing LNG projects in the region include Dominican Republic and 

Barbados. 

While a diversified energy matrix sounds appealing to many, in 

the short term, given the regional developments, I am hopeful that 

the United States will do more to support LNG import infrastructure for countries where renewable energy alone simply cannot provide an effective energy source. 

We must also keep in mind that OPEC has strategically decided 

to keep the oil market oversupplied, resulting in alarming effects 

to U.S. production, both onshore and offshore, and affecting the 

U.S. ability to possibly fill any void left by Venezuela in the destabilizing situation there. 

That is why today I have cosponsored H.R. 4559. And H.R. 4599, 

if it is enacted, will be a 1-year commission of experts who would 

assess whether the cartel’s actions are designed to disadvantage 

U.S. oil producers and secure market power through anticompetitive behavior, assess the impact of OPEC’s policies on U.S. economic and energy security interests, including on innovation in 

both energy production and transportation of goods and people, and 

make policy recommendations that counter these problems. 

That ought to be part of our discussion today, because when we 

look at the fact that the United States now ranks fourth in energy 

production according to, I believe, the U.S. Chamber, and that is 

down from number six, so we are improving in energy production, 

through 2015. That is prior to OPEC’s decision and Saudi Arabia’s 

decision to oversupply the energy markets, which has resulted, just 

since this reduction in our ranking to number four in the world, we 

have seen 100 bankruptcies in the energy market, we have seen 

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duction in oil rigs, and we have seen billions in deferred investment. 

So as we talk about the situation in this region, we have to keep 

in mind the impacts of OPEC policies on the U.S.’s possibility of 

engaging in the region more going forward, and possibly not being 

able to fill the void left by a deteriorating situation in Venezuela. 

So I look forward to hearing from our witnesses today on this 

issue. And we have a guest ranking member, a substitute ranking 

member today, Mr. Castro, filling in for Mr. Sires. I look forward 

to his comments, and I yield to him for his opening statement. 

Mr. CASTRO. Thank you, Mr. Chairman, for holding this hearing. 

And thank you to our witness for being here to talk about the 

impact of low oil prices on the energy security of the Americas. 

As you know, the Western Hemisphere is home to over a third 

of the world’s proven crude oil reserves and 10 percent of the 

world’s natural gas reserves, with the U.S. being, by far, the largest energy producer in the region. The United States has extensive 

oil and natural gas trade relations with the other nations of the 

Western Hemisphere, particularly Canada and Mexico. At the same 

time, the Obama administration has made energy diversification a 

priority, helping to decrease our dependence on foreign oil and create jobs. 

The administration’s focus regarding energy policy in the region 

has been on promoting the adoption of renewable energy resources. 

In recent years, the hemisphere has made strides in shifting to 

more renewable and diversified resources and as a result has become the world’s leading producer of hydroelectric power. 

However, the drastic shifts in oil prices have greatly affected 

many countries in the region that are more heavily reliant on hydrocarbons. A large portion of the world’s oil reserves are located 

in Venezuela, a country currently suffering from severe economic 

and political turmoil with an unstable regime at the helm. 

High oil prices greatly benefitted Venezuela and other energy 

producers in the Western Hemisphere over the last 10 years. Bolivia, Brazil, Ecuador, and Venezuela funded vast social spending 

and energy subsidy programs rather than protect their proven energy reserves and diversify their economies. 

For Venezuela and other energy producers in the region, such as 

Ecuador and Brazil, the drastic decrease in oil prices has led to 

substantial shortages to their revenue streams and affected their 

ability to provide basic services to their people and grow their 

economies. Countries like Mexico and Colombia have diversified 

their economies and are better prepared to absorb shifts in international oil prices. 

In contrast to the region’s energy producers, most Caribbean and 

Central American countries have few energy resources and depend 

heavily on imports from their neighbors. High oil prices during the 

last decade hit many Caribbean and Central American nations particularly hard, serving as a bottleneck to economic growth. 

Since 2005, the impact of high oil prices was somewhat mitigated 

by Venezuela’s establishment of PetroCaribe, which provides oil to 

other Caribbean Basin nations at a highly discounted rate in exchange for political influence in the region. Low oil prices are now 

forcing Venezuela to reduce the amount of subsidized oil it sends 

5

to its neighbors. I am interested in hearing how the possible end 

of PetroCaribe may affect these small economies. 

I look forward to the testimony of our witnesses as they help this 

committee understand how the considerable drop in oil prices since 

2014 is affecting our region and as they lay out the conditions 

needed in order for oil prices to recover. 

Thank you, and I yield back my time. 

Mr. DUNCAN. I want to thank the gentleman. 

Other members can provide their opening statements for the 

record. 

And I hope I don’t have to explain the lighting system. We are 

going to recognize all the witnesses for 5 minutes. I will have a little lenience, but not much. If you hear the tap of the gavel, please 

wrap up, and then you can finish your comments during the questions if you would like. But we are going to try to work expeditiously here today. 

So I would like to go ahead and recognize the witnesses, and 

their biographies are in your notebooks, so we are not going to go 

through their full biographies. 

But, Mr. Sieminski, you are going to be recognized first. And we 

thank you for being here and look forward to your testimony. You 

are recognized for 5 minutes. 

STATEMENT OF THE HONORABLE ADAM SIEMINSKI, ADMINISTRATOR, U.S. ENERGY INFORMATION ADMINISTRATION 

Mr. SIEMINSKI. Chairman Duncan, thank you very much. Mr. 

Castro and members of the committee, I appreciate the opportunity 

to be here before you today. 

The Energy Information Administration is the statistical and analytical agency within the Department of Energy, and by law EIA’s 

data analysis and projections are independent, so my views should 

not be construed as representing those of the Department of Energy or any other Federal agency. 

My testimony will summarize some key findings from EIA’s 

short-term energy outlook on the near-term price and supply situation. Then I am going to address some of the regional dynamics in 

the energy sector in the Western Hemisphere. 

Crude oil prices have recently recovered from a low of $26 in 

January of this year. Prices for North Sea Brent, which is the global benchmark price, averaged under $47 a barrel in May. West 

Texas Intermediate was about the same. 

Today, prices are actually up over $50 a barrel for WTI and close 

to $52 for Brent. EIA forecasts that Brent prices will average close 

to $43 a barrel this year and $52 a barrel in 2017. 

I would kind of offer a warning, though, that trading markets 

suggest considerable uncertainty in the outlook, indicating an average WTI price in September of this year could range from anywhere between $35 and $70 a barrel. 

EIA estimates that oil production in countries outside of OPEC 

grew by 11⁄2 million barrels a day last year, with most of that 

growth occurring in the United States and Canada. EIA forecasts 

non-OPEC production to decline by a little over 1⁄2 million barrels 

a day this year and an additional 200,000 barrels a day next year, 

most of that in the United States. This reflects the decline that 

6

both of you talked about in terms of the drop in drilling activity, 

especially in the lower 48 onshore states. This is going to be offset 

by some growth in the Federal Gulf of Mexico. 

Within the OPEC countries, crude production increased by 

800,000 barrels a day last year, mostly in Iraq and Saudi Arabia. 

We are forecasting almost as much this year, but it will be coming 

from Iran. OPEC noncrude liquids also will be up in 2016 and 

2017. 

EIA expects major OPEC producers to continue a strategy of 

market share rather than production cuts. However, EIA estimates 

that inventory builds of global petroleum and other liquid fuels will 

start to taper off. They are very large now, but they will taper off, 

and that should bring the markets back into some kind of balance 

next year. 

Over time, a continued slowing of the investment that started in 

2015 will make it difficult for supply to respond quickly to future 

growth and demand for oil. As a result, prices are expected to return to nearly $80 a barrel in the next decade. 

In South America, notably Brazil, Colombia, and Peru, long-term 

economic expansion is expected to support growing demand for oil, 

primarily for transportation uses and also in the industrial sector. 

Brazil, with the region’s largest economy, accounts for about 60 

percent of the regional growth in oil demand over the period out 

to 2040. 

Just turning to natural gas for a bit, we expect a gradual rise 

through the summer as demand from the electric power sector increases, but we expect prices here in the U.S. will remain below $3 

a million BTU through the end of the year. 

Natural gas production and consumption continues to grow fairly 

dramatically across the hemisphere. In addition to the U.S. natural 

gas pipeline trade with Canada and Mexico since the beginning of 

2016, multiple cargoes from the Sabine Pass LNG export facility 

are delivering gas to Argentina, Brazil, and Barbados in the form 

of liquefied natural gas. The U.S. is going to become a net exporter 

of gas by 2017. 

U.S. natural gas production remains high. Gas imports from 

Canada are coming down, growing exports of U.S. gas to Mexico. 

U.S. gas exports by both pipeline and LNG tanker shipments are 

expected to continue to go up. Mexico’s electric power demand is 

creating an opportunity for U.S. companies in selling gas by pipeline. 

EIA’s International Energy Outlook Reference case projects that 

natural gas production in the Americas, OECD countries, grows by 

almost half by 2040, with the U.S. accounting for most of that. Natural gas production in the non-OECD Americas region nearly doubles in EIA’s international outlook by 2040. 

Argentina, the country with potentially the largest gas resource, 

could become South America’s leading natural gas producer by 

2040. YPF, the national energy company, has joint ventures with 

a number of international oil companies, including American companies. 

Brazil’s natural gas production is projected to triple by 2040. EIA 

projects that natural gas consumption in South America overall 

7

will increase by 2 percent per year out to the year 2040, with electric power accounting for most of that growth. 

Summing up, Mr. Chairman, the Americas are the world’s second 

leading producer and consumer of liquid fuels, they are the leading 

producer and consumer of natural gas, and hemisphere crude oil 

and petroleum products trade is large and growing. 

Lastly, I would just like to mention the successful collaboration 

on energy data that EIA has underway with our statistical counterparts in Canada and Mexico. This trilateral effort has already resulted in the development of maps of energy infrastructure across 

all of North America, a cross-reference of energy terminology in 

three languages, English, Spanish, and French, because of Canada, 

and a better understanding of the differences in trade statistics 

that will enable us to improve the data accuracy and transparency 

over time. 

I would like to thank you very much for the opportunity to testify, and I would be delighted to answer your questions. Thank you. 

[The prepared statement of Mr. Sieminski follows:]

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Mr. DUNCAN. Thank you so much for your testimony. 

Mr. Hochstein, thank you for being here today. And you are recognized for 5 minutes. 

STATEMENT OF MR. AMOS HOCHSTEIN, SPECIAL ENVOY AND 

COORDINATOR FOR INTERNATIONAL ENERGY AFFAIRS, BUREAU OF ENERGY RESOURCES, U.S. DEPARTMENT OF STATE 

Mr. HOCHSTEIN. Thank you, Chairman Duncan, Ranking Member Castro, and members of the subcommittee. 

Mr. Chairman, we are living through a global energy revolution 

that has established the United States as an energy superpower. 

When I say energy superpower, it is because the United States is 

a leader in the full range of energy issues. In oil, we went from producing less than 6 million barrels per day a few years ago to a 

peak of 9.5 barrels a day in 2015. In natural gas, we have gone 

from being the world’s largest importer to becoming a significant 

exporter. When it comes to wind, solar, geothermal, in R&D, in innovation, in efficiency, in technology, the United States is the lead 

across the entire spectrum. However you define energy, the United 

States is the center of it and a position of global leadership. 

In our hemisphere, Mexico has undertaken historic action to reform and modernize the structure of the oil, gas, and electricity sectors. However, the timing of the reforms was unlucky. As the reforms were being finalized, oil prices tumbled. The Mexican Government was faced with the challenge of demonstrating that the 

negative impacts being felt throughout the sector were not the result of reforms, but rather of the oil price decline. 

Argentina, in spite of having the world’s second largest reserves 

of shale gas and great wind potential, it saw little investment in 

the sector in the previous decade due to restrictive policy and a 

negative regulatory environment. The new Macri administration, 

which found itself facing a state of emergency in the electricity sector shortly after coming into office, has demonstrated an awareness 

of the opportunities of reform in both shale gas and electricity sectors, as well as the need to attract international investment. This 

is the new chapter in Argentina’s history, and I will be traveling 

there in 2 weeks. 

In Colombia, low oil prices have led to a fall in production, difficulty in stimulating the country’s limited petroleum reserves, and 

reduced government revenues. The compounding effects of a serious drought this year further obligated Colombia to turn to more 

costly electricity options. 

In all three of these countries, we are deeply engaged to provide 

technical assistance in the power and renewable sectors, as well as 

the conventional and unconventional hydrocarbon sectors. With 

their political leadership and a strong partnership, their prospects 

to weather the storms are quite good. However, countries that are 

less diversified, fiscally constrained, and less progressive in their 

energy governance are facing a far more severe set of consequences. 

The clearest example is Venezuela, where oil generates about 95 

percent of the country’s total exports and contributes almost half 

of the government’s revenue. Venezuela’s crude oil production fell 

from 31⁄2 million barrels a day in 1997 to below 21⁄2 million barrels 

per day today. This is in spite of the fact that Venezuela has the 

35

largest oil resources in the world. Its mismanagement of the sector, 

its lack of reinvestment, and corruption means that the low oil 

price is one blow too many for the Venezuela economy. By accepting in-kind financing deals repaid in oil, Venezuela has constrained 

even further its cash flow, to the detriment of its own people. 

However, while the oil exporters struggle, importers in the region 

are hopeful. Up until 2012, the high Caribbean and Central American energy costs were frequently cited as a major impediment to 

economic growth. For these countries, the fall in oil prices was a 

blessing, but they are living on borrowed time. Without establishing meaningful reforms now, oil prices will rise and the fiscal 

shocks will return. 

Venezuela has long used energy as a political lever through the 

PetroCaribe scheme, which has created not just an oil dependency, 

but a financial one, linking the fate of Venezuela’s declining capacity with the region’s energy and fiscal security. An awareness of 

this risk has led some countries, as you mentioned, Mr. Chairman, 

to take advantage of the current context to buy back debt and pursue reforms. These steps will help, but they are not enough. 

This is why our level of engagement in Central America and the 

Caribbean has been unprecedented. Vice President Biden announced the Caribbean Energy Security Initiative, which you mentioned, in 2014, and I served as the President’s U.S. chair for the 

Central American and Caribbean Energy Security Task Force. 

Instead of depending on Venezuelan oil, the Caribbean nations 

can utilize 11 months of sun, wind, or geothermal, and in some 

cases countries have the scale for natural gas. Sitting so close to 

the U.S. shores, with our abundance of gas and the lowest price 

globally, means those countries will be less reliant on one supplier 

and will spend less on energy costs. 

Technology is advancing quickly and the private sector is already 

reducing the scale and size necessary for natural gas for the Caribbean, and U.S. renewables companies are actively exploring the opportunities in the region. Already U.S. companies are announcing 

significant projects there. 

The exciting potential for Central America is the opportunity to 

connect to itself. Through the SIEPAC and Connect 2022 initiatives, we are working with the region to establish a single Central 

America power market from Mexico in the north to Colombia in the 

south. This will turn eight small, isolated electricity markets into 

one market, boosting investment and lowering costs. 

We all agree that it is time to move beyond short-term fixes and 

take action to establish a new energy paradigm. This is not just 

about economic prosperity or environmental and climate goals. It 

is also in the interest of a more security hemisphere and key to the 

national security of the United States. The 21st century, I believe, 

could see a shift of the energy center of the world to the Americas. 

U.S. engagement is helping to get us there. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Hochstein follows:]

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Mr. DUNCAN. Thank you so much. 

Ms. Kenderdine, 5 minutes. 

STATEMENT OF MS. MELANIE KENDERDINE, DIRECTOR, OFFICE OF ENERGY POLICY AND SYSTEMS ANALYSIS, U.S. DEPARTMENT OF ENERGY 

Ms. KENDERDINE. Thank you, Chairman Duncan, Ranking Member Castro, and distinguished members of the subcommittee. I appreciate the opportunity to be here today to discuss the impact low 

oil prices have had on countries in the Western Hemisphere and 

ways the United States can enhance our energy security by assisting our allies and partners in the region. 

I am going to focus my remarks on the changed U.S. energy profile, how we view energy security in the context of the 21st century 

energy marketplace, and some of DOE’s initiatives in the Western 

Hemisphere. 

Until recently, the U.S. definition of energy security has been oilcentric, a narrow view that provides an inadequate framework for 

U.S. energy security policy in the 21st century. In June 2014, after 

the Russian aggression in Ukraine, the G7 leaders and the EU 

noted that ‘‘Energy security is not only domestic; it is dependent 

on interaction in the global interconnected market.’’

The leaders endorsed a set of seven broad collective and modern 

energy security principles summarized as follows: One, development of flexible, transparent, and competitive energy markets; two, 

diversification of energy fuel sources and roots; three, reducing our 

greenhouse gas emissions and accelerating the transition to a lowcarbon economy; four, enhancing energy efficiency; five, continued 

investment in game-changing research and innovation; six, improving energy system resilience; and seven, putting emergency response systems in place. 

Within this framework, we need to consider the fact that the 

U.S. is now the largest liquid fuels producer in the world, the 

world’s largest gas producer, and is also poised to be one of the 

largest gas exporters as well. These dramatic changes in domestic 

oil and gas production were both enabled by technology investments started at DOE in 1978, along with supportive tax incentives 

sustained for over two decades. They also have significant infrastructure and supply chain implications. 

Because of these changes, DOE has been able to approve 19 liquefied natural gas export applications for non-free trade agreement 

countries in the last 4 years. As of March of this year, U.S. LNG 

producers have exported 11.5 Bcf of LNG to Barbados, Jamaica, 

and Brazil in the Western Hemisphere, as well as to India. 

The U.S. entry into the world LNG markets, with volumes only 

exceeded by Qatar’s, will put downward pressure on European and 

Asian gas prices and could constrain noncompetitive gas marketing 

practices, such as those of Russia. 

Finally, it should be noted that the widening of the Panama 

Canal is taking place coincident with the growth of LNG exports 

from the U.S. This multibillion-dollar infrastructure improvement 

could help facilitate and lower transportation costs for U.S.-origin 

LNG trade with Asia and possibly to destinations on the west coast 

of South America. 

42

Switching gears to North American energy markets, where Secretary Moniz has invested a great deal of time, I would just note 

that the value of energy trade between the U.S., Canada, and Mexico has exceeded $150 billion annually in recent years. We have 

had two trilateral ministerials in the last 3 years and are working 

together on a range of initiatives. 

There are also major commercial markets in Central and South 

America, and we are collaborating with several countries—Argentina, Brazil, Chile, and the nations in the Caribbean and Central 

America—on a range of energy issues that will both enhance their 

energy security as well as our commercial opportunities. 

It is also important to note that most of the countries in our 

hemisphere, 32 out of 37 from my rough count last night, signed 

the Paris Agreement in New York on Earth Day and are committed 

to achieving deep carbon reductions. This creates new market opportunities for clean energy technology, where the U.S. is another 

clear leader. 

In this regard, DOE started and is a founding member of the 

Clean Energy Ministerial, which includes Canada, Mexico, Brazil, 

and 20 other countries. The new Mission Innovation initiative, 

where 20 countries are working to double their spending on clean 

energy R&D to accelerate transformation of energy systems, includes the U.S., Canada, Mexico, Brazil, and Chile. We support 

several other multilateral initiatives. They are in my written testimony. 

Finally, the Strategic Petroleum Reserve remains an important 

national security asset, protecting the U.S. economy and the economy of our allies from oil disruptions. To maximize the value of the 

SPR, the administration recommended and the Congress authorized an investment of $2 billion for its modernization. 

I note here also that Congress recently gave the Department 

emergency authorities to respond to cyber attacks on our grid, a 

new and growing energy security challenge as electricity becomes 

the uber infrastructure on which all other critical infrastructures 

rely. 

The changing energy landscape in the U.S., the nature of global 

energy markets, and the need for accelerated innovation to transform global energy systems frame our broader, more collective approach to energy security. It is in this context that the U.S. is deeply engaged with our allies in the Western Hemisphere to promote 

energy security in a wide variety of ways, irrespective of short-term 

volatility in commodity prices, sustained by friendships and alliances and common interests over time. 

Thank you very much. 

[The prepared statement of Ms. Kenderdine follows:]

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Mr. DUNCAN. Thank you so much. And thanks for mentioning 

cybersecurity as part of the energy security threat, not only to delivery systems like the grid, but also to production facilities as well. 

We have to keep that in mind. 

For the record, I am truly an all-of-the-above energy guy. I like 

wind and solar. I fully support countries like Uruguay and Peru 

and Chile that are going for more renewables. We visited on a codel 

to Chile recently a $200 million investment in a solar facility just 

out of Santiago. And so truly like to see the private investment in 

those areas. 

But when I was at the Summit of the Americas last year, before 

I went to the Summit of the Americas, we talked a lot about North 

American, really American energy independence and North American energy independence working with our allies to the north and 

south, Canada with the Keystone Pipeline and their oil fields, but 

also with Mexico, the expansion of natural gas pipelines from the 

Eagle Ford Shale into Mexico, denationalization of Pemex, and 

other things that were going on in North America. 

But then in conversations at the summit, we really started thinking more broadly about the Western Hemisphere and thinking 

about hemispheric energy independence, thinking about LNG exports, thinking about the Panama Canal, thinking about the pipelines that could supply natural gas from the U.S. to Central American countries that could be a game changer for quality of life. 

And when I think about renewables, I think about energy, I also 

think about 24/7 baseload power, always on, always available, that 

you don’t get from some intermittent sources. Proven sources are 

fossil fuels, oil and gas that work to provide transportation fuels, 

but also for electricity. 

In addition, we always think about hydroelectricity as being a 

prevalent source of energy. But what we see in Venezuela, due to 

the El Nino and weather patterns that have changed, and a 

drought, low water levels, they are having to ration electricity due 

to the hydroelectric dam not having water levels necessary to provide electricity in Venezuela. 

So there are a lot of dynamics and moving pieces with regard to 

energy security in the hemisphere. 

I do know this: That a robust U.S. energy renaissance due to the 

Bakken formation, due to expansion in the Gulf of Mexico, and 

other energy sources, new technologies, the impact of hydraulic 

fracturing and its impact on the natural gas production, has led to 

the United States’ ability to export a lot of natural gas and possibly 

export oil. Congress lifting the decades-long oil export ban could 

make, and was poised to make, the United States a bigger player 

in the energy markets globally. 

But then we see OPEC, the information I provided earlier, really 

increasing global supply of oil, and the impact that it has, not only 

on U.S. producers. I mentioned earlier 100 bankruptcies in the energy sector, 150,000 layoffs. Reduction in investment in the energy 

sector was mentioned earlier. But think about those OPEC policies 

and their impact on countries like Venezuela and the Maduro government that does not have the revenues now to artificially prop 

up the Socialist government and provide a lot of things to the citizens of Venezuela. The Venezuelans are the ones that are hurting. 

54

I think we will look back at OPEC’s decision as possibly being 

a game changer in a positive way for Venezuela—my hopes anyway—in regime change there, to lead to more democracy, more popular involvement in government, and more democratic principles 

applied in reality, not just on paper. So I hope that we will look 

back and see that. 

So, Mr. Hochstein, we talk about North American energy independence. You have heard all that I said. How can North American 

governments work better together to promote the energy resources 

that we have? We know what Mexico and the U.S. are doing in the 

Eagle Ford, just south of Mr. Castro’s district. We know what Canada and the U.S. have historically done and want to do with bringing Canadian oil to the refining capacity it will have in the U.S. 

We know we have lifted the decades-long oil export ban. We know 

that hydraulic fracturing has led to an expansion of natural gas so 

that we can export LNG. We know that we are trying to do all we 

can to expedite the permitting for LNG terminals so that we can 

be ready to export that. We know that Caribbean, as well as European countries, are wanting U.S. gas. 

What can we do more to make sure that the U.S. plays a part 

in energy stability, is what I am going to call it, within the Caribbean, but also in the Western Hemisphere region? And I will let 

you answer. 

Mr. HOCHSTEIN. Mr. Chairman, thank you for that question. I 

have spent a considerable amount of time thinking and working on 

this issue. 

I think that the way you have described it correctly is about the 

stability and security of the region, which is why we called it in 

2014, when oil prices were at $100, the Caribbean Energy Security 

Initiative. And it is about looking at just in our hemisphere, in the 

Caribbean you have islands that are dependent on fuel oil from 

Venezuela, where the dependency is not really on the oil, you can 

replace the oil with a different supplier, but the PetroCaribe 

scheme has indebted them and, through some additional aspects of 

corruption, has made an untenable situation for most of these 

countries to be able to sustain their economies long-term with this 

kind of debt structure. And we saw recently, you were in Paraguay 

recently, where PetroCaribe Venezuela tried to call the debt on 

Paraguay as a political leverage. 

So we have to get away from that paradigm. And we are in an 

era where, I think that you are right, that we have to have a mix, 

whether it is some renewables and natural gas. But none of that 

has been taken advantage of. And if you look at the case that you 

mentioned in Jamaica, where it has been renewables and natural 

gas, we are starting to see a real change in what we can do. 

And the leadership of the United States is necessary, not only in 

the permitting process, but the innovation on the corporate side, on 

the private sector, in addressing the smaller-scale capability to deliver gas, LNG, from the United States to the Caribbean islands is 

advancing very quickly. We are now talking about companies putting barges as a floating gas terminal so that you lower both the 

cost and the ability for the scale size of it. 

The first LNG cooperation between the United States and Jamaica started because an American company met with the JamaiVerDate 0ct 09 2002 10:34 Sep 27, 2016 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 F:\WORK\_WH\060916\20379 SHIRL
55

can Prime Minister at the first Caribbean Energy Security Summit 

last year, a year and a half go. They met there, and we encouraged 

it through there. We have to expand that, but we have to do it 

not—we can’t be the sole answer. It cannot be just about the 

United States. We have to bring in Canada and Mexico and the EU 

and other member states from the EU individually that will support us both financially, in working with the IDB, the World Bank, 

and others to create the kind of financial environment that will 

allow investment. 

We have a problem. We can find solutions to the energy security 

in the Caribbean. But as long as you don’t have a regulatory environment, a legal structure that American companies can trust, you 

are not going to have the investment, no matter what the price of 

gas is, no matter what the price of renewals are. 

Mr. DUNCAN. Talking about the rule of law, legal structure in the 

countries in the Caribbean and also in other Latin American countries that would make American companies feel comfortable doing 

best there. 

Mr. HOCHSTEIN. That is right. 

Mr. DUNCAN. Let me ask you, and in the interests of time, you 

mentioned Argentina. So the Macri government is very interested 

in expanding the bountiful resources in Argentina. When we were 

in Chile and Argentina on the same codel, there is a gas pipeline 

that runs from Argentina to Chile. It was once used to export natural gas from Argentina to Chile. Now it is used to import natural 

gas from Chile, and that doesn’t make the Argentine people very 

happy. 

Mr. HOCHSTEIN. That is right. 

Mr. DUNCAN. They want to be an exporter. 

So the Macri government wants to really start exploring and exploiting the natural resources to make Argentina a player once 

again. How does he do that? How does he attract that investment 

at $30 to $50 a barrel of oil? And what is the price point that will 

make it attractive for foreign investment in Argentina? 

Mr. HOCHSTEIN. So, again, I think what we are seeing is that 

putting together good governance and good tenders that are supportive, the kind of terms that will be supportive of investment, 

have already been successful, and American companies and international companies are coming to Argentina. 

Our teams have already been down to Argentina. I will be there 

in a couple of weeks. They have tremendous unconventional shale 

gas potential, some of the best that we have seen in the world. We 

would like to be supportive of them, looking at how to develop that, 

bringing in the kind of companies that would be able to support 

them. So I think their production can rise in natural gas while at 

the same time looking at other power solutions in the power sector. 

But it is not only there. We are seeing that by bringing the costs 

down of LNG and of floating storage and regasification units, so 

SFRUs, and the concept of a floating terminal, we are seeing that 

throughout Central America and South America. So Colombia is 

going to have a floating terminal. Honduras, El Salvador, and Guatemala all are talking about how do you utilize floating terminals 

while also interconnecting pipelines. 

56

So you talked about, sir, the interconnection between the United 

States, the Eagle Ford, with Mexico, but if we can also have an 

interconnection from Mexico to Guatemala of natural gas, that will 

allow for bringing, essentially interconnecting the American market 

all the way down to Mexico and from Mexico down to Guatemala, 

and you are starting to see us develop a broader market that can 

support their economies while also bringing down costs by broadening the base of what the sector——

Mr. DUNCAN. It would be a huge game changer for the quality 

of life in some of these Third World countries. Mexican gas coming 

from the north, LNG coming from the Panama Canal as a distribution hub going north and south could be a game changer for some 

of those countries, and I truly believe it. Thanks for mentioning 

that. 

I am out of time. I am going to yield to the ranking member for 

5 minutes. 

Mr. CASTRO. Thank you, Chairman. 

And thank you to each of you for your testimony, and most of all 

for your service to our Nation. 

You know, I sponsored legislation, was one of the sponsors of legislation last year on expediting LNG exports. And then this Congress voted in December, I believe, on the omnibus bill, which lifted 

the decades-long oil export ban. And Texas, of course, is a big oil 

and gas State. I represent San Antonio, and just south of that is 

the Eagle Ford Shale, one of the largest shale plays in the Nation. 

But I also see a bit of a cautionary tale in the Eagle Ford, and I 

will tell you why. 

When the price of oil was very high, there were lots of predictions, that were considered very solid predictions, that things 

would be that way for 20 years or more, that the times would be 

great. And if you looked at all of these small towns, you had landowners who suddenly were wealthy because they were able to lease 

the rights for drilling and so forth, towns built more hotels and infrastructure to accommodate the new traffic that was coming 

through there, both commercial and visitors, all of the workers who 

were then staying in these towns. And then, when the price of oil 

started to go down, the number of rigs also went down, and many 

of those towns are now left kind of in a lurch and trying to figure 

out what to do. 

So you mentioned the case of Argentina, for example. As we 

think about the direction that these countries are going to go, how 

do they avoid getting into that same boom-and-bust cycle? And perhaps it is not avoidable, we have gone through it before in the 

United States. 

And also I agree with the chairman’s comment about the issue 

of baseload versus intermittent sources of energy. I think that is 

a legitimate concern. That has to do with the predictability of availability, right? But what about the predictability of pricing? Because 

in the Eagle Ford Shale, what you saw was an issue with the predictability of pricing. In other words, people thought it was going 

to be $100 or more for years to come. 

So, please, any of you, if you would discuss those things. 

Mr. SIEMINSKI. I hear my colleagues sighing with relief that I 

would be delighted to answer your question, Mr. Castro. 

57

I think, actually, something that Chairman Duncan mentioned 

during his question, the two comments are really running parallel. 

It is how can the U.S. help energy security in a period of low 

prices, cautionary tale of Eagle Ford, how do you attract capital at 

$30 to $40 a barrel crude oil, and this issue of volatility. When I 

mentioned during my opening remarks that the market-implied 

volatility for the month of September coming up could range from 

roughly $35 to $70 a barrel, you kind of go wow. I mean, that is 

plus or minus $20 from where we are now basically. 

Why is that? And it is not a prediction from EIA. It is not a prediction from consensus forecasts of market analysts. It is actually 

the market itself. It is producers and refiners and airlines and 

trucking companies and hedge funds and others who are involved 

in the options market. And you can actually take the prices that 

they are paying in the futures markets and options and work it 

backwards to say what that means to volatility. 

So this is just the reality. The reality is you really don’t know 

what the price is going to be. So what companies tend to do, and 

countries need to understand this as well, they can’t manage the 

price, they have to manage their costs. Companies have to be careful in what they spend, they have got to be very disciplined in how 

they build up their cost structures. 

And for countries, I think as Amos was saying, they have to look at the contract structure. So if prices were to go back to $30 or $40 

a barrel, countries have to be very careful how they set the contracts up, because they could get companies to come in if they 

made it attractive for the companies to participate at those levels. 

Ms. KENDERDINE. I would say a couple of things. That looking at 

it, the low oil prices have had a small but positive impact on the 

U.S. economy, on U.S. GDP. And it is the same for countries in 

Latin America, that if you are an importer and relying on imports, 

you benefit from low oil prices. 

The countries that are producers in Latin and South America 

that have diversified economies, one of them is Mexico—Mexico has 

the most diversified economy—has not suffered as much from low 

oil prices, because it has a large manufacturing sector, and that 

manufacturing sector benefits from low energy prices. And so I 

would say that diversification of economies is important so that you 

can avoid some of the boom-and-bust cycles. 

And I agree with Adam that managing price is not what we do. 

But I would say one other thing, talking about Argentina—all of 

Latin America, actually. Development of flexible, transparent, and 

competitive markets is one of the principles that we are using for 

defining energy security. So that is important, as is diversification 

of energy fuel sources and roots. And so it is not just diversification 

of your economy, it is diversification of your infrastructure and 

sources of supply and types of supply. 

Mr. HOCHSTEIN. First, never believe projections, long-term projections on oil price, and don’t make plans based on them. 

Mr. CASTRO. Well, I won’t anymore. 

Mr. HOCHSTEIN. Even EIA’s. That is my first advice to any country. 

Mr. CASTRO. Well, but let me ask you. We are talking about oil 

and gas, right? How does that stack up against the predictability 

58

of pricing for wind or solar or hydro, I mean, these other sources 

of energy? We know with respect to baseload, the fossil fuel has obviously been more reliable, right? But with respect to the predictability of the pricing, how do these others stack up against fossil 

fuel? 

Mr. HOCHSTEIN. Well, I think there it is different, because there 

is not a global price, benchmark price for wind or for solar the way 

there is for oil. 

Mr. CASTRO. So it is more predictable? 

Mr. HOCHSTEIN. So you are doing tenders and essentially companies are bidding on what they will charge you for the long term or 

for medium term if they get the contract to build it out. 

But I will say on how these two issues that you just asked in Argentina play out, we have two programs that we are running right 

now in Argentina that we just started. One is in the power sector, 

a power sector program that works specifically on this issue to help 

them on the technical expertise side, how do you figure out how to 

put together a good tender where you will get the maximum benefit 

for the country and understand how to deal with some of these 

countries that are bidding and put it together in an open, transparent, but also economically and something that works well. 

The same in the unconventional in shale gas. We have a program 

called the Unconventional Gas Technical Engagement Program. 

And in Argentina it is working really on how do you make sure 

that you have internationally competitive contractual and fiscal regimes that will support Argentina as they negotiate to bring in 

companies. 

What you don’t want is in some cases where we have seen over 

the last 40, 50 years in the oil and gas sector, countries have a 

newfound resource, they don’t have the same legal expertise on 

how to deal with the oil sector, company comes in, 30 years later 

they realize they have been paying—all the profits have gone to the 

company, none have been able to be used for the country. 

So we are trying to help, specifically on shale where we have expertise that nobody in the world has, to be able to support them. 

So we have a program that just started in Argentina on that. 

Mr. CASTRO. Thank you. 

Mr. DUNCAN. The gentleman’s time has expired. 

Global demand has an impact on that as well. I don’t think you 

all touched on that. I drive a diesel truck. And in the times I have 

driven a diesel truck, historically diesel fuel has been higher than 

unleaded gasoline. Now what we have seen is diesel fuel is actually 

less than the per gallon price of unleaded gasoline. 

And I have chewed on that a lot. I ask everyone listening in the 

audience today to think about that, because I really believe global 

demand on diesel fuel has an impact on low diesel prices right now, 

because the supply of crude oil is the same. Both of them are refined products. So after the refining process, the amount is pretty 

much the same. So now we have diesel prices at a low. I have been 

driving a diesel for 6 or 7 years, and I have never seen that until 

just recently. So it is an interesting impact. 

I will go to the gentleman from New York, Mr. Donovan. 

Mr. DONOVAN. Thank you, Mr. Chairman. 

59

I have two questions for the panel, one dealing with the use of 

ethanol, the increase of ethanol in Mexico in their gas, and the 

other is about our national security and the oil reserve. 

Over the last decade in the United States, we have experimented 

with an ethanol mandate requiring ethanol be blended into our 

gasoline. The mandate was created in about 2005 and expanded in 

2007 with a goal to decrease the United States reliance on foreign 

sources of oil. While we were sitting here, the AP just reported that 

the EPA is holding a hearing in Kansas City, Missouri, today about 

reaching the goals that they set in 2007. Obviously, the oil market 

has changed with the revolution of hydrofracking for natural gas, 

the world has an abundance of oil, and the United States is now 

an exporter. 

We also have seen the unintentional adverse impact of the ethanol mandate, including harming our environment, increasing the 

cost of food, and a negative impact on various types of engines. 

With the recent liberation of Mexico’s energy sector and the mandate, or the push to increase ethanol use in Mexico, I was just wondering if you could comment on how that would affect the environment, how that is going to affect the food prices for the Mexican 

people, and how it would affect the engines in the cars in Mexico. 

Ms. KENDERDINE. Well, the ethanol mandate is a mandate 

passed by Congress, and it is volumetric, it is not percentage, 

which has always been interesting to me, because if your consumption of fuel goes down, the percentage of ethanol goes up, because 

it is volumetric. But it is the law, and I think that it has generated 

a significant industry, and I am certain that it will do so in Mexico 

as well. 

What I would say about DOE is that we have invested significantly in non-food biofuels, and so we are very interested in that. 

We will continue to do that and have been working with many 

countries in Latin America on technical expertise in nonfuel 

biofuels, in Brazil, Mexico, I believe, Canada. We are working with 

them on advanced biofuels, et cetera. So I can’t say how it will turn 

out in Mexico, but I know that it has generated a significant industry there. 

Mr. DONOVAN. Does anybody else care to comment? 

My second question actually has to do with our national security, 

the oil reserve. The ban on exporting oil was to protect our national 

security. Now that that is lifted, are there any related threats to 

our national security that any of you see? 

Mr. HOCHSTEIN. Well, first, I am going to let Adam talk about 

sort of the numbers, but even though we have seen this dramatic 

rise in production of oil and gas in the United States and that our 

rate of imports has decreased significantly, from over 60 percent to 

below 30 percent, that doesn’t mean that we are isolated or insulated from the world markets. So a disruption anywhere in the 

world has impacts everywhere in the world, including the United 

States. 

We are now living through the largest disruption level in oil production that we have seen in 5 years or so. We have seen through 

the fires in Canada 1 million barrels a day went off the market. 

Due to the terrorist attacks in Nigeria in the delta against the platforms, Nigeria has significantly cut its oil production, almost by 

60

half, to just around 1 million, 1.1 million barrels a day. So that is 

a significant decline in production all of a sudden. So if you can 

see, other shortages or outages will affect the United States without a doubt. 

So I think I would look at energy security not as how do we become independent of the rest of the world, because it is a commodity and it is always going to be tied, but rather see how much 

we can improve our diversified situation, how do we work closely 

with our allies and friends around the world, whether it is through 

the IEA, the International Energy Administration, or through other 

bilateral relationships, to make sure that we are working together 

on the stability in the market itself and to secure energy supplies 

and routes. 

So I think that is our best bet in protecting our own national security, and making sure that no country in the world is beholden 

to one supplier, whether it is, as Melanie mentioned before, Russia 

and Eastern Europe, where that is using its monopoly on gas to politically coerce and use it as a weapon, or Venezuela, as we discussed before, in this hemisphere. Those are the things that we can 

do to ensure our national security. 

Ms. KENDERDINE. If I could say something about the Strategic 

Petroleum Reserve. The requirement in law is to use it to protect 

the U.S. from the economic harm caused by oil disruptions. And 

Amos is right, it has very much changed since we first established 

the SPR in 1979, where you actually did have physical shortages. 

Now you get much more harm from the price spikes and prolonged 

outages than you do from actual physical loss of supply, and that 

is because we now have an oil market, a global oil market. We 

didn’t have one when we started the SPR in 1979. 

But another thing I would say is that we have been authorized for $2 billion to modernize the Strategic Petroleum Reserve, and we 

need to do that in part because we need to get oil on the water. 

And we are producing enough additional oil in the United States 

that a lot of that oil is moving to the Gulf of Mexico where the SPR 

oil facilities are located, and we need to be able to get incremental 

oil onto the water when there is a disruption in the world. And so 

it is thanks to the Congress for authorizing that. It is very important for our energy security in the future. 

Mr. DONOVAN. I thank you all. 

Chairman, my time has expired. Thank you. 

Mr. DUNCAN. Thank you. I thank the gentleman. 

I go now to the gentlelady from Illinois, Ms. Kelly. 

Ms. KELLY. Thank you, Mr. Chair. 

The last few years, we have seen declining oil prices. However, 

historic patterns of lower oil prices resulting in economic growth 

have yet to materialize. Quite simply, consumer demand is changing, and we are creating an oversupply of oil. 

Another market where we already have an oversupply is in the 

international corn market. Corn is trading at roughly $4.30 a barrel. Years of high crop yields have resulted in excess corn. Seeing 

an oversupply in both marketplaces, with an overinvestment in oil 

and an underinvestment in corn and cellulosic ethanol as forms of 

alternative energy, I have seen the opportunity for ripe—ripe for 

growth and diversification. 

61

I will say, my district is urban, suburban, and rural, but the 

rural part of my district has 1,200 family farms, and they grow 

$367 million worth of corn, wheat, and soybeans every year. 

And expanding upon my colleague’s question, Mr. Donovan, can 

you just explain more how you are working with Latin American 

countries to use non-edible portions from corn and ethanol? 

Ms. KENDERDINE. Well, basically, it is technical assistance on 

how you produce ethanol and et cetera from non-food products—

cellulosic ethanol. We worked with Brazil to produce bagasse, 

which is the non-edible part of sugarcane. And what I would say—

one, we are an R&D organization, by and large, so that is what we 

do for a living. 

Something I would say about the Caribbean and Central and 

South America is the production of ethanol will help with some of 

the energy security issues that we are talking about here today associated with Venezuela and oil. We need to find alternatives for 

these countries to oil, and that is one of the things that we can do. 

And so we are also, in the U.S. and with some countries, working 

on advanced biorefineries. That is one of the things we are doing 

here and—I forget which country we have been working on biorefineries as well. 

So it is, by and large, a technical assistance and R&D program 

but with the underlying motivation of enhancing the energy security of these countries in Latin America. 

Ms. KELLY. What do you see the opportunities are with Cuba and 

the sugar ethanol? 

Whoever——

Ms. KENDERDINE. Sorry. I don’t know. 

Amos, do you—I haven’t looked at Cuba and sugar ethanol. So, 

sorry. I can get more information for you. 

Ms. KELLY. Okay. Thank you. 

Did you want to take a crack? 

Mr. HOCHSTEIN. No. I have to be honest, I don’t know much 

about Cuba’s ethanol production. I have looked at Cuba from other 

perspectives but not that. We are happy to get back to you, I think 

collectively between the two of us, after the hearing. 

Ms. KELLY. Okay. Thank you. 

And, Mr. Chair, I yield back. 

Mr. DUNCAN. Thank you. I thank the gentlelady. Great questions. 

I go now to Mr. Yoho from Florida. 

Mr. YOHO. Thank you, Mr. Chairman. 

And I appreciate the panel being here. 

As Venezuela goes through their tumultuous time, how much of 

the market have they lost? Or their production, I guess is a better 

question. How much is their production down in Venezuela? 

Mr. HOCHSTEIN. What I said in my testimony earlier, sir, was 

that in 1997 they were at 31⁄2 million barrels a day. Today they are 

somewhere between 2.2 and 2.5 but definitely below 2.5 million 

barrels a day. 

Mr. YOHO. And they are doing most of their refinery in the 

United States with Citgo, right? 

Mr. HOCHSTEIN. They do a lot of—they sell a lot of their oil to 

themselves through Citgo. 

62

Mr. YOHO. Okay. Has that been impacted much by that reduction, or are they filling that void with their decreased production 

by U.S. suppliers? 

Mr. HOCHSTEIN. No. The United States is actually one of few 

places they get market price for their oil, so I suspect that that is 

going to continue to be a good supply source for them. They have 

had to discount their oil significantly due to other reasons. 

Mr. YOHO. Okay. 

Where do you see the Venezuelan production in the near future, 

in, say, 5 to 10 years? And I know it is such an uncertainty, with 

the state of their politics and economy, but your prediction? 

Mr. HOCHSTEIN. Sir, I said before to Mr. Castro that one should 

be wary of projections. So I don’t want to——

Mr. YOHO. Yeah, I heard you say that. I was trying to get you 

to come clean on that. But——

Mr. HOCHSTEIN. But——

Mr. YOHO. Go ahead. 

Mr. HOCHSTEIN [continuing]. Absent any change, their production will continue to decline below 2 million. 

But I will say that it is not—what is happening now is not sustainable. At the end of the day, Venezuela’s oil is easy to produce. 

It is not complicated. And the minute there is a political and economic change, you will see an increase in production. Because companies want to go to Venezuela; they are just forced out by both 

the politics, the corruption, and the—I would accuse the government of malpractice when it comes to management of the resource. 

When you have the largest resource in the world and you are declining at this rate, that is malpractice. 

So, as long as this continues, the same situation as is today, they 

will continue to see declines—not to zero. There will be—because 

oil is too easy and PDVSA is too to good at producing it. But there 

is going to have to be some kind of change. 

Mr. YOHO. How much does that influence the market and the security, I guess, of the Caribbean areas, especially the most important, you know, the U.S. Virgin Islands and, like, Puerto Rico? How 

much does that, number one, affect the price and then the stability 

of a reliable baseline energy production? 

Mr. HOCHSTEIN. Well, our message has been, to the region, to the 

Caribbean in particular, is: You need to get off PetroCaribe, and 

you need to do it now. 

Mr. YOHO. Okay. 

Mr. HOCHSTEIN. And at low oil price is the right time to do that. 

And you can do that—every island is going to be different because they have different resources, different capabilities, and different financial outlooks. 

The other is not the issue of the oil itself but the issue of the 

debt and the credit. So if you look at Jamaica or Dominican Republic that use the cash crunch in Venezuela to buy back their debt 

at a few cents on the dollar, not everybody is able to do that. 

You know, Haiti, while their reliance on PetroCaribe has decreased significantly—but if you look at their statistics, 86 percent 

of Haiti’s foreign debt is held by Venezuela, which is 15 percent of 

their GDP. That is massive. And if you look at what Venezuela just 

63

did to Paraguay, where they tried to, for political reason, call the 

debt, what happens to Haiti if they call that debt? 

So we have to work on a number of things. One is diversify the 

energy economy in each island. The second is to make sure that we 

support them in getting out of the debt structure that they have 

to PetroCaribe and Venezuela. 

That is why I said before they are living on borrowed time. They 

cannot celebrate the low oil prices as consumers because, as Adam 

talked about before, the oil prices are going to rise. We know that. 

We just don’t know when. So we have to do it now. 

Mr. YOHO. All right. And that brings me to another question 

then. It is talking about the floating LNG platforms. How feasible 

is that? Are they using that in U.S. Virgin Islands and/or Puerto 

Rico at this time? 

Whoever wants to answer. 

Mr. HOCHSTEIN. I don’t believe they are using it yet, but I think 

what we are seeing is a proliferation of FSRUs and new technologies to make it even cheaper and easier to manage the scale. 

So, now, for the first time, there are companies discussing how to 

do it, instead of on a big ship that is an FRSU, do it with a barge. 

There is another company, a U.S. company, that is looking at 

having a container ship in the Caribbean——

Mr. YOHO. Right. 

Mr. HOCHSTEIN [continuing]. Where you would basically have it 

like a wheel and spoke. So you would come in there, and then 

smaller containers going out to islands. 

So I think you are going to see a lot more. The bigger-scale ones 

of the FSRUs we are seeing in Central America. And with the expansion, as Melanie talked about before, of the Panama Canal, you 

are going to see a lot more traffic there and a lot more opportunities. Colombia just the other day started talking about an FSRU 

there as well. 

So I think you are going to see that mix—small-scale for the Caribbean and LNG FSRUs for the larger countries. 

Mr. YOHO. All right. 

And, you know, in the Caribbean, we know how the hurricanes 

come through there, and they can pop up pretty quickly. I assume 

those things are agile enough that we will know ahead of time, 

that they can get them out of harm’s way. And I am certain they 

have done the research on that. 

Mr. HOCHSTEIN. Well, I think the companies that are deploying 

these ships are well aware of that. 

Mr. YOHO. Yeah. 

Mr. HOCHSTEIN. It has actually been discussed between them 

and the countries. But I think we have to be aware of that, too, 

because it will fall onto us——

Mr. YOHO. Right. 

Mr. HOCHSTEIN [continuing]. If there is any disaster of any kind. 

Mr. YOHO. Thank you for your time. I appreciate you being here. 

I yield back, Mr. Chairman. 

Mr. DUNCAN. I thank the gentleman from Florida. 

I will now go to Mr. Lowenthal for 5 minutes. 

Mr. LOWENTHAL. Thank you, Mr. Chair. 

64

As the chair, myself, of the Safe Climate Caucus, I would like to 

drill down a little bit more deeply in terms of renewable and alternative energies and how we are really advancing our clean, lowcarbon energy in the Western Hemisphere, as we have already 

pointed out; that renewal energy sources have the benefit of being 

virtually free of the negative health implements and are not subject 

to some of the international volatility in the fuel supply costs, 

which also, I believe, strengthens our energy security. 

And, as you pointed out, we have seen the economies of many of 

the countries in our hemisphere falter because of their dependence 

on oil prices. That has already been made clear. As to the same 

matter, so have we seen some of the economies of budgets of oil extraction states have also been faltered. 

So the question is, as I move forward, the Paris Climate Agreement has signaled the world is transitioning away from carbon-intensive energy. And I am glad, when I went through the readings, 

to hear of our efforts through initiatives like Connecting the Americas 2022 and the Energy and Climate Partnerships of the Americas that are going to help our neighbors diversity their energy 

portfolio and strengthen their energy security. 

So the questions of any of the witnesses are: How do we measure 

the successes of these programs? Do we have any specific data to 

indicate the specific increase in alternative energy usage in the region? 

And the third thing is, you know, we are talking about energy 

in terms of development on one hand, but we are also talking about 

both transportation sectors and power sectors. And I haven’t heard 

the word ‘‘coal’’ at all mentioned once. Is coal a major player in the 

creation in Latin America of the power sector? And are we seeing 

specific changes in that also? 

And so those are the questions that I have. 

Ms. KENDERDINE. Let me say—and on coal in Latin American 

and South America, I am sure that Adam knows the data. South 

America is much more dependent on hydro——

Mr. LOWENTHAL. Hydro. 

Ms. KENDERDINE [continuing]. Hydro than a lot of places in the 

world, certainly in the U.S. And I have long been worried about the 

melting of glaciers and the loss of hydro—somebody discussed it 

earlier, in Chile, the problems with hydropower when the glaciers 

are melting—and have thought about natural gas as adaptation 

strategy for climate change in South America, which is something 

I think we need to think about. 

The Department of Energy has several initiatives. The Clean Energy Ministerial, that is more a best practices and kind of a deployment focus. There are 24 countries in the Clean Energy Ministerial, and Brazil, Mexico, U.S., Canada are the Western Hemisphere 

countries. 

We also just launched Mission Innovation. And Mission Innovation is an initiative of 20 countries. There are five countries in the 

Western Hemisphere—Brazil, Canada, Mexico, and Chile. The commitment in Mission Innovation is to double our government spending on clean energy R&D to accelerate transformation of our energy 

systems. 

65

Each country can define clean how they want it. We would define 

clean as all of the above. Coal would have a role in that, with carbon capture and sequestration. Our definition is reducing CO2 

emissions. But that Mission Innovation I think holds enormous 

promise for accelerating the R&D that we need for that transformation for renewables for zero-carbon power generation, et 

cetera, et cetera. 

How you measure it, it is—the course of R&D is hard to know. 

I don’t think Adam’s forecast 30 years ago would have picked up 

on the shale gas revolution. We didn’t know about it then, although 

the Department was investing in it. 

But one thing I would say on Mission Innovation, the doubling 

of the government R&D, clean energy R&D, of those 20 countries 

is not trivial. That is 85 percent of the world’s total spending on 

clean-energy R&D. So I think it is something that is worth supporting. Innovation is good in general. And so we are excited about 

it. And we just came from a ministerial in San Francisco. 

Mr. HOCHSTEIN. Mr. Chairman, if I may, we are putting quite a 

bit of resources—as the chairman talked before in his opening remarks about the conversations that the committee had, that you 

had led, with the leaders from the Caribbean during summits when 

they were here. We are working with them, but I don’t want this 

to be a Band-Aid. I don’t want to see, okay, a project is going up. 

Because the bottom line is, if they don’t make the fundamental 

change in their regulatory environment, their legal structures, you 

are not going to see long-term investment of the right kind of companies to come in. 

What we have done is we are putting resources behind, working 

with island by island, country by country, that have the political 

will to face the difficult task of facing the incumbents and some of 

the other special interests to be able to do that. 

We have a great example in Nevis. It is a small country dependent 100 percent for their power on Venezuela but have great geothermal opportunities, potential. But they didn’t have the expertise. We worked very closely with them for 2 years to rewrite their 

legal and their regulations. And they did a state-of-the-art tender. 

A company won the tender, an American company, and now we are 

looking at completing the process toward turning them into a geothermal-based power. 

I know it is a small country, but it is a model not only in the 

Caribbean, but it is going to be a model for islands of how to utilize 

this kind of technology. 

So we are working. I think it is entirely quantifiable and measurable. If you see that projects are happening—like the chairman 

mentioned, Jamaica. Jamaica is going on both the gas and renewables, and they have contracts to prove it. So when they are negotiating the right kind of contracts, giving the companies the rights 

to be able to come and create the incentives for companies to come 

and invest, they can spend the money up front but become far more 

secure and less expensive for the future. 

And they all have different qualities. All of them have sun; some 

wind, some geothermal, et cetera. But I think it is measurable. 

Mr. LOWENTHAL. Okay. Thank you. 

And I yield back. 

66

Mr. DUNCAN. Okay. Thank you. 

We have a little bit of time for a second round, if the committee 

would like. 

I do have a question for Ms. Kenderdine. 

You mentioned five countries that had committed to double their 

spending on renewables, I think is what you said. What were the 

countries again? 

Ms. KENDERDINE. Actually, it is 20 countries that have—it is 

doubling their government spending on clean-energy R&D, not renewables necessarily. But the five countries——

Mr. DUNCAN. On clean-energy R&D? 

Ms. KENDERDINE. Clean-energy R&D, yes. 

Mr. DUNCAN. Okay. 

Ms. KENDERDINE. And the five countries in the Western Hemisphere are Brazil, Canada, Mexico, Chile, and the U.S. 

Mr. DUNCAN. And the U.S. What do we spend currently? What 

is the U.S. spending on that? 

Ms. KENDERDINE. We all have developed baseline numbers. Our 

baseline number for clean energy is—for the U.S. Government is 

$6.4 billion, $6.6 billion a year. That includes the Defense Department and other agencies. At DOE, I think it is about $4.6 billion 

a year. 

And so we are a significant percentage of that clean-energy R&D. 

The Chinese just came in with a baseline surprisingly high. I think 

it was $3.4 billion, something in that range. And it creates a competitive position, as well. If these other countries are investing in 

the R&D, we need to be investing, too, so we can create commercial 

opportunities for that R&D, as well. 

Mr. DUNCAN. So that is U.S. Government spending on R&D. 

What do you think the private sector spends in R&D for clean energy? 

Ms. KENDERDINE. Clean energy? Much more than that, although 

it has been declining pretty significantly lately. The investment has 

gone down. 

Mr. DUNCAN. Right. Okay. 

We mentioned Jamaica earlier, about, you know, paying off their 

debt at a discount, I guess, to Venezuela. And Maduro went to Jamaica recently to show support for PetroCaribe and kind of give assurances to the Caribbean nation that it is still going to be a thriving enterprise. And, at the time, he mentioned that they were 

going to invest in upgrades to the refinery that is there in Jamaica. 

I asked the question of OAS today, Mr. Fitzpatrick, you know, 

where are they going to get the money. Because they are struggling 

to provide, with the low oil prices, for their citizens. And he said, 

Well, they are going to borrow it from China. 

That is alarming to me, that Venezuela is going to borrow from 

China to invest in their refinery in Jamaica. It just shows that 

dwindling oil prices has a dramatic impact not only on spending 

and revenues available but also now on the indebtedness of Venezuela. So I wanted to make that point. 

I don’t have any further questions. We don’t have any other 

members on my side of the aisle. Mr. Lowenthal, do you have 

any——

Mr. LOWENTHAL. I just have one. 

67

Mr. DUNCAN. Okay. You are recognized. 

Mr. LOWENTHAL. We have spent a significant amount of time 

talking about the power sector. I am interested also if you are seeing the same kinds of changes toward renewables in the transportation sectors also in these countries. 

Are we seeing investments in transportation, in renewable, electric? I know at one time Brazil had had very effective, kind of, alternative energy. So I am wondering, are we seeing it also in transportation? 

Mr. SIEMINSKI. Thank you for the question, Congressman 

Lowenthal. I would like to start off, actually, with your last question——

Mr. LOWENTHAL. All right. Go back to the last question. 

Mr. SIEMINSKI [continuing]. If you don’t mind——

Mr. LOWENTHAL. Absolutely. 

Mr. SIEMINSKI [continuing]. And then maybe we can provide 

something for the record on the transportation issue. 

You had asked about coal. 

Mr. LOWENTHAL. Right. I want to know about coal. 

Mr. SIEMINSKI. And the two biggest countries on the consumption 

side for coal are Mexico and Brazil. They use it largely in power 

generation. 

Mr. LOWENTHAL. Right. That is where it would be, in the power 

side. 

Mr. SIEMINSKI. And on the supply side, of course, the United 

States is a big coal producer, user, and we export. But Colombia, 

the country of Colombia, exports coal, and they actually dominate 

the coal trade kind of south of our border. 

Now, one of the interesting things about the natural gas situation, the pipeline gas that is going to go from Mr. Castro’s Eagle 

Ford into Mexico is probably going to be used largely to offset coal 

being used in electricity, so it will be a cleaner fuel. It is relatively 

cheap. Natural gas is tremendously competitive in the electric 

power markets. 

One of the—I think the very first shipment of LNG from the 

Sabine Pass facility down on the Texas-Louisiana border went to 

Brazil, the LNG went to Brazil, and they are using it in the same 

way. So the possibility of U.S. gas competing in these Latin American power markets is really kind of an interesting opportunity. 

You asked about renewables. The EIA does an international energy outlook. We try to forecast out, you know, 20 or 25 years. Over 

the period that we are looking at, renewables actually grow faster 

than any other fuel in the outlook, but oil and coal and natural gas 

continue to have a higher market share even at the end of the, you 

know, 2040 forecast period than renewables. But renewables are 

growing very strongly. 

A lot of that is—so we count hydro in there, renewables——

Mr. LOWENTHAL. As a renewable. 

Mr. SIEMINSKI [continuing]. Wind and power—wind and solar 

really go into those electric markets, as you were indicating. And 

you have to have something as the base load provider, you know, 

unless—the kinds of things that the Department of Energy was 

working on—the grid and the infrastructure allows for renewables 

to back up renewables. Right now, we need something like coal or 

68

nuclear or natural gas to provide the base load power. Natural gas 

is very effective at that. 

So, on the coal side, I think that the—in our projections, with 

China moving more toward more of a service economy rather than 

purely manufacturing, China’s use of coal is going to begin to flatten, and that is probably going to flatten out coal use on a global 

basis. 

So, back to the renewable side, there is a lot of opportunity there. 

It is going to grow pretty rapidly. But, in our projections, fossil fuel 

is still going to be needed, especially in transportation, your last 

question. 

Mr. LOWENTHAL. Right. That is right. 

Mr. SIEMINSKI. So, on renewables, Brazil, of course, has got ethanol. We have ethanol in the U.S. It is about 900,000 barrels a day 

of ethanol in the U.S. It is quite a bit, 10 percent of our gasoline 

consumption. 

The other renewables in transportation, Brazil has been pretty 

effective in using their sugar-based ethanol in transportation. But 

it is very difficult to compete with diesel fuel, as Chairman Duncan 

was saying, and gasoline in a lot of these locations where they 

don’t have the opportunity for sugarcane production or corn production. 

And, Mr. Chairman, just to wrap up my 30 seconds, if you will 

give it to me, I have a feeling that one of the reasons the diesel 

prices are lower now than gasoline is that the warm winter resulted in relatively low price differentials for the heating fuel side 

of the barrel, which is kind of right in the same area that diesel 

fuel occupies when it comes out of refineries. And so having heating oil around meant that diesel fuel prices came down. 

It is very possible that if we go back to normal winters—and that 

is what the NOAA forecasters are saying for this coming winter—

that your diesel prices might go back up again. 

Mr. DUNCAN. Yeah. The dynamics—the gentleman’s time has expired—dynamics of blending and wintertime and summertime fuel 

prices and blends are a fact, as well. Most people in America don’t 

think about that as they are changing over to that summer blend, 

but that does affect prices. 

It has been a great hearing. We are going to continue to delve 

into energy in the hemisphere and also continue to watch the Venezuela issue very, very closely. 

Members of the committee may have questions for the witnesses, 

and if we submit those questions, we would ask you all to provide 

an answer within 10 days. And I don’t know that that will happen. 

You all have been great witnesses. 

I want to thank the staff of the committee for working with the 

witnesses in providing today’s hearing. 

So, in wrapping up, pursuant to committee rule 7, members of 

the subcommittee will be permitted to submit written statements 

to be included in the official hearing record. And so, without objection, the hearing record will remain open for 5 business days to 

allow statements, questions, extraneous materials for the record, 

subject to the length limitation in the rules. 

With no further business, this committee will stand adjourned. 

[Whereupon, at 11:57 a.m., the subcommittee was adjourned.] 

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