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ENERGY AND THE RURAL ECONOMY: THE 

ECONOMIC IMPACT OF EXPORTING CRUDE 

OIL 

HEARING 

BEFORE THE

COMMITTEE ON AGRICULTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JULY 8, 2015 

Serial No. 114–20 

( 

Printed for the use of the Committee on Agriculture 

agriculture.house.gov 

COMMITTEE ON AGRICULTURE 

K. MICHAEL CONAWAY, Texas, Chairman 

RANDY NEUGEBAUER, Texas, 

Vice Chairman 

BOB GOODLATTE, Virginia 

FRANK D. LUCAS, Oklahoma 

STEVE KING, Iowa 

MIKE ROGERS, Alabama 

GLENN THOMPSON, Pennsylvania 

BOB GIBBS, Ohio 

AUSTIN SCOTT, Georgia 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

SCOTT DESJARLAIS, Tennessee 

CHRISTOPHER P. GIBSON, New York 

VICKY HARTZLER, Missouri 

DAN BENISHEK, Michigan 

JEFF DENHAM, California 

DOUG LAMALFA, California 

RODNEY DAVIS, Illinois 

TED S. YOHO, Florida 

JACKIE WALORSKI, Indiana 

RICK W. ALLEN, Georgia 

MIKE BOST, Illinois 

DAVID ROUZER, North Carolina 

RALPH LEE ABRAHAM, Louisiana 

JOHN R. MOOLENAAR, Michigan 

DAN NEWHOUSE, Washington 

TRENT KELLY, Mississippi 

COLLIN C. PETERSON, Minnesota, Ranking 

Minority Member 

DAVID SCOTT, Georgia 

JIM COSTA, California 

TIMOTHY J. WALZ, Minnesota 

MARCIA L. FUDGE, Ohio 

JAMES P. MCGOVERN, Massachusetts 

SUZAN K. DELBENE, Washington 

FILEMON VELA, Texas 

MICHELLE LUJAN GRISHAM, New Mexico 

ANN M. KUSTER, New Hampshire 

RICHARD M. NOLAN, Minnesota 

CHERI BUSTOS, Illinois 

SEAN PATRICK MALONEY, New York 

ANN KIRKPATRICK, Arizona 

PETE AGUILAR, California 

STACEY E. PLASKETT, Virgin Islands 

ALMA S. ADAMS, North Carolina 

GWEN GRAHAM, Florida 

BRAD ASHFORD, Nebraska 

SCOTT C. GRAVES, Staff Director 

ROBERT L. LAREW, Minority Staff Director 

(II) 

(III) 

C O N T E N T S 

Page 

Conaway, Hon. K. Michael, a Representative in Congress from Texas, opening 

statement .............................................................................................................. 1 

Prepared statement .......................................................................................... 3 

Peterson, Hon. Collin C., a Representative in Congress from Minnesota, opening statement ........................................................................................................ 3 

WITNESSES

Porter, Hon. David J., Chairman, Texas Railroad Commission, Austin, TX ...... 5 

Prepared statement .......................................................................................... 6 

Hamm, Harold, Founder, Chairman, and Chief Executive Officer, Continental 

Energy, Oklahoma City, OK ............................................................................... 8 

Prepared statement .......................................................................................... 9 

Duffy, Hon. Terrence A., Executive Chairman and President, CME Group, 

Chicago, IL ............................................................................................................ 18 

Prepared statement .......................................................................................... 19 

Cutting, Kari Bjerke, Vice President, North Dakota Petroleum Council, Bismarck, ND ............................................................................................................ 20 

Prepared statement .......................................................................................... 22 

Webster, Jamie, Senior Director, IHS, Washington, D.C. .................................... 26 

Prepared statement .......................................................................................... 28 

Rusco, Ph.D., Frank, Director, Natural Resources and Environment, U.S. 

Government Accountability Office, Washington, D.C. ...................................... 30 

Prepared statement .......................................................................................... 32 

(1) 

ENERGY AND THE RURAL ECONOMY: THE 

ECONOMIC IMPACT OF EXPORTING CRUDE 

OIL 

WEDNESDAY, JULY 8, 2015 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON AGRICULTURE, 

Washington, D.C. 

The Committee met, pursuant to call, at 10:00 a.m., in Room 

1300, Longworth House Office Building, Hon. K. Michael Conaway 

[Chairman of the Committee] presiding. 

Members present: Representatives Conaway, Goodlatte, Lucas, 

King, Thompson, Gibbs, Austin Scott of Georgia, Crawford, Gibson, 

Hartzler, Benishek, Denham, LaMalfa, Davis, Yoho, Walorski, 

Allen, Bost, Rouzer, Abraham, Emmer, Moolenaar, Newhouse, 

Kelly, Peterson, David Scott of Georgia, Costa, Walz, McGovern, 

DelBene, Vela, Lujan Grisham, Kuster, Nolan, Bustos, Kirkpatrick, 

Aguilar, Plaskett, Adams, Graham, and Ashford. 

Staff present: Carly Reedholm, Haley Graves, Jessica Carter, 

Josh Maxwell, Mollie Wilken, Paul Balzano, Scott C. Graves, John 

Konya, Anne Simmons, Evan Jurkovich, Liz Friedlander, and Nicole Scott. 

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A 

REPRESENTATIVE IN CONGRESS FROM TEXAS 

The CHAIRMAN. Good morning, everyone. We will call this full 

Committee hearing to order. I have asked Ted Yoho to offer up the 

opening prayer. 

Ted. 

Mr. YOHO. Thank you, Mr. Chairman. 

If everybody would bow their heads. 

Dear Heavenly Father, we ask you to grant us the wisdom and 

the knowledge, and we thank you for the many blessings that you 

have given us in this great country of ours. Along with that wisdom 

and knowledge, we ask you to give us the courage to act on that, 

to do what is right for this country in your name. And we say these 

things in our Lord’s name, Jesus Christ, amen. 

The CHAIRMAN. Thank you, Ted. 

Good morning everyone, and welcome to today’s full Committee 

hearing on Energy and the Rural Economy: the Economic Impact 

of Exporting Crude Oil. 

The ban on crude oil exports was a 1970s effort to protect the 

U.S. economy and U.S. consumers, but over the past 40 years has 

achieved the opposite result. While it may have been well-intenVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 P:\DOCS\114-20\95510.TXT BRIAN
2 

tioned at the time of enactment, the ban on crude oil exports is an 

antiquated relic and it is disrupting global energy markets, reducing domestic employment, and slowing economic growth throughout 

our country. 

We have heard repeatedly in this Committee about the importance of agricultural exports to the rural economy. The same logic 

applies when it comes to exporting crude oil. 

After the ban was first imposed, its impact was muted by declining domestic production throughout the 1980s and 1990s, but today 

it is no longer a benign Washington regulation. With the revolution 

in shale oil production, the ban has grown teeth, and those teeth 

have taken a bite out of our economy, particularly our rural economy. 

The majority of all development takes place in rural areas like 

my district, and when development slows or prices swing wildly, 

the health of those rural communities suffers. 

Job growth and wage increases are obvious benefits of expanding 

activity in the oil industry, but rural communities also benefit in 

indirect ways as well: landowners receive lease payments, residents 

have more disposable income to spend at stores and restaurants, 

and local governments see increases in sales, property, and income 

tax revenues. 

In fact, if the ban were lifted today, we would see close to a million jobs created over the next few years. Texas alone would see 

$5.21 billion in income contribution by 2020, helping to propel our 

economy forward. 

We often hear about the strain on Americans caused by high energy prices. Nowhere is that more the case than with our farms 

and ranches where energy is often a very significant input cost, 

both in terms of fuel and in costs of inputs like fertilizer. 

While the agricultural economy has dropped energy consumption 

nearly 30 percent since the 1970s due to innovation and improved 

production practices, the industry still spends nearly 18 percent of 

total farm income on energy inputs. Compared to their urban 

neighbors, rural households spend 58 percent more on fuel for 

transportation as a percentage of their income. Testimony we will 

hear today will shed light on how lifting the oil export ban will 

both lower and stabilize fuel cost. 

The Texas Legislature recently passed with overwhelming bipartisan support Senate Concurrent Resolution 13, Urging the United 

States Congress to end the ban on crude oil exports. As many as 11 

governors have written the Administration calling for an end to the 

ban as well. In response, I have introduced a bill to address this 

issue, H.R. 2369, the Energy Supply and Distribution Act of 2015. 

Lifting the oil ban will grow our economy, it will also improve 

our geopolitical position, and it will lower gas prices. The oil export 

ban is a relic of the 1970s and should be eliminated. 

We have a panel of distinguished witnesses who will share their 

expertise on this issue. I want to thank each of you for taking your 

time out of your schedules to be with us today, and I look forward 

to hearing your testimony. 

I would also like to recognize a new Member of the Committee, 

Congressman Trent Kelly, who is joining us for his first full ComVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 P:\DOCS\114-20\95510.TXT BRIAN
3 

mittee hearing. Trent is down in front. Trent represents the First 

District of Mississippi. 

Trent, welcome to the team. We are glad to have you with us. 

[The prepared statement of Mr. Conaway follows:] 

PREPARED STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE IN

CONGRESS FROM TEXAS

Good morning and welcome to today’s full Committee hearing, Energy and the 

Rural Economy: the Economic Impact of Exporting Crude Oil. 

The ban on crude oil exports was a 1970s effort to protect the U.S. economy and 

U.S. consumers, but over the past 40 years it has achieved the opposite result. 

While it may have been well-intentioned at the time of enactment, the ban on crude 

oil exports is an antiquated relic and it is disrupting global energy markets, reducing domestic employment, and slowing economic growth throughout our country. We 

have heard repeatedly in this Committee about the importance of agricultural exports to the rural economy. The same logic applies when it comes to exporting crude 

oil. 

After the ban was first imposed, its impact was muted by declining domestic production throughout the 1980s and 1990s. But today, it is no longer a benign Washington regulation. With the revolution in shale oil production, the ban has grown 

teeth and those teeth are taking a bite out of our economy, particularly our rural 

economy. 

The majority of oil development takes place in rural areas like my district, and 

when development slows or prices swing wildly, the health of those rural communities suffers. 

Job growth and wage increases are obvious benefits of expanding activity in the 

oil industry. But, rural communities also benefit in indirect ways, as well—landowners receive lease payments, residents have more disposable income to spend at 

stores and restaurants, and local governments see increases in sales, property, and 

income tax revenue. 

In fact, if the ban were lifted today, we would see close to a million jobs created 

over the next few years. My home State of Texas alone would see $5.21 billion in 

income contribution by 2020, helping to propel our economy forward. 

We often hear about the strain on Americans caused by high energy prices. Nowhere is that more the case than on our farms and ranches where energy is often 

a very significant input cost, both in terms of fuel and in the cost of inputs like fertilizer. While the agriculture industry has dropped energy consumption nearly 30% 

since the 1970s due to innovation and improved production practices, the industry 

still spends nearly 18% of total farm income on energy inputs. Compared to their 

urban neighbors, rural households spend 58% more on fuel for transportation as a 

percentage of their income. Testimony we will hear today will shed light on how lifting the oil export ban will both lower and stabilize fuel costs. 

The Texas Legislature recently passed with overwhelming bipartisan support, 

Senate Concurrent Resolution 13, ‘‘Urging the U.S. Congress to end the ban on 

crude oil exports’’. As many as eleven governors have written the Administration 

calling for an end to the ban. In response, I have introduced a bill to address this 

issue, H.R. 2369, the Energy Supply and Distribution Act of 2015. 

Lifting the oil export ban will grow our economy, it will also improve our geopolitical position and it will lower gas prices. The oil export ban is a relic of the 

1970s and should be eliminated. 

We have a panel of distinguished witnesses who will share their expertise on this 

issue. I thank each of you for taking time out of your schedules to be here with us 

today and I look forward to hearing each of your testimony. 

I also would like to recognize a new Member of the Committee, Congressman 

Trent Kelly, who is joining us for his first hearing today. Mr. Kelly represents the 

First District of Mississippi. 

The CHAIRMAN. With that, I yield any time the Ranking Member 

would like to use. 

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A 

REPRESENTATIVE IN CONGRESS FROM MINNESOTA 

Mr. PETERSON. Thank you, Mr. Chairman. 

4 

I support removing restrictions on the export of crude oil from 

the United States, and I am a cosponsor of H.R. 702, which would 

do just that. This simply makes sense as current export laws are 

outdated and we are in a world market. 

In the nearly 40 years since laws governing the export of crude 

oil were last visited in the United States, we have significantly increased domestic oil production, and we are now the world’s largest 

oil producer. Studies have shown that lifting the current ban on 

crude oil exports would create jobs, many in rural areas. 

The Agriculture Committee does not have jurisdiction over oil exports, but programs such as USDA’s rural development program 

could help rural areas face challenges with population fluctuations 

and increased strain on rural resources that come from increased 

oil production. 

I look forward to hearing from today’s witnesses about the opportunities crude oil exports could provide to rural communities, and 

I hope that we will also be able to discuss some of the infrastructure issues that we see come up in areas like North Dakota, near 

my district, where they have seen a dramatic increase in oil production. 

Again, I thank the chair for holding today’s hearing and welcome 

to our witnesses. 

The CHAIRMAN. I thank the Ranking Member. 

The chair requests that other Members submit their opening 

statements for the record so that our witnesses may begin their 

testimony and to ensure there is ample time for questions. 

I would like to welcome our witnesses at the table today, the 

Honorable David J. Porter, Chairman, Texas Railroad Commission 

of Austin, Texas. Actually Midland, Texas, but state law requires 

him to live there. David is a CPA like Collin and me. 

I appreciate you being here this morning, David. 

We also have Mr. Harold Hamm, founder, Chairman, and Chief 

Executive Officer of the Continental Resources, Inc., Oklahoma 

City. 

Mr. Hamm, thank you. 

We have Mr. Terry Duffy, Executive Chairman and President of 

CME Group of Chicago. This is the first time ever for Terry to appear before us. That is a joke. Terry is a regular visitor to this witness table. 

We have Ms. Kari Cutting, Vice President, North Dakota Petroleum Council, from Bismark, North Dakota. 

Kari, good to have you here this morning. 

We have Mr. Jamie Webster, Senior Director, IHS, here in Washington, DC. 

Jamie, thank you for coming. 

And Dr. Frank Rusco, Director, Natural Resources and Environment, U.S. Government Accountability Office here in Washington, 

DC. 

Dr. Rusco, thank you for being here as well. 

David, begin your 5 minutes, and we look forward to hearing 

your testimony. 

5 

STATEMENT OF HON. DAVID J. PORTER, CHAIRMAN, TEXAS 

RAILROAD COMMISSION, AUSTIN, TX 

Mr. PORTER. Chairman Conaway, Ranking Member Peterson, 

and Members of the Committee, for the record, I am David Porter, 

Chairman of the Texas Railroad Commission. 

For those of you who aren’t familiar with the Texas Railroad 

Commission, we are the state’s chief energy regulator. I am one of 

the three statewide elected Commissioners, and we oversee everything from oil and gas to pipeline, uranium surface exploration, 

coal mining, natural gas, local distribution companies, and alternative gas fuels. 

Thank you for holding this hearing and for the opportunity to 

testify today about the immediate need for Congress to lift the 

crude oil export ban. Crude oil exports would stir new American 

energy production, foster economic growth, and provide direct benefits to rural America and our nation as a whole. 

The U.S. crude oil export ban is a leftover relic from another period of time. Forty years ago, the United States was in the midst 

of the Arab oil embargo and faced gasoline shortages across the 

country. Development of our shale resources has been a gamechanger and presents the U.S. with the opportunity to be the 

world’s largest producer of both oil and natural gas. The export ban 

is more than just an outdated policy. Keeping it in place is actually 

harming our economy. 

In Texas, we understand and experience firsthand the link between U.S. oil and gas production and the strength of the economy. 

The two are inexorably linked. When oil prices recently dropped, 

we felt the harsh economic impacts at home. We saw thousands of 

hard-working men and women put out of work and rigs idled. 

To put this in perspective, according to recent studies from the 

University of Houston and Rice University, each drilling rig represents a total of 224 jobs. These are jobs on the rigs themselves 

and across the supply chain and in the broader economy. With the 

loss of 1,072 rigs through June, you can do the math. That loss 

comes to roughly 240,000 jobs. 

The ban is also responsible for the disparity between the U.S. 

pricing benchmark for crude, known as WTI, and the international 

benchmark, Brent. The majority of the new oil being produced from 

our shale formations is light sweet crude, and the U.S. refining capacity is not designated to economically handle the increased volumes of this type of crude. As a result, our oil is essentially 

trapped in the U.S., creating a supply glut that is driving down the 

price of U.S. oil. This represents billions of dollars of lost revenue 

that could be pumped back into the U.S. economy. 

The best way to put people back to work and address the glut 

of light sweet crude is to allow it to be exported to the world market. Earlier this year, the Texas State Legislature passed and Governor Abbott signed a resolution asking Congress to lift the ban on 

crude oil. It notes the multiple benefits it would bring to Texas and 

the U.S. 

First, lifting the export ban would increase production here at 

home, resulting in new American job creation, economic growth, 

and increased state and Federal revenue. 

6 

Second, lifting the export ban would help consumers save money 

at the pump. Domestic gas prices are based on the international 

price of oil. Lower fuel prices would be especially beneficial to farmers and rural Americans. As you are aware, agriculture is an energy-intensive industry, and rural Americans spend more money on 

fuel as a percentage of their income than urban residents. Lower 

gasoline prices will provide a significant economic boom for many 

of these families and small businesses. 

Third, lifting the ban will enhance free trade and lower the U.S. 

trade deficit. The U.S. exports all types of goods and commodities. 

In addition, the Federal Government also allows for unlimited exports of refined products. Why should U.S. crude oil be treated any 

differently? 

Finally, lifting the crude oil export ban will strengthen our national security and help our global allies. The increase in U.S. energy production has helped make the international sanctions 

against Iran successful. A recent report by Senator Murkowski 

points out that the U.S. Government has placed de facto sanctions 

on U.S. oil producers, and if the sanctions against Iran were lifted, 

Iranian oil would reach global markets that U.S. production is prohibited from accessing. Chairman Murkowski concluded: ‘‘Any deal 

that lifts sanctions on Iranian oil will disadvantage American companies unless we lift the antiquated ban on our own exports.’’ 

Allowing the free trade of oil would make the U.S. a true global 

energy leader and superpower, it would mean hundreds of thousands new jobs for Americans, thriving communities with vibrant 

economies, and families saving money every time they fill up the 

car. This is the world I want to live in and the world we can live 

in if Congress and the President take immediate action to lift the 

crude oil export ban. 

Thank you again for the opportunity to speak, and I would be 

happy to answer any questions at the appropriate time. 

[The prepared statement of Mr. Porter follows:] 

PREPARED STATEMENT OF HON. DAVID J. PORTER, CHAIRMAN, TEXAS RAILROAD

COMMISSION, AUSTIN, TX 

Chairman Conaway, Ranking Member Peterson, and Members of the Committee: 

For the record, I am David Porter, Chairman of the Texas Railroad Commission. 

For those of you who aren’t familiar with the Texas Railroad Commission, we are 

the state’s chief energy regulator. I am one of three statewide elected Commissioners, and we oversee everything from oil and gas to pipelines, uranium exploration, surface coal mining, natural gas local distribution companies and alternative 

natural gas fuels. 

Thank you for holding this hearing and for the opportunity to testify today about 

the immediate need for Congress to lift the crude oil export ban. Crude oil exports 

would spur new American energy production, foster economic growth and provide 

direct benefits to rural America and our nation as a whole. 

The U.S. crude oil export ban is a left-over relic from another period of time. Forty 

years ago the United States was in the midst of the Arab oil embargo and faced 

gasoline shortages across the country. The crude export ban was put in place out 

of fear of increased dependence on foreign oil and the need to protect our dwindling 

domestic oil supply. The world today is a much different place and the circumstances we faced in the 1970s are no longer relevant or true today. 

Technological advancements have allowed U.S. producers to tap new sources of oil 

and natural gas from shale formations, including from the Permian Basin and Eagle 

Ford in Texas. Development of our shale resources has been a game-changer and 

presents the U.S. with the opportunity to be the world’s largest producer of both 

oil and natural gas. 

7 

The export ban is more than just an outdated policy. Keeping it in place is actually harming our economy. 

In Texas, we understand and experience firsthand the link between U.S. oil and 

natural gas production and the strength of the economy. The two are inextricably 

linked. When oil prices recently dropped, we felt the harsh economic impacts at 

home. We saw thousands of hardworking men and women put out of work and rigs 

idled. We saw state revenues—used to support schools and infrastructure investments—decline. This impacted our state budget and the State Comptroller noted 

that the slowdown in oil and gas production ‘‘will dampen overall economic growth 

in Texas.’’ 

At the Texas Railroad Commission, we saw the number of drilling permits issued 

dramatically drop. In May of 2014, we issued 2,389 permits. This past May we 

issued only 916. This decline in wells drilled will harm our economy and the livelihood of all Texans. 

To put this in perspective, according to recent studies from the University of 

Houston (http://www.bauer.uh.edu/centers/irf/houston-updates.php) and Rice University, each drilling rig represents a total of 224 jobs. These are jobs on the rig 

itself and those across the supply chain and in the broader economy. With the loss 

of 1072 rigs through June, you can do the math to see just how devastating the recent downturn in development has been for oil and natural gas producing states. 

It comes to roughly 240,000 jobs. While repealing the ban will not bring back these 

jobs oversight, it will certainly get some of these men and women back to work in 

the near term. 

The ban is also responsible for the disparity between the U.S. pricing benchmark 

for crude known as WTI, and the international benchmark, Brent. The majority of 

the new oil being produced from our shale formations is light sweet crude and the 

U.S. refining capacity is not designed to economically handle the increased volumes 

of this type of crude. As a result, our oil is essentially trapped in the U.S., creating 

a supply glut that is driving down the price of U.S. oil. This represents billions of 

dollars of lost revenue that could be pumped back into the U.S. economy. 

The best way to put people back to work and address the glut of light sweet crude 

oil is to allow it to be exported to the world market. Earlier this year, the Texas 

State Legislature passed and Governor Abbott signed a resolution asking Congress 

to lift the ban on crude exports. It notes the multiple benefits it would bring to 

Texas and the U.S. 

First, lifting the export ban would increase production here at home, resulting in 

new American job creation, economic growth and increased state and Federal revenue. According to a study by ICF International, it’s estimated that U.S. GDP would 

increase by $38.1 billion in 2020 if expanded crude exports were allowed. The same 

study also noted that U.S. Federal, state, and local tax receipts attributable to this 

GDP increase could reach $13.5 billion in 2020. 

While large producing states like Texas would immediately feel the job-creating 

benefits, studies show that nearly every state and Congressional district would also 

benefit from increased oil production due to the expansive supply chain it supports. 

According to IHS Energy, for every energy job created in oil production, three jobs 

are created in the supply chain and six more in the broader economy. 

Second, lifting the export ban would help consumers save money at the pump. Domestic gasoline prices are based on the international price of oil. Therefore, increasing the global supply of oil would lower international oil prices and ultimately help 

lower the price of domestic gasoline. According to Columbia University, domestic 

gasoline prices could be reduced by up to 12¢ a gallon if the ban were lifted. 

Lower fuel prices would be especially beneficial to farmers and rural Americans. 

As you are aware, agriculture is an energy-intensive industry and rural Americans 

spend more money on fuel as a percentage of their income than urban residents. 

Lower gasoline prices would provide a significant economic boost for many of these 

families and small businesses. 

Third, lifting the ban will enhance free trade and lower the U.S. trade deficit. The 

U.S. exports all types of goods and commodities, from fruits and vegetables, to cars, 

to computer software. In addition, the Federal Government also allows for unlimited 

exports of refined products, such as gasoline, diesel fuel and jet fuel. Why should 

U.S. crude oil be treated any differently? A study by Columbia University rightly 

noted that ‘‘crude export restrictions are inconsistent with the U.S. enjoying the 

benefits of petroleum trade and the U.S. commitment to free and open markets.’’ 

Allowing U.S. crude oil exports will also help lower crude oil imports, thereby lowering the trade deficit. According to ICF International, crude oil exports could narrow the U.S. trade deficit by $22.3 billion in 2020. 

Finally, lifting the crude oil export ban will strengthen our national security and 

help our global allies. While I’m not a foreign policy expert, I will take the advice 

8 

of those who are and encourage others to do the same. Former Defense Secretary 

Leon Panetta, former Defense Secretary William Cohen and former National Security Advisor Stephen Hadley all agree that our security interests around the world 

would be strengthened by allowing U.S. crude oil exports. The U.S. can become a 

stable supply source for our allies, help prevent market distortions and lower the 

influence of OPEC. 

The Center for a New American Security (CNAS), issued a report in May on the 

multiple ways lifting the ban would enhance our national security, one of which is 

the ability it would give the U.S. to sustain and expand energy sanctions: ‘‘The 

United States will be in a stronger position to impose future energy sanctions, if necessary, if it promotes free trade in energy. In so doing, policymakers would make it 

possible for U.S. producers to expand production more easily to substitute for global 

supplies unavailable due to sanctions.’’ 

Indeed, the increase in U.S. energy production has helped make the international 

sanctions against Iran successful. A recent report by U.S. Senator Lisa Murkowski’s 

Majority staff on the Senate Energy and Natural Resources Committee points out 

that the U.S. Government has placed de facto sanctions on U.S. oil producers and 

if the sanctions against Iran are lifted, Iranian oil would reach global markets that 

U.S. production is prohibited from accessing. Chairman Murkowski concluded, ‘‘Any 

deal that lifts sanctions on Iranian oil will disadvantage American companies unless 

we lift the antiquated ban on our own oil exports.’’ I agree. 

Allowing the free trade of oil would make the U.S. a true global energy leader 

and super power. It would mean hundreds of thousands of new jobs for Americans, 

thriving communities with vibrant economies, and families saving money every time 

they fill up their cars. This is the world I want to live in, and the world we can 

live in if Congress and the President take immediate action to lift the crude oil export ban. 

Thank you again for the opportunity to speak and I’d be happy to answer any 

questions regarding my testimony. 

The CHAIRMAN. Thank you, David. 

Mr. Hamm, 5 minutes. 

STATEMENT OF HAROLD HAMM, FOUNDER, CHAIRMAN, AND 

CHIEF EXECUTIVE OFFICER, CONTINENTAL ENERGY, 

OKLAHOMA CITY, OK 

Mr. HAMM. Chairman Conaway, Ranking Member Peterson, and 

Members of the Committee, my name is Harold Hamm. I serve as 

Chairman and Chief Executive Officer of Continental Resources, an 

Oklahoma City-based independent oil and gas exploration and production company. It is an honor to address you today on the critical 

subject of crude oil exports. 

As Chairman of the Domestic Energy Producers Alliance and as 

CEO of the company that co-developed the first field ever drilled 

exclusively with horizontal drilling and a company that is the largest leaseholder and most active driller in the Bakken Play, I was 

in a unique position to be one of the first to see the American energy renaissance on the horizon a decade ago and accurately predicted we could become energy independent by 2020 in the U.S. 

And as technology continues to advance and new supplies of 

crude oil are discovered, today I see firsthand what is necessary to 

continue all the economic benefits that come with it for our nation, 

for consumers, and across every sector of society, including rural 

America. 

The American energy renaissance is the single most defining aspect on this planet today that will shape the next 50 years for 

America. This renaissance in energy is brought to you by the new 

technology, horizontal drilling. Thanks to the genius of America’s 

independent oil and natural gas producers, the world is moving 

from a concept of resource scarcity toward resource abundance. 

9 

This is the modern miracle of American oil and natural gas. It 

is a miracle that has particularly impacted rural communities from 

New England to North Dakota to Nebraska. Royalty payments to 

more than ten million American landowners across this country 

have contributed greatly to the support of family farms and 

ranches and a way of life. 

Since 2008, America has doubled its production of crude oil and 

natural gas liquids, and it was on track to do this again by 2025 

except for one glitch that we see today, and that is the refining situation in America. It is done only in America. It wasn’t OPEC 

growth or non-OPEC growth. It is only in North America due to 

horizontal drilling and the new technology that has come with it. 

Today we are producing light sweet crude, which just doesn’t 

work with the refining complex that we have. This has been complicated over the last many years, since 1988 to today, with the foreign ownership buy-in of the refining that began with Venezuela, 

Mexico, Canada, Saudi Arabia, and other countries that bought 

into the refining complex and owns about 28 percent of our refineries today. So we are down to a point with imports that we have 

reached a practical limit. We can’t get lower than where we are at. 

Those folks can bring their oil here. There is not anything that we 

can do about that in the future. 

So what we have wound up with is a refinery complex today that 

is 2⁄3 heavy sour that just won’t handle the oil that we are producing in the field today. So only 1⁄3, or about six million barrels 

a day, six of the 18, is for light sweet crude that we produce. So 

we have had to try to get oil into that market, and basically it has 

been at a huge discount. In fact, that discount today, between WTI 

and Brent pricing, has amounted to $125 billion since 2011. So it 

is very drastic. 

And in the meantime, of course, we are seeing exports, the refinery exports go out of this country ramping up to about 4.7 million 

barrels today currently that is being shipped out. And you can tell 

by the refinery crack spread that has gone up 500 percent that it 

is not being passed onto consumers today. It is not reflected, that 

discount in gasoline prices that is out there. 

And the decline in our industry, of course, has been very drastic, 

lost over 1,000 rigs, and we estimate, direct and indirect jobs, 

something close to 500,000 jobs have been lost in this industry, and 

basically that has been since Thanksgiving. So it has been very 

drastic. 

So we can turn it around. It has been estimated that lifting the 

ban will add one percent GDP growth. We only have two. It can 

add one percent. Eliminate the trade deficit, of course, de-intensify 

the Middle East situation we have over there, and OPEC dominance of foreign oil once and for all, reduce our European allies’ dependence on Russia, and put everybody back to work. Thank you 

very much. 

[The prepared statement of Mr. Hamm follows:] 

PREPARED STATEMENT OF HAROLD HAMM, FOUNDER, CHAIRMAN, AND CHIEF

EXECUTIVE OFFICER, CONTINENTAL ENERGY, OKLAHOMA CITY, OK 

Chairman Conaway, Ranking Member Peterson, and Members of the Committee, 

my name is Harold Hamm. I serve as Chairman and Chief Executive Officer of ConVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00013 Fmt 6633 Sfmt 6621 P:\DOCS\114-20\95510.TXT BRIAN
10 

1Powerplant and Industrial Fuel Use Act of 1978 (Repealed in 1987) http://www.eia.gov/ 

oil_gas/natural_gas/analysis_publications/ngmajorleg/repeal.html. 

tinental Resources, an Oklahoma City-based independent oil and gas exploration 

and production company. It’s an honor to address you today on the critical subject 

of crude oil exports. As Chairman of the Domestic Energy Producers Alliance and 

as CEO of the company that co-developed the first field ever drilled exclusively with 

horizontal drilling, and the company that is the largest leaseholder and most active 

driller in the Bakken Play, I was in the unique position to be one of the first to 

see the American Energy Renaissance on the horizon a decade ago. And as technology continues to advance and new supplies of U.S. crude oil are discovered, today 

I see first-hand what’s necessary to continue all the economic benefits that come 

with it—for our nation, for consumers, and across every sector of society, including 

rural America. 

The American Energy Renaissance is the single-most defining aspect on this planet today that will shape the next 50 years. This renaissance in energy is brought 

to you by the new technology of horizontal drilling. Thanks to the genius of America’s independent oil and natural gas producers, the world is moving from a concept 

of ‘‘resource scarcity’’ toward ‘‘resource abundance.’’ This is the modern miracle of 

American oil and natural gas. It’s a miracle that has particularly impacted rural 

communities from New England to North Dakota to Nebraska. 

Growing up as one of 13 children born to sharecroppers in Lexington, Oklahoma, 

I understand the impact of oil and natural gas on rural communities. In fact, oil 

helped me break the cycle of poverty my family had been caught up since the Great 

Depression. Oil has also helped today’s rural families thrive during and after the 

Great Recession. Royalty payments to more than ten million landowners across 

America have contributed greatly to the support of the family farms and ranches 

and the rural way of life. 

Continental’s oil and natural gas activity is concentrated in rural areas across 

North Dakota and Oklahoma—both states that have historically lost their brightest 

young residents to jobs elsewhere. However, since the American Energy Renaissance 

took off in 2008, North Dakota has experienced the lowest unemployment rate and 

fastest growing economy in the nation. At the same time, Oklahoma has been 

named the second best state in the nation for recent graduates and one of the nation’s top five fastest growing economies. 

The benefits of the American Energy Renaissance aren’t just limited to oil and 

gas producing states—they reach every individual American. Due to lower gasoline, 

home heating oil and diesel prices, unconventional energy increased annual U.S. 

household disposable income by $1,200 in 2012. That same year, unconventional energy contributed nearly $284 billion to GDP and more than $74 billion in government revenues. 

To continue and expand all these benefits, we must change our nation’s mindset 

from energy scarcity to abundance and end the outdated ban on U.S. crude oil exports. The Federal laws passed in the 1970s artificially controlled the supply, demand, and price of U.S. energy and brought about unintended consequences. For example, one law even banned the use of natural gas as a boiler fuel and mandated 

U.S. power plants switch to a less environmentally friendly alternative, coal.1 Today 

America is still struggling to rectify the aftermath of this rash regulation. 

In the years since the enactment of these laws, our elected officials have recognized our global energy industry has changed dramatically. Thankfully, in response 

to these changes, legislators have repealed or let expire nearly all post-embargo regulations save two: the Energy Policy and Conservation Act of 1975 and the Export 

Administration Act of 1979, which together essentially ban crude oil exports. 

Today, this ban is serving as a loophole for foreign producers to maintain their 

grip on America even as abundant new domestic oil supplies have been discovered. 

Now the American Energy Renaissance is at risk due to two things—OPEC oil price 

manipulation and foreign conversion of U.S. refining capacity. 

Thanks to OPEC’s predatory pricing, more than 130,000 oil and gas workers have 

lost their jobs and up to 500,000 jobs have been lost in supporting industries since 

Thanksgiving. In addition, 1⁄3 of U.S. refining capacity is owned by foreign entities 

and nearly all of it is configured to refine their low-quality heavy sour oil. Twothirds of total U.S. refinery capacity has been converted to process heavy sour crude 

from Canada, Venezuela, Mexico and Saudi Arabia instead of the premium quality 

light sweet crude being produced right here in the U.S. We have been forced to discount our oil into this limited domestic market, at times exceeding 20%, while the 

refiners sell at world market prices. As a result, refiner profits have soared 500% 

at no benefit to U.S. consumers or employment. In fact, America has lost $125 billion in revenue so far. 

11 

As the world has changed and other similar, post-embargo legislation has been 

phased out, the question has to be asked, ‘‘Why does the United States, a nation 

historically very supportive of free trade, continue to impose export barriers for domestic crude oil?’’ Some—mostly self-serving refiners—have said crude oil exports 

would raise gasoline prices. Curiously, the ban did not affect refined products such 

as gasoline and diesel, which consumers depend on. In fact, the U.S. currently exports 4.7 million barrels of refined products a day at world market prices. Because 

refined petroleum products are based on world prices, not domestic prices, U.S. oil 

exports would actually lower domestic gasoline prices, according to studies by 12 

government institutions and universities including the Congressional Budget Office, 

Energy Information Administration and Harvard Business School. 

In addition to lowering fuel prices, ending America’s antiquated policies would 

also provide opportunities to fund infrastructure projects across rural America. The 

Strategic Petroleum Reserve’s stock levels are currently four times greater than required. If we allow exports and sell excess SPR oil inventory, America could easily 

fund the Highway Bill and build desperately needed rural roads and bridges. 

Congress must lift the ban on U.S. oil exports. The ban is a terrible relic of the 

Nixon era that today actually harms the American economy and makes domestic 

gasoline and diesel prices higher than they should be. The situation is now urgent. 

If we do not lift the ban, gasoline and diesel prices will go up and job losses will 

double. According to a report released just last week, Oklahoma alone could lose another 11,000 jobs by the end of the year. 

The energy renaissance is the best thing that ever happened to America. As vast 

new supplies have been discovered, we must ask ourselves, ‘‘What can energy mean 

as America changes from a mindset of scarcity to abundance?’’ It means foreign oil 

producers and dictatorial regimes have had the edge in the past. Lifting the ban 

on U.S. oil exports would give that edge to U.S. consumers. Exports would also create 400,000 American jobs per year and increase GDP by 1% per year. As such, 

America has an opportunity to once again be the growth engine of the world as we 

were post-WWII. 

In conclusion, world energy markets have drastically changed since the 1970s. 

But due to the hard work and ingenuity of men and women in this country, our 

nation has recovered from those dark times. Now we need to focus our efforts on 

doing away with the reactionary crude export ban that was enacted during that era, 

a ban that was largely symbolic in the first place, as we had no oil to export. American consumers will benefit from lower gasoline prices at the pump, lower heating 

oil bills at home, and lower diesel prices for agricultural communities across the nation. 

POWERPOINT PRESENTATION

From Scarcity to Energy Abundance in America 

U.S. Crude Oil Production, Imports and Exports vs. Net Imports of Crude and Products 

Source: EIA. Mar.–May 2015 data calculated as averages of weekly data. 


11420001.eps
12 

World Petroleum and Other Liquids Production 

Source: U.S. Energy Information Administration, March 2015 Short Term 

Energy Outlook. 

Foreign Countries Buying Into U.S. Refining Capacity 

Source: EIA foreign capacity weighted by percent ownership. 


11420002.eps 11420003.eps
13 

Calculated Conversion of U.S. Sweet Refineries by Canadian Heavy Sour 

Developers w/Preferential Processing Rights to the Exclusion of Indigenous U.S. Crude 

Husky Energy Investor Presentation—March 2015. 

28% of U.S. Refining Capacity is Foreign-Owned 


11420004.eps 11420005.eps
14 

Most Light Sweet Refining Capacity Is Located Outside of the U.S. as a Result of Foreign Refinery Conversions 

Source: Oil & Gas Journal 2014 Refinery Survey (2013 numbers). 

Nelson Complexity Index (NCI) is the industry standard for measuring 

the relative cost of constructing the components that make up a petroleum 

refinery. The index can range from 1 (most simple) to over 15 (most complex). 

U.S. Exports of Petroleum and Refined Products 

* Source: EIA. 


11420006.eps 11420007.eps
15 

WTI vs. Brent Oil Price History Since 2005 

* Source: EIA. 

** Represents the largest policy-driven wealth transfer in U.S. industry 

history. 

Refiner Crack Spread History Since 1990 

‘‘Crack spread’’ is the difference between price of a barrel of unrefined 

crude oil vs. the total value of refined products from that barrel (after 

‘‘cracking’’), as reported on a daily basis. Crack spreads reported daily via 

OPIS (Oil Price Information Service), Platts McGraw Hill Financial, and 

Argus Media Limited. 


11420008.eps 11420009.eps
16 

U.S. Gasoline Prices are Set in Global Product Market, So U.S. Price Does 

Not Pass Through to Consumers 

Source: EIA, Bloomberg. 

Rapid Decline of U.S. Rig Count 

* DEPA jobs estimate; rig counts from Baker-Hughes. 


11420010.eps 11420011.eps
17 

Re-Asserting America’s Energy Leadership with Crude Oil Exports 

Lower Gasoline Prices 


11420012.eps 11420013.eps
18 

Consumer Stability 

The CHAIRMAN. Mr. Hamm, thank you. 

Mr. Duffy, 5 minutes. 

STATEMENT OF HON. TERRENCE A. DUFFY, EXECUTIVE 

CHAIRMAN AND PRESIDENT, CME GROUP, CHICAGO, IL 

Mr. DUFFY. Thank you, Chairman Conaway, Ranking Member 

Peterson, and Members of the Committee. As the Chairman said, 

I am Executive Chairman Terry Duffy. I am the President of CME 

Group. I want to thank you for holding this hearing today. 

This policy that is preventing the U.S. economy from reaping the 

full benefits of the country’s boom in oil production, is a ban on oil 

exports. My perspective will be a little bit different than the previous two testimonies. Mine will be more on the pricing of the product. 

In the 1970s, the U.S. Government banned crude oil export in reaction to OPEC-driven oil prices, mile-long gas lines, rising inflation, the depreciating dollar, and growing trade imbalances. From 

the start, the ban does not appear to have provided any benefits 

for the rural or agricultural sector. Instead, the export ban distorted the allocation of capital between the U.S. and non-U.S. production. 

Today, the factors that drove the ban have evaporated. The U.S. 

has experienced a resurgence in oil and natural gas production. 

Today, OPEC has little power to raise oil prices. Inflation is very 

low and has been stable for over 20 years. The interest rates are 

also at extreme lows. The U.S. still is a net importer of oil and refined products, but exports of refined products have been rising 

with the oil production boom while imports of crude oil have been 

falling. 

During this new era of expanded U.S. oil production, the ban has 

led to price spreads between U.S. crude oil and other worldwide 

sources. Nevertheless, as pipelines were reconfigured, new ones 

built, and rail capacity expanded, the U.S. oil markets have managed to become more aligned with global prices. But eliminating 

the ban would allow prices to more reliably reflect global oil supply 

and demand. 


11420014.eps
19 

There are two key benefits to the seamless integration between 

the U.S. and the global energy markets. First, segregating U.S. 

crude from the world market punishes the U.S. economy with price 

distortions. In order to encourage companies to invest in the production of crude oil here in the U.S., our domestic crude should be 

able to participate in the global market for oil. 

Second, the U.S. is the global leader in financial markets. Prices 

for global commodities such as crude oil and refined products are 

discovered in the United States futures markets. Commodity markets perform best when there is a clear, transparent, and readily 

available supply that is used to price markets. Moreover, the U.S. 

is in the place where producers come to manage energy price risk. 

But under the oil export ban, our domestic crude oil markets have 

been needlessly affected. 

In summary, in the U.S. we have a robust physical delivered 

market in West Texas Intermediate, and that should be opened up 

freely to the world. The export ban was protectionist when it was 

put into place 40 years ago. Its actual impact has been harmful to 

the efficiency of the markets and the price discovery process in the 

energy sector. Now is the time for the U.S. to repeal the ban and 

reassert its energy leadership through sensible policies that support our leading position in energy and financial markets. 

We at the CME Group are greatly encouraged by the growing bipartisan support for bringing our energy policy up to date and 

place the U.S. at the center of the global crude oil trade. I urge 

Congress and the Administration to repeal the ban on crude oil exports and let the markets trade freely. 

I want to thank you for the opportunity to appear before you 

today, and I look forward to answering your questions. Thank you. 

[The prepared statement of Mr. Duffy follows:] 

PREPARED STATEMENT OF HON. TERRENCE A. DUFFY, EXECUTIVE CHAIRMAN AND

PRESIDENT, CME GROUP, CHICAGO, IL 

Thank you, Chairman Conaway and Ranking Member Peterson, for holding this 

hearing today on a policy that is preventing the U.S. economy from reaping the full 

benefits of the country’s boom in oil production: the ban on oil exports. 

In the 1970s, the U.S. Government banned crude oil export products in reaction 

to OPEC driven oil prices, mile long gas lines, rising inflation, a depreciating dollar 

and growing trade imbalances. From the start, the ban does not appear to have provided any benefits for the rural or agricultural sector. Instead, the ban distorted the 

allocation of capital between U.S. and non-U.S. production. 

Some 4 decades after the ban was imposed, the economic context is totally different. The U.S. has experienced resurgence in oil and natural gas production. 

OPEC has little to no power to raise oil prices. Indeed, oil prices have dropped 

sharply. Inflation is very low and has been stable for over twenty years. Interest 

rates are extremely low. The U.S. still is a net importer of oil and refined product, 

but exports of refined product have been rising with the oil production boom while 

imports of crude oil have been falling. 

Prior to the commencement of the recent oil production boom, global oil markets 

had reached a balance in which there was little price difference between U.S. oil 

(West Texas Intermediate—WTI) and European oil (from the North Sea—Brent). 

Then, the rapid rise in U.S. production out-paced the ability of pipelines and railroads to get the oil to refiners and to end users. The result was a temporary widening of price spreads between U.S. and overseas oil, with the U.S. having cheaper 

oil. As pipelines were reconfigured, new ones built, and rail capacity expanded, over 

the last few years the U.S. oil markets have largely reconnected with overseas markets sufficiently to narrow price spreads and come back into a globally balanced position. 

20 

Today, the U.S. is the undisputed global leader in energy technology (exploration, 

extraction, etc.) and a major exporter of refined product. This has been achieved despite the imposition of inefficiencies onto the U.S. economy directly as a result of 

the ban. These inefficiencies include distortions in refining, including investment, by 

preventing crude production from sometimes reaching its most efficient processor, 

which could be outside the U.S.; distortions in logistics, including investment, by 

causing excessive storage and transport; and distortions in production, including investment, because crude cannot be marketed to its highest value use. 

While the market for crude oil is globally integrated, the export ban segregates 

U.S. crude from the world market, which punishes the U.S. economy with price distortions. In order to encourage companies to invest in the production of crude oil 

here in the U.S., our domestic crude should be able to participate in the global free 

market for oil. 

We support unfettered markets that can allow the U.S. more influence over the 

global price setting process. While the U.S. has reconnected with global markets, 

there are still considerable price differences between U.S. and European oil. Partly 

due to the export ban condition, the world today uses the European Brent benchmark that is in declining production. Here in the U.S., we have a robust physical 

delivered market in West Texas Intermediate (WTI), and if opened up freely to the 

world, it would be an even more robust tool for pricing global crude oil. Commodity 

markets perform better when there is a clear, transparent and readily available 

supply that is used to price markets. This suggests that lifting the ban on crude 

oil exports would enhance the use of U.S. markets for energy risk management. 

Stated another way, the U.S. is the global leader in financial markets—prices for 

global commodities, such as crude oil and refined products, are discovered in U.S. 

futures markets. And the U.S. is the place where producers come to manage energy 

price risk. The U.S. has managed to maintain this leadership role in spite of the 

distortions governing the market for the product whose price U.S. markets help discover. Lifting the crude oil export ban will remove an impediment to the integrity 

of the price discovery process in U.S. markets. In addition, a well-balanced global 

market of exports and imports has the potential to reduce the impact of any one 

region, especially unstable ones, on the global price of oil, to the benefit of the U.S. 

economy and the world as well. 

In conclusion, the export ban was ‘‘protectionist’’ in nature and intent when it was 

put into place over 40 years ago. Its actual impact has been harmful to the efficiency 

of markets and to the price discovery process in the energy sector. Moreover, energy 

markets have transformed significantly over the last 4 decades and, now, even the 

original intent of the crude oil ban no longer makes sense. 

• Now is the best time for the U.S. to reassert its energy leadership. 

• The way to do that is for us to have sensible policies in place that support the 

U.S.’s leadership position in energy technology and financial markets. 

• There will be numerous benefits for the U.S. to be at the center of the global 

crude oil trade. And the U.S. should be allowed to participate in the global market for physical crude in order to benefit from our technology and financial leadership. 

We at CME Group are greatly encouraged by the growing bipartisan support to 

update our energy policy to repeal this outdated ban. I applaud your leadership on 

this issue, Chairman Conaway and Ranking Member Peterson, and urge Congress 

and the Administration to repeal the ban on crude oil exports and let the market 

trade freely. 

The CHAIRMAN. Mr. Duffy, the chair recognizes you gave us 11⁄2

minutes back. Thank you very much. 

Ms. Cutting, thank you. Your 5 minutes. 

STATEMENT OF KARI BJERKE CUTTING, VICE PRESIDENT, 

NORTH DAKOTA PETROLEUM COUNCIL, BISMARCK, ND 

Ms. CUTTING. Chairman Conaway and Ranking Member Peterson, and Members of the Committee, thank you for the opportunity 

to testify today on the impact that lifting the export ban on crude 

oil would have on rural North Dakota, particularly the agricultural 

community. 

21 

The North Dakota Petroleum Council represents more than 500 

member companies engaged in oil and gas activities in North Dakota, South Dakota, and the Rocky Mountain region. Our members 

produce 98 percent of the oil and gas produced in North Dakota, 

and North Dakota’s largest industries are agriculture and energy. 

North Dakota is the second-largest oil-producing state in the nation, reaching one million barrels of daily production in May of 

2014, up from 100,000 barrels per day in 2007. Since 2005, the oil 

and gas industry has grown from a $3 billion industry supporting 

5,000 jobs in North Dakota to a $43 billion industry supporting 

65,000 direct jobs. 

These benefits extend well beyond North Dakota and into our 

neighboring States of Minnesota, South Dakota, Montana, and 

even further. A recent study by Harvard Business School indicates 

that between 2011 and 2014 many states saw a triple-digit increase in job postings related to unconventional oil development, 

including North Dakota at 286 percent, Montana at 198 percent, 

and Minnesota at 193 percent. For every dollar spent on oil and 

gas development in North Dakota, another $1.50 in additional business activity is generated, sending ripple effects through our state 

and national economies. 

If we turn back the clock a dozen years, rural North Dakota 

towns were shrinking and some had become ghost towns. Many 

businesses closed, schools consolidated, and farm auctions were 

very frequent. North Dakota’s young people, educated in some of 

the finest primary, secondary, and post-secondary schools in the 

country were North Dakota’s finest export. The cost of living, along 

with low commodity prices, forced most farm families to supplement their income with a second full-time job at local businesses. 

Their greatest fear was that they would be the generation who 

could no longer hang on to the land that previous generations 

worked so hard to keep in the family. 

In 2006, horizontal drilling technology unlocked the Bakken, resulting in a surge in oil and gas production, making North Dakota 

equivalent to the 19th largest oil producing country, and with that 

development came a rural renaissance for our state. Once dying 

towns were blossoming and the state’s population grew 23 percent 

since 2000. 

Oil development has also helped supplement the income of many 

local farmers and ranchers who receive checks for pipeline rightof-ways or mineral royalties. Some landowners have sold sand and 

gravel from pits on their land to the industry to build well pads 

and to maintain the roads. The influx of money allowed them to 

purchase bigger and newer equipment to enhance their farming 

and ranching operations. Some for the first time could plan to pass 

the family farm or ranch on to the next generation. 

The state also benefited from capital improvements and infrastructure projects. Burlington Northern Santa Fe Railway, the 

largest railroad in North Dakota, has invested hundreds of millions 

of dollars to improve the transportation infrastructure that not 

only benefits oil and gas, but also the movement of agricultural 

products to market and fertilizers to be made available at the local 

elevators. Some rural elevators had not had rail service for years. 

22 

This investment would never have occurred without oil and gas development. 

Additionally, value-added projects such as fertilizer plants are 

now being constructed or planned and will soon benefit North Dakota agricultural producers. U.S. farmers rely heavily on costly imports for fertilizer supplies. We now have an opportunity to produce 

more fertilizers locally, close to the farms in North Dakota. 

The first refinery to be built in the U.S. in 4 decades recently 

began operating in North Dakota. This refinery, a small refinery, 

targeted to the agricultural market in North Dakota produces 

7,000 barrels per day of diesel fuel. There has not been a harvest 

in the near past where there has not been a diesel shortage for the 

farmers in our state. 

These are just a few of the examples of how agriculture and oil 

can partner for rural growth, but this rural renaissance is being 

threatened by foreign entities and by restrictions imposed on the 

sale of oil abroad. 

I would just add in my last few seconds that in North Dakota 

we have lost about 20,000 oil and gas jobs. We have over 100 drilling rigs that have been idled. And as a previous speaker had mentioned, that represents a significant number of job opportunities, 

businesses, and economic growth in our state. 

I would like to say thank you. I don’t want to go over time. So 

I appreciate the opportunity to testify. 

[The prepared statement of Ms. Cutting follows:] 

PREPARED STATEMENT OF KARI BJERKE CUTTING, VICE PRESIDENT, NORTH DAKOTA

PETROLEUM COUNCIL, BISMARCK, ND 

Chairman Conaway, Ranking Member Peterson, and Members of the Committee, 

thank you for the opportunity to testify today on the impact that lifting the export 

ban on crude oil would have on rural North Dakota, particularly the agricultural 

community. 

The North Dakota Petroleum Council (NDPC) represents more than 500 companies engaged in all aspects of oil and gas activities in North Dakota, South Dakota, 

and the Rocky Mountain region. NDPC members produce 98 percent of all oil and 

gas in North Dakota. North Dakota’s two largest industries are agriculture and energy. 

North Dakota is the second largest oil-producing state in the nation, reaching 1.0 

million barrels of daily production in May 2014, up from 100,000 barrels per day 

in 2007. Since 2005, the oil and gas industry had grown from a $3 billion industry 

supporting 5,000 jobs to a $43 billion industry with 65,000 direct jobs. Today, the 

industry in North Dakota has more than 12,000 producing oil wells, and contributes 

$8–$9 million per day in oil production taxes to the state and political subdivisions. 

Supporting Jobs and Economic Growth 

* According to 2013 Job Service ND report. 


11420015.eps
23 

These benefits extend well beyond North Dakota and into our neighboring states 

of Minnesota, South Dakota, Montana, and even farther. In fact, according to a recent study by Harvard Business School, between 2011 and 2014, many states saw 

a triple digit increase in job postings related to unconventional oil development, including North Dakota at 286 percent, Montana at 198 percent, and Minnesota at 

193 percent. For every dollar spent on oil and gas development in North Dakota, 

another $1.50 in additional business activity is generated, sending ripple effects 

through our state and national economies. 

Turning back the clock a dozen years, rural North Dakota towns were shrinking 

and some had become ghost towns. Many businesses closed, schools consolidated 

and farm auctions were frequent. North Dakota’s young people, educated in some 

of the finest primary, secondary and post-secondary schools in the country, were 

North Dakota’s most valuable export because suitable employment was not available at home. The cost of living, along with low commodity prices, forced most farm 

families to supplement their income with a second full-time job at a local business, 

coal mine or power plant. Their greatest fear was that they would be the generation 

who could no longer hang onto the land that previous generations worked so hard 

to keep in the family. 

In 2006, horizontal drilling technology unlocked the Bakken, resulting in a surge 

of oil and gas production, making North Dakota equivalent to the nineteenth largest 

oil producing country and with development came a rural renaissance for our state. 

The oil and gas industry, as well as service companies, engineers, geologists and all 

the manufacturing and logistics that must accompany the industry brought jobs, 

new business opportunities, and royalties to land and mineral owners. Once dying 

towns blossomed and the state’s population grew 23 percent since 2000. North Dakota has been ranked as one of the best states for young people because of the abundant job opportunities. This has attracted new people to the state and brought many 

back home to live closer to family. 

Oil development has also helped supplement the incomes for many local farmers 

and ranchers who receive checks for pipeline right of ways or mineral royalties. 

Some landowners sold sand and gravel from pits on their land to the industry to 

build well pads and maintain roads. The influx of money allowed them to purchase 

bigger and newer equipment to enhance their farming and ranching operations. 

Some for the first time could plan to pass the family farm or ranch on to the next 

generation. 

The state also benefited from capital improvements and infrastructure projects 

brought about by the oil industry. Burlington Northern Santa Fe railway, the largest railroad in North Dakota has invested hundreds of millions of dollars to improve 

the transportation infrastructure that not only benefits oil and gas, but also the 

movement of agricultural products to market and fertilizers to the local elevators. 

Some rural elevators had not had rail service in years. This investment would never 

have occurred without oil and gas development. 

Additionally, value-added projects such as fertilizer plants are being constructed 

or planned, and will soon benefit North Dakota agricultural producers. U.S. farmers 

rely heavily on costly imports for fertilizer supplies. We now have an opportunity 

to produce more fertilizers close to the farms in North Dakota. 

The first refinery to be built in 4 decades recently began operating in North Dakota. This small topping plant will process 20,000 barrels of Bakken crude per day 

to produce about 7,000 barrels per day of diesel fuel. There has not been a recent 

harvest where we haven’t experienced a shortage of diesel fuel. This refinery is just 

one step forward in helping agriculture get the energy resources they need to harvest their crops. These are just a few examples of how agriculture and oil can partner for rural growth. 

This rural renaissance is being threatened by foreign entities not always friendly 

to the United States and by restrictions imposed on the sale of oil abroad. The recent collapse of the price of oil was precipitated by OPEC’s decision protect its market share by driving prices down and attempting to put American producers out of 

business. This tactic by our foreign oil competitors has had an impact on the U.S. 

industry. In North Dakota alone, 15,000–20,000 direct oil and gas, as well as many 

indirect employment opportunities have been lost. Across the nation this number is 

closer to 500,000 lost job opportunities. More than 100 drilling rigs are now sitting 

idle in North Dakota and production in the state has been flat for the past several 

months. Mineral owners are receiving smaller royalty checks, and the state of North 

Dakota and its citizens are receiving lower oil and gas tax revenues that fund 

schools, roads and infrastructure across our state. 

The U.S. oil and gas industry can rise to meet many challenges through innovation and hard work, but facing export restrictions at home, places the industry at 

an extreme competitive disadvantage. The U.S. Government should lift the ban on 

24 

crude oil exports and allow oil produced here at home, in places like North Dakota, 

to reach global markets. The U.S. energy industry deserves the opportunity to compete globally; lifting the ban on crude oil exports would immediately restore our 

competitiveness and revive the renaissance in rural America. Not only would rural 

America prosper, but all U.S. citizens would benefit from lifting the ban. 

U.S. Oil Exports Would Boost Production, Lower Consumer Costs 

Repealing the ban would create jobs, grow our economy, help decrease gasoline 

prices, and improve our energy security. The Domestic Energy Producers Alliance 

reports that lifting the ban will add one percent to gross domestic product growth, 

drastically reducing the U.S. trade deficit and putting Americans back to work. A 

recent study by IHS found that job creation from lifting the ban would average almost 400,000 jobs in the first year and peak in 2018 at nearly one million new jobs. 

The Brookings Institute concluded U.S. households will benefit from lifting the export ban through higher incomes and wages and lower gasoline prices. 

Economists and experts all agree that lifting the export ban will put downward 

pressure on U.S. gasoline prices. In a report titled ‘‘What Drives U.S. Gasoline 

Prices?’’ the U.S. Energy Information Administration (EIA) found that our gasoline 

prices are tied to the international price of oil, also known as Brent. Allowing U.S. 

oil exports would add to global supply and put downward pressure on international 

prices, which are precisely what determines our price at the pump. A study by Columbia University found that lifting the ban could reduce our gasoline prices by up 

to 12¢ per gallon. Others studies say American consumers could save up to $5.8 billion annually each year from 2015 to 2035. 

Every Major Study Agrees 

Oil Exports Would Put Downward Pressure on U.S. Gasoline Prices 

Summary of Major Economic Studies Estimated Decline in U.S. Price per Gallon of 

Motor Fuels 

Resources for the Future 1.7¢ to 4.5¢ 

IHS 8¢ average 

ICF Up to 3.8¢ (2.3¢ average) 

Brookings & Nera Up to 12¢ (9¢ average) 

Aspen & MAPI Up to 9¢ 

GAO 1.5¢ to 13¢ 

Columbia University Up to 12¢ 

CBO 5¢ to 10¢ 

U.S. Crude Oil Export Decision: Assessing the Impact of the Export Ban and Free Trade on the 

U.S. Economy (IHS, May 2014). 

Transportation fuels, gasoline and diesel fuel represent major fixed costs in any 

farming and ranching operation. Lower prices would benefit all of rural America 

and all American drivers. The Center for New American Security stated that new 

U.S. oil supplies have already helped to cap price spikes caused by global supply 

disruptions and to moderate oil prices for consumers. 


11420016.eps
25 

What are the Economic Benefits of U.S. Crude Exports? 

By ICF International and EnSys Energy 

‘‘The Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, Employment, Trade, and 

Consumer Costs’’ 

Up to $5.8 billion—Estimated reduced 

consumer fuel costs year 2015–2035 

Up to 300,000 potential job—gains in 2020 

U.S. weighted average petroleum product 

prices are expected to decline as much as 

2.3¢ per gallon 2015–2035 when U.S. crude 

exports are allowed. The greatest potential 

annual decline is 3.8¢ per gallon in 2017. 

These price decreases for gasoline, heating 

oil and diesel could save American consumers up to $5.8 billion per year, on average, over the 2015–2035 period. 

The U.S. economy could gain up to 

300,000 additional jobs in 2020 when 

crude exports are allowed. Consumer products and services and hydrocarbon production sectors would see the largest gains. 

Up to $70 billion—More investment by 

2020 

$13.5 billion—Estimated government revenues increase in 2020 

An expansion of crude exports could result 

in $15–$70 billion of additional investment 

in U.S. exploration, development and production of crude oil between 2015 and 2020. 

U.S. Federal, state, and local tax receipts 

attributable to GDP increases from expanding crude oil exports could increase up to 

$13.5 billion in 2020. 

Up to 500,000 Barrels per day—Increase in 

domestic crude oil production by 2020 

$22 billion—Estimated reduction of trade 

deficit in 2020 

Lifting crude oil export restrictions contributes to expanded U.S. exports. This 

could narrow the U.S. trade deficit by $22 

billion in 2020 through increased international trade of U.S. crude oil. 

Energy abundance and domestic energy Independence are terms that are difficult 

to grasp after decades of discussions on peak oil and energy scarcity. Two generations of Americans have been taught to believe that the United States has no choice 

but to be reliant on foreign energy supplies, particularly those from the Middle East. 

Many Americans have been indoctrinated with an energy scarcity mentality. Ken 

Hersch, CEO of NBP Energy Capital Management said ‘‘the ramifications of the 

U.S. moving from being primarily an oil consumer to being both a producer and consumer of oil, will shape global events for the next fifty years as oil scarcity gives 

way to oil abundance.’’ 

Thanks to advances in technology U.S. energy potential has been unlocked and 

has given this nation the key to break open abundant energy reserves, lower the 

price of transportation fuels, create jobs and generate a robust U.S. economy. 

It is time for a paradigm shift in mindset from energy scarcity to one of energy 

abundance that includes lifting the ban on crude oil exports. As the Harvard Business School so aptly stated in their study, unconventional energy development is 

‘‘perhaps the largest single opportunity to change America’s competitiveness and 

economic trajectory, as well as our geopolitical standing.’’ We must seize this opportunity, and the first steps is lifting this antiquated export ban. 

OPEC Dominance of Global Oil 

• Time Magazine: ‘‘OPEC says that demand for oil—its oil—with rise during 

2015 because the cartel is winning its price war against U.S. shale producers 

by driving them out of business.’’ 

• OPEC Chief, Reuters: ‘‘Maybe we will go to $200/barrel if there is a shortage 

of supply due to lack of investment.’’ 

North Dakota Petroleum Council. 

The story of North Dakota oil and gas development and its impact on agriculture 

in our state is an amazing American story, one that is being discussed all over the 

world. Exporting crude oil will have a dramatic effect on our state’s ability to fully 

develop the Bakken and realize its full benefits. Now is the time to follow North 

Dakota’s lead and let our nation be the energy leader for the world. 

26 

Mr. Chairman, and Members of the Committee, you have before you a once in a 

generation opportunity to impact the economy of the United States, provide lower 

transportation costs to rural America and make the U.S. the global energy market 

leader. 

Resources 

1. The Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, 

Employment, Trade, and Consumer Costs—ICF International and EnSys Energy, 

http://bit.ly/1o0fUF3 (http://www.api.org/∼/media/Files/Policy/LNG-Exports/ 

LNG-primer/API-Crude-Exports-Study-by-ICF-3-31-2014.pdf). 

2. U.S. Crude Oil Export Decision: Assessing the impact of the export ban and free 

trade on the U.S. economy—IHS, http://bit.ly/1pDU3WD (https://www.ihs.com/ 

info/0514/crude-oil.html?ocid=coe:pressrls:01). 

3. The Impacts of U.S. Crude Oil Exports on Domestic Crude Production, GDP, 

Employment, Trade, and Consumer Costs Supplement: State-Level Economic and 

Employment Impacts—ICF International and EnSys Energy, http://bit.ly/1o0ggLO 

(http://www.api.org/news-and-media/news/newsitems/2014/may-2014/∼/media/ 

Files/Policy/Exports/ICF-State-Economic-Impacts-Supplement.pdf). 

4. Crude Behavior: How Lifting the Export Ban Reduces Gasoline Prices in the 

United States—Resources For the Future, http://bit.ly/1o0h2Ze (http:// 

www.rff.org/RFF/Documents/RFF-IB-14-03-REV.pdf). 

5. A Signal to The World: Renovating The Architecture Of U.S. Energy Exports— 

U.S. Senator Lisa Murkowski, http://1.usa.gov/1o0jb78 (http:// 

www.energy.senate.gov/public/index.cfm/files/serve?File∼id=546d56f0-05b6-41e6- 

84c1-b4c4c5efa372). 

6. US Crude Oil Export Decision: Assessing the impact of the export ban and free 

trade on the U.S. economy, http://bit.ly/1iwp2h2 (https://www.ihs.com/info/0514/ 

crude-oil.html?ocid=coe:pressrls:01). 

7. Lift the Ban on U.S. Oil Exports, Brookings Institution, http://bit.ly/1pDRMe8 

(http://www.brookings.edu/research/papers/2014/01/lift-ban-us-oil-exportsboersma-ebinger). 

8. IHS: http://press.ihs.com/press-release/energy-power/lifting-export-restrictionsus-crude-oil-would-lower-gasolineprices-an-0. 

9. ICF: http://www.api.org/news-and-media/news/newsitems/2014/mar-2014/ 

study-crude-exports-an-economic-win-for-us-consumers-workers. 

10. Lifting The Crude Oil Export Ban: The Impact on U.S. Manufacturing, Aspen 

Institute, http://bit.ly/1vLyOSh (http://www.aspeninstitute.org/sites/default/ 

files/content/upload/FINAL_Lifting_Crude_Oil_Export_Ban_0.pdf). 

11. Changing Markets Economic Opportunities from Lifting the U.S. Ban on Crude 

Oil Exports, Brookings Energy Security Initiative, http://bit.ly/1vLzur1 (http:// 

www.brookings.edu/∼/media/research/files/reports/2014/09/09%208%20facts%20 

about%20crude%20oil%20production/crude%20oil%20exports%20web.pdf). 

12. What Drives U.S. Gasoline Prices?, U.S. Energy Information Administration, 

http://1.usa.gov/1pnLTVb (http://www.eia.gov/analysis/studies/gasoline/pdf/ 

gasolinepricestudy.pdf). 

13. Changing Crude Oil Markets: Allowing Exports Could Reduce Consumer Fuel 

Prices, and the Size of the Strategic Reserves Should Be Reexamined, http:// 

1.usa.gov/1pnM6I8 (http://www.gao.gov/products/GAO-14-807). 

14. Navigating the U.S. Oil Export Debate—Columbia≥SIPA, http:// 

energypolicy.columbia.edu/sites/default/files/energy/Navigating%20the%20US 

%20Oil%20Export%20Debate_January%202015.pdf. 

The CHAIRMAN. Thank you, Ms. Cutting. I appreciate you being 

here. 

Mr. Webster, 5 minutes. 

STATEMENT OF JAMIE WEBSTER, SENIOR DIRECTOR, IHS, 

WASHINGTON, D.C. 

Mr. WEBSTER. Thank you, Chairman Conaway, Ranking Member 

Peterson, Members of the Committee. I appreciate the opportunity 

to testify before you on the immense changes in the energy market, 

its impacts on the rural economy, and the importance of crude oil 

exports to maximize these benefits. I am Jamie Webster, and I appear before you in my capacity as Senior Director for IHS, where 

I lead the company’s short-term crude oil markets team. My work 

27 

through IHS has involved me in two landmark studies on crude oil 

exports. We are a global consultancy that specializes in energy, 

capital-intensive industries, data, and analysis. 

Today I want to address the recent changes in the market, North 

America’s critical place in it, and what it means for our rural 

areas. I will also address the importance of eliminating the crude 

export ban to fully maximize what the U.S. oil boom can offer. 

The catalyst for the oil price decline that started last summer 

was actuality the partial return of Libyan production, but it was 

the underlying growth in homegrown American companies, such as 

Mr. Hamm’s, that brought U.S. oil production from 5.6 million barrels a day in 2011 to over 9.5 million barrels today that really sustained this price drop. OPEC’s decision on Thanksgiving of last 

year to forego any sort of production cut really highlighted the big 

change that had happened in the market. It also, with the price decline, extended the benefits beyond just those that were receiving 

jobs in North Dakota and other places in the United States as well 

as the supply chain, but also extended these benefits with lower 

gasoline prices across the United States. Actually allowing the exportation of oil would actually continue this trend. 

The U.S. has a liberal trade policy currently for natural gas, coal, 

refined products, and processed condensate. It also allows oil exports to other countries in certain very specific areas. Now, some 

have said and Senator Markey has recently put out a letter that 

stated his concerns that we would be exporting a valuable product 

at a time when we are importing it. But if you look at the top ten 

exports of the United States, you will see that we also import large 

values of those goods as well. America is a trading country, and 

you don’t need to move down to zero imports before you decide to 

make the decision to start exporting it. 

Allowing this to be exported will keep downward pressure on 

global prices and keep the laboratory of U.S. shale technology and 

production fully open for business, while supporting job growth 

across many industries and in places far from the oil fields. It will 

also help to lower the price of Brent, the benchmark price for global oil, as much as the increase in production already has. 

Lowering the Brent price is the access point to lower gasoline 

prices, as U.S. gasoline prices are linked to the Brent world price 

because you can export gasoline and so it is a global fuel versus the 

WTI price, which is very much a domestic issue. 

Currently, refiners are investing quite a bit to try to take advantage of this crude oil boom. However, as Mr. Hamm suggested, 

there is a real mismatch that those refineries have spent over $85 

billion in the last 25 years to upgrade to be able to take heavy sour 

crude oil where we are now producing light sweet crude oil. So 

while they are working to reorient themselves and they will continue to do so even if we allow the exportation of crude oil, this is 

not something that is going to completely undermine their business. 

Our report, Unleashing the Supply Chain, fully documents these 

benefits, and these include an additional $86 billion in GDP, about 

another 400,000 jobs annually. These are jobs that on average pay 

about 25 percent higher than the national average and $1.3 trillion 

28 

in Federal, state, and municipal revenue from corporate and personal taxes. 

This touches states beyond just Texas and North Dakota. It also 

touches states like Minnesota, New York, and Massachusetts and 

Michigan, while also benefiting across economic activity and jobs, 

it is due to the interconnected nature of the U.S. supply chain. 

With that, I appreciate your time, Mr. Chairman, your leadership 

and that of the Committee to address this critical issue. And thank 

you for the opportunity, and I welcome your questions at the appropriate time. 

[The prepared statement of Mr. Webster follows:] 

PREPARED STATEMENT OF JAMIE WEBSTER, SENIOR DIRECTOR, IHS, WASHINGTON, D.C. 

Chairman Conaway, Ranking Member Peterson, and Members of the Committee, 

I appreciate the opportunity to testify before you on the immense changes in the 

energy market, its impacts on the rural economy, and the importance of crude exports to maximize these benefits. 

I appear before you in my capacity as Senior Director for IHS where I lead the 

company’s short term crude oil markets team. My work through IHS has involved 

me in two landmark studies on crude oil exports.1–2 IHS is a global consultancy that 

specializes in energy, capital-intensive industries, data and analysis with a worldwide presence. 

Today I want to address the recent changes in the global oil market, North America’s critical place in it, and what it means for our rural areas. I will also address 

the importance of the crude export issue to fully maximize what the U.S. oil boom 

can offer. particularly to rural economies. 

The catalyst for the oil price decline that started last summer was the partial 

(and temporary) return of Libyan production. But it was the underlying growth in 

U.S. oil production from 5.6 million barrels a day (MMb/d) in 2011 to the current 

9.2 MMb/d that sustained this price drop. OPEC’s decision last November 27 to not 

cut production in the face of growing volumes, not just from United States shale oil, 

but also the Gulf of Mexico as well as Canada further hastened the price decline. 

OPEC’s decision, reaffirmed again in June, appears to have marked the beginnings 

of a serious shift in how supply and demand is balanced in the global market. 

The boom in U.S. production has the potential to upend the need for a formal 

market balancer, leading to lower oil prices for consumers, while increasing energy 

security for not just the U.S. but the world. This is possible not only because of the 

large production volumes that U.S. producers have brought to the market, but because of the character of those flows. Conventional production projects can take 

years to finance, plan and bring to the market. U.S. shale producers can do it in 

4 months. Globally, conventional production has a decline rate of 5–6%, meaning a 

project will be producing that much less each year. U.S. shale production has an 

initial decline rate of about 50%. These two factors allow the U.S. shale system to 

react quickly to market signals to bring more oil onto the market, and a lack of investment when prices turn downward can quickly reduce supply. This shift from 

OPEC to the market-driven forces of shale oil is far from certain and far from complete and it could be reversed. 

The U.S. has a liberal trade policy for natural gas, coal, refined products and processed condensate. It also allows oil exports to other countries in certain, very specific cases. Allowing U.S. producers to seek out international markets for their product will allow them to receive global prices, keeping the ‘‘laboratory’’ of U.S. shale 

technology and production fully open for business, while supporting job growth 

across many industries and in places far from the oil fields. It will also help to lower 

the price of Brent, the benchmark price for global oil, much as the increase in production already has. Lowering the Brent price is the access point to lower U.S. gasoline prices as U.S. gasoline prices are linked to the Brent world price, not the domestic WTI price. 

To fully maximize U.S. savings at the pump, exports should be liberalized to ensure this dated policy does not cause an unnecessary drag on American productivity, 

while hampering our ability to exploit fully the national security benefits from this 

energy resurgence. The reasons are intertwined with the nature of the American refinery system and the price discounts that American oil producers must frequently 

take in order to sell their products competitively to refineries, particularly along the 

29 

Gulf Coast, which holds over half of the nation’s total refining capacity. Over $85 

billion has been spent in the past quarter century to reconfigure these refineries to 

process heavy oil imported from countries like Venezuela, Mexico and Canada. The 

United States contains the largest refining capacity of any country in the world, 

with 139 operating refineries with a combined crude oil distillation capacity of about 

18 million B/D. The U.S. refining system is characterized not only by the number 

and size of refineries but also by a high number of world-class, high-complexity, full 

conversion refineries with a substantial degree of petrochemical and specialty products integration. 

In this complex refining system, if the crude quality varies enough, the refineries 

cannot run optimally within their designed operating parameters. In the Gulf region, most refineries are configured to process heavy crude oil. When using light 

tight oil, Gulf refineries operate inefficiently. Refineries are now working to re-orient to take advantage of this new domestic crude, investments that will largely continue even if the export ban was lifted. 

Unfinished products are the result of the current crude mismatch, which have a 

lower value because they require further processing to be upgraded into gasoline, 

jet and diesel fuels. In some cases the crude quality mismatch is large enough that 

a refinery will have to reduce the crude oil throughput to process additional volumes 

of light tight oil. As a result, there are limits to how much of the new, domestically 

produced light tight oil the refining system can efficiently and effectively process. 

To fully use light tight oil, many Gulf Coast refiners often require a price discount. 

Allowing crude oil exports would allow light tight oil (i.e., WTI) to sell at higher 

world prices. In U.S. Crude Oil Export Decision, IHS estimates that eliminating the 

WTI discount would incentivize nearly $750 billion more in investment from 2016 

to 2030—and increase oil production by 1.2 million B/D. 

The IHS report, Unleashing the Supply Chain,1 fully documents the benefits 

across the economy from 2016–2030, and I recommend it to the Committee Members 

and their staff to fully understand the benefits to your districts. For the entire U.S. 

the increase is stunning: 

• $86 billion in additional GDP, 

• about 400,000 new jobs annually, many of them in rural areas 

• 25% 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. 

The benefits accrue across most of the United States, not just oil producing states 

like Texas. It also touches states like Minnesota, New York, and Massachusetts, and 

Michigan—with little or no oil production—also benefit substantially in terms of economic activity and jobs, owing to the interconnected nature of U.S. supply chains. 

The report affirms earlier research that eliminating the export ban would provide 

significant benefits while reducing gasoline prices by 8¢ per gallon. 

Eliminating the crude oil ban proves even more important when oil prices are low 

and companies are laying off workers which slows the benefits to the interconnected 

supply chain. For example, if Brent crude (the international standard) trades in the 

range of $55/barrel and WTI trades in the United States at around $45/barrel, many 

companies will be on the margins of their new well investment breakeven point. In 

such a case, a small price change can have a major impact on supply because it can 

make or break the profitability of a significant share of tight oil producers and because it may determine whether an investment decision is made or not. Crude oil 

production thus drops even more sharply when prices are low and producers must 

take further price cuts to sell to domestic refiners if they cannot export. A $3 per 

barrel change in a $50 per barrel price environment can have the same effect as 

a $10 change in a $100 per barrel environment. 

Energy flows into and out of the United States have already provided significant 

benefits to the region and the world. In July 2010, the United States imported 1.1 

MMb/d of oil from Nigeria. Because of U.S. supply, this has shrunk to nearly nothing, while at the same time we are providing a large share of its refined products 

(diesel, gasoline, etc.) from the United States. The change in refined product flows 

to Nigeria reflects a broader change in U.S. flow patterns for gasoline, diesel and 

other important consumer fuels. Ten years ago this month, the United States net 

imports of refined products was over two million barrels per day. This has now reversed direction and the U.S. net export balance is over two million barrels per day 

of exports. U.S. refiners are some of the most advanced in the world, and with low 

cost inputs they have been able to further exert their global standing, providing not 

just U.S. consumers with valuable fuels, but consumers around the world. 

30 

So why do we have the ban, and is there any reason to modify it? Its existence 

is due to an anachronism that grew out of a period of scarcity in the 1970s when 

the United States imposed price controls on oil and banned the export of oil in order 

to support the price controls. In the wake of the 1973 Arab oil embargo, the Emergency Petroleum Allocation Act of 1973 allowed President Nixon to set price controls 

and allocate oil to end users in the United States. The Energy Policy and Conservation Act of 1975 prohibited the export of crude oil and natural gas produced in the 

United States, with some exceptions. The U.S. system of price controls on oil was 

abolished in 1981, as was, a few months later, the ban on the export of oil products. 

However, illogically, the ban on crude oil exports was retained even though the rationale provided by price controls had disappeared. The United States now has the 

fastest growing oil production in the world. Since 2008, American entrepreneurship 

has increased U.S. crude oil output by ∼81%—4.4 million B/D principally of light 

tight oil, such as Eagle Ford in south Texas, Bakken in North Dakota and West 

Texas Intermediate (WTI). This increase is the fastest in U.S. history and exceeds 

the combined production gains from the rest of the world. The commercial and technical reasons for this increase in production are well documented, including the May 

2014 IHS report, called U.S. Crude Oil Export Decision.1 The conditions that justified the crude oil export ban in 1973 no longer apply. 

I appreciate, Mr. Chairman, your leadership and that of this Committee to address these critical issues for U.S., regional and global energy security. Thank you 

for this opportunity to testify before your Committee. I welcome the chance to respond to your questions. 

Endnotes 1 U.S. Crude Oil Export Decision: https://www.ihs.com/Info/0514/crude-oil.html. 2 Unleashing the Supply Chain: https://www.ihs.com/Info/0315/crude-oil-supplychain.html. 

* * * * * 

About IHS (www.ihs.com) 

IHS (NYSE: IHS) is the leading source of insight, analytics and expertise in critical areas that shape today’s business landscape. Businesses and governments in 

more than 150 countries around the globe rely on the comprehensive content, expert 

independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business 

since 1959 and became a publicly traded company on the New York Stock Exchange 

in 2005. Headquartered in Englewood, Colorado, USA, IHS employs almost 9000 

people in 32 countries around the world. 

The CHAIRMAN. Mr. Webster, thank you. 

Dr. Rusco, 5 minutes. 

STATEMENT OF FRANK RUSCO, PH.D., DIRECTOR, 

NATURAL RESOURCES AND ENVIRONMENT, U.S. 

GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C. 

Dr. RUSCO. Thank you. Chairman Conaway, Ranking Member 

Peterson, and Members of the Committee. I am pleased to be here 

today to discuss GAO’s report on the implications of lifting the restrictions on crude oil exports. 

In a report issued September 30, 2014, we found that allowing 

crude oil exports from the United States could reduce consumer 

fuel prices and enhance energy security by increasing our strategic 

petroleum reserves relative to our net imports of foreign crude oil. 

It could also improve the U.S. balance of payments. 

Specifically, according to the major empirical studies that we 

found and evaluated, allowing crude oil exports would remove a 

price penalty that some U.S. crude oils has been suffering and 

stimulate the production of additional oil in the United States. 

Because the resulting increase in U.S. oil production would reduce global crude oil prices, most studies also predicted that conVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00034 Fmt 6633 Sfmt 6601 P:\DOCS\114-20\95510.TXT BRIAN
31 

sumer petroleum product prices would fall because the price of 

crude oil is the largest cost component in producing these products. 

In addition, because producing oil is a complex industrial process 

that inherently poses some risk to worker safety and the environment, the increase in oil production activity encouraged by removing export restrictions could also lead to incrementally more worker 

injuries or environmental damages such as spills as a result of rail 

or truck accidents. 

Much of the increase in U.S. oil production has come from shale 

deposits and is light and sweet in nature. This has created a mismatch in the quality of oil in the United States that we produce 

and the heavier sour types of oil that our Gulf Coast refiners are 

configured to refine. Lifting the export ban should allow excess barrels of lighter oil to be exported at global prices and remove the 

mismatch between the quality of oil produced and the quality refiners are set up to handle. 

As oil production in the United States has increased in recent 

years, it has created a lot of economic activity in oil-producing regions, many of these in rural America. Specifically, the largest 

shale oil formations cover areas including the Bakken in northwest 

North Dakota and eastern Montana, the Permian Basin and Eagle 

Ford in west and south-central Texas, respectively, Haynesville in 

east Texas and west Arkansas, the Niobrara in parts of Colorado, 

Utah, Wyoming, Kansas, and Nebraska, the Marcellus in West Virginia and west and central Pennsylvania, and the Utica in east 

Ohio. 

Oil production is an industrial process that requires the application of complex technologies and skilled labor in the oil field and 

also a broad array of supporting services, including oil drilling 

services, pipeline operations, railroads, trucking, and housing, to 

name just a few. 

The removal of oil export restrictions has precedent in the lifting 

of an export restriction on Alaskan North Slope oil in the mid1990s. GAO issued a report in 1999 that found that lifting the export restrictions had caused North Slope oil prices to rise to parity 

with global prices. When that export ban was lifted, very little oil 

was actually shipped abroad, but it was enough to cause the price 

of North Slope oil to rise by about $1 per barrel. However, there 

was no discernible effect on consumer prices of petroleum products 

in the West Coast because the marginal barrels of those products 

were already imported from foreign sources and valued at global 

prices. 

This increase in North Slope oil prices also made additional reserves economic to produce, so it had similar effects as are predicted in the studies we reviewed in our most recent report. 

In conclusion, allowing exports of oil from the United States 

makes sense from the standpoint of economic efficiency. It allows 

the price of oil to be set by market forces and allows the efficient 

running of U.S. refining operations. It will likely cause consumer 

prices to fall or remain unchanged. And it should stimulate economic activity, particularly in the rural areas in which shale oil reserves exist. 

This ends my opening statement. I am happy to answer any 

questions you may have. Thank you. 

32 

[The prepared statement of Dr. Rusco follows:] 

PREPARED STATEMENT OF FRANK RUSCO, PH.D., DIRECTOR, NATURAL RESOURCES

AND ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, D.C. 

Crude Oil Export Restrictions—Studies Suggest Allowing Exports Could Reduce Consumer Fuel Prices 

GAO Highlights 

Highlights of GAO–15–745T (http://www.gao.gov/products/GAO-15-745T), a testimony before the Committee on Agriculture, House of Representatives. 

Why GAO Did This Study 

After decades of generally falling U.S. crude oil production, technological advances 

in the extraction of crude oil from shale formations have contributed to increases 

in U.S. production. In response to these and other market developments, some have 

proposed removing the 4 decade old restrictions on crude oil exports, underscoring 

the need to understand how allowing crude oil exports could affect crude oil prices, 

and the prices of consumer fuels refined from crude oil, such as gasoline and diesel. 

This testimony discusses what is known about the pricing and other key potential 

implications of removing crude oil export restrictions. It is based on GAO’s September 2014 report (GAO–14–807) (http://www.gao.gov/products/GAO-14-807), 

and information on crude oil production and prices updated in June 2015. For that 

report, GAO reviewed four studies issued in 2014 on crude oil exports; including two 

sponsored by industry and conducted by consultants, one sponsored by a research 

organization and conducted by consultants, and one conducted at a research organization. Market conditions have changed since these studies were conducted, underscoring some uncertainties surrounding estimates of potential implications of removing crude oil export restrictions. For its 2014 report, GAO also summarized the 

views of a nongeneralizable sample of 17 stakeholders including representatives of 

companies and interest groups with a stake in the outcome of decisions regarding 

crude oil export restrictions, as well as academic, industry, and other experts. 

View GAO–15–745T (http://www.gao.gov/products/GAO-15-745T). For more information, contact Frank Rusco at (202) 512–3841 or ruscof@gao.gov. 

What GAO Found 

In September 2014, GAO reported that according to studies it reviewed and stakeholders it interviewed, removing crude oil export restrictions would likely increase 

domestic crude oil prices, but could decrease consumer fuel prices, although the extent of price changes are uncertain and may vary by region. The studies identified 

the following implications for U.S. crude oil and consumer fuel prices: 

• Crude oil prices. The four studies GAO reviewed estimated that if crude oil 

export restrictions were removed, U.S. crude oil prices would increase by about 

$2 to $8 per barrel—bringing them closer to international prices. Prices for 

some U.S. crude oils have been lower than international prices—for example, 

one benchmark U.S. crude oil averaged $52 per barrel from January through 

May 2015, while a comparable international crude oil averaged $57. In addition, 

one study found that, when assuming low future crude oil prices overall, removing export restrictions would have no measurable effect on U.S. crude oil prices. 

• Consumer fuel prices. The four studies suggested that U.S. prices for gasoline, diesel, and other consumer fuels follow international prices. If domestic 

crude oil exports caused international crude oil prices to decrease, consumer 

fuel prices could decrease as well. Estimates of the consumer fuel price implications in the four studies GAO reviewed ranged from a decrease of 1.5¢ to 13¢ 

per gallon. In addition, one study found that, when assuming low future crude 

oil prices, removing export restrictions would have no measurable effect on consumer fuel prices. 

Some stakeholders cautioned that estimates of the price implications of removing 

export restrictions are subject to several uncertainties, such as the extent of U.S. 

crude oil production increases, and how readily U.S. refiners are able to absorb such 

increases. Some stakeholders further told GAO that there could be important regional differences in the price implications of removing export restrictions. 

The studies GAO reviewed and the stakeholders it interviewed generally suggested that removing crude oil export restrictions may also have the following implications: 

33 

1 EIA is a statistical agency within the Department of Energy that collects, analyzes, and disseminates independent information on energy issues. 2GAO, Changing Crude Oil Markets: Allowing Exports Could Reduce Consumer Fuel Prices, 

and the Size of the Strategic Reserves Should Be Reexamined, GAO–14–807 (http:// 

www.gao.gov/products/GAO-14-807) (Washington, D.C.: Sept. 30, 2014). 3 Resources for the Future, Crude Behavior: How Lifting the Export Ban Reduces Gasoline 

Prices in the United States (Washington, D.C.: Resources for the Future, February 2014, revised 

March 2014); ICF International and EnSys Energy (ICF International), The Impacts of U.S. 

Crude Oil Exports on Domestic Crude Production, GDP, Employment, Trade, and Consumer 

Costs (Washington, D.C.: ICF Resources, Mar. 31, 2014); IHS, U.S. Crude Oil Export Decision: 

Assessing the Impact of the Export Ban and Free Trade on the U.S. Economy (Englewood, CO: 

IHS, 2014); NERA Economic Consulting, Economic Benefits of Lifting the Crude Oil Export Ban 

(Washington, D.C.: NERA Economic Consulting, Sept. 9, 2014). 

• Crude oil production. Removing export restrictions may increase domestic 

production—8 million barrels per day in April 2014—because of increasing domestic crude oil prices. Estimates ranged from an additional 130,000 to 3.3 million barrels per day on average from 2015 through 2035. 

• Environment. Additional crude oil production may pose risks to the quality 

and quantity of surface groundwater sources; increase greenhouse gas and other 

emissions; and increase the risk of spills from crude oil transportation. 

• The economy. Three of the studies projected that removing export restrictions 

would lead to additional investment in crude oil production and increases in employment. This growth in the oil sector would—in turn—have additional positive effects in the rest of the economy, including for employment and government revenues. 

Chairman Conaway, Ranking Member Peterson, and Members of the Committee: 

Thank you for the opportunity to discuss our work on the implications of removing 

crude oil export restrictions. After decades of generally falling U.S. crude oil production, technological advances in the extraction of crude oil from shale formations 

have contributed to increases in U.S. production. Crude oil production increased by 

about 74 percent from 2008 through 2014 to reach over eight million barrels per 

day in 2014, and production increases in 2012, 2013, and 2014 were the largest annual increases since the beginning of U.S. commercial crude oil production in 1859, 

according to the Energy Information Administration (EIA).1 More recently, however, 

crude oil prices have declined by 40 percent, from about $100 per barrel in the summer of 2014, to about $60 in May 2015. In response to these and other market developments, some have proposed removing the 4 decade old restrictions on crude oil 

exports, underscoring the need to understand how allowing crude oil to be exported 

could affect crude oil prices, and the prices of consumer fuels refined from crude oil, 

such as gasoline and diesel. 

My testimony discusses what is known about the pricing and other key implications of removing crude oil export restrictions. It is based on our September 2014 

report that examined these and other issues,2 and information on crude oil prices 

and production updated in June 2015. For the 2014 report, we reviewed four studies 

issued in 2014 on crude oil exports; including two sponsored by industry and conducted by consultants, one sponsored by a research organization and conducted by 

consultants, and one conducted at a research organization.3 Market conditions have 

changed since these studies were conducted, underscoring some uncertainties surrounding estimates of potential implications of removing crude oil export restrictions. For our 2014 report, we also summarized the views of a nongeneralizable 

sample of 17 stakeholders including representatives of companies and interest 

groups with a stake in the outcome of decisions regarding crude oil export restrictions, as well as academic, industry, and other experts. Although not generalizable 

to all potential stakeholders, these views provide illustrative examples. More details 

on our scope and methodology for that work can be found in the issued report. We 

conducted the work on which this statement is based in accordance with generally 

accepted government auditing standards. Those standards require that we plan and 

perform the audit to obtain sufficient, appropriate evidence to provide a reasonable 

basis for our findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. 

Background 

The export of domestically produced crude oil has generally been restricted since 

the 1970s. In particular, the Energy Policy and Conservation Act of 1975 (EPCA) 

led the Department of Commerce’s Bureau of Industry and Security (BIS) to proVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 P:\DOCS\114-20\95510.TXT BRIAN
34 

4 15 CFR § 754.2(a). 5 15 CFR § 754.2(b)(2). 6For example, the Mineral Leasing Act of 1920 restricts exports of domestically produced 

crude oil transported by pipeline over certain rights-of-way (30 U.S.C. § 185(u)); the Outer Continental Shelf Lands Act restricts exports of crude oil from the outer continental shelf (29 U.S.C. 

§ 1354); the Naval Petroleum Reserves Production Act restricts the export of crude oil produced 

from the Naval Petroleum Reserves (10 U.S.C. § 7430) and Section 201 of Pub. L. No. 104–58, 

‘‘Exports of Alaskan North Slope Oil,’’ provides for exports of domestically produced crude oil 

transported by pipeline over rights-of-way granted pursuant to section 203 of the Trans-Alaska 

Pipeline Authorization Act (30 U.S.C. § 185(s)). 7 15 CFR § 754.2(c). 8GAO, Petroleum Refining: Industry’s Outlook Depends on Market Changes and Key Environmental Regulations, GAO–14–249 (http://www.gao.gov/products/GAO-14-249) (Washington, 

D.C.: Mar. 14, 2014). 9 Because of the large number of grades of crude oils, buyers and sellers use benchmark crude 

oils as a reference in pricing crude oil. A benchmark crude oil is typically an abundantly produced and frequently traded crude oil. For example, crude oils produced in North and South 

America are typically priced in reference to WTI. 

mulgate regulations that require crude oil exporters to obtain a license.4 These regulations provide that BIS will issue licenses for the following crude oil exports: 

• exports from Alaska’s Cook Inlet, 

• exports to Canada for consumption or use therein, 

• exports in connection with refining or exchange of SPR crude oil, 

• exports of certain California crude oil up to twenty-five thousand barrels per 

day, 

• exports consistent with certain international energy supply agreements, 

• exports consistent with findings made by the President under certain statutes, 

and 

• exports of foreign origin crude oil that has not been commingled with crude oil 

of U.S. origin. 

Other than for these exceptions, BIS considers export license applications for exchanges involving crude oil on a case-by-case basis, and BIS can approve them if 

it determines that the proposed export is consistent with the national interest and 

purposes of EPCA.5 In addition to BIS’s export controls, other statutes control the 

export of domestically produced crude oil, depending on where it was produced and 

how it is transported.6 In these cases, BIS can approve exports only if the President 

makes the necessary findings under applicable laws.7 Some of the authorized exceptions, outlined above, are the result of such Presidential findings. 

As we previously found, recent increases in U.S. crude oil production have lowered 

the cost of some domestic crude oils.8 For example, prices for West Texas Intermediate (WTI) crude oil—a domestic crude oil used as a benchmark for pricing— 

were historically about the same price as Brent, an international benchmark crude 

oil from the North Sea between Great Britain and the European continent.9 However, from 2011 through 2014, the price of WTI averaged $12 per barrel lower than 

Brent (see Fig. 1). In 2014, prices for these benchmark crude oils narrowed as global 

oil prices declined, and WTI averaged $52 from January through May 2015, while 

Brent averaged $57. The development of U.S. crude oil production has created some 

challenges for crude oil transportation infrastructure because some production has 

been in areas with limited linkages to refining centers. According to EIA, these infrastructure constraints have contributed to discounted prices for some domestic 

crude oils. 

35 

10The density, or gravity of a crude oil is specified using the American Petroleum Institute 

(API) gravity standard, which measures the weight of crude oil in relation to water, which has 

an API gravity of 10°. For the purposes of this estimate, we considered light oils as those with 

an API gravity of 35° or above. See: Energy Information Administration, U.S. Crude Oil Production Forecast—Analysis of Crude Types (Washington, D.C.: May 29, 2014). 

Figure 1: Monthly West Texas Intermediate and Brent Crude Oil Prices, 

2009—May 2015 

Source: GAO analysis of Energy Information Administration data. « GAO– 

15–745T. 

Note: West Texas Intermediate is a domestic crude oil used as a benchmark for pricing, and Brent is an international benchmark from the North 

Sea between Great Britain and the European continent. 

Much of the crude oil currently produced in the United States has characteristics 

that differ from historic domestic production. Crude oil is generally classified according to two parameters: density and sulfur content. Less dense crude oils are known 

as ‘‘light,’’ and denser crude oils are known as ‘‘heavy.’’ Crude oils with relatively 

low sulfur content are known as ‘‘sweet,’’ and crude oils with higher sulfur content 

are known as ‘‘sour.’’ As shown in Figure 2, according to EIA, most domestic crude 

oil produced over the last 5 years has tended to be light oil. Specifically, according 

to EIA estimates, about all of the 1.8 million barrels per day increase in production 

from 2011 to 2013 consisted of lighter sweet crude oils.10


11420017.eps
36 

11 In general, heavier crude oils require more complex and expensive refineries to process the 

crude oil into usable products but have been less expensive to purchase than lighter crude oils. 

Figure 2: U.S. Crude Oil Production and Energy Information Administration Forecast of Production by Crude Oil Type, 2011–2015 

Source: GAO analysis of Energy Information Administration data. « GAO– 

15–745T. 

Note: The density, or gravity, of a crude oil is specified using the American Petroleum Institute (API) gravity standard, which measures the 

weight of crude oil in relation to water, which has an API gravity of 10°. 

Heavy crude oils include those with an API gravity of less than 27; medium 

includes crude oil with an API from 27 to 35; and light includes crude oil 

with API gravities of 35 and above. 

Light crude oil differs from the crude oil that many U.S. refineries are designed 

to process. Refineries are configured to produce transportation fuels and other products (e.g., gasoline, diesel, jet fuel, and kerosene) from specific types of crude oil. Refineries use a distillation process that separates crude oil into different fractions, or 

interim products, based on their boiling points, which can then be further processed 

into final products. Many refineries in the United States are configured to refine 

heavier crude oils and have therefore been able to take advantage of historically 

lower prices of heavier crude oils.11 For example, in 2013, the average density of 

crude oil used at domestic refineries was 30.8, while nearly all of the increase in 

production in recent years has been lighter crude oil with a density of 35 or above. 

According to EIA, additional production of light crude oil over the past several 

years has been absorbed into the market through several mechanisms, but the capacity of these mechanisms to absorb further increases in light crude oil production 

may be limited in the future for the following reasons: 

• Reduced imports of similar grade crude oils: According to EIA, additional 

production of light oil in the past several years has primarily been absorbed by 

reducing imports of similar grade crude oils. Light crude oil imports fell from 

1.7 million barrels per day in 2011 to one million barrels per day in 2013. As 


11420018.eps
37 

a result, there may be dwindling amounts of light crude oil imports that can 

be reduced in the future, according to EIA. 

• Increased crude oil exports: Crude oil exports have increased recently, from 

less than thirty thousand barrels per day in 2008 to 396 thousand barrels per 

day in June 2014. Continued increases in crude oil exports will depend, in part, 

on the extent of any relaxation of current export restrictions, according to EIA. 

• Increased use of light crude oils at domestic refineries: Domestic refineries have increased the average gravity of crude oils that they refine. The average American Petroleum Institute (API) gravity of crude oil used in U.S. refineries increased from 30.2° in 2008 to 30.8° in 2013, according to EIA. Continued 

shifts to use additional lighter crude oils at domestic refineries can be enabled 

by investments to relieve constraints associated with refining lighter crude oils 

at refineries that were optimized to refine heavier crude oils, according to EIA. 

• Increased use of domestic refineries: In recent years, domestic refineries 

have been run more intensively, allowing the use of more domestic crude oils. 

Utilization—a measure of how intensively refineries are used that is calculated 

by dividing total crude oil and other inputs used at refineries by the amount 

refineries can process under usual operating conditions—increased from 86 percent in 2011 to 88 percent in 2013. There may be limits to further increases 

in utilization of refineries that are already running at high rates, according to 

EIA. 

Removing Crude Oil Export Restrictions Is Expected to Increase Domestic 

Crude Oil Prices and Could Decrease Consumer Fuel Prices 

In our September 2014 report, we reported that according to the studies we reviewed and the stakeholders we interviewed, removing crude oil export restrictions 

would likely increase some domestic crude oil prices, but could decrease consumer 

fuel prices, although the extent of consumer fuel price changes are uncertain and 

may vary by region. As discussed earlier, increasing domestic crude oil production 

has resulted in lower prices of some domestic crude oils compared with international 

benchmark crude oils. Three of the studies we reviewed also concluded that, absent 

changes in crude oil export restrictions, the expected growth in crude oil production 

may not be fully absorbed by domestic refineries or through exports (where allowed), 

contributing to even wider differences in prices between some domestic and international crude oils. According to these studies, by removing the export restrictions, 

these domestic crude oils could be sold at prices closer to international prices, reducing the price differential and aligning the price of domestic crude oil with international benchmarks. 

While the studies we reviewed and most of the stakeholders we interviewed 

agreed that domestic crude oil prices would increase if crude oil export restrictions 

were removed, stakeholders highlighted several uncertainties that could affect the 

extent of price increases. The studies we reviewed made assumptions about these 

uncertainties, and actual price implications of removing crude oil export restrictions 

may differ from those estimated in these studies depending on how export restrictions and market conditions evolve. Specifically, stakeholders raised the following 

three key uncertainties: 

• Extent of future increases in crude oil production. According to two stakeholders, in the absence of exports, higher production of domestic light sweet 

crude oil would tend to increase the mismatch between such crude oils and the 

refining industry. This was corroborated by two of the studies. As a result, one 

study indicated that a greater increase in production would increase the price 

effects of removing crude oil export restrictions. On the other hand, lower than 

anticipated production of such crude oil would lower potential price effects as 

the additional crude oil could more easily be absorbed domestically. 

• Extent to which crude oil production increases can be absorbed. The domestic refining industry and exports to Canada have absorbed the increases in 

domestic crude oil production thus far, and one stakeholder told us the domestic 

refining industry could provide sufficient capacity to absorb additional future 

crude oil production. On the other hand, some stakeholders suggested that the 

U.S. refining industry will not be able to keep pace with increasing U.S. light 

crude oil production. For example, IHS stated that refinery investments to process additional light crude oil face significant risks in the form of potentially 

38 

12 IHS is a firm that provides comprehensive economic and financial information on countries, 

regions, and industries. 13Specifically, the Department of Commerce’s definition of crude oil includes condensates, 

which are light liquid hydrocarbons recovered primarily from natural gas wells. 14Specifically, companies often process condensate through stabilization units to reduce their 

volatility and prepare the condensate for transport to markets. Some stabilization units include 

distillation towers. In March and May 2014, the Department of Commerce issued commodity 

classifications to two companies that determined that condensates processed through a crude oil 

distillation tower, as described by the two companies requesting clarification, did not meet the 

definition of crude oil in BIS’s regulations and thus were not subject to the export prohibitions 

applicable to U.S. produced crude oil. The Department of Commerce clarified the factors it will 

consider in determining whether a product has been ‘‘processed through a crude oil distillation 

tower’’ in December 2014. 15This clarification provided by the Department of Commerce occurred after the publication 

of the Resources for the Future, ICF International, and IHS studies and thus this was not taken 

into consideration in the studies. NERA Economic Consulting also did not consider the potential 

effect of the clarification in its study. 16 Unless otherwise noted, dollar estimates in the rest of this report have been converted to 

2014 year dollars. These are average price effects over the study time frames, and some cases 

in some studies projected larger price effects in the near term that declined over time. 17 NERA Economic Consulting is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. 

stranded investments if export restrictions were to change, and this could result 

in investments not being made as quickly as anticipated.12

• Extent to which export restrictions change. Aspects of the export restrictions could be further defined or interpreted in ways that could change the pricing dynamics of domestic crude oil markets. In 2014, for example, the Department of Commerce provided clarifications that condensate—a type of light crude 

oil 13—that has been processed through a distillation tower is not considered 

crude oil and so not subject to export restrictions.14 One stakeholder stated that 

this may lead to more condensate exports than expected.15

Within the context of these uncertainties, estimates of potential price effects vary 

in the four studies we reviewed, as shown in Table 1. Specifically, estimates in these 

studies of the increase in domestic crude oil prices due to removing crude oil export 

restrictions ranged from about $2 to $8 per barrel.16 For comparison, at the beginning of June 2014, WTI was $103 per barrel, and these estimates represented two 

to eight percent of that price. In addition, NERA Economic Consulting found that 

removing export restrictions would have no measurable effect in a case that assumes a low future international oil price of $70 per barrel in 2015 rising to less 

than $75 by 2035.17 According to the NERA Economic Consulting study, current 

production costs are close to these values, so that removing export restrictions would 

provide little incentive to produce more light crude oil. 

Table 1: Crude Oil Price Implications of Removing Crude Oil Export Restrictions from 

Four Studies Issued in 2014 

Resources for the Future ICF International IHS NERA Economic 

Consulting 

U.S. crude 

oil price 

Midwest refiner acquisition 

costs increase $6.68 per 

barrel.a

West Texas Intermediate 

crude oil prices increase 

$2.35 to $4.19 per barrel 

on average from 2015– 

2035. 

Prices increase $7.89 per 

barrel on average from 

2016–2030. 

Prices increase $1.74 per 

barrel in the reference 

case and $5.95 per barrel 

in the high case on average from 2015–2035.b

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA Economic Consulting 

studies. « GAO–15–745T 

Note: Estimates are in 2014 year dollars. 

a Refiner acquisition costs are the costs of crude oil including transportation and other fees paid by the refiner. 

Such costs may be closely related to the prices of crude oil. b Implications refer to the difference between the reference case and its baseline with export restrictions in 

place, and also the difference between the high oil and gas recovery case and its corresponding baseline. NERA 

Economic Consulting also found that removing crude oil export restrictions would have no measurable effect in the 

low world oil price case. 

Regarding consumer fuel prices, such as gasoline, diesel, and jet fuel, the studies 

we reviewed and most of the stakeholders we interviewed suggested that consumer 

fuel prices could decrease as a result of removing crude oil export restrictions. A decrease in consumer fuel prices could occur because such prices tend to follow international crude oil prices rather than domestic crude oil prices, according to the studies reviewed and most of the stakeholders interviewed. If domestic crude oil exports 

caused international crude oil prices to decrease, consumer fuel prices could deVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 P:\DOCS\114-20\95510.TXT BRIAN
39 

18 Resources for the Future also estimates a decrease in consumer fuel prices but this decrease 

is as a result of increased refinery efficiency (even with an estimated slight increase in the international crude oil price). 

crease as well.18 Table 2 shows that the estimates of the price effects on consumer 

fuels varied in the four studies we reviewed. Price estimates ranged from a decrease 

of 1.5 to 13¢ per gallon. These estimates represented 0.4 to 3.4 percent of the average U.S. retail gasoline price at the beginning of June 2014. In addition, NERA Economic Consulting found that removing export restrictions would have no measurable 

effect on consumer fuel prices when assuming a low future world crude oil price. 

Table 2: Consumer Fuel Price Implications of Removing Crude Oil Export Restrictions 

from Four Studies Issued in 2014 

Resources for the Future ICF International IHS NERA Economic 

Consulting a

U.S. consumer fuel 

prices 

Gasoline prices would decline 

by 1.8¢ to 4.6¢ per gallon 

on average. 

Petroleum product prices 

would decline by 1.5¢ to 

2.4¢ per gallon on average from 2015–2035. 

Gasoline prices would decline by 9¢ to 13¢ per 

gallon on average from 

2016–2030. 

Petroleum product prices 

would decline by 3¢ per 

gallon on average from 

2015–2035 in the reference case and 11¢ per 

gallon in the high case. 

Gasoline prices would decline by 3¢ per gallon in 

the reference case and 10¢ 

per gallon in the high 

case. Fuel prices would 

not be affected in a low 

world oil price case. 

Sources: GAO analysis of Resources for the Future, ICF International, IHS, and NERA Economic Consulting 

studies. « GAO–15–745T 

Note: Dollar estimates are in 2014 year dollars. 

a Implications refer to the difference between the reference case and its baseline with export restrictions in 

place, and the difference between the high oil and gas recovery case and its corresponding baseline. 

Price Effects of Allowing Alaskan North Slope Crude Oil Exports 

In 1995, Congress removed the restrictions on the export of Alaskan North 

Slope crude oil. From the time the restrictions were removed until 2004, about 

2.7 percent of Alaskan North Slope crude oil was exported; however, no Alaskan North Slope crude oil has been exported since 2004.The experience of allowing Alaskan North Slope crude oil exports may illustrate some of the potential effects of removing crude oil export restrictions nationally. In 1999, we reviewed the effects of allowing Alaskan North Slope crude oil exports and concluded that: a

• lifting the export ban raised the relative prices of Alaskan North Slope 

and comparable California crude oils by between $0.98 and $1.30 per barrel; b

• some refiners’ costs increased commensurate with the increase in crude 

oil prices; and 

• consumer fuel prices for gasoline, diesel, and jet fuel did not increase. 

The effect of removing the export restrictions for Alaskan North Slope oil is 

not completely understood due to data limitations and the difficulty of separating the effects of removing the export restrictions from other market changes 

that occurred at the same time. 

Source: GAO. « GAO–15–745T. aGAO, Alaskan North Slope Oil: Limited Effects of Lifting Export Ban on Oil 

and Shipping Industries and Consumers, GAO/RCED–99–191 (http:// 

www.gao.gov/products/GAO/RCED-99-191) (Washington, D.C., July 1, 1999). bThese estimates have not been adjusted for inflation. 

The effect of removing crude oil export restrictions on domestic consumer fuel 

prices depends on several uncertainties, as we discussed in our September 2014 reVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00043 Fmt 6633 Sfmt 6621 P:\DOCS\114-20\95510.TXT BRIAN
40 

19GAO–14–807 (http://www.gao.gov/products/GAO-14-807). 20See Severin Borenstein and Ryan Kellogg, ‘‘The Incidence of an Oil Glut: Who Benefits from 

Cheap Crude Oil in the Midwest?’’ The Energy Journal 35, no. 1 (2014). 21The Merchant Marine Act of 1920, also known as the Jones Act, in general, requires that 

any vessel (including barges) operating between two U.S. ports be U.S.-built, -owned, and -operated. 22GAO–14–807 (http://www.gao.gov/products/GAO-14-807). 23See EIA, Annual Energy Outlook 2015, DOE/EIA–0383 (2015) (Washington, D.C.: April 

2015). 24 In addition, Resources for the Future estimated that oil production in Canada and in the 

Midwest United States would gradually increase if the restrictions were lifted by about 84,000 

barrels per day. Resources for the Future estimated production elsewhere in the United States 

and the rest of the world would increase by 54,000 barrels per day for a total increase in world 

production of 138,000 additional barrels per day. IHS projected an additional 1.2 to 2.3 million 

barrels per day of crude oil production from 2016 through 2030. 

port.19 First, it would depend on the extent to which domestic versus international 

crude oil prices determine the domestic price of consumer fuels. A 2014 research 

study examining the relationship between domestic crude oil and gasoline prices 

concluded that low domestic crude oil prices in the Midwest during 2011 did not result in lower gasoline prices in that region.20 This research supports the assumption 

made in the four studies we reviewed that to some extent higher prices of some domestic crude oils as a result of removing crude oil export restrictions would not be 

passed on to consumer fuel prices. However, some stakeholders told us that this 

may not always be the case and that more recent or detailed data could show that 

lower prices for some domestic crude oils have influenced consumer fuel prices. 

Second, two of the stakeholders we interviewed suggested that there could be important regional differences in consumer fuel price implications and that prices 

could increase in some regions—particularly the Midwest and the Northeast—due 

to changing transportation costs and potential refinery closures. For example, these 

two stakeholders told us that because of requirements to use more expensive U.S.- 

built, -owned, and -operated ships to move crude oil between U.S. ports, allowing 

exports could enable some domestic crude oil producers to ship U.S. crude oil for 

less cost to refineries in foreign countries.21 Specifically, representatives of one refiner told us that, if export restrictions were removed, they could ship oil to their 

refineries in Europe at a lower cost than delivering the same oil to a refinery on 

the U.S. East Coast. According to another stakeholder, this could negatively affect 

the ability of some domestic refineries to compete with foreign refineries. Additionally, because refineries are currently benefiting from low domestic crude oil prices, 

some studies and stakeholders noted that refinery margins could be reduced if removing export restrictions increased domestic crude oil prices. As a result, some refineries could face an increased risk of closure, especially those located in the Northeast. However, according to one stakeholder, domestic refiners still have a significant cost advantage in the form of less expensive natural gas, which is an important 

energy source for many refineries. For this and other reasons, one stakeholder told 

us they did not anticipate refinery closures as a result of removing export restrictions. 

Removing Crude Oil Export Restrictions Is Expected To Increase Domestic 

Production and Have Other Implications 

The studies we reviewed for our September 2014 report,22 generally suggested 

that removing crude oil export restrictions may increase domestic crude oil production and may affect the environment and the economy: 

• Crude oil production. Removing crude oil export restrictions may increase domestic crude oil production. Even with current crude oil export restrictions, 

given various scenarios, EIA projected that domestic production will continue to 

increase through 2020.23 If export restrictions were removed, according to the 

four studies we reviewed, the increased prices of domestic crude oil are projected to lead to further increases in crude oil production. Projections of this increase varied in the studies we reviewed—from a low of an additional 130,000 

barrels per day on average from 2015 through 2035, according to the ICF International study, to a high of an additional 3.3 million barrels per day on average 

from 2015 through 2035 in NERA Economic Consulting’s study.24 This is equivalent to 1.5 percent to almost 40 percent of production in April 2014. 

• Environment. Two of the studies we reviewed stated that the increased crude 

oil production that could result from removing the restrictions on crude oil exports may affect the environment. Most stakeholders we interviewed echoed this 

41 

25GAO, Oil and Gas: Information on Shale Resources, Development, and Environmental and 

Public Health Risks, GAO–12–732 (http://www.gao.gov/products/GAO-12-732) (Washington, 

D.C.: Sept. 5, 2012). 26Growth in one sector of the economy can result in economy-wide growth through follow-on 

effects. For example, researchers at the Federal Reserve Bank of Dallas found that oil development in the Eagle Ford region of South Texas has had profound effects on jobs, income, and 

spending in the region with effects beyond those in the oil sector alone. See: Gilmer, Robert W., 

Rau ́l Hernandez, and Keith Phillips, ‘‘Oil Boom in Eagle Ford Shale Brings New Wealth to 

South Texas,’’ Southwest Economy (Federal Reserve Bank of Dallas: Second Quarter, 2012). 27 According to the NERA study, because of the increase in economic growth triggered by investment in more production capacity and infrastructure, there will be a corresponding acceleration of the rate at which the economy moves toward full employment. 

statement. This is consistent with what we found in a September 2012 report.25

In that 2012 report we found that crude oil development may pose certain inherent environmental and public health risks. However, the extent of the risk 

is unknown, in part, because the severity of adverse effects depends on various 

location- and process-specific factors, including the location of future shale oil 

and gas development and the rate at which it occurs. It also depends on geology, climate, business practices, and regulatory and enforcement activities. The 

stakeholders who raised concerns about the effect of removing the restrictions 

on crude oil exports on the environment identified risks including those related 

to the quality and quantity of surface and groundwater sources; increases in 

greenhouse gas and other air emissions, and increases in the risk of spills from 

crude oil transportation. 

• The economy. The four studies we reviewed suggested that removing crude oil 

export restrictions would increase the size of the economy. Three of the studies 

projected that removing export restrictions would lead to additional investment 

in crude oil production and increases in employment. This growth in the oil sector would—in turn—have additional positive effects in the rest of the economy.26 For example, NERA Economic Consulting’s study projected an average 

of 230,000 to 380,000 workers would be removed from unemployment through 

2020 if export restrictions were eliminated in 2015.27 These employment benefits would largely disappear if export restrictions were not removed until 2020 

because by then the economy would have returned to full employment. Two of 

the studies we reviewed suggested that removing export restrictions would increase government revenues, although the estimates of the increase vary. One 

study estimated that total government revenue would increase by a combined 

$1.4 trillion in additional revenue from 2016 through 2030, and another study 

estimated that U.S. Federal, state, and local tax receipts combined with royalties from drilling on Federal lands could increase by an annual average of $3.9 

to $5.7 billion from 2015 through 2035. 

Chairman Conaway, Ranking Member Peterson, and Members of the Committee, 

this completes my prepared statement. I would be pleased to answer any questions 

that you may have at this time. 

GAO Contact and Staff Acknowledgments 

If you or your staff members have any questions concerning this testimony, please 

contact me at (202) 512–3841 or ruscof@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page of this 

statement. Other individuals who made key contributions include Christine Kehr 

(Assistant Director), Quindi Franco, Alison O’Neill, and Kiki Theodoropoulos. 

The CHAIRMAN. I thank the witnesses for their testimony this 

morning. I have a couple of things to do before we get started on 

questions. 

Representative Joe Barton just stopped by. Joe has long championed lifting the oil export ban and is one of those strong voices. 

He stopped by to say thank you for having this hearing and highlighting that. 

I would be remiss if I didn’t call the audience’s attention to the 

portrait behind me. We have had a shifting of the portraits. The 

former Chairman, Frank Lucas, is now ensconced looking over our 

shoulder, and we have Mr. Goodlatte looking over the shoulders of 

the Democrats to make sure they keep things going on. But anyVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00045 Fmt 6633 Sfmt 6601 P:\DOCS\114-20\95510.TXT BRIAN
42 

way, we did shift the portraits around, and Frank’s 6 years as the 

Chairman is recognized as such. 

The chair will remind Members that they will be recognized for 

questioning in the order of seniority for Members who were here 

at the start of the hearing. After that, Members will be recognized 

in order of arrival. I appreciate Members’ understanding. I recognize myself for 5 minutes. 

Mr. Porter, Mr. Hamm, would you talk to us a bit about why it 

is important to continue to drill? Even though we have production 

levels to a certain level, why is it that we need new production, we 

need new drilling in order to both maintain and increase production levels? Either one. 

Mr. Porter? 

Mr. PORTER. Well, as you are well aware, Mr. Chairman, an oil 

well is a naturally depleting asset. As time goes by, you produce 

less and have less oil. So we must continue to drill to keep the supply up there at a level, as well as increase it. Also, if you don’t have 

the activity, you start losing the infrastructure, the talented people 

and the infrastructure that is needed to keep the industry healthy. 

The CHAIRMAN. Mr. Hamm, any other comments about the need 

to continue to drill? 

Mr. HAMM. Yes. I agree that basically it comes down to one 

thing, that we can’t export, we can’t develop the resource here in 

America, and that is kind of where, in a nutshell, that we have gotten to. Certainly, if we lift this ban on exports and we are able to 

export this material to refineries that need it, there is estimated 

to be about 3.2 million barrels of refining capacity that severely 

needs this product that we have in America today. 

The CHAIRMAN. Mr. Hamm, would you talk to us about the actual roughnecks and pulling unit hands and roustabouts, can you 

give us kind of a brief description of the education levels and kind 

of the salaries and compensation they get when they are fully employed? 

Mr. HAMM. Well, it is good. We call them middle class jobs, but 

it is certainly upper middle class jobs. 

Historically, we thought kind of roughnecks as being tough people out there, but a lot of these jobs today, with the technology that 

we have, we have people doing the directional work, running computers, everything, these are very high-paid, good jobs that draw 

$150,000 a year working out there, truck drivers in North Dakota, 

$80,000 to $100,000. So they are good middle class, upper middle 

class jobs. 

The CHAIRMAN. Ms. Cutting, can you talk to us a bit about both 

the impact that the rapid increase in the employment had in North 

Dakota, and also what has happened with school districts that had 

plans on trying to rebuild schools and making other improvements, 

but with this whipsaw in oil prices, what has the impact been on 

local communities? How are they dealing with the rapid change? 

Ms. CUTTING. Certainly. The oil and gas industry in North Dakota provides $8 million to $9 million per day in oil production and 

extraction taxes to the State of North Dakota and political subdivisions. And of course this money is used to build schools and roads 

and infrastructure. That is a very big impact in that regard. 

43 

Population-wise, we have seen a lot of our young people that 

were previously exported because there were no jobs to come back 

home and be close to their family. Population growth in North Dakota, the 2000 Census had North Dakota population around 

600,000; 23 percent growth puts us at about 730,000 to 740,000 

citizens. So that is a pretty significant influx of population on our 

state. 

Of course, that led to housing infrastructure being built, restaurant infrastructure, every sort of service that that type of population increase leads to. So you saw a lot of growth in every type 

of company and business opportunity across the state, as well as 

manufacturing, transportation. 

The CHAIRMAN. All right. Thank you. 

Mr. Peterson, for 5 minutes. 

Mr. PETERSON. Thank you, Mr. Chairman. 

I guess I am trying to understand here a little better. Maybe, Mr. 

Hamm, you could explain. I understand what OPEC is doing. They 

are trying to run you guys out of business with their cartel. I get 

that. But this foreign conversion of refining, how long has that 

been going on? When did that start? 

Mr. HAMM. Yes, this began when Venezuela came in and bought 

CITGO, which was a division of Cities Service Oil Company 

headquartered in Tulsa, Oklahoma. And they had heavy sour crude 

out of the Orinoco Belt that they wanted to put in this market. 

And so they came in, bought CITGO and the retail outlets that 

went with it, and basically changed the refinery, transformed it to 

handle the heavy sour crude from what was indigenous sweet here 

in America, change it over to heavy sour, started bringing the oil 

in, and basically claimed that market through those retail outlets. 

And that worked well for them. And so Pemex had the same 

thing going on with Mayan crude, came into Deer Park, bought a 

refinery there in Houston, changed that over, did the same thing. 

So that business plan took off—— 

Mr. PETERSON. When did this happen? What is the timeframe? 

Mr. HAMM. The timeframe, that was 1988 when CITGO was sold 

to Venezuela. And so it has come forward from then, but really, 

really got going strong here after 2000. 

Mr. PETERSON. I think North Dakota is building a refinery now 

or bought one. 

Mr. HAMM. Yes. It is the first little refinery built up there. We 

call them topping plants, 20,000 barrel a day, basically taking diesel out of the crude stream. 

Mr. PETERSON. So the oil out of the Bakken, or this light sweet, 

where is that going to go? If we lifted the ban, where would it go? 

Where would it be refined? 

Mr. HAMM. Well, it certainly would have to go to those refineries 

that could handle it. For instance, South Korea. That is a partner 

of ours, our company. We have a joint venture with them, a natural 

gas operation in western Oklahoma. But I can’t sell them oil. The 

closest movement would be to the West Coast and on to South 

Korea. But they have to buy their oil from Iran and Russia due to 

this ban. 

Mr. PETERSON. So we have been having trouble, as you know. 

Minnesota has been causing trouble on getting this pipeline built 

44 

out in North Dakota to Lake Superior. How much of an issue is 

that, the bottleneck of not getting the pipelines in place and overloading the train system and so forth, how much of a problem is 

that in this whole situation? 

Mr. HAMM. Well, the delay in building XL really caused a huge 

problem, just the fact that it was on the books and it stalled a lot 

of other people from building pipelines because they thought that 

was coming, and with that one on the books it—— 

Mr. PETERSON. The Bakken wasn’t going to go on the XL anyway, though, was it? 

Mr. HAMM. It was. We have a ramp, on-ramp to XL for 335,000 

barrels agreed to with them, with TransCanada, as they came by 

the Bakken. 

Mr. PETERSON. Wouldn’t the majority of it go on the Embridge 

Line if that got built? 

Mr. HAMM. Yes. 

Mr. PETERSON. Yes. 

Mr. HAMM. A lot of it would go on the Embridge Line, yes. 

Mr. PETERSON. I don’t understand why it is so difficult to build 

a refinery, and why can’t the Bakken oil get to a refinery? What 

is the issue with people not building refineries to do your—— 

Mr. HAMM. Well, the last one that was tried, the people gave up 

after 7 years of permitting. It is just almost impossible through 

EPA to build one. Like I say, the last guy gave up after 7 years: 

1975 was the last refinery built in America. 

Mr. PETERSON. And so it is not a lack of demand. It is a lack of 

just not being able to get through the bureaucracy. That is the 

problem. 

Mr. HAMM. Yes. Grassroots refinery would be very difficult. 

Mr. PETERSON. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Mr. Chairman. 

Mr. Lucas, for 5 minutes, Chairman Lucas. 

Mr. LUCAS. Thank you, Mr. Chairman. And thank you for the 

kind words earlier. I do live, in spite of the appearance on the wall 

there, absolutely. 

Mr. Hamm, for 25+ years you and I have worked the hallways 

together either here or at the state capital back home, so we go 

back a long ways. Let’s touch for just a moment the direct impact 

that your industry has, because you are the producer guy at the 

table, on farmers and ranchers out there. 

Number one, if you think there is potential, you will go into the 

field and do a seismograph. You will pay a surface owner for the 

right to take a look. If something viable is there, then you will 

come back and you will pay the mineral owners for the leasing 

privileges of potentially drilling, correct? 

Mr. HAMM. That is correct. 

Mr. LUCAS. If you determine that you proceed forward, you will 

hire a drilling contractor to actually drill the well, surface damages 

will be paid to the landowner, water will be purchased. 

If it is successful, then you will hire a completion company to 

come in and do the things that are necessary to make the well 

produce. You will then turn around and hire a pipeline company, 

45 

if it is successful, to pay the surface owner right-of-way for a pipeline to be laid, hopefully made out of steel from the United States. 

At every step of the way, as a private industry, you are not a 

part of the government, you are paying everyone for the privilege 

of enabling them to receive their royalty payments and consumers 

to receive their products. So you are adding to the economy in 

every step of the way, correct, sir? 

Mr. HAMM. Yes. Yes, every step. 

Mr. LUCAS. Now, that said, several comments here about the nature of the oil market. We on this Agriculture Committee, of 

course, represent an industry where day-to-day production agriculture, since the founding of the country, we have never been able 

to consume everything we have produced. We have always had to 

sell into the world markets. If we couldn’t sell, then we couldn’t 

function. 

But prior to 1960, approximately, and basically from this stage 

forward, isn’t the energy industry kind of like agriculture, we can’t 

consume everything we can produce at home? 

Mr. HAMM. Yes, we are just like agriculture. We call our self 

farmers, in fact, and developers. So we are just like agriculture. 

This export ban would be just like your wheat that you are growing 

out there. If you couldn’t export that wheat, say there was a ban 

on export and only flour could be exported, you would have a middleman that would take a big chunk out. 

Mr. LUCAS. So isn’t it fair to say, Harold, that many of your, 

‘‘competitors,’’ from a production perspective, are foreign companies 

that are government-owned, that take advantage of every policy 

mistake we have in this country to their own gain? 

Mr. HAMM. Yes. 

Mr. LUCAS. The political ban on exports in the 1970s being a policy mistake, I would opine. 

Mr. HAMM. Yes. 

Mr. LUCAS. So this is really a big issue that affects not just your 

industry, but every consumer here at home, and for that matter 

around the world. 

Mr. HAMM. This ban made us especially vulnerable when OPEC 

decided to open the valves and flood the market here, glut the market again. But we were especially vulnerable because of this export 

ban. 

Mr. LUCAS. Mr. Duffy, you are part of an industry that becomes 

ever more competitive, ever more international in nature by the 

moment. Discuss for a moment, if we were to do what I would define as the rational thing and drop this ban from the 1970s, how 

long would it take for the markets to readjust and what would you 

believe the net effect to be? 

Mr. DUFFY. As it relates to the pricing of the product, how long 

it would take? 

Mr. LUCAS. Yes. 

Mr. DUFFY. I think we would get an immediate reaction if in fact 

this ban was lifted. The markets always like to anticipate down the 

road anyway, so they will look at this, try to look at the supply 

numbers, and then everybody always tries to figure out what is the 

demand, which is the $60 billion question. We don’t know what demand is going to be. 

46 

What is completely interesting here is that if this really adds one 

percent to the GDP the way Mr. Hamm said, that is the most compelling thing that this Congress should understand, and you should 

echo that through the halls of Congress, because that is really compelling. 

But as far as the pricing of the product, sir, it would absolutely 

be a greater sample. It goes to the products that we trade, which 

are agriculture and energy and metals and everything else. But 

when we watch our farmers export the grain products they do 

today, if they did not do so, I assure you they would not be able 

to put a crop in the field because they would be upside down with 

their input cost each and every year if they didn’t have the ability 

to export. That is what is critically important. Oil is no different. 

Mr. LUCAS. Is it fair to say, Harold, that if we don’t get our act 

together, the trends since the 1970s of more and more of the world 

production and refining capacity going into foreign hands, is that 

just going to continue? 

Mr. HAMM. It is. And one thing I would like to add to that last 

question there on how long it would take to change it around. We 

exported till 1975. The infrastructure is there. You don’t have to 

build a lot. The ships are there, the market is there, the ship channels are there, the pipelines are there. So you just go to work with 

it. It is almost instantaneous putting this country back to work. It 

can happen really quickly. 

Mr. LUCAS. My time has expired. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Mr. Aguilar, 5 minutes. 

Mr. AGUILAR. Thank you, Mr. Chairman. 

Mr. Webster, you talked a little bit about the supply chain within 

this discussion, and that is what Mr. Peterson was also discussing. 

In Quebec and in North Dakota, we have experienced derailments 

in transporting oil from Bakken. Many were forced to evacuate 

their homes for safety purposes, and in Quebec, people died. Some 

argued that the explosions were due to the unstable nature of the 

oil extracted. 

Can you talk about the risks both to the environment and the 

communities, both rural and urban, through which the oil is transported in difference to—and maybe Chairman Porter can talk 

about this—the system that is in place in Texas and Oklahoma 

from an infrastructure perspective that is very different? 

Mr. WEBSTER. Thank you for your question, Congressman. I will 

try to answer that, but I am a oil markets guy, not an environmental risk guy. 

One, I would say, and I imagine Mr. Hamm would agree with 

me, is that it is better to move by pipeline. It is usually a little bit 

cheaper. It doesn’t give you as much flexibility. There have been 

accidents, but as you can see, there are actually a number of accidents that do take place on rail, not just on the oil side. 

But, if you look in terms of what the benefits are for the supply 

chain, it extends well beyond just where the rail is. So you have 

companies that produce tubulars, materials, frack sand, all of these 

sorts of things that are moved around the U.S. quite a bit. So I 

know I didn’t quite answer your question, but, yes. 

Dr. Rusco. 

47 

Dr. RUSCO. Yes, as with any industrial process, there are environmental and safety risks. And so we have seen that as the shale 

revolution has occurred, you will see incidents of that sort of thing. 

There are regulations in place to monitor and evaluate that and 

mitigate those, but those sort of things are inevitable with industrial processes. 

The one thing that I will say in relation to lifting the export ban, 

it removes a piece of uncertainty that could allow the building of 

additional infrastructure that might mitigate this further in terms 

of pipeline development. 

The other thing that I will say about that is that the Department 

of Transportation has currently reevaluated sort of rail safety and 

is requiring changes to both the treatment of the oil, which is more 

volatile, the shale oil is more volatile than some of the heavier oils 

that are produced elsewhere in the country, and they are taking 

steps to require different railcars that can handle that kind of volatility. And also some of the higher ends of that are being pulled off 

before shipment. 

Mr. AGUILAR. Thank you. 

Thank you, Mr. Chairman. I yield back. 

The CHAIRMAN. The gentleman yields back. 

Mr. Gibbs, for 5 minutes. 

Mr. GIBBS. Thank you, Mr. Chairman. Thank you for holding 

this very timely and important hearing. I think it is very interesting, listening to the testimony about the impact, the economic 

impact, the positive impact, job creation. We have seen that in 

Ohio at the Utica shale play. It has just been tremendous, just like 

it has been in the Bakkens and Eagle Fork. 

And I personally want to thank Mr. Hamm for his innovation 

and developing the horizontal drilling technology, because that is 

what has brought this all about. And it is this sector, this energy 

sector that has actually helped this economy recover from 2008– 

2009, in spite of all the bad policies coming out of this town where 

we are choking a lot of businesses with all the heavy-handed regulations and other policies. But it is this sector and it is horizontal 

drilling that has done that. 

But I want to talk a little bit about the price differential between 

the WTI and the Brent. I have been looking at the contract. It is 

$6 to $10 a barrel, which at some points can be, what, more than 

ten percent, depending on the price of oil. 

What do you see—maybe Mr. Webster might want to respond or 

Mr. Hamm—the ban is lifted, the impact of oil being exported from 

the United States, how many barrels that is, how many X amount 

number of barrels that is on that $6 to $10 differential, how much 

do you think that the spread narrows on a barrel price? 

Mr. WEBSTER. Thank you for your question. So our view is that 

the spread would narrow to the point where it took care of normal 

transportation and quality differences. So you are talking about $3 

to $4. 

That differential that you have seen in the last couple of years, 

that tends to be quite volatile because it depends on when refineries go into turnaround or maintenance season, which is when 

they are not taking the crude quite as much, and that is when you 

48 

start to see that quite wide discount and the higher stocks that you 

have, going forward. 

So while there would still be a discount, it is a, normal discount 

that you would expect because you have still got to ship it all the 

way down to the Gulf Coast. 

Mr. GIBBS. I have one—I won’t mention a name—but I have one 

American refiner that is against lifting the ban, and they are making investments to handle the light-type shale oil. And, obviously, 

I thought it was interesting to hear your testimony about how price 

of refined products is based on the world market price, that is helpful. 

But do you see an impact? Because they seem to think that they 

are going to be impacted and they won’t be able to continue their 

investment that they are making if the ban is lifted. 

Mr. WEBSTER. We have looked at this, and there is no question 

that refiners are making quite substantial investments. Our estimate is if you don’t lift the ban, between now and 2030, you would 

see an additional $3 billion in investment in the United States due 

to the refining. But that is at the expense of $746 billion that you 

would get from the upstream and from the supply chain. 

So while there is a benefit on the refining side, it is much more 

substantial in terms of both, across a greater swath of the U.S. The 

refiners will still have an advantage because relative to the rest of 

the world, they are still a world class refining system. They are 

still going to be able to take in natural gas as one of their feedstock, so they have an advantage over a lot of other refiners around 

the world. So maybe that advantage will shrink if you no longer 

get our discounted crude, but it is still a substantial—— 

Mr. GIBBS. Go ahead, Mr. Duffy. 

Mr. DUFFY. Can I just add to that? Because, from a market perspective, that is a really interesting question. So if you look at the 

price of oil in its peak, when it hit roughly $134.50 a barrel, the 

spread between West Texas and Brent was at its widest. When the 

recent downturn in the market as U.S. explorers went in and got 

more oil out of the ground, like Mr. Hamm and his folks have done, 

you started to see that spread narrow. That spread is about $3.50 

today, or as of last night. So as the market continues to go down 

from pressure from more production, and hence if you were to export this product, I believe that spread could actually go inverted. 

And that would be a big plus for this country. And so that is why 

when we see the demand—with China slowing down right now, we 

are not seeing quite the demand we had—the FT article yesterday 

put out that there are less people producing. Of course, there are 

less people producing because the input costs are much lower now 

than they were before. 

Mr. GIBBS. Mr. Webster, our local refineries would also pick up 

some benefit on transportation costs getting the oil here from over. 

The impact is just tremendous by lifting the ban, as has been stated today. It is something that needs to get done. And everybody 

will benefit in the long run. 

So I yield back my time. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman yields back. 

Ms. Plaskett, 5 minutes. 

49 

Ms. PLASKETT. Thank you, Mr. Chairman. Good morning, everyone. Thank you so much for your testimony and this information. 

This is actually a very important topic for the district that I represent, the U.S. Virgin Islands, which at one point had one of the 

largest oil refineries in the Western Hemisphere. 

However, Mr. Hamm, when you talked about a refinery and oil 

being a lifter of an economy, particularly in a rural area, I understand that. And I understand how people can have jobs that they 

didn’t normally have, and families can enter the middle class and 

become stronger. 

And Ms. Cutting, you talked about the drain and the leaving 

that occurs when these jobs are lost. In our own economy, we had 

on the island of St. Croix, where the refinery was, a population of 

about no more than 60,000 people, the direct job loss of 2,000 individuals when a refinery that was partly owned by Hovensa and the 

Venezuelan Government, of course, decided that it would close because the Venezuelan Government would not reduce the cost of the 

crude that was being refined on the island. And it didn’t become 

economically viable anymore to refine that type of crude. On our 

economy, we lost about 20 percent of our revenues in the territories 

in that timeframe. And that will continue on our islands until 

something occurs to bring this production or something like it back 

on. 

The thing that is important to me is, Mr. Webster, when you talk 

about retrofitting and the cost of retrofitting. It would be an important thing for our economy and for the territory to be able to move 

on to a different type of crude, to possibly be able to refine the light 

sweet crude that you are discussing. But could you explain to us 

what some of the costs of retrofitting would be from a territory 

such as ours and a rural community that is not able to give the 

incentives to a private company that owns that to be able to do it? 

Mr. WEBSTER. Certainly. Thank you for your question, Congresswoman. It obviously depends on the size of the refinery and all 

that. But I would say in the range of a couple of hundred million 

dollars would be what would be required. The problem is that often 

once you have already made the investments to be able to take on 

heavy sour crude, there are elements of that that essentially end 

up becoming kind of stranded capital. So even if you retool, you 

will still always have that capacity that is there that is kind of sitting idle. 

Ms. PLASKETT. So a refinery that was probably one of the largest 

in the Western Hemisphere, you are talking maybe several hundred million dollars? 

Mr. WEBSTER. Yes. 

Ms. PLASKETT. To be able to retrofit that to come back on line? 

And that is the issue that we have, that we own the submerged 

lands, but we have land that is owned by private companies and 

particularly the Venezuelan Government that is not even willing to 

come to the table at times to talk to producers about coming back. 

And plus, as was already mentioned already, we have the specter 

of EPA hanging over us in the territory. Because although we want 

to maintain our greatest resource, which is our Sun and our sand, 

we also want to be able to have people be able to eat and to have 

employment. And so that balance is something that we are fighting 

50 

against, which our neighbors in the other Caribbean don’t have to 

follow the rules of EPA and can do things in Trinidad, and some 

of the other places where this is being refined don’t have the restrictions that we have on our island. So for rural areas that the 

retrofitting becomes too costly, what is the next best thing for those 

economies to do when you have this type of infrastructure sitting 

in an area? 

Mr. Webster, do you have any idea or examples of what has been 

done? 

Mr. WEBSTER. That is a very tough question because if you have 

a refiner that is geared for heavy sour crude and is not viable at 

this point, you can shift it to light sweet to try to take in some of 

that from the U.S., but it is a difficult question. 

Ms. PLASKETT. Well, I guess my warning to everyone is beware 

having an economy that is based on one industry. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlelady yields back. 

Mr. Austin Scott, for 5 minutes. 

Mr. AUSTIN SCOTT of Georgia. Thank you, Mr. Chairman. 

And I want to talk about the benefits of this to other parts of the 

country as well as those that would traditionally think of it. I represent the Eighth District in Georgia. And we have the Kaolin Belt. 

And we through the Kaolin that we mine are an important part of 

this because the ceramic beads that come out of that Kaolin Belt 

are used to produce the proppants for fracking. And we have significant industries in my district specifically that benefit from this. 

And, Ms. Cutting, you talked a little bit about the other industries outside of what we would naturally think of as the oil and gas 

companies. Could you speak a little further to how lifting this 

crude oil ban would help industries throughout the country that 

maybe people might not realize where those materials come from? 

Ms. CUTTING. Absolutely. There are many places in the country 

where proppant is brought in, sand, gravel. We know there is sand 

and gravel that come from Minnesota, very many places in North 

Dakota. But there isn’t enough sand and gravel in North Dakota 

to get the job done. So that is being imported in our state from surrounding states. Manufacturing, pipelines, tanks, all of the equipment that goes into a well site and all of the parts of processing 

of the crude oil and the natural gas, I mean, this is just a huge 

amount of work and manufacturing and jobs that are created 

across the country. 

I think that there are some studies—I am not sure which gentleman here from the analytical groups could address this—but I 

know that there are studies out there that talk about the impact 

on all 50 states from conventional and unconventional oil and gas. 

And so Mr. Webster perhaps might be able to address that with 

more detail or Mr. Hamm. 

Mr. AUSTIN SCOTT of Georgia. Mr. Webster was next in line. And 

if he could just explain also how other states tend to benefit substantially in terms of jobs from this potential legislation. 

Mr. WEBSTER. Certainly. Thanks for the question, Congressman. 

Our analysis, and we did, as I stated, we did a report, Unleashing 

the Supply Chain, which actually delves into what the impact is 

not just at the state level but also at the Congressional level. And 

51 

what we found is that this boom in unconventional production, 

both oil and gas, one, Federal Reserve Chairman, former Federal 

Reserve Chairman Ben Bernanke at our CERA Week last year 

stated that this is one of the most beneficial developments that 

happened since the Great Recession. And while 50 states benefit 

from this and almost every Congressional district ends up getting 

some benefit from this, even places that don’t necessarily want to 

allow fracking. And these are jobs that pay, on average, 25 percent 

more than the average job out there. 

Mr. AUSTIN SCOTT of Georgia. Mr. Hamm, you said that it has 

been 40 years since a refinery was built in the United States. Is 

that right? 

Mr. HAMM. Yes. The last one was built in 1975, 1976. 

Mr. AUSTIN SCOTT of Georgia. And Gerald Ford was President 

then. That has been a long time. And if we could get through the 

permitting process, if we could give refiners the ability to—or investors the ability to build refineries in the United States, how 

many additional refineries would you estimate would be built? 

Mr. HAMM. Well, there have been several expansions of existing 

refineries over time. A lot of the upgrades that have gone on to 

handle all this heavy sour have been like $85 billion put in in the 

last 20 years. So there has been a lot of expansion of existing refineries. To answer your question how much additional would be built, 

obviously, we need sweet crude refineries built. But the time to 

build one, permit and build it, I mean we are talking 10 year timeframe or something close to that probably. So it is difficult to estimate when that could be done and how it could be done. But it 

would definitely help. Lifting those regs would certainly open the 

door. 

Mr. AUSTIN SCOTT of Georgia. It seems to me from a strategic 

standpoint it would be good also to build refineries in different locations, the East Coast, for example, so that when we get these big 

storms in the Gulf of Mexico and certain other areas where so 

much of our petroleum is refined, and those refineries have to shut 

down because of those storms, that if we had refineries in other 

areas that might not be impacted by that same weather event, that 

that might help the United States. 

With that, Mr. Chairman, I am over my time so I don’t yield anything back. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. David Scott, for 5 minutes. 

Mr. DAVID SCOTT of Georgia. Thank you, Mr. Chairman. 

First of all, let me say that I support lifting the ban on crude oil 

exports. And it is for this reason: Our nation is at a very, very critical time. And it is very important for us to be the leader, the leader of the world, maintain that position. And in order to do that, we 

have to be number one, have the strongest financial and economic 

system. We have to have the strongest and number one agriculture 

and energy system, and we have to have the strongest number one 

military and national security system. And this issue we are faced 

with today dovetails and intersects with all three of these, our national security, our agriculture and energy, and our financial and 

economic system, the hundreds of thousands of jobs that this will 

bring too. 

52 

But it is our leadership in the world that is on issue today with 

this issue. Now, Mr. Duffy, you touched upon that issue of leadership. If I read your testimony, you said that there is a critical need 

to manage energy price risk. And you said that the United States 

is the leader for which producers come to manage their risk. And 

I thought that to be a very, very meaningful, profound statement 

that goes to the heart of my concern. But I want to ask you, how 

has the United States been able to be the leader, given the current 

ban? I think that requires an answer. How have we been able to 

do that if we have had the ban? 

Mr. DUFFY. Mr. Scott, thank you for the question. I think it is 

very important. One of the greatest assets this country has is its 

financial services system. The world sugar that is produced today 

is not grown in the United States of America; it is grown outside 

the United States of America. Yet the price of the world’s sugar is 

discovered in New York City, not in Brazil. That goes to show you 

the power of the financial services industry that we have here in 

the United States. Other products, like grains and that, we set the 

prices for the world products for so many different asset classes, especially in energy, which are critical to the people of the United 

States and the rest of the world. If you can then do the same thing 

for oil, we are already setting the price for it today, but we are not 

getting the sample because, as has been said earlier, we are paying 

for it at the pump without using our oil. And I think that is very 

damaging to our society. 

So if we could have our oil be part of the refined products and 

be reflected in the price that the people are paying at the gas 

pumps, it is no different than what they do at the grocery line. So 

that is a very important part. And, again, it is the strong financial 

services system that we have, hence what is going on in Greece, 

hence what is going on in China right now. It is not happening in 

the United States because of the system that we have built here 

over hundreds of years. 

Mr. DAVID SCOTT of Georgia. So we are the leader with the ban. 

Mr. DUFFY. We are, no question, the leader in financial services 

and in setting of price. 

Mr. DAVID SCOTT of Georgia. Okay. So how different would our 

markets look if the ban is lifted? What would that do in sustaining 

our world leadership? 

Mr. DUFFY. I think what it would do, it would create investment 

into these refined products that Mr. Hamm was talking about earlier, which is critically important. If we haven’t built a refinery in 

40 years because of EPA rules or whatever, but because they are 

set up for other grades, if we can have people invest in this, knowing that they can export this product outside the United States and 

not invest in something that is land locked within the 50 states of 

the United States, it is a very intriguing investment. That is the 

leadership role that I am speaking about. That is what we need to 

do. Just like we do with every other product that we have in our 

country today. 

Mr. DAVID SCOTT of Georgia. Okay. Now, given the fact also, and 

I looked at some statistics here, and we had the ban in, but in the 

1980s, we still exported 287 barrels of crude oil per day, and today 

we are importing 401,000 barrels of crude oil per day. So I guess 

53 

my point is that we have a ban, and we don’t have a ban. I mean, 

we are doing that now. And there are those that don’t want to lift 

this ban, and they could very well use this argument that, hey, 

with the ban they are still producing 400,000 barrels a day. 

Mr. DUFFY. We are producing 9.4 million barrels a day. Our current consumption today is around 19.4 million barrels a day. I 

think those numbers are relatively accurate. And no one is saying 

that if you are producing nine million barrels a day, you export 

nine million barrels a day. No different than we export all of our 

wheat, corn, or soybeans. We are part of the world market; be a 

part of the world price. That is the argument that we are saying. 

The problem the refiners are saying is they are set up to refine 

a different crude, and they don’t want to have the expense of going 

in to refining their own product that is produced right here in the 

United States of America. 

Mr. DAVID SCOTT of Georgia. Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. Crawford, of Arkansas, for 5 minutes. 

Mr. CRAWFORD. Thank you, Mr. Chairman. 

I have a big steel industry in my district. And a lot of that is 

dedicated OCTG products. 

Ms. Cutting, you are shaking your head. And what has taken 

place in North Dakota has impacted our steel industry as the 

downturn took place. I also have the dumping issues, where we see 

other products entering the market dumped onto the market. So 

that is having a negative impact at home. And I represent one of 

the counties in my district is the number two steel producing county in the nation. 

So, Mr. Webster, if you could, do you have any data that sort of 

shows the relationship between the steel industry and the oil industry and what some of those ancillary effects are to an industry 

like the steel industry? 

Mr. WEBSTER. I apologize, Congressman, I don’t have that right 

in front of me. But our report does dig into and has a fact sheet 

actually specifically on the steel industry. And you are exactly 

right, which is this is something that has benefited around not just 

your district but every place that steel is manufactured as it goes 

across the United States in order for it to be used in a variety of 

different ways across the supply chain. One thing I would say is 

that allowing the repeal of the ban, what it does is it eliminates 

this policy discount. It won’t necessarily—it is not going to bring us back to $100 oil, 

which I would say anybody on the consumer side doesn’t necessarily want, but it does eliminate that ban to benefit people in 

your district to the maximum extent that you can from your seat. 

Mr. CRAWFORD. Thank you. I have heard several different comments about how fast the industry can respond if, for example, if 

the ban were lifted. 

Mr. Hamm, in your estimation, if the ban was lifted tomorrow, 

number one, how fast could the industry respond, and how fast 

would we see the benefits accrue in terms of job creation and economic impact, particularly in rural economies? 

Mr. HAMM. It would be very quick. We have customers for our 

oil abroad that their refineries are suited for it. There are a lot of 

54 

refineries today at risk because they can’t get light crude, sweet 

crude. That is what they are fitted for, and there are refineries that 

are partially shut down in the Atlantic basin, about 2.6 million barrels in the Atlantic basin alone, that need this oil. So it could happen quickly, very quickly. 

Mr. CRAWFORD. My colleague from the Virgin Islands kind of referred to this a little bit as the EPA issue. If the ban were lifted 

tomorrow, do we still have significant work to do in terms of EPA 

restrictions that would impede the investment to allow for the expansion to address that market demand, or would we just immediately see the flow of product? 

Mr. HAMM. Well, lifting the ban would certainly help very quickly turn that around. As far as working with the regs, EPA to build 

new refineries, that needs to be done. So, going forward, certainly 

that would be very helpful. 

Mr. CRAWFORD. I support lifting the ban. I mean, we have heard 

a lot of testimony that indicates that is probably the right move. 

We have heard commentary and questions from my colleagues. My 

concern, though, as she referred to, the costs of retrofitting on top 

of the regulatory regime that you are facing, how big of an obstacle 

is that going to be for us to play in the global market in a significant role? Besides just price discovery, which, Mr. Duffy, you mentioned how important that is. But beyond that, to be a significant 

player as we are in other things, like agriculture, how much of an 

impediment are those regulations going to be and retrofitting costs 

and so on? 

Mr. HAMM. Well, I see lifting the ban will let us go back to work 

to develop the resource here in America, which is quite significant. 

We don’t have the infrastructure needs in our industry that you 

might expect because everything is pretty much in place. Other 

than with refineries, there are a lot of—you have to look at motive 

here with a lot of these refiners. If they are bringing their oil out 

of the tar sands of Canada here within this market, they don’t have 

any desire to do anything, change those refineries to help us refine 

our product. If they are bringing their oil from Venezuela, they 

don’t have any desire to do that. So you have to look at the foreign 

ownership, the amount of it, almost 1⁄3 is foreign owned. Plus they 

have a lot of joint venture arrangements made that they get their 

oil processed through these refineries. So you have to overcome a 

lot of that before—they don’t have any incentive to retool those. 

Mr. CRAWFORD. Mr. Duffy? 

Mr. DUFFY. Can I just make one quick comment? What is important to note here is when you look at the American farmers and 

ranchers, what they have had to go through over the last 10 to 20 

years to retrofit in order to produce the food that they have done 

and make the investment they have made, they have made it because in the long run, it is in their best interests. So Mr. Hamm 

is right, why would they want to do it? But at the same time, it 

is the right thing for the future, and other people have done it in 

the agribusinesses for many, many years. 

Mr. CRAWFORD. Thank you. I appreciate it. 

My time has expired. 

The CHAIRMAN. The gentleman’s time has expired. 

Ms. Lujan Grisham, for 5 minutes. 

55 

Ms. LUJAN GRISHAM. Thank you, Mr. Chairman. 

And I want to thank the panel too. 

I am going to take a similar approach that my colleague from the 

Virgin Islands, Congresswoman Plaskett, because while I represent 

a district and a state, really, that has a significant productive reliance on local oil and gas industries that, quite frankly, provide the 

revenue and the required resources for most of New Mexico’s infrastructure investment and certainly investments in our public 

schools, and without which we could not make those investments 

at all. And so I would really identify that effort and that work as 

bread and butter work for the state. And it is valuable, and it is 

important. 

And, Ms. Cutting, I am drawn to the statements that you have 

made about seeing ghost towns literally come back. And representing such a rural and frontier state, particularly a state that 

also has families that quite literally have lived there for hundreds 

of years in these small communities, we do see that when we have 

the industry doing well, that those communities do well. 

And New Mexico is another state, a situation where we have had 

one of the worst job recoveries in the country since the recession. 

So these are all very positive aspects when you talked about the 

benefits about lifting the ban. The downside, which I just want to 

explore and see if folks have ideas, is that when there is a boom, 

and today actually in several of those communities, particularly 

two, Hobbs and Carlsbad—they are not in my district; they are in 

the southeastern part of the state—what happened is school teachers can’t afford to live there anymore. And we have one of the highest vacancy rates for public schools. And retirees, who I spent my 

career working for before coming to Congress largely advocating 

and supporting seniors—and again, these are families that have 

lived there for generations. And to your points, the panel’s points, 

and Mr. Duffy about farmers and ranchers and the benefits. The 

impact that it has not only on the state but on what we offer and 

produce for the rest of the country is valuable and important. 

These people can’t stay. They can’t afford those farms. They can’t 

afford those ranches. 

And as my colleague identified, when things don’t go well and everybody leaves, and with the oil and gas prices currently, we had 

sort of a boom, and then we have had producers move out. And 

then we have a huge gap. And those gaps are very difficult to recover from. Are there ideas, have you seen efforts in your experience where those communities have looked at ways to mitigate 

those production impacts by growing the economy so quick so fast 

that the local folks can’t afford to stay there and live there? Any 

strategies that you would recommend that we undertake and look 

at in a state like mine? 

Ms. CUTTING. Well, certainly. And, obviously, it is a difficult situation and requires some significant out-of-the-box thinking. Any 

small community that is impacted with an influx of population is 

all of a sudden going to find itself in a supply and demand problem 

with housing. 

The State of North Dakota established a housing incentive fund, 

which allows corporations and individuals to put money into this 

fund that is then used for building houses that have a rent cap. 

56 

And those are specifically for policemen and teachers and those 

who require a continual price cap on their rent. So you are putting 

a hold on rent escalation. 

Ms. LUJAN GRISHAM. Is there something to promote—and I didn’t 

mean to interrupt you—that’s helpful—home ownership, which is 

something in a state that is also looking at stability and poverty 

and trying to create independence for these families so that they 

could also own these homes in addition to being able to afford them 

over the long haul? 

Ms. CUTTING. This particular fund provides those who donate to 

this fund essentially have tax credits on their North Dakota State 

taxes. So that is a win for the individual or the corporation that 

puts money in that fund. At the same time, those funds are distributed to developers, and the developer will get a reduction in the 

capital that is required to build that housing development. But 

then he has to put aside so many units for the individuals that we 

are talking about that struggle in a rent escalation period. But, 

again, as supply and demand, any time you have demand in a community—— 

Ms. LUJAN GRISHAM. I am going to reclaim my time. That idea 

is helpful, but the folks that I am in addition worried about—Mr. 

Chairman, and I will yield back—are those folks that are in their 

homes and on their property and can’t afford to stay there because 

the property taxes have gone up, and they can’t stay. But I would 

like to explore that further. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentlelady yields back. 

Mr. Davis, for 5 minutes. 

Mr. DAVIS. Thank you, Mr. Chairman. I too want to thank you 

for calling this hearing today on a very important issue. And I 

agree, it is critical that we look at this issue as American oil producers look for ways to access the global market. And additionally 

a Member who also understands the leadership roles that our futures market plays in this particular issue. 

I am glad to be joined by my friend, Mr. Duffy, and I want to 

start with a question for you, sir. It has been suggested by some 

that CME’s oil futures, your oil futures contract would benefit from 

lifting the crude oil export ban. But based on the testimony that 

I have heard and your testimony, it seems to me that there would 

be a much more broader and more significant benefits for market 

participants and the market as a whole. Can you maybe expand on 

some of those benefits and address some of these issues that have 

been brought forth? 

Mr. DUFFY. From our perspective, on the business side, our oil 

business has been up 10 to 12 percent year over year for the last 

15 years. So we have had great growth, as I said to Mr. Scott earlier, from people managing their risk from all over the world coming to the markets in New York and Chicago. 

I thank you for your leadership that you are doing in Illinois, sir. 

But this is really an important point here because the CME 

won’t benefit by that change if the oil ban was lifted by doing more 

business. So that won’t be the case. 

And the second part of your question was? 

57 

Mr. DAVIS. Can you expand on some the benefits of what we are 

looking to do by opening up more opportunities for crude exports? 

And what does that mean to the futures markets and those who 

utilize futures? 

Mr. DUFFY. What it means is it gives us a greater sample from 

around the world in order to price the product. So the panel has 

done a really good job up here explaining how what is really important here is when we go pump gas at the pump for our cars. That 

is really what we are talking about here. And that refined product 

is not West Texas Intermediate. And if you can get West Texas into 

the flow of the world oil market, it gives a greater sample of what 

the gasoline that we are pumping into our cars is. 

So if OPEC decides that they want to raise prices, we have explorers that, Mr. Hamm and other folks, that can come back in if 

they want to do that because the input costs are there to drive 

them back down. It is critically important from a standpoint to 

have a greater sample of the world market that impacts the price 

of gasoline because that is really what we are talking about is 

going to the pump once a week and filling up, no different than 

going to the grocery store. 

Mr. DAVIS. I agree with you, Mr. Duffy, it is about the consumer 

and how do we lower prices so Americans can afford to continue 

to do what they need to do on a regular basis. It is interesting 

when we hear about the ability to export crude oil, I have seen 

some statistics that show that Illinois would be a prime beneficiary 

of a more robust export market for crude. Well, I am here to represent my constituents. Job creation, economic growth in Illinois, I 

don’t think is a bad thing. So if this is a benefit to my home state, 

similarly to what we are hearing from Ms. Cutting in North Dakota, I would encourage more towns that I represent that would 

love economic development that North Dakota is experiencing. 

And I know my colleague Ms. Lujan Grisham brought up some 

concerns about what economic growth may mean to a local property 

tax base. But I also want to ask you, Ms. Cutting, what is the average wage for somebody going into maybe the retail industry in your 

communities because of the growth in the energy sector in North 

Dakota? 

Ms. CUTTING. Well, the wages, of course, in oil and gas are much 

higher than the average wage. We have all heard about the stories 

of McDonald’s in Williston and the kind of wages they provided. So 

definitely higher cost of living, but also higher wages are available 

for businesses in North Dakota and the impacted cities. I would 

also like to add that one of the things I was moving into with the 

Congresswoman’s question was that because of the oil and gas tax 

revenue that the North Dakota State has experienced, they have 

been able to reduce income taxes; they have been able to significantly reduce property taxes. That, coupled with having other 

sources of income for rural communities, has certainly helped 

maintain a cost of living that people can still exist in these smaller 

communities. 

Mr. DAVIS. And you didn’t need government to set those wages? 

Ms. CUTTING. No. 

Mr. DAVIS. Shocking. 

58 

Well, with that, I will yield back the last 10 seconds of my time, 

Mr. Chairman. 

Mr. THOMPSON [presiding.] The gentleman yields back. 

I am now pleased to recognize Mr. Ashford, for 5 minutes of 

questioning. 

Mr. ASHFORD. Thank you. I am from Nebraska. And I served in 

the Nebraska Legislature for a number of years. And we spent the 

entire year working on the TransCanada pipeline issue. And we 

successfully came up with legislation, with the help of everyone, 

moving that pipeline somewhat from the original route to protect 

the Ogallala Aquifer. We thought that was good work. It still 

hasn’t been built. But Nebraska legislature almost voted unanimously—only one or two votes against—to proceed with the pipeline. 

Anyway, there were three issues that came up in the discussion 

on the floor of the legislature. We had at least one major special 

session dealing with this very issue. And one was the issue of none 

of this product is going to stay in the United States; it is going to 

be exported to China. That was the opposition. It is all going to 

China. Every drop is going to China. So this has been asked and 

answered. But if someone could just answer that for my constituents. 

Mr. Hamm, if you would comment on that. 

Mr. HAMM. Well, I commented earlier that we had arrangements 

for an on-ramp for Bakken oil into the pipeline. Of course, that 

couldn’t be exported. So that would have been here in the U.S., certainly refined here and whatever. 

Mr. ASHFORD. The second concern was that this is not going— 

if this pipeline were built—and obviously this issue is much 

grander than the TransCanada pipeline, but it is endemic of what 

we are dealing with here—is that the price of gas—and this has 

been mentioned many times and answered adequately—is that the 

gas prices would tend to go up. And all the research I have done 

and the answers to the questions today would indicate that is not 

correct, that gas prices will not go up with the lifting of the ban. 

And I think that has been answered. I don’t know if anybody has 

any other comments. So I will just leave that the way it is. The 

third—— 

Mr. DUFFY. Can I comment on that? 

Mr. ASHFORD. Yes, sir. 

Mr. DUFFY. Because I don’t want to have a misdirect here. Because gas prices could go up with the lift of the ban if demand was 

to increase. That is really something that we cannot ever—— 

Mr. ASHFORD. Sure. But it doesn’t automatically. 

Mr. DUFFY. Correct. 

Mr. ASHFORD. It is market driven, as has been suggested. 

So the third opportunity, and Congressman Davis really landed 

on it, in rural Nebraska, for example small town of Trenton, Nebraska, out in western Nebraska, has free and reduced lunch, 70 

percent of the kids are on free and reduced lunch. Crete, Nebraska, 

over by Lincoln, has 50 percent free and reduced lunch. We need 

opportunity in rural Nebraska for well-paying jobs. It is not just 

about my district, Omaha, and Sarpy County; it is about my entire 

state. And so this idea of building a diesel refinery or refining into 

59 

diesel product is compelling. And it would create jobs in Nebraska 

if we could do something like that in our state. 

And Mr. Webster, you were talking about diesel conversion, or 

were you? Or someone was. And I would like to hear maybe a little 

bit more about that because certainly we need diesel at a reasonable price in Nebraska for our ag economy. We could do refineries 

in Nebraska. How difficult is that to do? And what opportunities 

are there? 

Mr. WEBSTER. Well, actually, it was Mr. Hamm who was talking 

about the refineries that were splitting off the diesel. 

Mr. ASHFORD. Sorry. 

Mr. HAMM. That is what has been built recently in North Dakota, was what we call a topping unit. And basically, on a pipeline 

stream, take product off, and particularly the distillates diesel and 

other products, and about 20,000 barrels a day. So you don’t go 

through the same process for permitting that you would on a huge 

refinery. It is a lot simpler. 

Mr. ASHFORD. It seems to me that Nebraska would benefit significantly from lifting the ban, first of all, and secondarily from exploring economic opportunities like this so towns like Trenton can 

get more economic development. I just feel strongly about this for 

our state. We are a small state population-wise but a big geographic state. And I see just nothing but positive. Yes, we have to 

think through the technologies. And even, I know at the UP Railroad where the railroad is—the railroad is headquartered in 

Omaha—doing a lot of work on technology to deal with some of the 

issues of transporting oil and gas. 

So thank you, Mr. Chairman. I yield back. 

The CHAIRMAN [presiding.] The gentleman yields back. 

Mr. Yoho, for 5 minutes. 

Mr. YOHO. Thank you, Mr. Chairman. 

Gentlemen, I appreciate it. Ms. Cutting, I appreciate you being 

here. And looking back over the years, I look at the panel, and everybody remembers the oil embargo, except you, Ms. Cutting, of the 

1970s, when we had to wait in line for our gas, and we were indebted to foreign nations for our oil. I never want to go back to 

that. In fact, when I came up here, I heard somebody say that we 

don’t even need a farm bill; we should import our food. And it reminded me of the oil situation. And like I said, I never want to be 

back into that. So what I see is getting rid of the ban will increase 

our exports. Increasing our exports is going to increase our production. Increased production, as Mr. Davis brought up, will bring 

down the price. We are all in favor of that. But, more importantly, 

it is the stability in the price that brings certainty to the economic 

market. Because I remember, in 2005—I am a veterinarian by 

trade, and I had three trucks on the road at the time, and they are 

diesel. 

And every time you went to fill up, it was $200 at the pump. And 

that was three times a week per truck. And I remember the economic impact, not just on me but on our staff, coming into work. 

And so at the bottom line, at the end of the month, there was less 

discretionary income to spend when that husband and wife or the 

single mom or dad were sitting at the end of the month to write 

their bills, they didn’t have the discretionary money. And so by 

60 

bringing the stability to the market would help not just rural 

America, but all of America. 

And the Lord has blessed this country with so many great resources that it would be foolish for us not to take advantage of 

those resources. 

And, Mr. Hamm, I wanted to ask something of you. You were 

saying that the current situation with the foreign ownership of our 

refineries is roughly 28 to 30 percent. Are we at refinery capacity 

in this country? 

Mr. HAMM. We are not. Refinery capacity right now, refineries 

have been running about 94 percent over the last month. Of course, 

this is driving season and all of that. But about 94 percent. But the 

foreign ownership, direct foreign ownership is about 28 percent exactly. But there is a lot of throughput arrangements that have been 

made on top of that for upgrades to handle heavy sour crude that 

other countries have made as well. 

Mr. YOHO. Would there be a need to increase the refinery capacity? Because if we had more production, I assume most of that is 

going out of the country, or is that being refined here? 

Mr. HAMM. Well, as we go forward, we see the possibility to double production again by 2025 in this country would put America 

way out front in leadership. 

Mr. YOHO. And there would be a need to go ahead and increase 

refinery capacity here? 

Mr. HAMM. We would need to, yes. 

Mr. YOHO. And on the Keystone pipeline, would any of this oil 

from North Dakota transit that in the Keystone pipeline if that 

were to be built? 

Mr. HAMM. Well, yes. If it were to be built, there would be shipments on the pipeline yet. We have commitments and a lot of other 

companies have commitments yet. 

Mr. YOHO. Do you have a feel for what percent of that oil coming 

through the Keystone pipeline would stay here in America domestically? 

Mr. HAMM. Well, right now if everything would—under the ban, 

certainly it would. But, yes, there would be a good bit of it staying 

here I am sure. 

Mr. YOHO. I sit on the Foreign Affairs Committee, and it came 

up that 70 percent of that oil would stay here domestically because 

there was a controversy that most of that would go outside. And 

I find that is not the truth. 

Is there any downside of not lifting the ban in anybody’s opinion? 

Mr. HAMM. No, it is certainly a bipartisan thing. It is an American thing. I have not run across anybody. The refiners themselves 

agree, they were the first ones that actually asked Commerce for 

the ability to move oil to other refineries that they owned that was 

tooled for it outside the country. They were the first ones that 

made application. 

Mr. YOHO. Does anybody else see a downside of lifting this ban? 

Nobody? We, as people in government—because again government 

is a nonentity; it is the people in it—we should do everything from 

a Federal standpoint to make this country stronger, more competitive. It is time that we go to the EPA and just say, ‘‘No, we need 

61 

this refinery capacity. We need to waive some rules. Let’s make 

America strong, and put that investment in America.’’ 

And, with that, Mr. Chairman, I am going to yield back. Thank 

you. 

The CHAIRMAN. The gentleman yields back. 

Mr. Costa, for 5 minutes. 

Mr. COSTA. Thank you very much, Mr. Chairman. 

I know the subject of the hearing is about energy and rural economy and the impacts of lifting the ban on export of oil in America. 

But I would submit that in my view, the same arguments that 

have been made and the same merits that are involved would 

apply to natural gas, frankly. And it is something that also would 

have benefits to not only rural America but also the geopolitics, 

frankly, of dealing with Mr. Putin, who is using natural gas, but 

also other fossil fuels as political leverage is something that goes 

into the factor. And to the degree that we have solid markets in 

Europe, it helps—and Asia and elsewhere—it helps American agriculture sell our products. California exported $174 billion of product last year, and $19.4 billion of it was agricultural products. 

Dr. Rusco, I have a question to you. Are you aware of any studies 

that have been done regarding the impact of lifting of the export 

ban on rail infrastructure or impacts on rail customers? Because 

we export a lot of our ag products on rail, and sometimes we have 

issues or challenges there. 

Dr. RUSCO. I am not aware of any specific studies on that. It is 

likely that some of the rail—some of the oil that is shipped by rail 

now could still be shipped by rail to port for export or could continue since that infrastructure is there. But to the extent that 

there is additional pipelines built, it is usually cheaper to ship by 

pipeline. 

Mr. COSTA. Okay. Dr. Rusco, are there any examples of specific 

port locations where the Jones Act would be a factor or where light 

crude could be shipped from? 

Dr. RUSCO. Well, currently, most of the crude oil that is shipped 

around the country is either by rail or by pipeline, not very much 

by ship from port to port. 

Mr. COSTA. Anecdotally, you hear that it would be cheaper to export the product to Europe rather than to East Coast refineries. I 

don’t know if there is any basis of fact on that or not. 

Dr. RUSCO. Yes, that is true. Shipping on Jones Act ships is more 

costly than on international tankers. 

Mr. COSTA. Mr. Duffy and maybe Dr. Rusco and any other witnesses—by the way, Mr. Duffy, you have excellent representation 

here in Washington. Do you know or do you have any other opinions or options available to find workarounds as we talk about the 

question of exporting crude oil? And would that play a role while 

Congress is considering legislation on lifting the ban? What I am 

trying to figure out is, is there any non-legislative options that you 

folks are looking at? 

Mr. DUFFY. No, there is not any non-legislative options that we 

are looking at on the ban of oil. We think that we have to lift the 

one from 40 years ago. 

Mr. COSTA. The Jones Act. Ms. Cutting, there are a lot of ramifications in terms of the economic marketplace working when we 

62 

are talking about lifting the ban as it applies to rural America. But 

are there any areas specifically that have not been mentioned this 

morning during the hearing that you would like to put on the 

table? 

Ms. CUTTING. I would just like to comment that this is all about 

markets. And whenever you have a commodity that doesn’t have 

sufficient markets and then markets become available, for example 

crude oil to Europe, then you go from establishing the market to 

then determining how to transport that product to that market. 

Immediately, it has supply and demand implications and price implications. Lifting the ban is about having crude oil in this country 

and natural gas in this country that need additional markets. 

Mr. COSTA. That is why I say, at least from my perspective, it 

is also applicable as it relates to the incredible gas production and 

potential with the Marcellus Shale, the Monterey Formation, and 

the Bakken. I mean, there are a lot of opportunities there. Would 

you agree, Mr. Hamm? 

Mr. HAMM. Yes, I would. 

Mr. COSTA. Nice succinct, short answer. 

Mr. COSTA. All right. 

The CHAIRMAN. The gentleman’s time has expired. 

Mr. Abraham, for 5 minutes. 

Mr. ABRAHAM. I thank you, Mr. Chairman. 

I thank the panel for being here. I am from northeast Louisiana. 

Certainly we have the Haynesville shale, but that is mostly natural 

gas at this point. But we have thousands upon thousands of workers that go to North Dakota, Texas, wherever you can find the production. 

And, Mr. Hamm, we will call it the new roughneck. It is certainly 

a very highly technical job that I could not do with my educational 

background, very high-paying job. 

And, Ms. Cutting, even our welders from Louisiana are making a little over a $100,000 in your good state. So when you shutter a 

well, if it is a 224 average person, as Louisianans, we want those 

jobs back. And certainly being in Louisiana, our ports, if we do lift 

the ban, would certainly be a recipient of some of that wonderful 

light crude going overseas. So, to Louisiana, it is a huge thing. 

Ponying up on Mr. Scott’s comments a little bit, it certainly to 

me is a national security issue. I don’t want Iranian oil sold anywhere that American oil can be sold. I don’t want the ban on Iranian oil lifted. So if we can stabilize national security and world 

markets, well, that is a twofer on anybody’s game. I guess the 

question, Dr. Rusco, I will go to you first, I read your testimony 

last night, and it said that if we do lift the ban, that the revenue 

for the government would go up $1.4 trillion was the figure, if I remember right. Walk me through that. Just briefly, how much—that 

is a lot of money. How will we get to that point? 

Dr. RUSCO. So some revenue, some oil is produced on Federal 

lands, and so the Federal Government collects royalties and rent 

and also leasing payments for those properties. So to the extent 

there is an increase in production and some of that is on Federal 

lands, that will increase revenue. And then if the price goes up, the 

royalties on the value of the oil produced, and so that would also 

affect revenues. 

63 

Mr. ABRAHAM. Okay. Mr. Webster, you had in your testimony 

somewhat of the disparity between trade policy of crude, natural 

gas, coal, those type—gasoline and those type of products. Would 

you expound a little bit on that for me, please, as far as the disparity issue? 

Mr. WEBSTER. Certainly. As an oil market or energy analyst you 

look and see what is allowed to be exported out this country in 

terms of an energy base. It is essentially everything except for 

crude oil. And that is due to an anachronistic law that was put in 

place back when we were concerned about that. For the last several 

decades, if you had allowed the export of crude oil, you really 

wouldn’t have seen it at all until probably the fall of 2013, when 

the price spread blew out to as much as $15. It is hard as an analyst to try to figure out why it is okay to export everything, to include gasoline and diesel, but that we don’t on crude. 

Mr. ABRAHAM. Thank you. 

Mr. Chairman, I yield back. 

The CHAIRMAN. The gentleman yields back. 

Mr. Allen, for 5 minutes. 

Mr. ALLEN. Thank you, Mr. Chairman. 

And thanks to the panel for being here. I too am a small business owner, a previous owner. And one of the things that—I am 

new here—and I promised folks that I was going to do everything 

I could to get folks back to work in this country. I think that is priority one. And I really appreciate what you are proposing here to 

get folks back to work. A couple concerns that I have is that one 

of the other things that was discussed, particularly in my district 

and throughout this country, is a long-term vision for this country 

to become energy independent. 

In fact, it is almost unconscionable that we have a country in 

South America who is in charge of a number of these refineries 

which is not a friend to this country. And so what is our long-term 

strategy to get this country energy independent? Sure, we are 

ready to go; this is a short-term fix. But then would you agree that 

we need a long-term strategy to get this country energy independent? And I would ask any of the members of the panel to comment on that. 

Mr. HAMM. I think it comes about naturally. The entrepreneurship in America is just so strong. Nobody thought we could ever do 

what we have done with this energy renaissance, yet we did. We 

brought about horizontal drilling. We have a completely new reservoir that we are working with actual source beds themselves to 

get here. It will occur. I predicted, DEPA predicted that we would 

see energy independence in this country if we had been unfettered—with this old ban, if it hadn’t come into place, and refinery 

situation that we have, it would have happened—been on track, we 

had been on track to do it by 2020. By 2025, we can again double 

production here in America. If we are left alone and government 

does no harm, this will happen with or without a policy in Washington. 

Mr. ALLEN. The country I was referring to is Venezuela. And, of 

course, our relationship with that country has been—and, of 

course, we buy a lot of oil from other countries that fund organizations that are a security risk to this country. And in looking at, 

64 

say, where we would send immediately this sweet crude to, what 

nations would be refining this oil? And is it possible if we send the 

oil there to be refined, that we could actually buy it back and use 

our own oil in this country? I mean, what are the possibilities of 

that? 

Mr. HAMM. Well, it is a fungible product. We don’t need to have 

direct ownership or whatever. It is fungible in trade, as Mr. Duffy 

has explained. So we don’t have to have our hands on it, so to 

speak. Our allies need this product. Atlantic basin and Europe, 

Eastern and Western Europe, and South Korea are forced to buy 

from Iran. 

Mr. ALLEN. Obviously, we want to get folks back to work, obviously, you have to look after your bottom line. But at the same 

time, we need to be patriotic, and we need to be careful about who 

we are dealing with around the world as far as our oil and gas reserves. I mean, it is unconscionable to me that Venezuela has been 

able to get this foothold in this country in our oil industry. 

And, with that, Mr. Chairman, I will yield back the remainder 

of my time. 

The CHAIRMAN. The gentleman yields back. 

Mr. Goodlatte, 5 minutes. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

I appreciate your holding this hearing. 

And, gentlemen, let me start with you, Mr. Hamm. I will follow 

up with some of the questions that Mr. Allen asked. I am interested in knowing what the plan of the industry, if you will, is if 

this law were to be changed. And, first, as a start question, does 

this law restrict already refined gasoline right now, or can you export it now if it is refined? 

Mr. HAMM. Yes, you can export refined products. 

Mr. GOODLATTE. It is just crude oil, petroleum products, and natural gas liquids that are restricted right now? 

Mr. HAMM. Right now you can export refined products. And 

crude oil, some crude oil has been exported to Canada. But if it is 

exported to Canada, you have to get refined products back. 

Mr. GOODLATTE. Where do you anticipate most of the crude oil 

that might be exported would go to? 

Mr. HAMM. Where would I expect that most of the crude oil if 

this ban is lifted—— 

Mr. GOODLATTE. Yes. 

Mr. HAMM.—would go to? Obviously, with our allies, South 

Korea, people we trade with and have a great relationship with, 

Western Europe, South America, Eastern Europe. 

Mr. GOODLATTE. What about China? 

Mr. HAMM. Canada? 

Mr. GOODLATTE. China? 

Mr. HAMM. China? I don’t see a lot of that trade happening. But, 

there shouldn’t be any restriction on it I don’t believe. 

Mr. GOODLATTE. And with regard to the use of oil in the United 

States, what is the long-term trend for that right now? Is it going 

up at paces like it did 20 or 30 years ago, or my understanding is 

it has sort of leveled off because of more fuel-efficient vehicles, because natural gas has replaced the use of oil in some cirVerDate Mar 15 2010 08:47 Oct 28, 2015 Jkt 041481 PO 00000 Frm 00068 Fmt 6633 Sfmt 6601 P:\DOCS\114-20\95510.TXT BRIAN
65 

cumstances. What is the domestic market looking like for oil heading down the road? 

Mr. HAMM. I don’t see it changing a great deal. We have seen 

estimates out to 2040. Mr. Webster might be able to address this 

better than myself, but right now about 90 percent or 95 percent 

of our oil is used for transportation. 

Mr. GOODLATTE. Right. 

Mr. HAMM. Gasoline, diesel, jet fuel, whatever. 

Mr. GOODLATTE. Do you see electric vehicles depleting the demand in the United States for petroleum products, or do you think 

that is not going to develop in the numbers that some people think 

it will? 

Mr. HAMM. We have seen demand in the U.S. kind of flatten. 

And it has flattened. 

Mr. GOODLATTE. But it would actually go down if everybody 

switched over to electric vehicles. We would have to figure out how 

to generate a lot more electricity, but that would probably not come 

from petroleum. 

Mr. HAMM. Well, we have actually seen a lot more, of course, 

power plants going to natural gas—— 

Mr. GOODLATTE. Right. 

Mr. HAMM.—in the last few years. 

Mr. GOODLATTE. But not crude oil. 

Mr. HAMM. Not crude oil, yes. 

Mr. GOODLATTE. Mr. Webster, you have been referred to, do you 

want to add anything to that? 

Mr. WEBSTER. Sure. I mean, we have seen U.S. demand for gasoline and other refined products has gone up. Partly this is driven 

by the lower gasoline prices. So AAA expected this past weekend 

to be the biggest driving weekend for the Fourth of July that we 

have had in 8 years. And part of that is attributable to the lower 

gasoline price, and part of that is attributable to the economic 

growth that we have seen here. Long term, even with the lower 

gasoline price, you have vehicles that are more efficient. You have 

a number of millennials now that don’t drive cars. So you have this 

kind of trend to where it is going to offset each other. And so while 

we do still expect some slight growth in U.S. demand, it is not 

going to be the big game changer. It is not going to be the sort of 

thing that on its own is going to be able to handle the sort of scale 

of production that we think companies like Continental Resources 

and others could end up bringing out in the next several years. 

Mr. GOODLATTE. And very quickly, Mr. Duffy, welcome. It is good 

to see you back as well. As a manager of a major market for the 

transactions related to sale of various sources of energy, what do 

you see as the trend? 

Mr. DUFFY. I see what we are already seeing today, which is people are managing risk from all over the world on our products in 

the United States. So that won’t change. What will change is that 

we can cap the upside of this market dramatically by lifting this 

ban. If you get the oil—and I am not an expert like these two are, 

but I have talked to many experts in the field—if you get the cost 

of oil—and we don’t want it to go there—but at $80 a barrel, you 

get a lot of people back in the exploration business that will create 

probably up to 18, 19 million barrels by 2020 or 2018, as projected 

66 

by. So there are a lot of benefits to it. But what is most important 

is to get a pure sample of what the product is worth. One of the 

big arguments Congress has always had is we have a glut of oil, 

but the price is going up, so it must be the speculators, except nobody said that when oil went from $92 a barrel to $45 a barrel, it 

was the speculators. It was a supply-demand equation. So I do 

think that goes to show you the bigger the supply or the bigger the 

sample you have the price on, the better it is for the American consumer. 

Mr. GOODLATTE. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. The gentleman’s time has expired. 

I want to thank our witnesses today. This has been a terrific 

hearing. It was very informative. Crude oil is the only commodity 

America produces that we can’t export, and yet we import unlimited quantities. I don’t know of another commodity where we have 

unlimited imports. We use sanctions on Iran’s production of crude 

oil and exporting crude oil as a punishment. It seems odd to me 

that we would continue to punish domestic producers the same way 

we punish Iran with respect to being able to sell their product 

where we want to sell it. 

Lifting this crude oil ban is important. The President could lift 

it today with an Executive Order, and we are going to pursue it 

legislatively. A couple of our colleagues mentioned the geopolitical 

aspects. I was in a conversation with the Prime Minister of 

Ukraine in April and asked him flat out: If you could buy crude oil 

directly from the United States, would that improve your negotiating position vis-a`-vis Putin? He lit up like a Christmas tree and 

said: ‘‘Absolutely, yes, we would love to buy your crude oil and your 

natural gas to offset the direct negative influence Vladimir Putin 

has with respect to all of Eastern Europe.’’ 

Markets work best when they are efficient. Mr. Duffy knows this 

best of anybody at the witness table. Artificial inefficiencies built 

into any market cause consumers to ultimately pay more than they 

would have otherwise. Artificial restraints, like a crude oil export 

ban, create inefficiencies that some folks take advantage of, to the 

detriment of the overall market. Eliminating these artificial inefficiencies that we are baking into our system is, in my view, something that we ought to do. 

The problem we have is that there are several Members who 

don’t represent districts that produce crude oil. Their natural reaction is, when you first mention lifting the ban, is it somehow would 

increase gasoline or diesel prices, and every district has someone 

who buys gasoline and diesel every day. We have to convince them 

that that is not the case. All the empirical evidence shows fuel 

prices would actually decrease and become more stable. Getting the 

218+ votes needed to move legislation to lift this ban is important 

on every level. I don’t see any down side to having that happen. 

It creates the kind of efficiencies that we need. It also leads to 

better decisions made by those trying to invest, whether it is in 

crude oil or refineries, to make better and confident decisions that 

the risks they are taking relate just to supply and demand, and not 

to some sort of an artificial thing that we have going on at the Federal Government. 

67 

Again, I thank our witnesses for being here today. 

Under the rules of the Committee, the record of today’s hearing 

will remain open for 10 calendar days to receive additional material and supplementary written responses from the witnesses to 

any question posed by a Member. 

This hearing of the Committee on Agriculture is now adjourned. 

Thank you all. 

[Whereupon, at 12:03 p.m., the Committee was adjourned.] 

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