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97–820 2016

H.R. 702, LEGISLATION TO PROHIBIT 

RESTRICTIONS ON THE EXPORT OF CRUDE OIL 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JULY 9, 2015 

Serial No. 114–64 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

(III) 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

PETE OLSON, Texas 

Vice Chairman 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

ROBERT E. LATTA, Ohio 

GREGG HARPER, Vice Chairman 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

BILL FLORES, Texas 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

PETER WELCH, Vermont 

JOHN A. YARMUTH, Kentucky 

DAVID LOEBSACK, Iowa 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(V) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 5 

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

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 7 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 8 

Prepared statement .......................................................................................... 8 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

prepared statement .............................................................................................. 9 

WITNESSES

Petr Gandalovic, Ambassador to the United States, Czech Republic .................. 10 

Prepared statement .......................................................................................... 13 

Commander Kirk Lippold, President, Lippold Strategies .................................... 17 

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

W. David Montgomery, Senior Vice President, NERA Economic Consulting ..... 25 

Prepared statement .......................................................................................... 27 

Mark Kreinbihl, Group President, The Gorman-Rupp Company ........................ 38 

Prepared statement .......................................................................................... 40 

SUBMITTED MATERIAL

H.R. 702 .................................................................................................................... 2 

Statement of the Energy Equipment and Infrastructure Alliance ...................... 81 

Statement of the Chamber of Commerce of the United States ............................ 85 

Statement of America’s Natural Gas Alliance ....................................................... 87 

Statement of Americans for Tax Reform ............................................................... 88 

Statement of United States refineries ................................................................... 89 

(1) 

H.R. 702, LEGISLATION TO PROHIBIT RESTRICTIONS ON THE EXPORT OF CRUDE 

OIL 

THURSDAY, JULY 9, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY AND POWER, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:02 a.m., in room 

2123 of the Rayburn House Office Building, Hon. Ed Whitfield 

(chairman of the subcommittee) presiding. 

Members present: Representatives Whitfield, Olson, Barton, 

Shimkus, Pitts, Latta, Harper, McKinley, Pompeo, Kinzinger, Griffith, Johnson, Long, Ellmers, Flores, Mullin, Hudson, Upton (ex 

officio), Rush, McNerney, Tonko, Engel, Green, Doyle, Castor, Sarbanes, Welch, Loebsack, and Pallone (ex officio). 

Also present: Representative Cramer. 

Staff present: Nick Abraham, Legislative Associate, Energy and 

Power; Will Batson, Legislative Clerk; Leighton Brown, Press Assistant; Allison Busbee, Policy Coordinator, Energy and Power; 

Tom Hassenboehler, Chief Counsel, Energy and Power; A. T. Johnston, Senior Policy Advisor; Brandon Mooney, Professional Staff 

Member, Energy and Power; Dan Schneider, Press Secretary; 

Christine Brennan, Democratic Press Secretary; Jeff Carroll, 

Democratic Staff Director; Michael Goo, Chief Counsel, Energy and 

Environment; Caitlin Haberman, Democratic Professional Staff 

Member; Rick Kessler, Democratic Senior Advisor and Staff Director, Energy and Environment; John Marshall, Democratic Policy 

Coordinator; and Alexander Ratner, Democratic Policy Analyst. 

Mr. WHITFIELD. I would like to call the hearing to order this 

morning, and today’s hearing is on H.R. 702, Legislation to Prohibit Restrictions on the Export of Crude Oil. 

[H.R. 702 follows:] 

2 


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3 


97820.028
4 


97820.029
5 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

Mr. WHITFIELD. We have one panel of witnesses this morning, 

and I will introduce each of you individually right before you give 

your opening statement. But we are very excited about this panel 

of witnesses because they have a great deal of expertise and can 

give us some insights into the positive and any negative impacts 

that might occur if we lift the restrictions on export of crude oil. 

And I would like to recognize myself for 5 minutes for an opening 

statement. 

I want to thank, first of all, Congressman Joe Barton of Texas, 

Chairman Emeritus of this committee, for introducing this bill. He 

has bipartisan support on this bill, and it certainly raises an issue 

that there is more and more discussion about it around the country 

and around the world. 

Americans believe in free trade, and our Nation has greatly benefited from policies that allow us to export our products around the 

world. Everyone from farmers to automakers enjoy the advantages 

of a global economic and customer base. However, oil does remain 

basically an exception to the rule. 1970s-era restrictions still prohibit most exports of American crude. 

But as we all know, the reasons for these restrictions are certainly different than they were in the ’70s. Most significantly, we 

have gone from a Nation with dwindling petroleum output to the 

world’s number one producer of liquid hydrocarbons. In fact, American production growth has been so robust that the domestic supply 

of oil is now outstripping demand. This is especially true for the 

lighter grades of crude not suitable for most domestic refiners but 

still very much in demand around the world. Allowing American 

companies to serve this global market would provide substantial 

economic as well as geopolitical benefits, and that is what H.R. 702 

seeks to remedy. 

There has been tremendous job growth associated with increased 

oil and gas production over the last decade, and it should be noted 

that this includes many jobs far away from the Nation’s oil fields, 

such as those manufacturing the equipment used by these energy 

companies. Unfortunately, we have seen the loss of thousands of direct and indirect oil jobs over the past year as supplies have exceeded demand and prices have dropped. New production is being 

cut back, not because of a shortage of places to drill but because 

of a shortage of customers. 

Lifting the export restrictions and allowing the market for American oil to extend beyond our own borders could create nearly a 

million additional jobs, according to an estimate from a lot of different groups. Put another way, these are jobs that would already 

exist today if the export ban was not in place. 

The pro-exports consensus is a broad one, including groups 

across the political spectrum, from the Brookings Institute to the 

Bipartisan Policy Center to the Heritage Foundation. It also includes numerous high-ranking Obama and Clinton Administration 

officials as well as many who served under both Bush Administrations. 

6 

Of course, one of the concerns that we always hear about is we 

want to be sure to keep gasoline as affordable as possible, and 

would this have an impact on gasoline prices? I think most people 

would agree that this would certainly not cause gasoline prices to 

increase, but that is an area that when we get into questions, I am 

sure we will be asking some of our witnesses about. I might also 

say that the Energy Information Administration, Government Accountability Office, and the Congressional Budget Office predict 

that oil exports would actually help lower the prices at the pump, 

just one more benefit of oil exports. 

So we look forward to a great hearing this morning. Many members are open to the discussion, have not made any kind of decision 

about this, but as I have said in the beginning, there is more and 

more discussion about this issue around the country, and we do 

look forward to the testimony of our so-called experts this morning. 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

This morning, we will be discussing H.R. 702, a bipartisan bill introduced by Joe 

Barton that would lift the restrictions on the export of oil produced in the U.S. 

Americans believe in free trade, and we as a nation have greatly benefitted from 

policies that allow us to export our products around the world. Everyone from farmers to automakers enjoys the advantages of a global customer base. However, oil remains an exception to the rule. 1970s-era restrictions still prohibit most exports of 

American crude. 

But as we all know, the reasons for these restrictions are no longer true. Most 

significantly, we have gone from a nation with dwindling petroleum output to the 

world’s number one producer of liquid hydrocarbons. In fact, American production 

growth has been so robust that the domestic supply of oil is now outstripping demand. This is especially true for the lighter grades of crude not suitable for most 

domestic refiners but very much in demand around the world. Allowing American 

companies to serve this global market would provide substantial economic as well 

as geopolitical benefits, and that is what H.R. 702 seeks to unleash. 

There has been tremendous job growth associated with increased oil and gas production over the last decade, and it should be noted that this includes many jobs 

far away from the nation’s oil fields, such as those manufacturing the equipment 

used by energy companies. Unfortunately, we have seen the loss of thousands of direct and indirect oil jobs over the past year as supplies have exceeded demand and 

prices have dropped. New production is being cut back, not because of a shortage 

of places to drill, but because of a shortage of customers. 

Lifting the export restrictions and allowing the market for American oil to extend 

beyond our own borders could create nearly a million additional jobs, according to 

an estimate from IHS. Put another way, these are jobs that would already exist 

today if the export ban was not in place. 

The pro-exports consensus is a broad one, including groups across the political 

spectrum, from the Brookings Institution to the Bipartisan Policy Center to the Heritage Foundation. It also includes numerous high ranking Obama and Clinton Administration officials as well as many who served under both Bush Administrations. 

Of course, we are always concerned about keeping gasoline as affordable as possible, and some critics of oil exports have raised fears of price spikes. However, reports from the Energy Information Administration, Government Accountability Office, Congressional Budget Office and others predict that oil exports would help 

lower the price at the pump—just one more benefit of oil exports. 

The economic arguments alone make oil exports worth pursuing, but as with LNG 

exports the foreign policy benefits are also very important. Our allies around the 

world have made clear that they would rather get their oil from America than from 

unfriendly and unreliable suppliers. Every barrel of U.S. oil on the world market 

is one less barrel that can be sold by oil-rich states like Russia and OPEC members. 

And to the extent we would be supplanting their oil exports, we would also be supplanting their influence. 

Oil exports have the potential to be a jobs success story and a foreign policy success story, and H.R. 702 comes at a time when we can use a whole lot more of both. 

7 

Mr. WHITFIELD. With that, I would like to recognize the gentleman from Illinois, Mr. Rush for a 5 minute opening statement. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. Thank you, Mr. Chairman, for holding this important 

hearing today on H.R. 702, Legislation to Prohibit Restrictions on 

the Export of Crude Oil which was introduced by my good friend 

and colleague, the Chairman Emeritus of this Full Committee, on 

the Full Committee, Mr. Joe Barton of Texas. 

Mr. Chairman, as we enter into the era of new American energy 

renaissance, I think that it is entirely appropriate for this subcommittee to revisit the Energy Policy and Conservation Act of 

1975. This policy, which restricts the export on domestically produced crude oil, may in fact be outdated as conditions today have 

shifted dramatically from the 1970s when the bill was first enacted. 

While I come to this issue, Mr. Chairman, of crude oil exports 

with an open mind, I believe that there are a variety of ways that 

this issue could be structured. I look forward to engaging the witnesses on the questions of lifting the ban entirely as H.R. 702 

would or with conditions to protect the American consumer against 

unforeseen consequences. 

Another option, Mr. Chairman, which we should consider is exporting crude oil regionally to targeted areas in order to maximize 

American diplomacy and leverage. In fact, Mr. Chairman, I am currently working on a bill that would remove limitations on the export of energy resources to Cuba. My bill would promote market access for the efficient exploration, production, storage, supply, and 

distribution of energy resources to our neighbor 30 miles off the 

coast of Florida. This would include the exportation of crude oil as 

well as American technology and technical assistance in developing 

Cuba’s clean and renewable energy sectors. 

Mr. Chairman, I think it is very important to look at what the 

effect of displacing oil from our foreign competitors and opponents 

and whether it be Russia or Venezuela and replacing it with U.S. 

energy resources, what the effect might have on our overall national security and diplomatic objectives. 

So Mr. Chairman, I look forward to hearing from today’s panel 

of witnesses on how lifting this ban might impact the American 

economy in terms of manufacturing, employment, gasoline prices, 

and imports. Mr. Chairman, in addition to examining the lasting 

impacts of lifting the ban, it is also important to look at the impacts to our national security and our overall global diplomacy objectives. 

So Mr. Chairman, as we move forward on the path to enacting 

an American energy strategy for the 21st century, it is vital that 

we examine policies that may have run their course in light of the 

new realities of our time. I think today’s hearing is most timely 

and essential to examining some of these critical and important 

issues, and I look forward to engaging today’s witnesses. With that, 

I yield back the balance of my time. 

8 

Mr. WHITFIELD. Thank you, Mr. Rush. At this time I would like 

to recognize the Chairman of the Full Committee, Mr. Upton of 

Michigan, for 5 minutes. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Thank you, Mr. Chairman. America’s energy picture 

has changed dramatically, and this committee has been working 

hard to keep pace. Clearly times have changed since the 1970s 

when the oil export ban was put into place. Few back then could 

have imagined a domestic oil glut that jeopardizes new drilling and 

the jobs that will go with it, but that is the situation that many 

experts say that we face today. 

The energy sector has been the Nation’s most significant jobs creator over the past decade, but the recent drop in oil prices, as many 

as 100,000 energy industry jobs, in fact, have been lost. 

Proponents of the legislation that we are considering today argue 

that allowing American oil on the global market would boost production and bring back those lost jobs and, in fact, add quite a few 

more. And the demand for American oil is there, especially from 

our allies who want to reduce their dependence on a market dominated by unfriendly and unstable nations. 

As I stated in a previous hearing with Secretary Moniz, we need 

to get this policy right. Yes, we do. We need to be certain that any 

actions taken don’t have unintended consequences that negate the 

benefits. The question of what to do with our incredible resource 

abundance is a great kind of problem to have, and I look forward 

to working with my colleagues on both sides of the aisle on that 

issue. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

America’s energy picture has changed dramatically and this committee has been 

working hard to keep pace. Clearly times have changed since the 1970s when the 

oil export ban was put in place. Few back then could have imagined a domestic oil 

glut that jeopardizes new drilling and the jobs that go with it, but that is the situation many experts say we face today. 

The energy sector has been the nation’s most significant jobs creator over the past 

decade, but with the recent drop in oil prices, as many as 100,000 energy industry 

jobs have been lost. Proponents of the legislation we are considering today argue 

that allowing American oil on the global market would boost production and bring 

back those lost jobs and add many new ones. 

And the demand for American oil is there, especially from our allies who want 

to reduce their dependence on a market dominated by unfriendly and unstable nations. 

As I stated in a previous hearing with Secretary Moniz, we need to get this policy 

right. We need to be certain that any actions taken don’t have unintended consequences that negate the benefits. 

The question of what to do with our incredible resource abundance is a great kind 

of problem to have, and I look forward to working with my colleagues on this issue. 

Mr. UPTON. And I would yield to other members wishing time. 

Mr. Barton, I yield time. 

Mr. BARTON. Well, first of all, Mr. Chairman, thank you for yielding, and I want to thank Subcommittee Chairman Whitfield for 

hosting this hearing. I want to thank the Ranking Member Mr. 

Rush for the open mind that he expressed in his opening stateVerDate Nov 24 2008 11:25 Jan 19, 2016 Jkt 037690 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-64 CHRIS
9 

ment. This is an important issue for me obviously. The other subcommittee chairmen here, Mr. Pitts, and Mr. Shimkus, can testify 

that I don’t show up on time to many hearings in the morning, but 

I am here for this one because it is a big deal. 

The issue that we are debating today is the last remnant of the 

Carter scarcity of energy policy of the 1970s. We have a former Assistant Secretary of Energy out in the audience, Mr. Jan Mares, 

who was in the Reagan Department of Energy in the early ’80s, 

and when the Reagan administration came into office, you had in 

place an energy policy that said America was running out of energy. And we had restricted the use of natural gas. We had put 

price controls on natural gas. We had done all kinds of things because we thought America was out of energy and America could 

not compete in energy policies. 

Beginning with President Reagan and continuing through President Clinton and President Bush, we have repealed every bit of 

that policy except one thing that is this, the issue that America 

cannot export crude oil. We can export everything else in America, 

but we can’t export crude oil. We can export refined products, but 

we can’t export crude oil. 

We have had hearings on this in the Ag Committee, the Foreign 

Affairs Committee, the Small Business Committee, but until today, 

we have not held a hearing in the committee of jurisdiction which 

is our committee. I think if you listen to the witnesses, especially 

my good friend, Ambassador Gandalovic from the Czech Republic, 

you will see the absolute positivism of repealing this ban. America 

is number one in energy production. It is number one in oil production. If we can use our energy resources strategically, it will help 

us in that area, but it will also help us economically as Chairman 

Upton has just pointed out. 

So thank you, Mr. Chairman, Mr. Chairman, Mr. Rush, for 

agreeing to have this hearing and thank the witnesses. 

[The prepared statement of Mr. Barton follows:] 

PREPARED STATEMENT OF HON. JOE BARTON

Thank you Mr. Chairman—— 

I am so pleased that this committee is having this hearing. Our friends on the 

House Foreign Affairs Committee held a hearing in April. Our friends on the House 

Small Business Committee held a hearing in June. Our friends on the House Agriculture Committee held a hearing just yesterday. 

Last year when I brought up this issue I was told to go out and educate my colleagues and garner support for my bill. Well, I’ve done that. And I will continue to 

do this until this bill is on the House floor. 

As of this morning, H.R. 702 had 77 cosponsors. But what is more interesting is 

that those cosponsors hail from 30 states. Because as folks look at the issue and 

read the supply chain study by IHS, they quickly realize that this is not an oil patch 

issue, it is an American issue. 

One point that I want to make is America is a trading county. We don’t need to 

or should we get to zero imports before we export. Just yesterday, GAO testified 

that whether prices fall or stay the same, the lifting of the ban on crude oil exports 

will stimulate economic activity. 

This ban is the last remnant of Carter’s scarcity policy from the 1970s. And it 

just makes no sense for us to even consider allowing Iran to export crude oil while 

not allowing ourselves the ability to. This bill is good policy for both economic and 

strategic reasons. 

At last count there were more than 16 major studies just since March of last year 

on why lifting the crude oil ban was in the best interest of America. This bill will 

create jobs, lower gas prices, and stabilize world energy markets. 

10 

I’ve said it before and I’ll say it again—momentum is on our side and the facts 

are on our side. 

Mr. BARTON. And with that, I am willing to yield another minute 

to anybody on our side that wishes. Mr. Mullin of Oklahoma. 

Mr. MULLIN. Thank you and I want to just reiterate what my 

friend from Texas was saying and also point out the fact that this 

is about bringing stability to a market. In Oklahoma alone, we 

have lost 20,000 jobs since January, and you know, an entrepreneur that is able to understand what the sacrifices means is 

with us today sitting over there in the corner, Harold Hamm, an 

individual that started with absolutely nothing and was able to 

achieve the successes because of barriers that were lifted and taken 

out of place. But today we are limiting entrepreneurs like him, and 

this is something that we need to have an open conversation about, 

and I thank the chairman for bringing this to our attention. I yield 

back. 

Mr. WHITFIELD. The gentleman’s time has expired. At this time 

Mr. Pallone was going to make an opening statement, but I think 

he has been delayed. So is there anyone—— 

Mr. RUSH. Mr. Chairman, we want to reserve Mr. Pallone’s 

time—— 

Mr. WHITFIELD. OK. All right. 

Mr. RUSH [continuing]. Until he arrives. 

Mr. WHITFIELD. OK. We will reserve Mr. Pallone’s time when he 

arrives. He can give his opening statement. At this time I would 

like to introduce our witnesses and recognize each one of them for 

5 minutes for their opening statement. 

Our first witness is Mr. Petr Gandalovic, who is the Ambassador 

to the United States for the Czech Republic. I am just going to introduce you individually before you give your opening statement. 

Mr. Ambassador, we are delighted you are with us this morning, 

and you are recognized for 5 minutes for an opening statement. 

STATEMENTS OF PETR GANDALOVIC, AMBASSADOR TO THE 

UNITED STATES, CZECH REPUBLIC; COMMANDER KIRK 

LIPPOLD, PRESIDENT, LIPPOLD STRATEGIES; W. DAVID 

MONTGOMERY, SENIOR VICE PRESIDENT, NERA ECONOMIC 

CONSULTING; AND MARK KREINBIHL, GROUP PRESIDENT, 

THE GORMAN-RUPP COMPANY 

STATEMENT OF PETR GANDALOVIC 

Ambassador GANDALOVIC. Thank you Subcommittee Chairman 

Whitfield, Ranking Member Rush, and members of the subcommittee. I appreciate the opportunity to be here today to provide 

my perspective on the utmost importance of the strategic energy alliance between the United States and Europe as energy exports 

from democratic countries like the United States enhance the energy security of the Czech Republic and the European Union. 

Since 1989 when we reestablished our independence, we have always known that we cannot achieve true state sovereignty without 

having energy sovereignty. Bearing this in mind, one of the first 

steps of our revived independent diplomacy was to start negotiations with Germany on the building of a new transit oil pipeline 

that would connect us with the Western markets and diminish our 

11 

previous 100 percent dependence on oil supplies from the East, 

namely Russia. 

This truly strategic decision was successfully materialized in the 

IKL. It means Ingolstadt Kralupy Litvinov pipeline, which has connected us via Germany with the Italian seaport of Trieste, at the 

Adriatic Coast. The existence of that oil pipeline has given us the 

opportunity to import oil from international markets. 

Nowadays, we import around one half of our oil consumption 

through this pipeline. It is interesting that most of this oil comes 

from Azerbaijan which flows via Georgia to the Turkish port of 

Ceyhan on the coast of Mediterranean Sea, then onto the port of 

Trieste in Italy and then through the Alps to Germany and finally 

via this IKL pipeline to the Czech Republic, or oil from Kazakhstan 

that follows a similar route. 

What is crucial for our energy security is that the capacity of this 

IKL pipeline is large enough that in case of emergency we can 

practically cover our oil needs from other than Russia territory and 

potentially also from the United States. 

Moreover, we have also done our homework in the area of natural gas. In the ’90s, we signed a contract with Norway that diminished our 100 percent dependence on deliveries from the East. We 

also built the so-called Gazelle pipeline that has interconnected us, 

our gas transit network with the German one. Thanks to this interconnection, we have been significantly integrated with the German 

and European gas market, and as a result, we also buy natural gas 

on spot markets in Western Europe. This interconnection with Germany also provides us with an alternative supply route in case of 

extraordinary supply disruptions from the East. 

Apart from the diversification of transit routes, we have always 

given particular importance to diversification of energy sources. 

Therefore, our energy mix has been based on nuclear energy, coal, 

oil, gas, hydro, and renewables. 

I mentioned that energy security has always been a priority to 

the Czech Republic. Since 2004, we have been trying hard to emphasize the issue of energy security within the European Union in 

general. We made energy security one of the official priorities during our presidency in 2009. We led the negotiations during this gas 

crisis between Russia and Ukraine, finalized the Third EU energy 

package, which is the crucial component of the European energy 

legislation and organized the so-called Southern Corridor Summit. 

Energy security has always been on top of the so-called Visegrad 

Group, V4, so-called. It is the grouping of countries, Czech Republic, Hungary, Slovakia, and Poland, and it is one of the official priorities of its current Czech presidency. The V4 group strives for energy sources diversification and, with its demand reaching 42 cubic 

meters of natural gas per year and almost 40 million tons of oil per 

year, accounts for an important European regional market. 

As I mentioned earlier, we always keep in mind that we have to 

do our homework. Thanks to this approach, I am glad to be able 

to say that the energy security of the Czech Republic has reached 

a very good level. It is important to stress that our energy security 

is based on the assumption that access to the global markets 

means access to oil and gas exported by countries that see energy 

as business and not as a political tool. Hence, I would like to reitVerDate Nov 24 2008 11:25 Jan 19, 2016 Jkt 037690 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-64 CHRIS
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erate the crucial statement: The larger the number of stable democracies among the world energy exporters, the more robust the 

energy security of the Czech Republic and the European Union will 

be. Moreover, U.S. energy exports would send a strong signal to the 

world community that democracies stick together. 

Mr. Chairman, Mr. Ranking Member, members, thank you for 

your attention. 

[The prepared statement of Mr. Gandalovic follows:] 

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Mr. WHITFIELD. Mr. Ambassador, thanks for that opening statement. And our next witness is Commander Kirk Lippold who is retired from the U.S. Navy and is now President of Lippold Strategies, and we are delighted you are with us this morning. You are 

recognized for 5 minutes. 

STATEMENT OF KIRK LIPPOLD 

Mr. LIPPOLD. Thank you, Mr. Chairman. Mr. Chairman, Ranking 

Member Rush, my name is Commander Kirk Lippold. I appreciate 

the opportunity to testify before the subcommittee. While I may 

disagree with this bill, I would like to personally thank Representative Joe Barton for his dedicated support to our Armed Forces, specifically our veterans. Sir, you have made service to our Nation a 

source of pride for our citizens. 

In my 26-year career in the Navy, I was a surface warfare officer 

serving on five different ships, including guided missile cruisers 

and destroyers to protect U.S. national security interests across the 

globe. Foremost among those missions was to safeguard the sea 

lanes of communications, or SLOCs, that facilitate the global economy, including oil imports to the United States. I have experienced 

firsthand, particularly in my command of the USS Cole when it 

was attacked by Al Qaeda terrorists during a routine refueling 

stop, the devastating effects of reliance on imported oil when the 

men and women who serve our country are placed in harm’s way. 

The U.S. Navy has a unique role in the world in cooperation with 

our allies to ensure the safe conduct of trade including in oil. Since 

the 1970s, we have had policies in place to encourage energy independence that include investment in energy research and efficiency, diversity of fuel inputs, and the strict regulation of oil exports. At its heart, the legislation being contemplated before this 

committee will have far-reaching national security implications. 

Before we drastically alter the law and these longstanding and successful policies, we should proceed with great caution to evaluate 

their real-world consequences. 

The United States is still import dependent despite significant 

gains in domestic energy production. While the United States has 

experienced an impressive boom in domestic crude oil production, 

a blunt fact persists: The United States remains overly dependent 

on those oil imports. We still import a staggering amount of oil. According to the U.S. Energy Information Administration, the U.S. 

imports in 2014 totaled more than 2.6 billion barrels or around 30 

percent of supply. 

Another key point is that domestic consumption will outpace domestic production for the foreseeable future. There are significant 

national security benefits to decreasing our reliance on imported oil 

supplies. It keeps the nation focused and working toward achieving 

energy independence. It markedly decreases our reliance on unfriendly or dangerous regimes that do not share our interests or 

values. Lastly and most importantly, energy independence leaves 

the United States and its leaders with more workable options in 

achieving our foreign policy and national security objectives. 

History, as always, is instructive. The original purpose of the export regulations was to bolster national security by furthering energy independence. That purpose still holds true. Lifting export 

18 

regulations may have the unintended consequence of undermining 

our national security goal of energy independence. Given the current strategic environment, precipitously lifting the regulation of 

exports would not confer equal strategic benefits. Advocates of lifting the export ban frequently point to Russia’s aggressive invasion 

in Ukraine as a ready opportunity for the use of energy diplomacy. 

That notion makes little sense. As an initial matter, all credible 

economic studies on the subject project that the vast majority of 

U.S. crude oil purchased on world markets would make their way 

to Asia, not Europe. Indeed, the number one beneficiary of lifting 

the ban is likely to be China, a nation whose recent activities in 

the Pacific and South China Sea reflect more the actions of a rival 

hegemon for security dominance in the transpacific region than a 

responsible international partner. 

The United States does not need to export crude oil to influence 

international markets. With strict export regulations in place, 

other countries are better off because the United States is producing more of its own supply which increases the supply of crude 

outside the United States, thereby reducing prices and alleviating 

bottlenecks. With the export ban staying in place, the United 

States gets the dual national security benefits of ample supply and 

leverage on the international stage. 

Another key consideration is the need to maintain the strong domestic refining base that provides the United States with significant and under-appreciated national security benefits. Lifting the 

crude export ban would expose one of America’s most important industries to the unpredictable vagaries of international markets and 

international politics. Military assets mobilize on petroleum products, like gasoline, diesel, and jet fuel. They do not run on crude. 

Maintaining and expanding our robust refining base directly improves the operational flexibility the United States requires for 

rapid mobilization necessary for modern force projection. 

While tempting, from the perspective of gaining a commercial 

foothold in a new market arena at this time, too many times in my 

career I have experienced the stark reality of our national leaders 

not thinking through the impact of changes in international and 

domestic policy. We cannot afford to wave off these potential consequences as inconsequential under the guise of market principles. 

The regulation of crude oil exports was put in place with the longterm objective of decreasing U.S. reliance on foreign sources of energy, specifically oil. The day may come when the United States is 

no longer overly dependent on oil imports and we may be in a position to change our export laws, but for the sake of national security, that day is not today. 

[The prepared statement of Mr. Lippold follows:] 

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Mr. WHITFIELD. Thank you, Commander. And our next witness 

is Dr. David Montgomery who is Senior Vice President for NERA 

Economic Consulting Group, and thanks for being with us. You are 

recognized for 5 minutes. 

STATEMENT OF W. DAVID MONTGOMERY 

Mr. MONTGOMERY. Thank you, Mr. Chairman and Ranking Member Rush. It is a privilege to appear before you today and I very 

much appreciate your invitation. 

I have retired as Senior Vice President of NERA Economic Consulting, though I continue to work with my team there and on 

other things that are interesting. I found that is a great benefit of 

retirement. 

What I would like to do in my 4 minutes and 40 seconds is give 

a quick overview of the major conclusions of my testimony and 

then just touch on a few elementary points in a little more detail. 

My conclusion, and I think the conclusion of every independent 

study that has tried to quantify the effects of crude oil export ban, 

is that restrictions on crude oil exports pose a cost on the economy 

in several forms. They cause us to lose domestic production of 

crude oil that we would otherwise be able to produce. They cause 

a loss in investment and corresponding economic growth. They 

have done so for the past several years and will continue to do so. 

Oil export restrictions actually lead to higher gasoline prices 

than we would have had in the recent past and going forward. And 

finally, it is my conclusion that restrictions on crude oil exports actually decrease our energy security, and I would amplify a bit on 

each of those points. 

How is it that production is reduced? The evidence that production is reduced by restrictions on crude oil exports is the differential that we see in the market between the price of the light tight 

oil that is what the boom in oil production in the United States has 

produced. The boom in oil production has come about because we 

have discovered ways, the oil industry discovered ways, to produce 

oil from tight formations that were not previously possible to 

produce. That oil is light oil because that is what the production 

technology is able to extract, and that is what is there. The light 

oil is coming from Texas, from Oklahoma, from New Mexico, from 

North Dakota, the major sources, huge amounts of that oil, growing 

rapidly over the last few years. The problem is the U.S. refining 

sector is set up to process heavy oil, and it can’t simply swap one 

for the other. So since the oil can’t be exported, it has been stuck 

in the United States and its price has been depressed. 

When we did our study at NERA 1 1⁄2 years or so ago, the price 

of oil produced in North Dakota where the famous Bakken field is 

was selling at about the same discount from international market 

crudes as it is today. That means that there is a disincentive for 

production, and we are losing production. That is what leads in 

large part to the negative effects on the economy which are taking 

the form of less investment, less growth in the oil and gas sector. 

And just let me remind you that over the past couple of years the 

oil and gas sector has been the primary source behind economic 

growth overall. It has been the major growing sector in the economy. So we would lose that stimulus. 

26 

Let me turn then to the effect on consumers, gasoline prices. It 

only takes one sentence to raise the fear that gasoline prices will 

go up. It takes about four to explain why they will go down. But 

the key factor here is that it is net imports that matter. It is net 

imports that matter for the effect of the United States on world oil 

markets and mid-imports that matter for national security. Net imports are basically the difference between how much crude oil we 

produce in the United States and how much oil we consume in the 

United States. 

Since it would take massive refinery investments to be able to 

use the light oil that we are now producing in the Bakken and 

other places in U.S. refineries, it is much more economic to export 

that oil than it is to expend all that money to refine the products 

domestically. But it makes absolutely no difference to our total call 

on oil markets because that is determined by how much hydrocarbon we are producing in liquid form and how much hydrocarbon 

we are consuming in liquid form. All the change in oil exports does 

is it allows us to avoid wasteful investments in refineries domestically, to use the oil here, to export that oil and actually increase 

the world’s total oil supply. That is the important part. By removing the restrictions on crude oil exports, we will increase the 

world’s oil supply. That will tend to drive down the price of oil on 

world markets of crude oil. 

Now, the price of refined products is based on the price of crude 

oil in the world market. U.S. refineries are already exposed. They 

export 4 million barrels per day of products. They see prices go up 

and down all the time. The price of gasoline in the United States 

is determined by that world market. If we soften the price of crude 

oil in the world market, we reduce gasoline prices in the United 

States. 

And the same thing is true of energy security. Even if we take 

Commander Lippold’s definition of energy security—and I agree 

with everything else he said—we differ on the issue of whether it 

is imports to the United States or net imports that matter. I think 

it is far worse than what Commander Lippold described. The world 

oil market is one market. We can’t just defend ships going to 

United States and ships coming from the United States. We are affected by the world oil price, and we will be forever because even 

EIA sees no prospect of oil independence in the United States. That 

means if there is a supply disruption anywhere, it is going to affect 

the United States. If there are military interventions, we are going 

to have to defend everybody’s ships, not just ours. 

But if we increase our oil exports, one of the likely consequences 

is Persian Gulf countries will cut back their production, and that 

removes a major source of risk. 

I conclude my testimony at this point. Thank you. 

[The prepared statement of Mr. Montgomery follows:] 

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Mr. WHITFIELD. Thank you, Dr. Montgomery. And our next witness is Mr. Mark Kreinbihl, who is the Group President of The 

Gorman-Rupp Company, and we appreciate your being with us. 

You are recognized for 5 minutes. 

STATEMENT OF MARK KREINBIHL 

Mr. KREINBIHL. Thank you, Chairman Whitfield and committee 

members for this invitation to testify in support of lifting the ban 

on U.S. crude oil exports. Gorman-Rupp started in 1933 by two entrepreneurs, J.C. Gorman and H.E. Rupp in Mansfield, Ohio. Currently Jeff Gorman is our CEO and third generation. We design, 

manufacture, and sell pumps in the many different markets. The 

oil and gas market uses our equipment in several different areas, 

primarily for water transfer and wastewater transfer, directly or 

indirectly related to the energy industry. 

In October of 2014, we started our planning process for our 2015 

forecast budget. 2014 was a good year, and the outlook for 2015 

was looking to be even better. We planned on a 12 1⁄2 percent increase in sales with a corresponding operating budget. I have provided in my testimony a chart that correlates the number of gas 

and oil rigs to our incoming orders. When the price of oil went 

down and the number of drilling rigs were reduced, our business 

was impacted. A distributor in Texas was planning a major expansion until drilling activity reduced. A Canadian distributor anticipated levels of business that ended up being cut back significantly. The combination of just these two distributors accounts for $4 

million of cancelled orders on our books. The impact of our business 

has been a surplus of inventory and a reduction in workload. That 

has required the elimination of all but essential overtime. Thirteen 

temporary employees were terminated. These traditionally have 

been temp to full-time employees. We have implemented voluntary 

unpaid leave of absences. Wage increases were postponed due to 

business conditions. All hiring is scrutinized. There are 21 retirements of which only a portion will be replaced. Our full-time employees is 25 less than the end of last year. We have not hired summer help. Traditionally we hire college students bound for college 

of the Gorman-Rupp employees. Capital expenditures have been 

postponed on items that are not essential to the operation. 

I put my company example forward as typical of what is happening in tens of thousands of energy supply chain companies 

throughout the United States. While my numbers might not make 

the news, the aggregate of all similar stories throughout the country has a profound impact on American workers and the total U.S. 

jobs and growth picture. Lifting the ban will help turn this around. 

Here are several important reasons why. It would remove the 

competitive disadvantage and allow the United States to compete 

in the worldwide battle for energy market share. New production 

will drive substantial additional investment in products and services from crude oil supply chain, generating up to $63 billion of 

supply chain economic output nationally. This investment would 

create up to 440,000 new supply chain jobs nationally by 2018. 

These export-dependent jobs and GDP growth would be widely 

spread throughout the American economy. They would exist in all 

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tional supply chain gains, 10 of the top 15 states gaining jobs are 

non-producing states. By GDP growth, 11 of the 15 states are nonproducing states. 

The Energy Equipment and Infrastructure Alliance, of which my 

company is a member, estimate there is at least 120,000 supply 

chain businesses and 615,000 workers supporting American oil and 

natural gas production, 100,000 of which are small businesses. 

The U.S. energy sector has been a leader in developing new technologies for energy exploration and extraction. Taking advantage of 

those technological advances before competitors do would give the 

U.S. energy industry incentives to innovate and become even better 

at finding and extracting oil and natural gas in an efficient and 

safe manner. Lifting the oil ban on crude oil exports is a step that 

could yield almost immediate results at a time when the United 

States continues to see sluggish growth in the kind of good jobs the 

energy sector provides. 

Thank you again, Mr. Chairman, for inviting me to address your 

committee. 

[The prepared statement of Mr. Kreinbihl follows:] 

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Mr. WHITFIELD. Well, thank you for your opening statement. And 

Mr. Pallone has arrived, and he is the ranking member of our Full 

Committee, and I would like to recognize him for 5 minutes for his 

opening statement. 

Mr. PALLONE. Thank you. Thank you, Chairman, for bearing 

with me. Today we have been working on the 21st Century Cures 

and bringing it to the floor on a bipartisan basis, so I appreciate 

the opportunity. 

I also wanted to thank Commander Lippold for your service to 

our country. As I have said before, it is not a bad idea to reconsider 

the merits of a policy enacted in the wake of the 1973 oil embargo. 

The world is very different than it was 40 years ago, and our energy picture is evolving rapidly. Domestic oil production has increased dramatically in recent years, and demand growth has 

slowed noticeably. The current relatively low price of oil and the increase in domestic production benefit us all. Low oil prices boost 

our GDP and decrease the amount Americans spend at the pump. 

However, there is no guarantee that these conditions will last. We 

still import much of our oil, and while oil prices might remain 

where they are, gasoline prices have already risen significantly 

since our March hearing on this issue. 

Many factors could change the future energy picture, including 

geopolitical instability and international domestic market forces. 

These are important issues to consider before shipping the oil we 

produce here to countries around the world. And that is why we 

need to better understand where exported oil will go, whether it be 

to Asia, Europe, or other locations. I welcome the Czech Ambassador, and I am interested to hear about what type of U.S. oil could 

benefit his country as he spoke. 

I believe that we need to answer a host of complicated questions 

before considering a wholesale dismantling of our Nation’s ability 

to restrict oil exports as proposed in H.R. 702. First, how would 

lifting the ban affect the price of crude oil and therefore the price 

of gasoline? I don’t think there is a consensus on that point, though 

I think my constituents would all agree the prices at the pump are 

still far too high. Exports may help oil companies, but will they 

really benefit consumers? 

Second, how would such a change affect both our refinery capacity and associated jobs? How would exporting crude oil instead of 

finished petroleum products affect job growth in the years ahead? 

Some, like the steelworkers want to keep and grow those jobs in 

the United States. Exporting the oil could mean exporting those 

jobs and paying a higher price for gasoline. 

Third, if we are going to export crude oil, shouldn’t the American 

people receive some direct benefit in the form of increased revenues? Shouldn’t we consider a fee on exports to ensure all Americans benefit from the exploitation and exporting of the natural resources? 

And fourth, what are the environmental and climate impacts of 

lifting the export ban? Are we still going to put our beaches and 

oceans at risk just to add oil to the world market? Increasing crude 

exports means increasing impacts on climate change, public health 

and safety, property owners, and our water supplies. And we have 

to choose the cleanest and most sustainable path forward. 

46 

Finally, Mr. Chairman, are we really ready to treat oil as just 

another commodity like peanuts or grain? Because if oil is no 

longer something to be restricted, then isn’t it also time to remove 

the many subsidies we have given to oil over the years in the name 

of national security? I never thought those subsidies were good policy. But if oil is no different than peanuts, why should it enjoy special liability exemptions under Superfund and other statutes? Why 

should we subsidize oil production on federal lands? 

These are only some of the issues that I believe we have to address before completely doing away with the ban on exports. We 

shouldn’t embrace short-term gains without understanding the 

long-term costs of our decisions because we can’t afford to get it 

wrong. 

And to that end, maybe it would be wiser to explore some smaller intermediate steps first such as easing restrictions on crude exports to our neighbors in Mexico before abruptly eliminating all our 

national security protections for this critical energy source. 

And again, I want to thank you, Mr. Chairman, Mr. Barton, for 

sponsoring the bill and helping begin this discussion, and I do 

apologize for interrupting now the questions. But I know we are 

doing a lot now to get the votes for our 21st Century Cures bill, 

but I wanted to have the opportunity to speak on this. Thank you. 

Mr. WHITFIELD. Thank you, Mr. Pallone, and that concludes our 

opening statements. And once again, thank you, panel members, 

for coming and for your statements. At this time I would like to 

recognize myself for 5 minutes of questions, and then we will give 

other members of the committee that opportunity as well. 

Generally speaking, when we do consider the export of products 

from America, I mean, we have been quite successful, and it is 

quite difficult to understand how, as Mr. Barton said, we can export almost anything, but we can’t export crude oil. And from my 

discussions with people about this issue, the two primary reasons 

that you hear about are, number one, oh, this is going to increase 

gasoline prices. And then the second reason that I have heard that 

some refiners have already made adjustments so that they can refine light, sweet oil that is coming primarily out of our domestic 

production now, and originally they were doing heavy crude and 

heavy, sour, and they have made these investments so they can do 

it. Now other refiners have not made that investment, and they are 

complaining that it would put them at a disadvantage. 

But Dr. Montgomery, you had indicated and I have heard others 

say this and I would see what Commander Lippold says about it, 

but gasoline prices are determined by the world market price. And 

if more oil is being produced into the world market, you would 

think that that would reduce gasoline prices, and that is what EIA 

has said and other groups. Do you agree with that, Dr. Montgomery? 

Mr. MONTGOMERY. [Audio malfunction in hearing room.] 

Mr. WHITFIELD. OK. And Commander Lippold, do you have a 

comment on this? 

Mr. LIPPOLD. Mr. Chairman, I am not an economist, so I couldn’t 

really judge the prices. But what I can say is that obviously if you 

are introducing more oil onto the world market, that creates a 

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tive is obviously good because it gives the ability for nations to now 

take in the oil—— 

Mr. WHITFIELD. Right. 

Mr. LIPPOLD [continuing]. And produce it. But when you are 

looking at our country, it is the fact that we have still got that 30 

percent and we are trying to export that concerns me. 

Mr. WHITFIELD. Yes. I mean, one of the arguments that you 

made, which I think is a little bit of a stretch myself, but you were 

saying that because if we put more oil into the market, the world 

market, you are saying that would be a disadvantage. Explain that 

to me once again. 

Mr. LIPPOLD. Well, right now when you look at the oil that we 

are producing which is the light tight or light crude—— 

Mr. WHITFIELD. Right. 

Mr. LIPPOLD [continuing]. In discussion, the refineries right now 

say that they have the excess capacity to be able to produce that 

which creates the refined product which goes out onto the market 

and therefore, the more you have in the market, just common sense 

says it is going to bring that price down. By keeping it here at 

home, we are able to adjust and be able to react more because we 

are not as dependent on other nations. It also gives us the flexibility that if we need to export refined product around the world 

and we are exercising that capacity within our refineries, it gives 

us the capability to get that product where it needs to go for any 

kind of an emergency for any countries, whether it is in the Pacific 

rim, whether it is in Eastern Europe, because if you can deliver refined product right off the bat, that is what they are going to need 

to make their economies and militaries be able to protect their nations. 

Mr. WHITFIELD. Mr. Ambassador, all of us on this committee 

have had representatives from all over Europe talk about the importance of doing this for the benefit of their countries, and you are 

being here today to explain those benefits is particularly helpful. 

Right now, how much oil is the Czech Republic consuming a day? 

Do you know the answer to that question? In barrels. I think you 

all talk about it in tons, right? 

Ambassador GANDALOVIC. Our total consumption is 195,000 barrels a day—— 

Mr. WHITFIELD. One hundred ninety-five thousand barrels a day? 

Ambassador GANDALOVIC [continuing]. Which goes, as I said, 

about 50 percent from Russia and another 50 percent is combined 

from Azerbaijan, Kazakhstan, and other smaller suppliers. 

Mr. WHITFIELD. But in your discussions with other European 

leaders, on this issue I am assuming that the majority of them 

would support our efforts to lift this restriction on the export of 

crude oil. 

Ambassador GANDALOVIC. Well, of course, as ambassador of the 

Czech Republic, I cannot represent or speak on behalf of other 

countries, but just from the perspective of the Visegrad Group, as 

I said, is Hungary, Poland, Slovakia, and the Czech Republic, there 

are members of this grouping whose dependence on Russia is almost 100 percent. 

48 

So in this respect, they would probably need to adjust their refineries and make some homework in interconnectors to be able to import other than Russian crude oil. 

Mr. WHITFIELD. Right. 

Ambassador GANDALOVIC. So then of course U.S. opportunity 

would be welcome I guess. 

Mr. WHITFIELD. OK. Well, my time is expired, so Mr. Rush, I will 

recognize you for 5 minutes. 

Mr. RUSH. I want to thank you, Mr. Chairman, and I also want 

to again thank the witnesses. I have a question for Commander 

Lippold. Commander, in your testimony you say that security benefits to changing export regulations are unlikely to materialize in 

the near future. Do you see any benefits to national security and 

our diplomacy efforts if we were to export crude oil among other 

energy resources to our neighbor, Cuba? Could U.S. imports to 

Cuba displace Venezuelan or Russian imports? And if so, what implications might that have in the region for us politically and diplomatically? 

Mr. LIPPOLD. So the question that I would look, or the answer 

that I would give to that is going to be if we are going to be exporting it to countries to try and displace, once again we are getting 

into the issue, we are beginning to parse out who we want that oil 

to go to, and from a national security perspective, I think most people here on the committee would agree that the number one people 

that we need to take care of first is going to be here in the United 

States. If we are dependent on oil, all we are doing is while we may 

be giving our oil to one person as one type, we are still going to 

be taking in more amounts of oil to make up for the total quantity 

that has to be consumed within the United States. 

So I don’t see an immediate advantage in taking our oil and then 

saying, well, we will export it. We do already export through licenses a certain degree of that oil under the existing law to Canada, and we have just prevented it from going to other nations. But 

if we drop the thing wholesale and decide we are going to be able 

to export it to everyone, the ramifications in second- and thirdorder effects on national security and stability have not been 

thought through yet. 

Mr. RUSH. Dr. Montgomery, I was just handed a study by the 

Chairman Emeritus of the Full Committee, and it is an IHS study. 

Are you familiar with that, IHS study that was released in March 

2015? 

Mr. MONTGOMERY. I am familiar with some IHS studies. You will 

have to describe this one a little bit more for me I am afraid. 

Mr. RUSH. Well, let me just quote from it. It says in states with 

a diverse and mature set of supplier industries, the supply chain 

can account for half of the value added from lifting the export ban. 

Illinois, an oil-producing state with diverse supplier industries, 

would derive 58 percent and 54 percent of the total GDP impacts 

from its supply chain. Illinois consistently stands to gain from lifting the ban in all supply chain sectors examined in the IHS study. 

Do you have any commentary on that which I have quoted? 

Mr. MONTGOMERY. Yes. I think it is first missing the point that 

one of the primary benefits that comes from increasing crude oil 

production in the United States and oil exports is a reduction in 

49 

gasoline prices which accrues to everyone in the U.S. economy. It 

is directly beneficial to consumers. It is money in their pockets, and 

it in turn provides additional income for them to spend locally in 

their own economies. So that is one point. 

The second point though is that this emphasis on value-added I 

think is a misconception and is bad economics because it is mistaking costs for benefits. High value-added in the refining sector is 

actually means it takes more capital investment, more workers in 

order to produce the same amount of hydrocarbons or the same 

number of BTUs. And I actually think Mr. Kreinbihl used a great 

phrase which I am going to copy frequently. What we are really 

seeing here is a situation in which we can compete more effectively 

internationally as crude oil producers than as refiners because 

what we are looking at is the prospect for producing several hundred thousand barrels per day in addition to what we are producing today. Nothing is being taken away from U.S. refiners. It 

is true. They are already using all the light tight oil we produce 

today. The opportunity with removing the export ban is we can 

produce more crude oil which we can export which will help our 

balance of trade. 

Now some refiners say we want that oil for ourselves. But they 

have to make additional investments in order to use it, which 

means that it costs more to export a barrel of product than it does 

to export a barrel of crude. So the economy benefits more from exporting the crude because we don’t have to make this wasteful investment in refining. We can invest in something else, improved 

agricultural productivity, for something we have a comparative advantage in. 

Mr. RUSH. Thank you. I yield back, Mr. Chairman. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Texas, Mr. Barton, for 5 minutes. 

Mr. BARTON. Thank you. I want to build on what Mr. Rush just 

asked Dr. Montgomery, but I am going to ask the question to Mr. 

Kreinbihl. I have studied that study that Congressman Rush referred to, and my understanding is that what it means for a state 

like Illinois, if you have a manufacturing base that supplies oil 

field equipment and supplies pipeline equipment and supplies electrical equipment. In other words, if you have a manufacturing base 

and distribution base, that even though you are not producing the 

oil, you benefit from it. That is the kind of company and business 

that you are in, is that not correct, Mr. Kreinbihl? 

Mr. KREINBIHL. That is correct, and I think as I have pointed 

out, I did provide a chart in my testimony showing the correlation 

between the number of drilling rigs and our incoming orders. 

As I tried to mention in my testimony before, what really happens for us is it is not just the oil and gas or the crude that is exported. It is all the ancillary things that happen. They need pumps 

to build the hotels and dewater the construction site for that. They 

need pumps for transferring just water to and from the sites. And 

I am speaking of pumps because that is my background. But I 

think you can take that and use it throughout the manufacturing 

industry. Everybody seems to benefit from an increase in the economy and the activity that the oil—— 

50 

Mr. BARTON. So a state like Illinois, which again has some oil 

production but is centrally located, has a manufacturing base, 

those small businesses and some large businesses would benefit because they would send equipment to the Bakken in North Dakota, 

over into Pennsylvania, even down into Oklahoma because if the 

drilling rigs went back into production, their business would increase. Is that not a fair assessment of what that study indicates? 

Mr. KREINBIHL. That is very correct. 

Mr. BARTON. OK. I want to go to Ambassador Gandalovic. Commander Lippold indicated that if we lift the ban, most of the oil 

production that we would export would go to Asia, and certainly 

Asia would be a good market. I would point out that under current 

law, oil that goes through the Trans-Alaska Pipeline can go to Asia 

right now. 

You represent a part of the world that we would say would be 

Central Europe or Eastern Europe, and you indicated that your 

country specifically and the countries around you that you have 

economic relationships with, would want to import some of this oil. 

So what is your assessment of what Commander Lippold said 

about the benefits primarily going to Asia as compared to your part 

of the world? 

Ambassador GANDALOVIC. Well, again, I just want to speak on 

behalf of the Czech Republic only, first, and second, I have to explain to you the structure, the ownership structure of the oil distribution and refinery sector in the Czech Republic. 

Simply said, the pipelines and storage capacities are owned by 

the state while refineries and of course distribution of product is 

private. So we don’t have, as a state, any influence on whose oil 

these refineries are going to buy. As a state, we have actually put 

in place such a system that there is more opportunities from both 

ends, for these refineries. So it gives us energy security to certain 

level that even if there is a disruption of supply from one end, 

there is an alternative. 

So I cannot assure you that even if you pass this bill, there will 

be a direct purchase from our refineries, I mean from refineries 

that operate in the Czech Republic of the U.S. crude oil. I cannot 

assure and predict. I can predict that if there is an alternative coming from the United States as democratic state that doesn’t use exports of natural resources as a political tool, the world itself will 

be a more safer place. 

Mr. BARTON. My time has expired, Mr. Chairman. Thank you. 

Mr. WHITFIELD. At this time I recognize Mr. Pallone, the gentleman from New Jersey, for 5 minutes. 

Mr. PALLONE. Thank you, Mr. Chairman. The initial purpose of 

the export regulation was to protect the United States from stateowned oil actors organized through OPEC, and the oil market was 

not and is not today truly a free market. Oil is a commodity unlike 

any other, and our Nation is disproportionately impacted by oil imports. 

Secretary Moniz recently expressed doubt about the wisdom and 

timing of lifting the crude export ban when we still import 7 million barrels of crude oil per day. And some of those barrels come 

from Canada and Mexico, but others come from Venezuela, Saudi 

Arabia, and Iraq. 

51 

So Commander Lippold, my questions are all for you. Is it in the 

best interest of the U.S. national security to continue relying on potentially volatile regions and nations for our oil consumption? And 

could lifting the export ban result in a decrease of lower priced domestic crude oil for refineries in the Northeast? 

Mr. LIPPOLD. Not being an economist, I wouldn’t know how it is 

exactly going to ripple through and affect the markets. But I can 

tell you from a national security perspective, the fact that we are 

still as dependent as we are on imported oil does have an effect on 

our ability to act independently on the world stage. 

Mr. PALLONE. And could lifting the export ban result in further 

imports from the Middle East? 

Mr. LIPPOLD. I don’t know if we exactly know that. One of the 

problems is if we lift the export ban and we introduce crude onto 

the market, every study that is out there indicates that the vast 

majority of it will go to the highest bidder. Oil will always follow 

the path of greatest financial gain. Right now that is going to be 

to Asia, and that is going to have a ripple effect that goes through 

every part of our economy, including Gorman-Rupp. I mean the 

previous testimony. A few years ago, their president said that the 

Chinese were copying their pumps, building what they are doing, 

and yet we are going to be now providing them, if we export it, fuel 

that is going to be taking on those very industries that undermine 

our industrial base. That is not something we want to do. 

Mr. PALLONE. I want to ask you something about refining capacity. We have heard suggestions that there is insufficient refining 

capacity for the light tight oils that are being produced today and 

that therefore we have a surplus of oil that must be exported. But 

do you believe that that is the case? 

Mr. LIPPOLD. No, I do not. The refineries right now are indicating that they do have the excess capacity and capability to take 

the light tight oil and refine it for distribution. 

Mr. PALLONE. So if refiners are incapable or unwilling to process 

this oil, then our discussion today would be different. However, in 

a recent survey of a majority of the American Fuel and Petrochemical Manufacturers Association’s membership indicated that 

construction is already underway on additional refining capacity 

that will be able to process an additional 720,000 barrels of new 

light sweet crude a day. The new capacity is on track to be operational in 2016 when this outpaces EIA’s oil production forecast. 

So Commander, does this match your understanding of U.S. refiners’ ability to handle or process our domestic light sweet crude? 

Mr. LIPPOLD. It does, but I would also add onto that to say not 

only are they working to be able to take on more capacity by building onto the refineries that exist, but one of the key things we also 

have to do is look at the refining industry that goes also with the 

production industry as well and the amount of regulation that is 

imposed on them today and figure out how can that process be best 

streamlined so that we can in fact increase capacity on both sides 

to be able to make us toward that long-term goal of energy independence. Everyone talks about it, we aim toward it, and now we 

need to start putting some of the pieces in place because as the 

Czech Ambassador very well said, if you have energy sovereignty, 

you are going to have national sovereignty. We do not have that 

52 

energy independence and sovereignty right now. We are still overly 

dependent on foreign oil from countries that clearly we have seen, 

especially over the last 15 years, do not represent our interests and 

values. The more we can disconnect from that, the better off our 

Nation will be in the long run. 

Mr. PALLONE. Well, let me just ask you about the Czech Republic. I notice that the ambassador didn’t clearly indicate that U.S. 

oil would displace Russian or European crude. If we lift the export 

ban, does U.S. oil flow to the Czech Republic and how would the 

Czech Republic benefit if at all? 

Mr. LIPPOLD. I think one of the greatest problems that you would 

have is that they are geared to take certain amounts and types of 

oil and refine it. If you only have—given 195,000 barrels a day, I 

don’t know and perhaps the ambassador could enlighten and say 

this is how much it is able to process the Russian crude which is 

medium sour versus the light tight oil that the U.S. would be sending them. 

So again, one of the great capabilities that we have in our country is in our refining capacity in that we don’t have to lift the export ban if we have a refined product available that if energy is 

used as a weapon somewhere in the world, we can turn around and 

export refined product to give them immediate, tangible benefit 

that is going to help us and give us flexibility. 

Mr. PALLONE. All right. Thank you. Thank you, Mr. Chairman. 

Mr. WHITFIELD. Mr. Ambassador, do you want to respond to 

that? 

Ambassador GANDALOVIC. I just wish to say that it is a wellknown fact that even in Europe there is an access capacity of refineries. So we talk of a broader picture that U.S. oil could be possibly 

refined in some other European refineries, not speaking of a rather 

small Czech market only. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Texas, Mr. Olson, for 5 minutes. 

Mr. OLSON. I thank the chair. Welcome, Dr. Montgomery and 

Mr. Kreinbihl. Warm greetings to our NATO ally, Ambassador 

Gandalovic, and a special shipmate-to-shipmate welcome to Skipper Lippold. 

October 12th of 2000 at 11:18 in the morning, you took the biggest hit Al Qaida could muster. Their bombs killed 17 of your sailors and wounded 39 more. Your leadership kept the Cole afloat, 

and you brought her home. As we say in the Navy, Bravo Zulu, 

Skipper. Bravo Zulu. 

Now to the matter at hand, exports of American crude oil. This 

debate was started in 1975 by a law that is way out of touch with 

2015. I believe that American free trade is the most powerful force 

for freedom in the whole world, and I do see value in ending 1975’s 

ban. I know some refiners will feel some pain if we end the ban 

and stop distortions of the market caused by government mandates. But once we have moved through this debate, Mr. Chairman, 

I hope we can take a look at other distortions of the market caused 

by outdated government mandates like the broken ethanol mandate. These are not linked, exports and ethanol, but they have a 

common problem: DC in the market. 

53 

Skipper Lippold and Dr. Montgomery, I have noticed that you all 

have very different opinions about crude exports causing more imports of foreign crude. You each have 1 minute to make your case. 

Skipper, you have the con. 

Mr. LIPPOLD. Thank you, Congressman. I think when you look at 

the imports that we have today, when we are still importing 30 

percent of our oil and the fact that it is not controlled in an open, 

free market, there are entities out there, whether it is OPEC or 

other nations that are acting as cartels that are influencing that 

market and will continue to have an undue influence on them, they 

will directly affect our national security should they choose like 

they did in 1973 or ’73, ’74, following the Yom Kippur War, to 

squeeze the oil supply and force an embargo and put things on us. 

What we need to do is create the capacity and capability in this 

Nation using the oil that we have at hand to refine it here at home 

so that we don’t remain dependent. One of the greatest concerns 

that I have right now is that being 30 percent, that is like saying, 

hey, you have completed 8 steps of a 12-step program on your recovery from addiction to oil. 

Mr. OLSON. Skipper, I have to take—— 

Mr. LIPPOLD. And now is not the time to go to the bar and celebrate. 

Mr. OLSON [continuing]. The con back. I am sorry, sir, but you 

are relieved. Dr. Montgomery, you are up, sir. Your response? 

Mr. MONTGOMERY. Yes. I think that the first thing to remember 

is that removing the restrictions on crude oil exports will lead to 

an increase in U.S. production of crude oil. It is that increased production that would be exported. It is not a question of production 

being constant and oil being taken away from U.S. refineries to be 

shipped overseas. Instead, the problem is that we are seeing a big 

price differential indicating that U.S. oil is backed up in those 

fields and not being produced. If it can be exported, that is a net 

addition to the world’s oil supply, and it is a net subtraction from 

the total call that the United States is making on the world market. And it is those net imports that matter for everything, as I 

said before, but in particular for national security because by reducing our net call on world oil markets, we don’t help Venezuela 

and—— 

Mr. OLSON. And Dr. Montgomery, I am sorry. I have run out of 

time. I ask that both of you submit for the record any documents 

or reports that justify your position. 

My final questions are for you, Ambassador Gandalovic. I doubt 

Mr. Putin would be very happy about America ending its ban on 

crude exports. How will his displeasure affect the Czech Republic? 

Ambassador GANDALOVIC. Congressman, with all due respect, I 

would rather not comment on other nations’ leaders. 

Mr. OLSON. Mr. Montgomery, do you care if the comment about 

Mr. Putin’s impact and maybe OPEC’s impact if we export crude? 

Mr. MONTGOMERY. Yes. I think I should have included Russia in 

my litany of those who will not be helped by lower world oil prices. 

Russia is currently dependent on its hydrocarbon exports for foreign exchange and for keeping its economy going, and both allowing unlimited LNG exports from the United States as well as reVerDate Nov 24 2008 11:25 Jan 19, 2016 Jkt 037690 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-64 CHRIS
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moving restrictions on crude oil would take away from his economic 

power. 

Mr. OLSON. Thank you. Go Navy, beat Army. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

California, Mr. McNerney for 5 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman. I thank Mr. Barton 

for bringing this issue up, and I thank the panelists for an interesting discussion this morning. 

It looks like there are about three issues that are involved here: 

the impact on domestic prices, the impact on national security, and 

the environmental impact. So the first two sort of go hand in hand. 

Dr. Montgomery, I believe you stated that it is all about imports, 

net imports and net exports so that if we export more crude than 

we import refined product, we are on the winning side of this 

thing. Is that what I understood you to say? 

Mr. MONTGOMERY. No. Our increased exports of crude oil would 

not be offset by increased imports of refined products. Unless people start consuming more gasoline because the price of gasoline has 

dropped, there is going to be no change in our product consumption. So it would be a net so that—to a first approximate, back of 

the envelope, the amount of additional oil that we produce and export is a net change. It is not going to be balanced by increased 

import, by increased product. 

Mr. MCNERNEY. Well, I didn’t mean that we were going to import more. I meant that if we export more than we import, then 

we are on the winning side of this thing. That is what I understood 

you to say. But my problem with that is that if we depend more 

on imported refined product, then we have to secure our sea lanes 

which has a very high cost that the consumers aren’t going to pay 

at the pump but they are going to pay through our National Defense Authorization. Would you agree with that, Commander? 

Mr. LIPPOLD. I think that there is going to be a certain amount 

of some cost that is going into any safeguarding of the sea lanes 

of communication for the global economy. The issue is that if you 

begin to increase more coming to the United States, obviously that 

lifeline is going to become more important for us, and yes, we 

would have to develop more assets to put out there. And while 

there may be a cost, I am certainly not going to turn down any opportunity to have more ships built to do that. 

Mr. MCNERNEY. Thank you. The environmental impact is also at 

surface here. I think the increased production has been very good 

for our economy, but my concern is that the technology that we 

need to keep production clean—by clean I mean carbon, greenhouse 

gas emissions from production, greenhouse gas emissions in transportation—that they are not there to keep up with the demand 

that would increase if we lifted the export ban. Did I make that 

clear? So I guess I am concerned about the environmental impact 

of increased emissions, increased groundwater contamination, especially in California, if we lift this ban, you know, precipitously. 

Would you agree with that, Dr. Montgomery? 

Mr. MONTGOMERY. Not entirely. I mean, yes, the increased activity in producing oil will produce somewhat—well, the activity of 

producing oil itself is not going to increase greenhouse gas emisVerDate Nov 24 2008 11:25 Jan 19, 2016 Jkt 037690 PO 00000 Frm 00060 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-64 CHRIS
55 

sions. Let me stop there. It is only if that increased production of 

crude oil does in fact reduce gasoline prices. 

So first of all we have to all agree that allowing exports of crude 

oil would cause gasoline prices to fall. If we all agree on that, then 

yes, there would be some increase in consumption of gasoline in the 

United States. We actually calculated this in the study we—— 

Mr. MCNERNEY. I am not talking about consumption. I am talking about fugitive gas emissions in the production process, fugitive 

gas emissions in the transportation process. 

Mr. MONTGOMERY. Those—— 

Mr. MCNERNEY. But I don’t think our technology is there yet to 

make sure that that increased production in the United States and 

increased transportation in the United States and overseas is going 

to be carefully done. I just don’t believe that we are there. 

Mr. MONTGOMERY. I believe it is. I have been watching this industry for 40 years. There are occasional accidents—— 

Mr. MCNERNEY. Well, if that is the case, then why—— 

Mr. MONTGOMERY. They operate safely. 

Mr. MCNERNEY. Let me regain my time. Why are they burning 

off so much gas in the production process? 

Mr. MONTGOMERY. In the Bakken it is being burned off because 

they can’t build the infrastructure fast enough—— 

Mr. MCNERNEY. Well, that is my point. 

Mr. MONTGOMERY [continuing]. To move the gas out. 

Mr. MCNERNEY. They don’t have the infrastructure there yet—— 

Mr. MONTGOMERY. But that is not—— 

Mr. MCNERNEY [continuing]. To affect the production that is already being done. So if we increase production, then we are going 

to get more of that. 

Mr. MONTGOMERY. We actually—— 

Mr. MCNERNEY. And I would like to fall back on what the Commander’s observation was that the U.S. dependence on 30 percent 

of imported oil, we really aren’t in a position to precipitously lift 

the ban. I think we can do it in steps, and it would make sense 

to increase production in exports in steps but not precipitously. We 

are not there yet. I will yield back. 

Mr. WHITFIELD. The gentleman yields back. At this time I recognize the gentleman from Illinois, Mr. Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you, Mr. Chairman. This is a great hearing, 

and I appreciate those who are here. The Ranking Member Mr. 

Pallone really said an interesting statement. At the time that—and 

he is still here so hopefully I get it right. The restriction, the current restriction was based upon our desire to protect our economy 

against state oil interest, state-owned oil interest. That is why we 

did it in the ’70s. The international security debate today is now 

we need to export oil to protect our allies against state-owned oil 

interest. 

We are in a different era. We are in a different age. Commander, 

when you sailed the seven seas, I was on the West German border. 

My defensive position was across the border from a country that 

was called Czechoslovakia at that time. That country no longer exists. You have the Slovak Republic and the Czech Republic, and 

they are our allies. And I spent a lot of time in Eastern European 

issues. Just returned with the Speaker from Lithuania, Finland, 

56 

Poland, and Ireland, and they want to free themselves from the 

grip of oil extortion by Russia. 

So the world has changed, and I also take issue with the flexibility debate that you have about why we shouldn’t export because 

you have more flexibility to respond if you have more crude oil on 

the world market. Recovering crude oil is not something you can 

do overnight. It is a time-consumed process of investigation, drilling for discovery and then drilling for recovery, and it takes a long 

process. 

So right now the United States, we export refined product. Why 

do we export refined product? Does anyone know? Because we 

produce more than we consume. So Commander, you wouldn’t ask 

the United States to not export refined product when we produce 

more than we consume, would you? 

Mr. LIPPOLD. No. 

Mr. SHIMKUS. OK. And so the debate on our refining capacity, 

and we have it, too. I have got both sides on the aisle who are trying to make this argument. But the idea is we want more crude 

oil on the world market. Economics 101, supply and demand. You 

don’t have to be an economist to understand that if demand remains the same and supply increases, the price goes down. The 

only political fear is there are some unplanned disruption in our refinery, a fire, that there is a price spike. Then everybody gets 

caught by that. 

So I only have 2 minutes left. I want to cover, one, Eastern European national security relies on expanded exports. Whether it is 

LNG or crude oil, they are begging the United States to be involved 

in this market for their own security. The second thing is the economic argument for pricing is sound. More crude oil on the market, 

demand remains the same, prices go down. And the third thing, 

Mr. Kreinbihl, you mentioned it, and it is true. Chairman Emeritus 

Barton and Mr. Rush were talking about jobs related, and we were 

talking about the State of Illinois. Well, Southern Illinois is exhibit 

number one. We are ready. We have marginal wells. We were prepared for using the new technology. Prices went down, and there 

is a halt in any activity of recovering from the Illinois Basin which 

is probably going to be one of the most productive basins in the 

country because now the pricing is just not there. So the local 

schools have lost revenue. The local counties have lost revenue. 

The job creators, the haulers, the steel mills have all lost the ability to create jobs because of a policy that was designed, and I will 

just end on this, a policy that was designed to protect us against 

state oil interests. Well, we don’t have to fear state oil interests 

anymore. They have to fear us as we put our crude on the world 

market. So with that, Mr. Chairman, not many questions, but a 

statement of listening to the testimony. I yield back. 

Mr. WHITFIELD. Great opening statement there. This time I 

would like to recognize the gentleman from Texas, Mr. Green, for 

5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and I would like to ask 

my full statement be placed in the record. 

Most of you know and maybe not the panel but I represent a district in East Houston that at any given time over the last 20 years, 

I have had all five of our refineries in the Houston ship channel 

57 

in our district. And I can tell you growing up there, this is the best 

time to be in the refining business in Texas that I have ever seen. 

And I know the issue is that most of those refineries were retooled 

in the ’90s to handle our overseas crude, Venezuela, you name it, 

heavier crude because that is all we could get. 

But now we are seeing some of those refineries actually retooling 

to take our lighter sweet that we are getting. Now it is millions of 

dollars of investment. It was millions of dollars to turn those refineries around from lighter crude in the ’90s to heavier crude, so it 

is going to be that. So our engineering companies are doing very 

well right now. 

But Mr. Montgomery, you mentioned massive refinery investment would be required in the United States. Do you know if that 

is occurring to handle the lighter sweet? 

Mr. MONTGOMERY. Some is occurring, but not the amount it 

would—but my understanding when I look at studies that were 

done by Baker & O’Brien for EIA—— 

Mr. GREEN. So there is some. 

Mr. MONTGOMERY. But not—— 

Mr. GREEN. I only have 5 minutes and I need to get to another 

panel. 

Mr. MONTGOMERY. Got it. Got it. Yes, there is some taking place 

but not enough to use all of the light tight oil that could be produced if we knocked out the differential. 

Mr. GREEN. My response to that, not everybody switched over to 

heavier crude at the same time in the mid-’90s, either. 

Mr. Ambassador, when you talked about the refining capacity in 

the Czech Republic, and I know Europe has a lot of other refinery 

capabilities, but you said that to handle the lighter sweet from the 

United States that your refineries would also be retooled to handle 

that lighter sweet. Is that true for Europe in general or is it just 

for the Czech Republic? 

Ambassador GANDALOVIC. I think and I am not an expert in this 

field that taking about 50 percent of non-Russian crude oil, the capacity is there to handle the light sweet. 

Mr. GREEN. OK. Well, maybe I misunderstood earlier. You said 

that there would have to be investment to retool those refineries 

to handle the lighter sweet. 

Ambassador GANDALOVIC. Yes, there might be disruption of deliveries from the East. Further retooling might be necessary. 

Mr. GREEN. Well, again, as a policymaker in our country, I would 

much rather we have that investment in our refineries and even 

though I want to help Europe both with LNG, but right now we 

are doing very well sending low-sulfur diesel from Texas over to 

Europe. And those are the jobs that we have in my East Harris 

County. They are very high-paying jobs at those five refineries, and 

there are refineries in my area who are retooling to handle that 

lighter sweet to make sure we can do it because you can’t move a 

ship very quickly, and you can’t move a refining industry very 

quickly because of the high cost of the investment. But now we 

know there is enough lighter sweet coming out of the Eagle Ford 

in Texas and even in West Texas where we thought Midland-Odessa was dead for production. But now we are seeing just amazing 

production out of that, and I think you will see a lot of our refiners 

58 

doing like they are doing in my own district along the coast of 

Texas. It is starting now, and we will see it. So if we start exporting it, we will lose some of that incentive to have these downstream 

jobs. 

I have a district where I have a lot of folks who produce oil, too. 

I represent a lot of service companies, and I want them to be working in the field. But I also want to see that we have that industrial 

capacity in our country, like the admiral said—or Commander. I 

am sorry. I promoted you. You should be an admiral. But I like 

your testimony. We need those downstream jobs to make sure we 

have that industrial capacity. 

My colleague from Pennsylvania has steel plants. We used to 

have them, but now we buy so much of our steel from everywhere 

else in the world. But I lost those jobs. I don’t want to lose our refining capacity jobs. And again, I only have a few seconds. I support exporting LNG because we have a process for it. And granted, 

the Department of Energy, and this committee has looked at it, has 

been too slow in deciding their national interest. But I have talked 

to my colleague, Mr. Barton. If we want to create a system like 

where we don’t price ourselves out of the market on exporting 

crude oil, like I would worry about chemical industry, we are not 

going to see that because we are going to make sure that exporting 

is in our national interest for LNG. And I think we could do the 

same thing for crude oil. 

But again, thank you, Mr. Chairman. 

Mr. WHITFIELD. At this time—— 

Mr. GREEN. I could spend all day with the panel. 

Mr. WHITFIELD. Yes. At this time I recognize the gentleman from 

Pennsylvania, Mr. Pitts, for 5 minutes. 

Mr. PITTS. Thank you, Mr. Chairman. Mr. Ambassador, how has 

the use of energy, you know, by regional players, shaped the Czech 

energy policy and planning? 

Ambassador GANDALOVIC. How has the use of—— 

Mr. PITTS. Energy diplomacy or energy as a political weapon. I 

don’t know, however you want to categorize it. How has that 

shaped Czech energy policy and planning? 

Ambassador GANDALOVIC. Our main policy is diversification. So 

we do not want to rely on one energy resource technologically and 

geographically or I would say in terms of foreign supplies. It applies on our domestic energy policy is so as I mentioned before in 

my testimony, we wish to develop both nuclear as well as conventional energy sources. Also we put a lot of emphasis on renewables. 

But we do not exaggerate their importance. So mix and diversity 

is our policy. 

And the same thing applies on resources of energy that we do not 

have in our country, oil and gas. Speaking of gas, you may also 

have noticed that Visegrad Group countries, the four countries I 

mentioned, about 1 1⁄2 years ago turned a letter to Speaker Boehner 

to initiate relaxation of U.S. strict export policies on gas export. So 

the same logic that applies to gas exports, I believe would apply on 

our position and position of other Visegrad Group countries on the 

U.S. policy of limitation of crude oil exports. 

Mr. PITTS. Thank you. Commander Lippold, would you explain 

again your assertion that lifting the export ban would increase reliVerDate Nov 24 2008 11:25 Jan 19, 2016 Jkt 037690 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-64 CHRIS
59 

ance on foreign imports? The Energy Information Administration, 

leading experts, academics in the energy field all seem to agree 

that removing the U.S. crude export ban would likely increase U.S. 

production an reduce imports. What is the basis of your assertion? 

Mr. LIPPOLD. When you produce more oil and you put it on the 

world market, that oil is going to go wherever the highest bidder 

is going to take it. So we can’t control where it is going to go, 

whether it is to Eastern Europe and our partner allies over there 

that may need it because of energy weapon—being used as a weapon. For example, Russia. Every study that I have read says that 

the majority of that oil is going to go to the highest bidder. Right 

now that is going to be China. Obviously, that has huge national 

security implications. When I look at the oil that would be produced and the fact that we have it, necessity is going to be the 

motherhood of invention. We are going to be able, whether it is 

through fracking or other things—I have never said don’t ever lift 

this ban. What I am saying is if you just immediately drop it, we 

have not thought through those national security effects. 

Right now one of the things that I worry about is that I think 

everyone on the committee would agree. We would like to have a 

national energy policy that is dovetailed and marries in with a national security strategy protected with a national military strategy. 

But when you look at if we were to just open it and do it, all we 

have are studies. There have been conflicting studies on what that 

effect would be. There have been conflicting studies on the price 

impact it would have. What it doesn’t do is that when you are still 

30 percent dependent on oil to begin to start exporting that oil 

overseas when we have not even solved our energy independence 

here at home, it doesn’t make common sense. 

Mr. PITTS. Thank you. Dr. Montgomery, you discussed the cost 

and investments domestic refiners must make relative to costs associated with exporting crude. In short, can you tell us what would 

make the U.S. economy more efficient, refining more crude or allowing for exports? 

Mr. MONTGOMERY. Unquestionably allowing for exports. Essentially what we are doing with the crude oil export restrictions is 

raising gasoline prices in order to subsidize a select group of refiners. In essence, the crude oil export restrictions are price controls. 

They are price controls on a particular kind of oil. The refiners I 

think can see that they are benefiting from that because otherwise 

they wouldn’t have any reason to oppose lifting the export restrictions. 

So I think we will have some refinery investment which will take 

up some light tight oil, but it is still going to strand a great deal 

of oil that could otherwise be produced because without those price 

controls and without those subsidies, U.S. refiners can’t compete 

selling all of the light tight oil in the world market without a subsidy. 

Mr. PITTS. Thank you. My time has expired. 

Mr. WHITFIELD. At this time I recognize the gentleman from 

Pennsylvania, Mr. Doyle, for 5 minutes. 

Mr. DOYLE. Thank you, Mr. Chairman, and thanks for holding 

this hearing. I find it very interesting and fascinating. 

60 

You know, I have been in Congress 21 years, and I have heard 

colleagues on both sides of the aisle constantly talk about the goal 

of making our country energy independent so that we could free 

ourselves from having to import oil from the Middle East and Venezuela. And the reason we don’t export oil is because we were importing so much. It seems kind of crazy, at least in Pittsburgh, that 

you would talk about exporting something that you are still importing. 

And I want to say another thing, too. There is no urgency to do 

this. I would like to put into the record an article that appeared 

in the Financial Times just 2 days ago entitled Oil Market Throws 

Cold Water on U.S. Export Ban Push. 

When we talk about letting the market work, this is very interesting. It says the oil market has thrown cold water on the push 

to repeal the ban. The price of U.S. crude has been remarkably 

strong against global grades, undermining the contention that export restrictions have imprisoned domestic supplies and forced producers to sell at deep discounts. 

Last week the spot price of light Louisiana sweet crude on the 

U.S. Gulf of Mexico Coast was $61 per barrel, more than the price 

of $59.09 for Dated Brent from the North Sea. 

The article concludes by saying, in an analyst from Citigroup, if 

the U.S. crude export ban is removed and light sweet crude starts 

to flow out of the U.S. Gulf Coast, it would struggle to find a home 

in the well-supplied European market. It would only add to the 

oversupply in the Atlantic Basin and could hurt Brent more than 

it helps WTI. It could well be an instance where U.S. upstream 

players should be careful for what they wish for. 

So Mr. Chairman, I think that we can slow this process down. 

There is no urgency to do this and start to consider some of the 

ramifications if we just simply open up, lift this ban which will 

never be put back in place again. I would say to my Pennsylvania 

colleagues, by the way, to be careful what this does to our refineries in Philadelphia because it damages them greatly, and a lot 

of that has to do a little bit with the Jones Act which I will get 

into later. But I think we ought to slow this process down. 

Why wouldn’t we be talking about taking this excess light sweet 

crude and tooling up our refinery capacity to keep it here in the 

United States and eventually over time become the energy independent country that we keep telling our constituents we want to 

be? I mean, this doesn’t make a lick of sense to me as policymakers 

who are supposed to be thinking 20, 30, 40 years down the road 

for the next generation, not how can we make a quick buck on the 

disparity in oil prices. I mean, that is not our job. Our job is to look 

after the future of our country, not to look after how people need 

to make some more money in the oil industry. 

I have a couple questions. Did I go over my whole 5 minutes or 

has that clock been running? There is no way I spoke 8 minutes 

and 50 seconds, Mr. Chairman so—— 

Mr. WHITFIELD. I think you have spoken too long, Mr. Doyle. 

Mr. DOYLE. I mean, were you just so enraptured with my speech 

that you forgot to put the clock on. I think the only—— 

Mr. WHITFIELD. Let me just say, you were mesmerizing. 

61 

Mr. DOYLE. I think I only used a couple seconds. Let me ask the 

panelists. The Energy Information Administration reference case 

from 2014 projects that U.S. tight oil production, which is the type 

of oil largely responsible for this oil boom, is going to increase in 

the coming years and peak at about 4.8 million barrels a day in 

2021. This was up from 3.5 million barrels a day in 2013, and it 

has been a huge increase from where we were in the year 2000. 

However, except in the high resource case, production then begins 

to decline. 

Commander Lippold, are you concerned that this legislation essentially permanently lifts the ban, even though we may start to 

see a decrease in oil production as early as the 2020s? 

Mr. LIPPOLD. Sir, that would clearly be one of the considerations 

that needs to be taken into place as the long-term predictions on 

what our oil production capacity is going to be and the fact that 

if you lift this ban precipitously and take it off, that the ramifications that it would have exactly on the point you made—what is 

our national security impact going to be 20 to 30 years from now— 

needs to be thought through. That is why I say let’s take a longer, 

slow down the approach, and take a look at either a phased-in or 

a more thought-out process. 

Mr. DOYLE. Yes, I mean, do you think there is a more responsible 

way to allow for some of this oil to be exported? I mean, is there 

a different mechanism that we could do this for? And do you think 

we should just keep the ban in place? 

Mr. LIPPOLD. I think one of the great things about our Nation is 

that we in fact have the capacity that we are developing this oil, 

that it is going to be out there, and that we are now going to have 

a greater degree of flexibility of aiming and working toward that 

energy independent country that we want to be. But I think that 

we shouldn’t lift it immediately. Could it be lifted at some point, 

absolutely yes. Should we lift it at some point? Absolutely. Less 

regulation is better for the country as a whole. 

Mr. DOYLE. Thank you. We saw changes to refineries in the 

1970s to process new types of oil, and I know that some of the refineries in my home State of Pennsylvania have made those structural changes to process the new oil we are benefiting from today. 

I have read that a large number of refineries will follow suit to 

benefit from the oil boom. I think many refineries are going to start 

to make these structural changes in the coming years. 

Commander Lippold, I am a strong supporter of Americans working and of organized labor, and I would like if you would comment 

on how the Jones Act plays in this? Because I have talked to my 

refineries up in Philadelphia in my State, and there is some concern that because of, you know, U.S. flag ships, the Jones Act, it 

may actually cost more money to take that light sweet crude up to 

our refineries in Pennsylvania than it would be to send them over 

to Europe. And that is going to cost a lot of high-paying union jobs 

that we sustain families on that we are very proud of in Western 

Pennsylvania. And I want to know the effect of that because I have 

got colleagues on this committee from Pennsylvania, two Pennsylvanians on the other side of the aisle, that I think want to hear 

what the effect this is to Pennsylvania refineries. 

62 

Mr. LIPPOLD. I have not studied, Congressman, the effect of what 

the Jones Act would have knowing that that oil be transported. I 

haven’t run the analysis to find out what the economic costs would 

be to ship that oil overseas versus keeping it in the United States 

to a certain degree because if you look at it, if we were to start 

pushing, though, one of the things you have to consider if we do 

drop the Jones Act or we impact in some way or if we change the 

export, lift the export ban, is obviously it is going to have an impact on the American shipbuilding industry as well. That is one of 

those ramifications or ripple effects that we need to think through 

and—— 

Mr. DOYLE. Dr. Montgomery, how about your analysis of how the 

Jones Act plays in this? 

Mr. MONTGOMERY. We did actually look at that, and on that I 

agree with you completely. If the Jones Act were even lifted for 

shipments of crude oil between U.S. ports, a great deal more of the 

oil that we could produce—a great deal more of the light tight oil 

would go to U.S. refineries in the Mid-Atlantic than it will with the 

Jones Act in place. So yes, the Jones Act is clearly hurting the refineries in Pennsylvania, and lifting the Jones Act, along with removing the export restrictions, would keep a lot more of that 

crude—— 

Mr. DOYLE. Well, let me make it clear. We have no intention of 

lifting the Jones Act in the United States Congress, just so that 

that is clear. That is not going to happen. But it is going to negatively impact our refineries in Pennsylvania. 

Mr. Chairman, I would just end by asking that we put this article from the Financial Times into the record and to say that the 

studies I have seen of the refineries in Europe is that they are actually designed to process medium sour oil, not light sweet crude. 

I don’t think most of Europe is going to benefit from this at all. 

Thank you. 

Mr. WHITFIELD. We would like to get a copy of that, without objection. 

I might also say that the record is going to be open for 10 days, 

and we are also working for an accumulation. There have been so 

many articles written on this issue, and we are going to enter all 

of those into the record because we want a full record. And our 

staff is working with some groups to compile that list of articles 

now. So thank you. 

Mr. DOYLE. Thank you. 

Mr. WHITFIELD. At this time I would like to recognize the gentleman from Ohio, Mr. Latta, for 5 minutes. 

Mr. LATTA. Well, thank you, Mr. Chairman, and thanks very 

much for the panel. It has been a very interesting discussion today, 

and we appreciate your patience for taking our questions and listening to us. But if I could start, Dr. Montgomery, with a couple 

of questions for you, I just want to just double-check some facts 

here. We were talking right now, fortunately the numbers are coming down, that we are at about 27 percent of our oil is being imported in this country. Is that correct? 

Mr. MONTGOMERY. Yes. 

Mr. LATTA. And I think if my quick check here is that that is 

back to the lowest number that we have done since 1965. And is 

63 

it correct that we are using about 18.7, 18.9 million barrels of oil 

a day in the United States? 

Mr. MONTGOMERY. It sounds like the right number, yes. 

Mr. LATTA. OK. Well, we will assume that is correct. 

Mr. MONTGOMERY. Yes. 

Mr. LATTA. OK. And if you take that 27 percent of the oil that 

we are importing, you know—another quick number, is it correct 

hat Canada is our largest supplier of imported oil? 

Mr. MONTGOMERY. Yes. 

Mr. LATTA. OK. And then would Mexico, where would they fall? 

Are they close to second? Third? Somewhere in that? 

Mr. MONTGOMERY. Mexico has trouble with production sometimes, but yes. And basically, Western Hemisphere sources aside 

from Venezuela are where we get most of our oil. 

Mr. LATTA. OK. So we have been very fortunate in the last few 

years that we have weaned ourselves really off of the imported oil 

from maybe more from the Middle East. We are looking at the Canadian and Mexican oil being really pretty much our main area, 

probably over 50 percent then. We are close to it today. Would you 

calculate that number at that? 

Mr. MONTGOMERY. Yes. Yes. We get only occasional shipments 

from the Middle East at this point. 

Mr. LATTA. OK. Thank you very much. Mr. Kreinbihl, we are almost neighbors. I am from Wood County, and you are from down 

in Mansfield, Richland County. And in my district in Northwest 

Ohio, I have got 60,000 manufacturing jobs. And we have had a 

boom in the State of Ohio because of the Utica shale. Now, I don’t 

think that Utica has quite made it into Richland County or they 

have found the discoveries there yet. But I know that there have 

been questions that came to you a little bit earlier. But could you 

go back into it a little bit because again, when you look at the jobs 

that are produced, especially the jobs in your industry, could you 

get into that a little bit more about what the Utica has meant in 

the production in the State of Ohio and also with the shale development over in Pennsylvania with the Marcellus, how that has 

helped your business? 

Mr. KREINBIHL. There has been quite a bit of activity in both of 

those, the Utica and the Marcellus. I guess what I would point out 

to answer that question is the chart that the Energy Equipment 

and Infrastructure Alliance provided, and it really shows the number of different manufacturers and suppliers that are involved in 

this industry. And being in Ohio, I have seen some of the growth. 

As a matter of fact, as I drove over here yesterday, I was in traffic 

with some of the equipment that was being moved through the 

State. So it has an effect that as there is more activity going on, 

whether it is pumps or something else, there is just a lot of activity 

all over from a manufacturing and supply standpoint. Does that 

answer your question? 

Mr. LATTA. And because also, and off the top of my head I can’t 

think of it, but like in unemployment numbers in the last several 

years, how is Richland County doing in the Mansfield area? 

Mr. KREINBIHL. Richland County, we have lost a General Motors 

plant here recently. So Richland County has been really suffering 

with unemployment. I will tell you that a college roommate of mine 

64 

lives over in Caroline County or Caroline, Ohio, and there is a lot 

of activity over there and it was really booming until the price of 

oil went down. 

Mr. LATTA. Well, thank you very much. Mr. Ambassador, if I 

could, in my remaining time, just ask a couple of quick questions. 

You know, some of us on the committee have been privileged to be 

able to meet with a lot of, especially Eastern and Central European, leaders, and the discussion you had about the diversification 

that your country is looking at, why do you think—and we have 

heard this and we have had certain members like Mr. Shimkus and 

some others bring this up. Why is it that Europe is looking to the 

United States for energy needs into their future? 

Ambassador GANDALOVIC. Well, as I said, the more resources of 

energy that are coming from stable democracies in this matter from 

the United States as an ally moreover, the better for us countries 

that are relying on supplies from the outside. 

Mr. LATTA. Thank you very much. Mr. Chairman, my time has 

expired, and I yield back. 

Mr. BARTON [presiding]. We thank the gentleman from Ohio. I 

now recognize the gentlelady from Florida for 5 minutes. 

Ms. CASTOR. Well, thank you, Mr. Chairman, and welcome to the 

witnesses. Thank you for your testimony today. My overriding concern is with the American consumer and with America’s national 

security, and it doesn’t make a lot of sense to me to export American crude oil to the People’s Republic of China while increasing 

costs to American consumers and refiners. 

Commander Lippold, first of all thank you for your service to our 

country. You have a very distinguished record of service, and I 

heard you loud and clear that you pointed out that the United 

States still imports a staggering amount of oil, and you have urged 

us to be cautious, to consider the real-world consequences. You say, 

while tempting from the perspective of gaining a commercial foothold in a new market arena at this time, the national security implications of changing the existing policy, regulating the export of 

crude oil is rife with unknown and probably unintended consequences. That must be fully considered and addressed. Now, you 

have spent a lot of your career on international security concerns. 

Can you talk to us a little bit about what is happening in China, 

they are increasing cyber security attacks, whether state-sponsored 

or not, what is going on in the South China Sea, especially their 

reclamation of islands and lands to seemingly want greater control 

over the shipping channels. What is happening with China’s military strategy? 

Mr. LIPPOLD. What you are seeing in China today is a country 

who has taken their economic power and wealth and is beginning 

to expand it on a, first, regional basis to gain greater influence over 

the countries that are around there. China has always viewed the 

South China Sea as their lake. They view that as entirely their territory. They tend to ignore the territorial limits at 12 miles or the 

exclusive economic zone that goes out to 200 miles. They say that 

they can expand it if it is disputed. They are the big guy on the 

block, so they will do what they want. And that is what you are 

seeing with the building of the islands there today. 

65 

While we have tried to engage with the Chinese, and I think we 

should continue to engage with them on a very positive basis where 

and when possible, clearly they have taken actions recently that 

are not in accordance with our interests or values, whether that 

has been in cyber warfare, how they are dealing with things regionally, how they have dealt with us economically, and obviously 

Gorman-Rupp has unfortunately been a beneficiary of their trademark violations and in stealing our equipment and knowhow, 

American knowhow. 

So on a variety of fronts we just need to engage with them positively where we can and punish them where we have to in order 

to make sure that they behave responsibly in the international 

community. 

Ms. CASTOR. I mean their international strategic plans have been 

quite interesting. I can’t help but think back to when I traveled to 

Afghanistan, and all of the American money, the treasure, the lives 

that we poured into that country and then it was pointed out that 

it was China that was exploiting their minerals. The same is happening all across the globe, where the Chinese reach is just enormous, into Africa, into South America. And I don’t know why the 

United States of America would be party to supplying China, the 

largest importer of petroleum across the globe, why we would help 

them gain that strategic foothold. I take your advice very seriously, 

and I think it should give this committee something to think about. 

Thank you, and I yield back the balance of my time. 

Mr. BARTON. The gentlelady yields back. We now go to the gentleman from Mississippi, Mr. Harper. 

Mr. HARPER. Thank you, Mr. Chairman. If I could start with Dr. 

Montgomery? Dr. Montgomery, there was a moment in questioning 

earlier ago that you were trying to answer about the flaring excess 

at production and the impact increases in production might have, 

and I don’t think you got a chance to finish that. Did you care to 

comment on that further? 

Mr. MONTGOMERY. I did. Thank you very much. What I wanted 

to say was that we looked at this and did some computations in 

the study that we did at NERA, and what we found is that using 

an oil export ban to try to limit field emissions or greenhouse gas 

emissions associated with fuel consumption is about the worst possible climate policy you could think of. 

The administration just announced that it thinks that a ton of 

CO2 does $36 worth of damage. Well, we calculated that the economic benefits of oil exports that you would lose through the ban 

amount to several hundred dollars per ton for every ton of CO2

emissions that you could avoid that way. There are so many other 

ways to reduce greenhouse gas emissions and to deal with the 

problems of appropriate regulation at the field that the oil export 

ban should be at the bottom of anybody’s list as a tool for environmental policy. 

Mr. HARPER. Let me ask you this. Are oil export restrictions one 

of the main reasons why West Texas Intermediate Crude trades 

about $5 less per barrel than its international competitor, Brent? 

Mr. MONTGOMERY. For a time there was a problem with pipeline 

capacity for moving it. At this point, I think that is exactly the reason. The same thing is true of Bakken in North Dakota trading 

66 

below Brent. It is because the only—and in fact, in the last couple 

of weeks, well, in the last day or two Bakken has actually popped 

up to being pretty much equivalent to Brent and what the news reports were saying was that priced U.S. refiners out of the market. 

So the fact is that, yes, it is the fact that it is not economical to 

be used in the United States that drives that price—— 

Mr. HARPER. In my home State of Mississippi, we have the Tuscaloosa Marine Shale that was really beginning to take off. The 

cost per well was going down, and then of course, the price drops 

out and production stops. And that has been an issue. But I have 

seen estimates that show that eliminating the discount that we 

just talked about would incentivize a significant amount of investment in the United States. IHS estimates perhaps as much as $750 

billion over the next 10 to 15 years. What impact would that have 

on the U.S. economy broadly and who would benefit? 

Mr. MONTGOMERY. That kind of investment is basically a driver 

for economic growth. The slow growth that we have had in the past 

few years has almost—we wouldn’t have even have had that were 

it not for the investment that was going on in the oil and gas industry, and as Mr. Kreinbihl has described, that investment produced stimulates activity throughout the economy, not just people 

working on drilling in the oil fields. It provides us with lower cost 

energy, and it is a driver of economic growth. 

So that investment, as long as it is driven by the market and is 

not driven by government subsidies to refiners through effective 

price controls. 

Mr. HARPER. Thank you. 

Mr. MONTGOMERY. So all investment is not the same. The market-driven investment that we have seen because of a technological 

revolution in the oil and gas industry, that clearly drives the economy forward. Taking money out of consumers’ pockets to subsidize 

a set of refiners doesn’t. 

Mr. HARPER. Thank you, Dr. Montgomery. Mr. Kreinbihl, if I 

could ask you a question? If the export ban were to be lifted, how 

would you change your business plan to adjust for the more positive outlook? 

Mr. KREINBIHL. We have our business plan already in place for— 

as I mentioned, last year when we looked at our business plan for 

this year and we have to look at, OK, if things increase a certain 

percentage or decrease a certain percentage—— 

Mr. HARPER. Sure. 

Mr. KREINBIHL [continuing]. What do we do? What it would 

mean for us is making sure that we hire the people that can create 

the product—— 

Mr. HARPER. Let me ask this because—— 

Mr. KREINBIHL [continuing]. Supply the market—— 

Mr. HARPER [continuing]. My time is almost up. How quickly 

would you see that positive impact? How quickly? 

Mr. KREINBIHL. I don’t know that I can comment on that. It depends on how quickly the oil rigs get back into when the demand 

increases. 

Mr. HARPER. OK. 

Mr. KREINBIHL. There is quite a bit of supply now. 

Mr. HARPER. My time has expired. I yield back. 

67 

Mr. BARTON. The gentleman’s time has expired. We now recognize the distinguished gentleman from Iowa for 5 minutes. 

Mr. LOEBSACK. Thank you, Mr. Chairman. This has been a very, 

very wonderful hearing. I think we have all learned quite a bit, and 

I want to thank all the panelists. Although my colleague from 

Texas is no longer here, Mr. Olson, one thing we can agree on, and 

I have expressed this concern directly to General Dempsey when I 

was on the Armed Services Committee as a proud father of a stepson and daughter-in-law, both Naval Academy grads, although they 

are in the Marine Corps now, but go Navy nonetheless, Commander. 

Also, Ambassador Gandalovic, good to see you as always. For 8 

years I have proudly represented Cedar Rapids, Iowa. No longer, 

but they have a wonderful, of course as you know, the National 

Czech and Slovak Museum there. So thank you for being here 

today as well. I do want to start out with you, Ambassador. If you 

could, because I realize a lot of what is going on here, the proposal 

to lift the ban on crude oil exports is based on a concern for our 

national security, for the national security of the countries where 

hopefully the oil would be going. Whether it would or not is not a 

question. Can you talk a little bit about the national security interests at stake here for the Czech Republic when it comes to where 

you get your oil, where it might come from if this ban were to be 

lifted? 

Ambassador GANDALOVIC. Well, again, since the changes in 1989, 

we saw energy delivery and energy sovereignty as a part of our national security, and this is why we put such an emphasis on diversification. And so in my whole testimony, it is of course representing a country that has done all possible measures to enlarge 

opportunities and diversify resources of energy. It is not my role 

here to tell you, the United States, what you do with your national 

security, but I am representing a country that is prepared to accept 

deliveries, even from the United States, as or when or if the ban 

is lifted, and it is actually convinced that those deliveries would 

benefit to our national security as it is coming from an ally. 

Mr. LOEBSACK. Thank you. And again, I feel for you as the ambassador. You are not a politician, yet you have been kind of put 

in the middle of this here today, and I thought you have done a 

very good job representing your country and serving as the ambassador and not a politician today. So thank you very much for what 

you have done today as far as your testimony is concerned. 

Look, we had another hearing on this issue a while back, not on 

this particular bill but on the issue of lifting the ban on export. 

And I stated at the time that my biggest concern, not unlike others 

up here today, is our national security, U.S. national security. Everyone here knows that prior to 1973 America had essentially a 

drain America first oil policy. I think we can all acknowledge that, 

driven by the Seven Sisters, driven by domestic interests here in 

the United States and pursued by Congress and pursued by the 

various administrations up to that point. So I have a real concern 

myself about lifting this ban from that standpoint given that we 

still import 30 percent of our oil, given all the other considerations. 

I understand the economic arguments. I get all that, markets are 

going to drive prices, all those things. But at the same time, I just 

68 

think we have to be very careful that we don’t do something in the 

short term which, while it may benefit certain actors in the United 

States, private industry, in particular in the oil industry, that we, 

not as my colleague from Pennsylvania expressed his concern on 

this same issue, that we look down the road, that we don’t do 

something now in the short term that is going to have a very, very 

negative effect on our national security, on our economic security, 

on the security of the United States. That is why I do appreciate 

your testimony, Commander. And again, I appreciate the testimony 

of everybody here because you are all coming at this from different 

perspectives, and we have to take into account all those perspectives. There is no question about that. 

But I do have a question as to—and I stated this question when 

we had the previous hearing similar to this, is there any guarantee 

if we lift this ban that the oil is going to go where we might want 

it to go from our national interests perspective? And Mr. Chair, I 

see I am at the end of my time or near the end of my time, so if 

I don’t get to an answer, I would like to request answers in writing 

from the panelists. 

Mr. BARTON. Without objection. 

Mr. LOEBSACK. Commander? I am sorry. 

Mr. BARTON. Without objection. 

Mr. LOEBSACK. OK. Thank you. 

Mr. BARTON. Are you yielding back now? 

Mr. LOEBSACK. If you need me to I will. 

Mr. BARTON. Well, your time has expired. 

Mr. LOEBSACK. OK. I yield back. Thank you, Mr. Chair. Thank 

you. Thank you for your help. 

Mr. BARTON. I am a little rusty at this, see, but we are only supposed to get 5 minutes. The gentleman from West Virginia is recognized for 5 minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman. And thank you for 

your patience, the panel. Almost 2 hours ago there was a remark 

that was made, and I have heard it over the last few years that 

if we are going to have exports, we ought to at least tax it or get 

some kind of fee on that export. And all I can say is, with all due 

respect to those that want to tax our exports, that will require a 

Constitutional amendment because there is a prohibition under Article 1, Section 9, paragraph 5 in the Constitution that says no tax 

or duty shall be laid on articles exported from any state. So I just 

want everyone to understand. As much as some people might want 

to take advantage, you just can’t do that. 

So some of my questioning is looking for consistency. We seem 

to be here in Congress often picking winners and losers. I don’t like 

that, and in this consistency we—I come from a coal state. We export a lot of coal, and now we are in the process—and actually, if 

I can stay on coal just for a minute. With this increasing demand 

for coal around the world, we haven’t seen a rise in the price of 

coal. Coal has been a very stable marketplace to have that product. 

So I reject some of that notion that if we export it, we are going 

to see a rise in price because I haven’t seen that with coal. And 

now we have got the argument that seems to be moving on LNG, 

that we are finally, finally, going to start exporting our natural gas, 

both for diplomatic purposes and economically. What is the consistVerDate Nov 24 2008 11:25 Jan 19, 2016 Jkt 037690 PO 00000 Frm 00074 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-64 CHRIS
69 

ency here that if we say it is all right to export coal and natural 

gas but we have made—the government is going to get involved 

here and say we are not going to export oil, is that consistent? So 

Commander, I am just curious because you seem to be the designated contrarian for this panel. Do you support the export of 

coal? 

Mr. LIPPOLD. I think you have to look at it in the total context 

of energy security and what we are capable of producing and what 

nations need around the world. Right now, we are still importing 

30 percent of our oil, and until we reach that point—— 

Mr. MCKINLEY. Just on coal. Just on coal. Do you support the exporting of coal? 

Mr. LIPPOLD. I will be honest, sir. I am not familiar with coal—— 

Mr. MCKINLEY. OK. 

Mr. LIPPOLD [continuing]. And the industry. 

Mr. MCKINLEY. We export—— 

Mr. LIPPOLD. So it would be—— 

Mr. MCKINLEY [continuing]. About—— 

Mr. LIPPOLD [continuing]. Inappropriate for me to comment. 

Mr. MCKINLEY. We export about 15 percent of what we produce 

in coal because obviously this administration doesn’t like us burning coal in America. So we have found we have got markets overseas to produce that. 

What about LNG? Is your view consistent that you would also 

pose exporting LNG? 

Mr. LIPPOLD. Again, I have not gotten into LNG, although I will 

look at it and having studied it to a small degree, when you look 

at our ability to export and have an immediate impact especially 

on the Eastern European countries that are overly dependent on 

Russian gas, that is a critical national security issue that we are 

contributing positively toward and should continue to work for us, 

especially as we develop more fields and have that excess capability 

in our system where we are taking not only of our needs that are 

being met but now can give it to other nations as well. 

Mr. MCKINLEY. I appreciate it. I know we have been running 

over here long so I yield back the balance of my time. 

Mr. BARTON. The gentleman yields back. We now go to Mr. 

Tonko for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. And I would like to see us 

become less dependent on oil, imported or domestic, but that has 

not yet been achieved. Until it is, I think we need to proceed cautiously. This is not just another commodity. It has one we have 

paid a high price for in blood, treasure, and other environmental 

and social costs. 

So Commander Lippold, I appreciate your testimony and your 

perspective on this important issue. As I understand it, Venezuela 

and Saudi Arabia have the largest proven reserves of oil, more 

than 250 billion barrels and that Saudi Arabia’s oil has production 

costs that are lower than ours, among the lowest globally. And 

given that situation, it seems difficult to assess much about the 

overall direction for the price of oil without a sense of what the 

Saudis plan to do. 

I also imagine that since a number of countries rely on oil revenues to meet their obligations, they will continue to produce and 

70 

sell into the market, even if that means they may be selling below 

their production costs. So I don’t see how increasing exports of the 

U.S.-produced crude is going to have much impact on the global 

price of oil. And given that during that period, the period that our 

crude oil export ban has been in place, we have seen significant increases and decreases in prices at the pump. I doubt consumers 

will see a net benefit from lifting the export ban. 

I can see that this change could alter decisions about whether to 

continue investing in domestic refining capacity. I can see that it 

can alter decisions about whether to drill additional domestic wells, 

and I think it will also influence decisions about investments in oil 

pipeline or oil-transporting rail cars. 

So Commander Lippold, in his testimony, Dr. Montgomery refers 

to the prospect that the refiners would make additional investments to refine more light oil as economic waste. But those investments create domestic construction and related manufacturing jobs 

and maintain or create domestic jobs in the refining industry. My 

question to you is, is there strategic value in keeping a strong domestic refining industry? 

Mr. LIPPOLD. Absolutely, yes. 

Mr. TONKO. And you indicated in your testimony that you believe 

lifting the export ban would lessen the trend to declining imports. 

Would you expand upon that a bit? 

Mr. LIPPOLD. If you look at if we were to increase the capacity 

of the refiners here in the United States, while they have some excess capacity right now to take in the light tight oil that is being 

produced here in the United States, if we create the conditions and 

they expand that capacity going from the heavy sour to the light 

sweet, that is going to give us an ability to refine it here in the 

United States which is going to lessen the dependence on oil that 

we have to import in order to meet U.S. domestic needs. 

Mr. TONKO. Thank you. And if drilling slows down, we may reduce the immediate benefits to some in the oil sector, but it may 

give us a chance to catch up on other things we need to do to better 

adapt to the new production areas, for example in the areas of 

transportation and pipeline safety. The oil isn’t going anywhere. If 

it is still in the ground, it is still available for our use. In a sense, 

it maintains another form of strategic reserves. Would you agree 

with that? 

Mr. LIPPOLD. I would agree to that with a caveat and that is 

while it may be there, just as with any industry, you are now asking industries like Gorman-Rupp to be able to keep a capacity 

available so that if we decided we needed to exercise use of that 

strategic reserve that they could immediately tool up and be able 

to expand it. That is a consideration you have to look at is do we 

have the capability and capacity in the industrial base to maintain 

that in addition to keeping those strategic reserves in the ground. 

That has to be thought through, and again, this goes back to the 

point of my argument which is before we lift that ban, this is one 

of those second- and third-order effects that we need to look at is 

how do we maintain that industrial capacity that if we have to exercise use of that strategic reserve, can we and how quickly can we 

get our industrial base to tool up to be able to do that? 

71 

Mr. TONKO. Yes. Well, lifting the export ban clearly would benefit the oil production sector by drilling and other ancillary services. It would maintain or expand growth in pipeline investments 

and rail investments. These sectors have done very well, and the 

boom has spurred tremendous growth. But it has come at a cost. 

My constituents, for example, are very alarmed at the rapid rise in 

the number of oil trains rolling through our region. They do not believe that investments in safer rail cars and contingency plans for 

dealing with accidents have kept pace with the increase in oil production. If now we are incurring these costs only to export the oil, 

support for expanded domestic production will be even less popular 

than it is already in non-oil producing areas of the country. 

And so I just share these concerns with the committee and here 

at this hearing because they are real and they are lived through 

each and every day. And with that, Mr. Chair, I yield back. 

Mr. BARTON. The gentleman yields back. Mr. Cramer, who has 

been here the whole time, is not a member of the subcommittee. 

So he is going to have to wait until the two other members of the 

subcommittee ask their questions. We now go to Mr. Markwayne 

Mullin of Oklahoma. 

Mr. MULLIN. Thank you, Chairman, and thank you for having 

this very important hearing. As I alluded to earlier, Oklahoma has 

lost 20,000 jobs since January. Obviously we are a rich state in our 

fossil fuels, and it is very important. It drives our economy. And 

to have this conversation to me, as a business owner, I am just sitting there scratching my head. And Commander, I hear what you 

are saying, and I understand your point of view. But strategically 

speaking, when we start talking about our allies, I mean, we are 

forcing South Korea right now who we are still heavily invested in 

to buy oil from countries that aren’t exactly friendly to us right 

now. How is that possibly a good idea? How is it that if we can’t 

at least, at least, export crude oil to our allies, don’t we weaken 

their hand when we make them dependent on those that don’t’ exactly have our country’s best interests in mind? 

Mr. LIPPOLD. Well, if you are to use that as the bottom line, we 

would be in trouble in a number of areas in what we—— 

Mr. MULLIN. Well, it is not the bottom line, sir. It is where we 

are at. It is the point. I am not talking about everything. We are 

talking about export of oil, of a commodity that we have an abundance amount of right now and a commodity that honestly, we are 

running out of storage in the United States. We are at record-level 

storages, and we are holding onto it. We have plays that we 

haven’t even started in. We without doubt could be the number one 

producer, not because of government intervention. In fact, they are 

choking us because of the entrepreneurial spirit. We have the ability to strengthen the hand of our allies and strengthen our relationship with our allies across the country for providing them a 

commodity that they are in desperate need of. We have got the 

Czech sitting right beside you. Is that not an opportunity to 

strengthen their hand by taking them off the dependent of an unstable and unreliable Russia right now? 

Mr. LIPPOLD. I think one of the concerns goes back, sir, to the 

fact that, once again, if we don’t look out for our interests first, 

while our allies may be important, at the end of the day, we are 

72 

the ones that are still going to be vulnerable and dependent, and 

we have seen that with exactly the impact that has affected your 

state. 

When you look at a country, or not a country but a cartel, principally driven by Saudi Arabia that can influence the world oil 

market in the way they do by depressing prices, by putting more 

on there, not reducing their production quotas, and allowing that 

to happen, even if we put our oil on the market—— 

Mr. MULLIN. Commander, you are—— 

Mr. LIPPOLD [continuing]. They still have the capacity to lower 

that down and—— 

Mr. MULLIN. Well, Commander, you are making my point—— 

Mr. LIPPOLD [continuing]. Make those prices depressed. 

Mr. MULLIN [continuing]. Because as a business owner, to stabilize the market, you put more players in it. Competition strengthens the sword of an entrepreneur. We allow them to control it because they are the only player on the market. We have reserves. 

We have the ability to go out there and not compete but beat. You 

are talking about our economy and our security of our Nation? Unemployment brings insecurity. Security is when we have a strong 

financial stability inside our country. We have lost 20,000 jobs and 

yet we have it underneath our feet, and we can’t get it because we 

don’t have a place to take it to. We are putting it in storage as I 

alluded to earlier. We put it in storage which we are running out 

of storage capacity. 

It is absolutely crazy to think that we limit the ability of entrepreneurs. That is the only thing driving our economy at the socalled recovery we are having. We are limiting their ability. We are 

not talking about the ’70s anymore. We are not talking about running rogue on stuff that—depleting our oil. The technology has 

changed. The world has changed, and the world is in desperate 

need of another player in the world market so we are not held by 

the cartel of the Middle East. 

Right now our refineries, 30 percent of our refineries in the 

United States are owned by foreign entities, and they can bring 

their oil to us? They can buy our refineries? They can refine their 

oil? They have a place to bring it to and yet we limit ourselves. 

From a strategic point of view, sir, I find it very hard to buy into 

your argument when we are not able to shore up our own allies at 

this time, at this critical time. We have an opportunity to become 

a world leader. All we have to do is loosen the rope just a little. 

Thank you for being here, and I yield back. 

Mr. BARTON. We thank the gentleman. I apologize to Mr. Johnson. I thought Mr. Mullin was here before. So I erroneously allowed 

him to go first. But we now recognize the distinguished gentleman 

from the great State of Ohio and a catcher on the Congressional 

Baseball Team. 

Mr. JOHNSON. Go Bucks, who got no playing time in this month’s 

game by the way. We can talk about that next time. 

Mr. BARTON. Obviously a managerial mistake. 

Mr. JOHNSON. Thank you, Mr. Chairman. I appreciate the time. 

I want to take just a minute to talk about the incredible journey 

these past few years have meant for the folks I represent in Eastern and Southeastern Ohio where the vast majority of the exploVerDate Nov 24 2008 11:25 Jan 19, 2016 Jkt 037690 PO 00000 Frm 00078 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 114\114-64 CHRIS
73 

ration and production of shale development have been occurring in 

the State. 

Thanks largely to the oil and gas industry, unemployment in 

shale counties has fallen some 66 percent since 2010. Counties in 

my district which have historically seen higher unemployment 

rates than both the State or the national average are now driving 

down the State’s overall unemployment rate. But certain challenges are now coming into play, challenges that have recently 

caused about 1,000 rigs to be laid down across the United States 

resulting in an estimated 150,000 layoffs. 

That said, we have an opportunity to address these challenges, 

and I believe it starts by looking at our outdated energy policies, 

many of which were crafted when America’s energy resources were 

considered scarce. That is why legislation like the LNG Permitting 

Certainty and Transparency Act that passed the House back in 

January which helps America harness our natural energy abundance by requiring DOE by law to act on pending LNG export applications in a timely fashion is so very much needed and important. 

This legislation would stop Washington from further delaying job 

creation at home and will help positively influence global politics 

abroad. And after much thought, I believe the current crude oil exports restrictions are also standing in the way of real economic and 

geopolitical benefits. As you all well know, GAO recently testified 

that removing these restrictions could increase domestic production 

to an additional 130,000 to 3.3 million barrels per day from 2015 

to 2025 while decreasing consumer fuel prices. Lifting the ban 

would also create American jobs, and like the LNG Permitting Certainty and Transparency Act, it would strengthen America’s geopolitical hand globally. 

So while I understand that lifting these restrictions will cause 

some bumps in the road, it is hard to ignore the numbers contained 

in the GAO’s report along with other recent reports, and I think 

if we go about this the right way, we can smooth out those bumps 

in the road so that everybody in America wins and we take our 

rightful place as the world’s leader in energy exports. 

And so with that, Mr. Barton, even though you didn’t play me 

in the game, I am going to forgive you for that. I would be happy 

to lend my name to H.R. 702—— 

Mr. BARTON. Well, thank you. 

Mr. JOHNSON [continuing]. To support your bill. 

Mr. BARTON. We will have to rectify managerial mistake. 

Mr. JOHNSON. All right. We will work on that. We will work on 

that next year. 

Mr. BARTON. All right. 

Mr. JOHNSON. I will be back. Now, onto a few questions. Mr. 

Kreinbihl, in your testimony—and I know you have got a business 

in Mansfield, right? 

Mr. KREINBIHL. Yes. 

Mr. JOHNSON. And you have got a friend who owns a business 

I think in Carroll County as well? 

Mr. KREINBIHL. Yes. 

Mr. JOHNSON. In your testimony, you touched on many of the 

harmful impacts that the export ban has had on your business 

74 

such as laying off workers and wage stagnation. Do you know of 

other companies who have been similarly affected by the export 

ban, and what do they have to say about it? 

Mr. KREINBIHL. I think there are many suppliers in the industry 

that are affected by it. A lot of the suppliers to us are affected by 

how our business is and whether they are supplying us castings or 

any of the raw materials that we buy, it is affecting them also. 

Mr. JOHNSON. OK. Would you expect these negative impacts on 

your business to continue getting worse if the ban is not lifted? 

Mr. KREINBIHL. It seems like as the number of rig counts go 

down that our business is directly correlated to that, yes. 

Mr. JOHNSON. OK. Well, to the extent that you can, and I understand that it may be hard to quantify, can you give us some idea 

to what extent the export ban has hurt your business, your ability 

to expand and invest? 

Mr. KREINBIHL. I think if we lifted the ban we would create the 

marketplace for then the economy to pick up and generate business 

and the need for supplying that market with our equipment and 

equipment like ours. 

Mr. JOHNSON. OK. So basically, your sales would go up you think 

as the market expands I guess? 

Mr. KREINBIHL. Yes, and again, our sales are very much correlated to the number of rigs and the activity out there. 

Mr. JOHNSON. OK. All right. Well, thank you very much, gentlemen. And Mr. Chairman, I yield back. 

Mr. BARTON. We thank the gentleman from Ohio. We are now 

going to turn to the gentleman from New York City, the Big Apple, 

the late-arriving but always welcome, Mr. Engel, 5 minutes. 

Mr. ENGEL. Thank you very much, Mr. Chairman, and thank you 

for always being concerned with this important issue. So I want to 

thank the chairman, ranking member, for holding this important 

hearing on the current ban against crude oil exports. 

Let me first of all say the United States has more influence over 

global energy production today than we have had in generations, 

and that is a terrific thing. It is certainly vital that we pursue a 

smart and responsible course for energy production distribution. If 

we develop our energy resources while vigorously protecting the 

health and safety of all Americans, our Nation can realize enormous economic and energy security benefits. 

Mr. Barton knows, because he and I have discussed this, that I 

have been interested and continue to be interested in the geopolitical aspects of this, the fact—and our ambassador can attest 

to the fact that Europe is so dependent on Russian oil, and that 

if the United States were to lift a ban, it might make Russia less 

important. And I think that is a good thing, given the way they 

have acted in Ukraine and in Eastern Europe. And so I think that 

to help wean Europe off of Russian energy, this might be a good 

thing. 

So I am particularly interested in the global ramifications of lifting our crude oil ban and the impacts it would have on jobs and 

the economy in the United States. 

Now, since we held the hearing on this issue last December, I 

note that two unions, the Laborers International Union of North 

America and the International Union of Operating Engineers, split 

75 

from the AFL–CIO position and now support lifting the crude oil 

import ban, export ban. Mr. Barton and I have had discussions 

about this. 

So we heard as testimony today that if we lift the ban on crude 

exports, then the vast majority of U.S. crude purchased on world 

market would make its way to Asia, not Europe. I also read a Wood 

Mackenzie report from March of this year that concludes the same 

thing. So let me ask you, Dr. Montgomery, do you agree with the 

conclusion that if we lift the ban, the vast majority of our crude oil 

exports would go to Asia? And if you do, does it matter? 

Mr. MONTGOMERY. Yes and no. I am sorry, but yes. Asia is a 

large market, but it is not one we are particularly well set up to 

serve. I mean we would be moved if the refining is taking place in 

the Gulf Coast and Mid-Atlantic. That is a long way to get to Asian 

markets. So basically I think it is extremely hard to predict exactly 

where a physical barrel of oil is going to move mainly because it 

is irrelevant in thinking about the global market. Whether we load 

a ship in the United States and follow that ship around Cape Horn 

or the Cape of Good Hope or the Suez Canal to get it to Asia or 

whether that oil goes to Czechoslovakia freeing up some oil that 

Czechoslovakia might have purchased from Russia to move to Asia, 

it is all going to have exactly the same effect. It is not where the 

barrels go. It is how much there is in the total world market. 

Mr. ENGEL. So let me ask Commander Lippold. I think he will 

disagree, but let me hear your disagreement. Commander, do you 

agree with Dr. Montgomery? 

Mr. LIPPOLD. There are certain—— 

Mr. BARTON. You have got to put your microphone—you have got 

to push the button. 

Mr. LIPPOLD. Yes. Sorry, sir. I would say yes and no. While the 

oil goes in there and we can’t trace where that barrel of oil would 

go, clearly you put more oil onto the world market, the highest bidder is going to get that oil, and transportation costs will be absorbed in that total thing. Right now the majority of that oil is predicted to go to Asia and studies indicate that. 

Mr. ENGEL. So let me ask about imports. Despite the recent increase in domestic crude oil production, the volume of oil of the 

U.S. imports is not drastically different from the time the ban was 

put into place in the 1970s. The U.S. Information Administration, 

according to them, imports in 2014 totaled more than 2.6 billion 

barrels or around 30 percent of supply. So testimony today, we 

have heard that lifting the crude oil export ban would result in a 

greater reliance on imports than would otherwise have taken place. 

So I would like to ask Dr. Montgomery and Commander Lippold, 

do you agree? Dr. Montgomery? 

Mr. MONTGOMERY. No, I do not believe that—I mean, I do not 

believe that lifting the export ban would lead to an increase in imports. I look at net imports. The additional production that we 

would be exporting will be far larger than any conceivable increase 

that we might have in refined product imports. 

So on balance, we are going to reduce—our import position is 

going to improve if we export the crude oil. 

Mr. ENGEL. Commander? 

76 

Mr. LIPPOLD. I believe that if you are going to start exporting 

and you are still importing 30 percent, that fact isn’t changing. It 

still affects our national security in a negative way because we are 

not achieving that goal of energy independence. 

Mr. ENGEL. Ambassador, may I ask you one quick question? Do 

you agree with my premise that if the United States exported more 

oil, it would help to wean Europe off of Russian energy? 

Ambassador GANDALOVIC. Congressman, I cannot assure you 

that in the Czech Republic refineries would start buying American 

crude oil once you possibly lift the ban, but the mere possibility 

that there is an alternative from the deliveries from the East would 

definitely strengthen our security and not only the Czech Republic 

but the entire Europe. 

Mr. ENGEL. I know other countries agree with you and the Czech 

Republic about these things. Mr. Barton, we will continue to have 

conversation. Thank you. 

Mr. BARTON. We appreciate your testimony and your attendance. 

Last but not least, the longsuffering gentleman from North Dakota, 

Mr. Cramer, is recognized for 5 minutes. 

Mr. CRAMER. Thank you, Mr. Chairman, and thank you for introducing the bill and thanks to all of you for your patience because 

you have been here and you haven’t even left. And I have been able 

to go up and get out a couple of times. 

I want to hone in on this issue of the impact of a free market 

on everybody because we sort of pick where we want to pick and 

pick situations. I mean for one of the examples, Commander, you 

have referenced Asia a number of times. It might surprise people 

to know that in 2013 the United States exported nearly 50 million 

barrels of refined petroleum products to China. I don’t find that offensive any more than I would find selling oil to China offensive. 

But my understanding of a free and open market and its impact 

on security in the world is you have used the word—Commander, 

you have used the word energy independence many times in the 

context of national security. I frankly think that that is only half 

of the formula. I think energy security is different than energy 

independence. 

For example, and Mr. Mullin raised the point, I think we have 

established that we import roughly 27 percent of the oil that we 

refine in the United States. He raised the point that 30 percent of 

our refining capacity is foreign owned, largely by the people that 

are exporting or we are importing the oil from. I don’t see a lot of 

incentive for them to change their refining and retooling their refining to take our oil when the whole reason they own those refineries is to import their own oil. 

So we export a lot of things out on the Atlantic Ocean that we 

import back on the Pacific Ocean other than oil. We do that regularly in agriculture products. We have pasta plants in North Dakota that buy low-cost durum from Canada, and our farmers sell 

higher-priced durum to producers in Minnesota. I mean, that is 

how a free market works to the benefit of everybody, and I think 

we are missing some of that. 

I would be interested to know—perhaps Mr. Montgomery, you 

can start—this issue of the 30 percent ownership, foreign ownership of our refineries, whether you find it offensive or not offensive. 

77 

That is relevant, is it not, in the context of this discussion of energy security and energy independence? 

Mr. MONTGOMERY. To me the importance of that is that those 

foreign owners are actually benefitting economically from having 

access to the U.S. market and are richer than they would be, and 

I think that if our enemies are poorer, that is better for the United 

States. 

But those assets are still in the United States. The fact that they 

might be owned by LUKOIL or by Venezuela doesn’t make them 

not available to us should there be a national emergency or should 

we—if we went to war with Venezuela. It wouldn’t change the operation of their refineries if we had to take the bullet. 

Mr. CRAMER. And I would agree. I don’t mean to imply that I am 

offended by it. I am not offended by it, but in the context of this 

discussion. Anybody else on that topic including you, Commander, 

since I am sort of jabbing you a little bit on the issue? 

Mr. LIPPOLD. Well, yes. Thank you. It goes actually to the heart 

of what I have talked about which is when you look at energy independence and we look at developing as part of a national security 

strategy and having an energy policy, when you look at those refineries and 30 percent being owned by foreign interests, when you 

look at 30 percent of our oil or 27 being imported into the United 

States, if you want to look at it at a free-market perspective, we 

don’t have a free market. There are always going to be a certain 

degree of regulations on what we control, goes where, to whom, and 

under what conditions. That is part of what government’s function 

is, to ensure that there is a certain degree of level playing field not 

only internally to the United States but externally to the United 

States. 

So I would look at it and I wouldn’t necessarily be concerned 

about that 30 percent ownership and what they are doing. It is 

what is going to be available and what conditions are we creating 

for our people in the United States to perhaps push that 30 percent 

out and create those jobs for the United States and for the money 

to end up here in the United States—— 

Mr. CRAMER. But I guess I see in this case the regulation creating an uneven playing field to the disadvantage of the American 

producer. And that is sort of the whole point in the whole issue. 

I want to ask, Mr. Ambassador, you have said a couple times or 

referenced this. I want to ask it in a real specific question. Do you 

believe, representing just your country, that the world would be 

safer if the United States was a force or a player in the global marketplace, being the stable, reliable provider of crude oil? 

Ambassador GANDALOVIC. Yes, I do believe that, and I have tried 

to prove that in my testimony. 

Mr. CRAMER. You have done very well. Let me ask quickly, Commander, since I have a couple seconds. Do you think that displacing heavy sour crude from Venezuela with heavy sour crude 

from Alberta, Canada, would be better and more in the national interest than—would it make it safer? 

Mr. LIPPOLD. If importing it—— 

Mr. CRAMER. From Canada rather than Venezuela? 

Mr. LIPPOLD. I think any time we are taking something not from 

Venezuela it is for our best interests. 

78 

Mr. CRAMER. Thank you. I appreciate your support for the Keystone Pipeline. With that, I yield back, Mr. Barton. 

Mr. BARTON. The gentleman’s time has expired. That is all the 

members. No other members present to ask questions. We will 

keep the record open for the requisite number of days—— 

Mr. RUSH. Mr. Chairman, if you would, Mr. Chairman, before 

we—— 

Mr. BARTON. The gentleman from Illinois. 

Mr. RUSH [continuing]. Conclude, the question that—I do have a 

question. 

Mr. BARTON. Well, then we will recognize—— 

Mr. RUSH. One final question because I am interested in Commander Lippold’s reference in his written statement where he said 

that Nigeria and the impact that lifting the ban would have on the 

Nigerian government and its fight against extremists. The impact, 

this impact on Nigeria, can you be more explicit about that? That 

is of concern to me. 

Mr. LIPPOLD. Yes. What you are referring to is the fact that Nigeria produces, along with Azerbaijan, the same type of light sweet 

crude that we do. If the export ban is lifted, one of the second-order 

effects you will have is you are now introducing a larger quantity 

of that oil onto the world market that is going to affect their market share, potentially depressing prices. Clearly, Nigeria being as 

overly dependent upon oil to support their economy, it is going to 

have a ripple effect. If the price goes down, they are not going to 

be able to maintain the type of economy that they need to keep 

their nation functioning. They are clearly faced with a clear and 

present danger with the terrorist group Boko Haram. They would 

take advantage of potential economic instability to try and destabilize if not topple that government which would have ramifications. And this again, sir, goes back to the core of my argument. 

This is one of those second- and third-order effects. Before we precipitously just lift the ban and move forward, it has to be thought 

through. 

A point that was made a few minutes ago was that, let’s lift the 

ban and we will deal with the bumps in the road. I too, many times 

in my military career, lived through the consequences of that happening with national leadership making those kinds of decisions. 

We need to be not reactive but instead plan ahead for what we are 

going to do. If we think through what the ban is going to do, there 

hopefully will come a day where we can lift it and do that. But 

today is not the day because we have not thought through those 

effects. 

Mr. RUSH. Dr. Montgomery, do you have a counter to that argument? And Mr. Chairman, I want to thank you so much for your 

liberalism. 

Mr. BARTON. Be careful how you use that word. But we will let 

Dr. Montgomery answer that question. 

Mr. MONTGOMERY. Thank you, Mr. Rush. Two brief comments. 

One, to paraphrase, no economic plan survives contact with the 

market, and this notion that we can plan out all the consequences 

of a change in policy I think is a fantasy. What we have to do is 

look at the basic principles of free trade and the way in which our 

79 

ability to buy and sell goods internationally has benefitted the 

economy for hundreds of years. 

As far as Nigeria goes, again, there are unintended consequences 

in every direction. We have frequently analyzed the consequence of 

lower world oil prices on different regions of the world. The fact is, 

most countries in Africa are oil importers rather than oil exporters. 

They are the poorest countries in the world. Anything that we do 

to reduce the world price of oil is going to benefit those poorest 

countries in the world because they need it and they will pay less 

for it if we put more oil on the market and make it cheaper. 

Mr. RUSH. Thank you, Mr. Chairman. 

Mr. BARTON. Thank you. I am so tempted using the power of the 

chair, which I currently have, to say that a quorum is present. I 

ask unanimous consent to move the bill as is, call for the ayes, the 

ayes have it, and the bill is reported out. But that would not be 

proper form. 

Mr. RUSH. It sure wouldn’t be, Mr. Chairman. 

Mr. BARTON. I won’t do that. I do want to first—I have some 

business. We would ask that three letters from the Energy Equipment and Infrastructure Alliance, the U.S. Chamber of Commerce, 

and America’s Natural Gas Alliance be put into the record, without 

objection. 

Mr. RUSH. No objection. 

Mr. BARTON. OK. 

[The information appears at the conclusion of the hearing.] 

Mr. BARTON. I would also ask to thank our panelists. And before 

we close this hearing, just put a little bit more context on this, we 

have had a good discussion today. We talked a lot about exports 

and imports. I want to put some information in the record from the 

Energy Information Agency, and we import about 9 million barrels 

of petroleum products a day, but we export about 4 million. So on 

a net basis, it is about 5 million barrels per day of imports. Of 

those 5 million barrels, about 3.5 million come from Canada and 

Mexico who are geographically adjacent to the United States. In 

fact, Canada is the number one source of our oil imports. Number 

two is Saudi Arabia. It is a little over a million barrels a day. Last 

year, U.S. production increased over a million barrels a day, and 

if we were to repeal the ban on crude oil exports—now this is an 

opinion. This is not a fact. I believe that we could easily increase 

domestic production another million to 2 million barrels a day in 

the next year or 2 years. 

So if you really think about it, we do have the ability to move 

from a time in the 1970s when we had to import oil from overseas. 

We have been as high as 74 percent of our oil coming from overseas. We now have the capability that the only oil we import is not 

by necessity but because of economic availability. That is a real 

possibility. That is not fantasy. And removing the ban on crude oil 

exports puts the market in play. I don’t discount what Commander 

Lippold has said, but I do believe if you let markets operate and 

let the world’s largest producer, which is the United States of 

America, let our producers have the choice to sell domestically to 

domestic refiners or to sell on the world market. They are going to 

produce more. And if they produce more, there is going to be more 

competition, there is going to be more stability, there is going to 

80 

be less reliance on unstable sources or sources that are in unstable 

parts of the region. 

So we talk about imports and the Commander’s facts are correct, 

but if you look at it from a net import basis and given the capability of our domestic producers to produce, we for all intents and 

purposes have the capability to be energy independent in the real 

near-term. And I think that is important in the debate. 

Chairman Whitfield has asked me to indicate and so has Chairman Upton that this is an issue that has got a real chance to be 

marked up. No decisions have been made yet obviously, but it is 

something that is under active consideration. 

With that, again, I want to thank the panelists, and this hearing 

is adjourned. 

[Whereupon, at 12:45 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

81 


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97820.038
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Æ 


97820.039