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95–078 2015

CRUDE INTENTIONS: THE UNTOLD STORY OF 

THE BAN, THE OIL INDUSTRY, AND AMERICA’S 

SMALL BUSINESSES 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JUNE 17, 2015 

Small Business Committee Document Number 114–016 

Available via the GPO Website: www.fdsys.gov 

SBREP-219 with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

TOM RICE, South Carolina 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

MIKE BOST, Illinois 

CRESENT HARDY, Nevada 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

MARK TAKAI, Hawaii 

KEVIN FITZPATRICK, Staff Director 

STEPHEN DENNIS, Deputy Staff Director for Policy 

JAN OLIVER, Deputy Staff Director for Operation 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Steve Chabot ................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 2 

WITNESSES 

Dr. Kenneth B. Medlock III, James A. Baker, III, and Susan G. Baker, 

Fellow in Energy and Resource Economics, Senior Director, Center for 

Energy Studies, Rice University’s Baker Institute for Public Policy, Houston, TX .................................................................................................................. 4 

Mr. Dale Leppo, Chairman, Leppo Group, Tallmadge, OH, testifying on behalf 

of the Energy Equipment and Infrastructure Alliance ..................................... 6 

Mr. Rory McMinn, President and Managing Director, Read & Stevens, Inc., 

Roswell, NM ......................................................................................................... 7 

Mr. Tyson Slocum, Energy Program Director, Public Citizen, Washington, 

DC .......................................................................................................................... 9 

APPENDIX 

Prepared Statements: 

Dr. Kenneth B. Medlock III, James A. Baker, III, and Susan G. Baker, 

Fellow in Energy and Resource Economics, Senior Director, Center 

for Energy Studies, Rice University’s Baker Institute for Public Policy, 

Houston, TX ................................................................................................... 29 

Mr. Dale Leppo, Chairman, Leppo Group, Tallmadge, OH, testifying on 

behalf of the Energy Equipment and Infrastructure Alliance .................. 36 

Mr. Rory McMinn, President and Managing Director, Read & Stevens, 

Inc., Roswell, NM .......................................................................................... 42 

Mr. Tyson Slocum, Energy Program Director, Public Citizen, Washington, 

DC .................................................................................................................. 48 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

Energy Equipment and Infrastructure Alliance ............................................ 58 

Opening Statement of Hon. Radewagen ......................................................... 63 

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(1) 

CRUDE INTENTIONS: THE UNTOLD STORY OF 

THE BAN, THE OIL INDUSTRY, AND 

AMERICA’S SMALL BUSINESSES 

WEDNESDAY, JUNE 17, 2015 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 11:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Steve Chabot [chairman of the Committee] presiding. 

Present: Representatives Chabot, King, Luetkemeyer, Hanna, 

Huelskamp, Rice, Gibson, Brat, Radewagen, Knight, Curbelo, Bost, 

Hardy, Kelly, Vela ́zquez, Chu, Hahn, Payne, Meng, Lawrence, 

Clarke, Adams, and Moulton. 

Chairman CHABOT. The Committee will come to order. Before 

we get started, I wanted to thank Congressman Joe Barton for 

stopping in from Texas earlier. They certainly have an interest in 

oil. He was pleased we were holding this hearing today. I just 

wanted to acknowledge that and thank him. 

We want to thank everyone for joining us today in this very important discussion. There is no disputing it, America has entered 

into a new energy era. After years of decline, the United States is 

now the largest producer of oil and gas in the world. 

Over the last year alone, U.S. oil production has expanded by 1.6 

million barrels a day. This production, which comes primarily from 

unconventional fields, is expected to increase by an average rate of 

234,000 barrels per day, topping 10.6 million barrels per day by 

2020. 

What does all this mean to American families? What does it 

mean to American workers? What does it mean to those still looking for work? 

Increased American energy production means more jobs and a 

stronger economy. It is that simple. The only problem with increased production is that we cannot keep up with it. Our increase 

in production has not been met with an increase in capacity to refine this oil, which creates a bottleneck that forces producers to 

slow or halt production. When this happens, it does not hurt the 

big guys, it hurts the small producers and their tertiary partners 

most of all. That is why allowing the export of this resource is so 

important. It is the only realistic solution to the situation. 

Most of our recent conversations about energy have focused on 

the Keystone Pipeline. That is one project that would create roughly 40,000 American jobs. Lifting the decades-old ban on oil exports 

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2 

would create hundreds of thousands more. In fact, a recent study 

found that lifting the ban would help one million Americans find 

work by 2020, one million people finding jobs by 2020. It would 

also increase GDP, narrow the trade deficit, attract new capital to 

the United States, and diversify and stabilize the global energy 

supply, which in turn protects the price of oil from major fluctuations. 

Some may falsely charge that this hearing and this policy are 

about big oil. They are not. This Committee is concerned with 

small businesses and the people they employ. The untold story 

about this export ban is the negative impact that it has on the 

American people and small businesses. Our witnesses today are 

testament to that, and I look forward to hearing from them. 

Those of us who lived through the 1970s know there are not 

many useful things from that decade still around today, so why are 

some clinging white knuckled to a 1970s energy policy? Just like 

bellbottoms, some things are better left in the past. 

If America is going to continue to lead the world in energy production in the 21st Century, let’s not keep one hand tied behind 

our back. Let’s replace outdated energy policies with ones that are 

forward thinking and realistic, ones that will produce economic 

growth, and most importantly, create new jobs. 

The American workforce stands ready. Washington must stop 

standing in their way. 

I want to thank the witnesses for joining us here this morning, 

and I will now yield to the ranking member. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. Any decision to 

modify or repeal the long-standing ban on U.S. oil exports will profoundly affect our nation. More than 35 percent of small businesses 

say energy costs account for one of their top three expenses, and 

a range of sectors, from construction to agriculture to trucking to 

manufacturing, are sensitive to energy price changes, and would 

therefore be significantly affected should the U.S. begin exporting 

abroad. 

Small businesses are impacted by energy supply and price issues 

in a second way. The price of petroleum, gasoline, and home heating oil affect the expendable income of American households. When 

fuel prices drop, we usually see a concurrent rise in consumer 

spending and confidence. 

Reinforcing this point, it has been estimated that a sustained $30 

decline in the price of a barrel of oil translates into more than $200 

billion a year in savings for U.S. consumers. These resources can 

be spent on items sold by small business retailers and made by 

small manufacturers. 

With the latest data showing a surge in retail sales during May, 

it is clear that falling energy prices are contributing to consumer 

spending. This raises an important question about what effect lifting the export ban will have on small firms and the economy overall. 

At best, the available research seems mixed on whether such a 

move would reduce prices. The most empirical evidence suggests 

that sending the majority of U.S. produced fuel domestically helps 

keep gasoline prices low. Proponents made the claim that energy 

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3 

exploration efforts and technology have advanced to a point where 

the ban no longer makes sense. 

However, several analyses suggest that much of the recent rise 

in oil production may be temporary as oil reserves exist. Through 

fracking technology, I expect that to quickly level off. 

Moreover, although the U.S. has seen a dramatic production increase, we are far from achieving energy independence. Today, we 

import roughly the same percentage of oil from foreign sources as 

we did in 1975, when the export ban passed. 

It seems hasty to suggest this new found capacity justifies abandoning a 40 year old policy that has helped insulate our economy 

against dramatic changes in international energy markets. 

Mr. Chairman, just a few short years ago, this committee was 

holding hearings on how rising energy prices were inhibiting 

growth and harming our small businesses. None of us want to return to those old days. The recent increase in domestic oil production and the steady drop in oil and energy prices has been welcomed news for small businesses and American consumers. 

As Congress and the administration move forward with future 

changes to energy policy, it is vital they take into account small 

company needs and how entrepreneurs are affected by these 

changes. 

On that note, I thank the witnesses for testifying, and I yield 

back the balance of my time. 

Chairman CHABOT. Thank you very much. The gentlelady 

yields back. If Committee members have opening statements, we 

ask they submit them for the record. 

I will now take just a moment to explain our five minute rule 

here. Each of you get five minutes to testify. There is a lighting 

system to kind of help you in that effort. 

The green light will remain on for four minutes. The yellow light 

will let you know you have a minute to wrap up. When the red 

light comes up, we would ask you to complete your testimony as 

close to that as possible. 

We will let you go over a little bit but not too long. We restrict 

ourselves to that same five minute rule when we are asking questions. 

I would now like to introduce our very distinguished panel here 

this morning. Our first witness is Ken Medlock. He is the James 

A. Baker, III and Susan G. Baker Fellow in Energy and Resources 

Studies, as well as an adjunct professor and lecturer in the Department of Economics, and adjunct assistant professor of civil and environmental engineering at Rice University. 

In this role, Dr. Medlock teaches courses in energy economics 

and conducts research on a number of energy industry topics. Dr. 

Medlock received his Ph.D. in economics from Rice University. We 

appreciate you being here, Doctor. 

Our second witness is Dale Leppo, chairman of the Leppo Group 

in Tallmadge, Ohio. The Leppo Group is a full service power equipment sales and rental company operating two companies, Leppo 

Rents and Razor Rents. Razor Rents supplies equipment to operators in the energy industry. 

Mr. Leppo received his undergraduate degree in chemistry from 

Kent State University. He is testifying today on behalf of the EnSBREP-219 with DISTILLER

4 

ergy Equipment and Infrastructure Alliance. We also welcome you 

this morning. 

Our third witness today is Rory McMinn, president and managing director of Read and Stevens, Inc. He has created and operated a pipeline services company, an energy consulting company, 

an oil and gas production company, and has owned, drilled and operated oil wells. 

He received his undergraduate degree from West Texas A&M 

University, and we welcome you here as well. 

I would now like to yield to our ranking member for introducing 

our next witness. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. It is my pleasure 

to introduce to the committee Mr. Tyson Slocum. He is the Energy 

Program Director at Public Citizen, covering climate change, coal, 

oil, fracking, nuclear energy, renewables and commodity market 

oversight. 

Public Citizen seeks to represent the general public on policy 

matters and does not endorse any candidates for elected office, and 

does not accept any government or corporate money. 

Mr. Slocum also serves on the Commodity Futures Trading Commission’s Energy and Environmental Markets Advisory Committee 

and has authored numerous reports on energy matters. 

He appears regularly on television and radio shows, including 

PBS Newshour, The Colbert Report, MSNBC, Fox News, and 

CNBC. 

Welcome. 

Chairman CHABOT. Thank you very much. We will now turn to 

Dr. Medlock. You are recognized for five minutes. 

STATEMENTS OF KENNETH B. MEDLOCK, III, SENIOR DIRECTOR, CENTER FOR ENERGY STUDIES, JAMES A. BAKER, III 

AND SUSAN G. BAKER, FELLOW IN ENERGY AND RESOURCE 

ECONOMICS; DALE LEPPO, CHAIRMAN, LEPPO GROUP; RORY 

MCMINN, PRESIDENT AND MANAGING DIRECTOR, READ AND 

STEVENS, INC.; TYSON SLOCUM, ENERGY PROGRAM DIRECTOR, PUBLIC CITIZEN 

STATEMENT OF KENNETH B. MEDLOCK 

Mr. MEDLOCK. Thank you, Chairman Chabot. Thank you, 

Ranking Member Vela ́zquez and the rest of the Committee. 

I want to in my brief time focus my remarks on a couple of 

things that were mentioned in the opening comments, in particular, with regard to what we generally classify as energy security. 

Generally when we talk about energy security, we are really concerned with avoiding any economic malaise associated with the 

sudden increase in the price of energy or an increase in the volatility of the price of energy. 

Historically, we have tended to focus on oil. That is largely because there is a strong empirical relationship between the price of 

oil and macroeconomic performance in the United States. 

What we have done as a nation in terms of enacting policy to try 

to achieve energy security has been widely varied, and by some accounts, inaccurate. That is actually one of the things we try to adSBREP-219 with DISTILLER

5 

dress in a study that we released, ‘‘To Lift or Not to Lift’’ earlier 

this year. 

In particular, if you look at the global oil market from 2008 to 

2013 and you focus on the countries where production actually declined during that time and ultimately led to an increasing tightness in the market which drove price up north of $100 a barrel, you 

see that the majority of the decline are countries that were largely 

affected by internal strives for civil strives, the so-called ‘‘Arab 

Spring,’’ those nations, plus sanctions on countries such as Iran, accounted for roughly 3.5 million barrels a day of oil going off line 

from 2008 to 2013. 

To flip the ledger, when you sort of look to north of that to see 

where production increased, the U.S. led the charge. From 2008 to 

2013, we actually saw increases in production close to three million 

barrels a day, but that was not the only place where production increased. 

This was very much a price driven phenomenon, higher prices 

brought a lot more interest in activity in places that we had not 

really drilled before. 

When you start to look at what that means going forward, you 

realize very quickly the U.S. first of all has really pushed out a lot 

of the lighter crude oils that we used to import. We have by nature 

of substitution substituted away from importing the lighter crudes 

and we are starting to move in the margins where the light crudes 

that are being produced domestically are pushing out medium 

grade and heavier crudes that we normally would import. 

That sounds on its face like a laudable thing to have happen. 

The trouble with it is for the domestic crudes that are lighter and 

sweeter typically to compete into the domestic refining space, and 

in particular, you actually see they have to be discounted. 

This is another thing we focused on, that discount. In particular, 

when you look at places like the Eagle Ford Shale, you can see discounts even in the $60 price environment that are north of $6 a 

barrel. That is actually quite substantial particularly given how 

much margins have been compressed in the upstream. 

When we start talking about the health of the upstream industry, and I think it is fairly well recognized that the job creation 

that has been fueled by this over the last decade has been quite 

substantial. As a matter of fact, there are a number of studies on 

this issue in terms of job creation, the upstream sector was for several years post-2008 the only sector that was providing any upward 

movement in terms of employment. 

When you look at that and you start to see these compressed 

margins plus the discounts that are being forced by current policy 

on the upstream could compromise that growth. That then begs the 

question what is the policy actually doing. 

In effect what it is doing is hindering the furtherance of what we 

have already seen, namely U.S. production providing stability to 

the global oil market. 

If the ban were to be lifted, that oil could actually flow into the 

international market. That would definitely lift the crude price domestically, but that does not translate into prices that are higher 

at the pump. This is a critical point. 

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6 

When we get back to the point of energy security and what small 

businesses and consumers actually purchase, what do we buy? We 

buy gasoline. We buy heating oil. We do not buy crude oil. 

When you look at the price of petroleum products in particular, 

those are unimpeded, that price is actually set in the international 

market. Petroleum product exports are unimpeded by policies. As 

a matter of fact, we export north of three million barrels a day of 

products today. 

The lack of a ban on petroleum exports, quite frankly, has actually lifted the refining sector quite substantially. 

When we look at what policy direction we ought to be thinking 

about, we ought to be thinking about how do we actually provide 

stability to the petroleum product price. Going back to energy security, it really is about stability at a reasonable level. 

One of the ways we can achieve that is by adding a stable source 

of supply to the global energy market which would help stabilize 

petroleum product prices, which is where the energy security benefit is actually conveyed to small businesses and consumers in 

North America. 

Thank you. 

Chairman CHABOT. Thank you very much. Mr. Leppo, you are 

recognized for five minutes. 

STATEMENT OF DALE LEPPO 

Mr. LEPPO. Thank you, Chairman Chabot, Ranking Member 

Vela ́zquez, and Small Business Committee members for inviting 

me to testify about the impact of lifting the ban on crude oil exports on our small family owned business, which employs 127 people in Ohio and was founded by my grandparents in 1945. 

Leppo Group rents and sells construction equipment at seven locations throughout Northeast and East Central Ohio. In 2013, we 

opened Razor Rents in Carrollton to serve the needs of the emerging Utica shale energy play. Fifteen percent of our employees are 

involved in some way in supporting our energy related business. 

In the second half of 2014, Razor Rents’ business doubled versus 

the first half of that year as the Utica shale activity ramped up. 

At one point, Ohio had 48 drill rigs operating by the end of 2014. 

We added 14 new jobs, many of which went into supporting our energy sector, our Razor Rents’ fleet grew by 130 percent, from 154 

to 355 units, creating jobs for our suppliers. 

For example, last year we purchased 45 new pieces of equipment 

from JLG Industries, almost all of which are manufactured either 

in Ohio or Pennsylvania. Each machine represents an investment 

of between $80,000 and $140,000. 

We also created three internships for students from Ohio State 

University ATI, who then joined us full time after they graduated. 

When the price of oil and natural gas fell, so did that increased 

activity. The number of drill rigs working Ohio has fallen from 48 

to 22. The number of machines that we have on rent in the energy 

sector has fallen by 42 percent since the peak in late 2014. 

As a result, in 2015, we have put an aggressive hiring plan on 

hold. We have transferred some of our co-workers from the energy 

sector back to our normal construction and industrial activities. 

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7 

That means the six positions we had planned to fill this year are 

going to remain open. 

We have ordered minimum new equipment for our energy markets, and we currently have two interns from Ohio State ATI but 

only time will tell if we are able to bring them on full time after 

they graduate. 

What can Congress do to help our small business create jobs both 

in our company and for our customers and suppliers? Congress can 

help increase markets for American produced crude oil by lifting 

the ban on crude oil exports. Why would that help? IHS Economics 

estimates that lifting the ban would increase U.S. crude oil production by up to 2.3 million barrels per day average between 2016 and 

2030. 

This would create up to 440,000 new supply chain jobs nationally 

and up to 13,600 in Ohio alone by 2018. These export dependent 

jobs and GDP growth are widely spread throughout the American 

economy and exists in all 50 states. 

The Energy Equipment and Infrastructure Alliance, of which my 

company is a member, estimates there are currently 120,000 supply chain businesses supporting American oil and natural gas production, of which at least 100,000 are small businesses. 

The U.S. energy sector has been a leader in developing new technologies for energy exploration and extraction. Lifting the ban 

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. 

During the energy boom in Ohio, we have seen significantly increased activity in the energy supply chain, such as the manufacturing of steel pipe, the manufacturing, distribution and support of 

equipment used in energy markets such as forklifts, man lifts, 

pumps, compressors, generators, and earth moving equipment. 

Investment in infrastructure to get oil and gas to the market, 

such as well site production, pipelines, separation plants, rail lines, 

roads, and bridges. 

We have also seen investment in gas fired electric generation 

plants to replace older, less efficient coal fired plants. We have seen 

investment for energy sector workers to sleep, eat, and shop, places 

like hotels, restaurants, et cetera. 

At a time when the United States continues to see sluggish 

growth in the kind of good jobs the energy sector provides, lifting 

the ban on crude oil exports is a step that could yield almost immediate results. 

I hope we can move forward on expanding the markets for U.S. 

exports of energy that I believe will be a good source of jobs for 

Ohio and much of the rest of the country. 

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

Committee. 

Chairman CHABOT. Thank you very much. Mr. McMinn, you 

are recognized for five minutes. 

STATEMENT OF RORY McMINN 

Mr. MCMINN. Thank you, Mr. Chairman. Mr. Chairman and 

members of the Committee, my name is Rory McMinn and I am 

the president and managing director of a small family owned oil 

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and gas operating company based in Roswell, New Mexico by the 

name of Read and Stevens, Inc. 

I am pleased to testify today in regards to the adverse effect that 

the depressed oil price market is having on small oil companies 

such as Read and Stevens, and to convey to you the enormous 

value to small operators such as ourselves, our employees, and our 

communities which would be attainable from lifting the antiquated 

and destructive 1970s ban on the export of domestic crude oil. 

The issue of eliminating the ban on crude oil exports is important to the livelihood of thousands of people in my state and hundreds of thousands of people throughout the United States that do 

not live in the oil patch area, but whose work and family welfare 

depends on making the goods and providing the services used by 

the oil production industry. 

Read and Stevens was founded in 1972 and has drilled for and 

produced oil and natural gas within New Mexico and West Texas 

since that time. We operate approximately 150 wells ourselves, and 

we have interest in an equal number of wells that are operated by 

other companies. 

Many of our wells in our inventory are considered strippers. 

Stripper wells are wells that have 15 barrels of oil per day or 

equivalent or less. Like other small producers, the Read family finances its operation through cash flow and bank debt. We have no 

access to selling shares of stock. We have no access to private equity. 

Any constriction on our cash flow or any devaluation of our oil 

reserves that we are experiencing now with the depressed price affects our bank credit line and affects our ability to move forward. 

We had a 26 well drilling program that we had designed on some 

Legacy property within Southeastern New Mexico Delaware Basin 

in 2014. We have 24 wells remaining to be drilled. We have lost 

revenue as a result of having to cancel that drilling program, and 

in fact, if we had not already signed the contracts on the two wells 

we have drilled, we would have cancelled those. 

The 2014 estimated well cost is $6.325 million per well. The current 2015 estimated well cost is $4.5 million per well. That is an 

one-third reduction in cost made possible simply by the fact that 

our vendors, who are facing a steep decline in the demand for their 

goods and services in the reduction of new drilling, are eliminating 

jobs, they are mothballing equipment, they are deferring maintenance, they are eliminating advertising, they are cutting offices, 

and they are cutting back their support for a wide range of civic 

and public organizations in a desperate attempt on their part to 

maintain their businesses rather than have their contracts simply 

cancelled. I would emphasize that a lot of those vendor contracts 

have indeed simply already been cancelled. 

While that one-third drop in well costs in and of itself would be 

enough incentive to drill, the simultaneous 50 percent drop in oil 

commodity prices causes this to still be a negative marketplace for 

us. 

With small operators and our vendors and suppliers all cutting 

back on our activity, the collective adverse impact on those small 

businesses, their employees and their communities, is widespread 

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9 

and immense. Every community where small producers operate has 

felt the drilling down turn by the loss of economic activity. 

Our offices are flooded with applicants, people from the very unskilled workers to the most highly skilled. The operators that have 

reported to me are receiving resumes from newly graduated petroleum engineers that are requesting jobs that are on the lowest level 

within the industry, and merely to get into the industry. 

New Mexico is on the list of the poorest recovering states as a 

result of the recent severe recession. The only bright spot within 

our state has been the oil and gas industry, which is the largest 

private employer in the state, and one of the few that was growing 

jobs until the last six months. 

In the first quarter of 2015 alone, we lost 2,000 jobs. Now our 

industry is continuing to lay off people and more and more folks 

are losing their jobs. 

One New Mexico state agency has stated that in addition to the 

2,000 jobs that were lost, we have lost $220 million in revenue for 

the state. That particular loss of revenue affects hospitals, schools, 

and communities. 

In closing, I would strongly urge the Committee to lift the oil export ban, thereby sending the signal that Congress cares about the 

smaller producers, and I appreciate being able to speak to you 

today. 

Committee. 

Chairman CHABOT. Thank you very much. Mr. Slocum, you are 

recognized for five minutes. 

STATEMENT OF TYSON SLOCUM 

Mr. SLOCUM. Mr. Chairman, Ranking Member Vela ́zquez, 

members of the Committee, thank you so much for having me here 

today. It is an honor to be part of such an esteemed panel. 

At core, the debate around whether or not to lift the oil export 

ban pits two big industries against each other, those that are directly producing oil and the associated small businesses that support them in those communities and elsewhere, and the oil refining 

industry that is taking that crude oil and turning it into useful end 

products like gasoline, diesel, and so forth, and the associated 

small businesses that support the refining industry and the communities where those refineries are located. 

What is clear is the oil export ban limits the ability of U.S. oil 

producers to sell that oil outside of the United States, and a direct 

result of that is they have to sell to U.S. refiners, and what we 

have seen is that stockpiles of crude oil in the United States are 

at record highs. 

Anyone who knows supply/demand fundamentals understands 

that when supplies are very high, that is going to have a downward 

pressure on prices, and as Dr. Medlock testified, that results in a 

significant price discount for U.S. refiners to buy crude oil. 

The question is what are U.S. refiners doing with that discount. 

Are they pocketing it to their shareholders or are they sharing it 

with end users of the products that they are refining. 

The data clearly shows that U.S. consumers and small businesses and anyone else that purchases gasoline or refined products 

SBREP-219 with DISTILLER

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has enjoyed significant savings at the pump as a result of lower 

gasoline prices. 

An analysis by Deutsche Bank not based on speculation of what 

lifting the ban would do but on actual comparative gasoline price 

data in the United States versus the Brent benchmark gasoline 

price in Europe shows that we have seen significant reductions in 

gasoline prices available to the U.S. economy. The prices from 2008 

to 2010, U.S. gasoline prices were about $4.73 a barrel higher than 

the European benchmark. By the 2011 to 2014 time period, that 

had reduced to $1.62, and in 2014 alone, it was down to $1.20. 

What we have seen since the 2008 to 2010 time period is U.S. 

gasoline prices have reduced $3.50 per barrel compared to the key 

European benchmark. That translated to $11.4 billion in lower gasoline prices for U.S. consumers in 2014. 

The oil industry has funded a number of studies, and there have 

been a number of other independent studies as well that speculates 

that removing the crude oil export ban will allow a tide of U.S. 

crude oil exports that will influence the price and push that price 

down. 

The problem with that theory is that it runs into the hard realities of the inherent volatility of global oil prices and the sheer number of variables that influence crude oil prices. 

The United States’ ability to unilaterally influence a global 

benchmark price like Brent is going to be countered potentially 

with moves by other oil producing nations, say the OPEC member 

nations cartel, or Russia, who could do unilateral actions to try to 

offset the increase of U.S. crude supplies. 

There are other variables that could not be political or intentional in nature. There are always fluctuations in demand. There 

could be supply or other types of disruptions due to natural disasters or conflict. 

The fact of the matter is anyone who studies the crude oil markets and who pretends to think they can safely predict what one 

variable is going to influence a complicated thing like global oil 

markets, they are not going to be able to accurately do that. 

I think for the purposes of this Committee, it is very important 

to understand that the 40 year old ban on crude oil exports has actually delivered value and benefits to the U.S. consumer, to small 

businesses, and the economy. 

Thank you very much. 

Chairman CHABOT. Thank you. I appreciate all the witnesses 

staying within, for the most part, the five minute rule as well. 

Dr. Medlock, I will begin with you, if I can. I will recognize myself for five minutes. You heard Mr. Slocum’s testimony relative to 

what lifting the export ban potentially could do to oil prices. Could 

you respond to that and give us your point of view? 

Mr. MEDLOCK. Sure. Thank you. The first thing I will note, and 

we actually note this in our study that was released in March, it 

is difficult at best to try to predict what lifting the export ban 

would do to the benchmark global crude price. As a matter of fact, 

we shy away from doing that because if you look at the studies that 

have been done that make those predictions, they largely hold 

OPEC market response fixed or assume something without really 

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modeling what cartel behavior would mean in a different sort of 

market environment. No argument there. 

However, the comment that domestic gasoline prices have been 

lower because of the export ban, I will take issue with. A simple 

sort of casual analysis, if you will, of the data, can lead one to that 

conclusion. 

Here is the trouble. The biggest driver of the reduction in gasoline price relative to global benchmarks in the United States has 

been the reduction in demand in the United States that we have 

seen 2008. As a matter of fact, back in 2006, end of 2006 plus the 

recession in the U.S. really beginning, that is where you begin to 

see imports of petroleum products in the U.S. begin to turn around, 

begin to decline. 

Then we became a net exporter of petroleum products around the 

end of 2010. This is important because what that does is it actually 

shifts the arbitrage point between domestically produced petroleum 

products and international petroleum products offshore. 

Think about it this way, if the point where the trade is actually 

occurring is say in Europe, then you actually have to net back the 

transportation costs to the U.S. Gulf Coast, which means the U.S. 

price will be less than the European price by at least that amount. 

That has nothing to do with the export ban. Nothing. It has to do 

with domestic demand for petroleum products, and it is very important that one disentangle those two things because if you do not, 

you can get to an erroneous place, quite frankly. 

I think we are going to see this, we are going to see a summer 

driving season in the United States. We have not had one since 

2006. You are going to see the inventory situation that Mr. Slocum 

referred to again correct itself, and you are going to see some upward lift in terms of domestic petroleum product prices because 

quite frankly we will be exporting less because domestic demand 

will be higher. 

There is a really critical point to reconcile with or differentiate 

from the effect of lifting the export ban. 

Chairman CHABOT. Thank you. Just to clarify, you disagree 

with Mr. Slocum’s point that in his opinion, if we lifted the ban, 

it would cause gasoline prices at the pump to go up? 

Mr. MEDLOCK. Absolutely. As a matter of fact, in the study 

that we published we actually discuss the relationship between 

Brent and domestic market crude. We used WTI because it is a 

broadly accepted domestic marker, in the Gulf Coast wholesale gasoline price. 

You actually see the kind of relationships that Mr. Slocum refers 

to with regard to Brent and the domestic wholesale gasoline price, 

but you also have to take a step back and understand how that relationship actually changed between domestic wholesale gasoline 

and WTI. It has been dramatic. 

To claim that discount has been passed through to consumers, it 

does not hold up against data, it just does not. 

Chairman CHABOT. Thank you. Mr. Leppo, let me turn to you. 

What impact has the crude oil export ban had on small businesses 

in the oil and gas industry, and in particular, on the U.S. economy 

overall? 

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Mr. LEPPO. In our business in particular, it has led to the nonhiring of six people. We had job descriptions. We had them lined 

up ready to hire. That lack of demand for the output from the oil 

and gas producers in Ohio has led us to move people out of our energy sector business back into the other portion of our business 

that rents equipment to construction and industrial companies. 

As I mentioned we have two interns that we have on board this 

summer. We may or may not be able to offer them employment at 

the end of their internship. Basically, it kills jobs. 

Chairman CHABOT. Thank you. Mr. McMinn, let me turn to you 

now, and I only have a short period of time left. You stated that 

although small producers such as yourself will probably never contract with international buyers, producers that do engage in international transactions will have a favorable impact for all United 

States producers. Would you expound upon that a bit? 

Mr. MCMINN. Yes, sir. Mr. Chairman and members, what I was 

referring to was the fact that we are land locked, and our production is within the Southeastern part of New Mexico. What we are 

looking for with the lifting of the export ban is the allowance of export trade on crude oil because that improves the marketplace. 

Ours will fill the empty void that is left in the domestic area 

when those larger companies that contract directly with international companies or international marketplaces are allowed to 

export their crude. 

Our refiners are within 40 miles of where we produce or 100 

miles or where we produce typically, and we do not expect to ever 

deal in the international market. We would just like to see the 

marketplace open up to allow others to do that so we can fill the 

void. 

Chairman CHABOT. Thank you very much. My time has expired. The ranking member is recognized for five minutes. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. Mr. Slocum, I 

would like to hear your reaction to the statement made by Dr. 

Medlock. 

Mr. SLOCUM. Sure. I think what is interesting here and as Dr. 

Medlock pointed out, we are now exporting over three million barrels of refined petroleum product every day, 75 percent of that out 

of the Gulf Coast. That is because what the refining industry has 

done, which is a major center of manufacturing in the United 

States, is take these crude oil supplies and turn it into products 

that are important and necessary for the American economy. 

As Dr. Medlock said, consumers cannot use raw crude oil that is 

pulled out of the Bakken or Eagle Ford. We can only use those 

products that have been refined. 

Essentially what we are presented with is a decision, do we want 

to change a 40 year old statute to allow the U.S. oil industry to bypass the U.S. refining industry and export raw materials directly 

out of the United States, and therefore export that discount, that 

U.S. crude oil discount overseas to foreign markets, or do we retain 

that discount for domestic purposes. 

We are using about nine million barrels of gasoline every day. 

The industry is exporting about three million. The U.S. consumers 

are benefitting from that discount that refiners are currently getting from producers. That, I think, is the big issue here, does that 

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discount remain in the United States’ economy or is it exported out 

in the form of the discounted raw crude oil to be processed in foreign markets for foreign consumption. 

I would like that discount to remain within the United States’ 

economy. 

Ms. VELA ́ ZQUEZ. As you discussed, given the fact there are 

many calls to lift the ban on exports, you just said we import nine 

million barrels of oil a day. That might not always be the case 

given threats such as Isis that currently exist in the Middle East. 

What would happen if the ban was lifted but we experienced a disruption in our oil supply? 

Mr. SLOCUM. What we have seen is that a result of the crude 

oil ban has been that we have replaced certain imports with U.S. 

production. For example, in the summer of 2010, we were importing 1.1 million barrels of oil every day from Nigeria. In March 

2015, the latest import numbers show we are importing 98,000 barrels of oil a day from Nigeria. That is a million barrel of oil a day 

decline that we are not getting from a country that has significant 

political and economic turmoil. There is a lot of connections to terrorism in that part of Africa. That has been replaced with U.S. produced oil. 

Any time that you are going to expedite the export of U.S. crude 

oil at a time when our economy still is not energy independent, we 

still require millions and millions of barrels of foreign oil to be imported to meet U.S. domestic demand, I would rather that demand 

be met with crude oil pulled out by U.S. workers in the Bakken 

and Eagle Ford than in countries with unstable political situations 

and unknown how they spend their money on crude oil. 

Ms. VELA ́ ZQUEZ. Thank you. Dr. Medlock, to what degree do 

you think market speculation is responsible for spiking or lowering 

gas prices? 

Mr. MEDLOCK. We actually did a study on this issue that we 

released in the summer of 2010. At that time, there was a lot of 

concern that speculation really had a big influence on commodity 

price formation. 

The core finding in that analysis was that speculative pressures 

can lead to short term pressures on price but not long term pressures because inventories adjust and ultimately the physical market will be self correcting. 

When you start to think about the role that speculation can play, 

it begs the question of if it can influence things in the short run, 

how severe can the spikes be and what might that mean. Those are 

very, very good questions. 

At the end of the day, it really boils down to how tight the market is. If the market is tight, speculative pressures matter. 

Ms. VELA ́ ZQUEZ. How much market regulation is necessary to 

prevent companies from manipulating commodities prices? 

Mr. MEDLOCK. The ultimate corrector is our open markets. 

Fungibility is ultimately what will eliminate any single entity from 

manipulating the markets. The more fungible the market is, the 

more movement there is by multiple different trading entities to 

come into the market. 

Ms. VELA ́ ZQUEZ. Mr. Slocum, how much is speculation playing 

a role when we discuss what will happen if the export ban is lifted? 

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Chairman CHABOT. The gentlelady’s time has expired but you 

can answer the question. 

Mr. SLOCUM. Thank you, Mr. Chairman. I cannot predict what 

level of speculation is going to be involved if we lift the export ban, 

but there has been a number of academic studies, some of them by 

some of the big banks that are involved in these markets, like 

Goldman Sachs and Citi and others, that have shown that when 

oil prices are around $100 a barrel, that speculators play a significant role influencing the price of oil by as much as $20. 

Like I said, I serve on an advisory committee to the Commodity 

Futures Trading Commission, and the former chairman, Gary 

Gensler, had testified about how a decade ago 15 percent of the 

crude oil market participants were speculators, and today it is 85 

percent. You have seen a huge transition where speculators are 

often driving the volume in markets like crude oil. 

Chairman CHABOT. The gentlelady’s time has expired. The gentleman from Nevada, Mr. Hardy, who is chairman of the Subcommittee on Investigations, Oversight, and Regulations, will be 

recognized for five minutes. 

Mr. HARDY. Thank you, Mr. Chairman. Dr. Medlock, while I 

support lifting the export ban, it was discussed here about refineries and the lack of ability to refine light crude. 

I guess my question first of all is why would we not domestically 

be trying to increase or build new refineries that would help create 

jobs in this country, help support and sustain and probably better 

economic viability? Do you agree or disagree with that at all? 

Mr. MEDLOCK. No, it is a great question. It is one that often 

comes up in the context of this issue. When you see the discounts 

that have emerged, and there have been a couple of studies looking 

at what the domestic refining industry can do, and in fact, it can 

handle the volumes that are being produced, it is just an issue 

about what price. 

Take the existing refining infrastructure. If I built something 

back in the mid-1990s that was really built to process heavier to 

medium grade crudes, then I have already sunk capital so I can access that crude oil from the international market, which is typically 

sold at a lower price. 

In order for me to be incentivized to buy the lighter, sweeter 

crudes and effectively idle portions of my facility, what I am going 

to have to do is actually see that price discounted to a level where 

it is competitive with my alternative, which is the heavier grade of 

crude that sells internationally. 

This is precisely what is driving the discounts that we have actually seen for domestic crudes. Some of the work we did actually indicates that Louisiana light sweet is really the crude that sits right 

at the margin at the moment, so this has sort of stimulated a lot 

of interest in understanding if domestic production were to continue to increase, what would happen to LLS. It would likely see 

sustained discounts. 

We have actually seen periodic discounts, for example, during periods of refinery turn around for LLS, and that is because there 

just was no capacity to handle all the light sweet we were producing domestically. 

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15 

Mr. HARDY. Thank you. I owned a construction company for 

years, over 20 years, 350 employees at our peak with the three 

businesses I held. Over that time, I have always found that when 

I did larger projects, higher volume, that the price was always 

more effective for the end user that was purchasing, whether it be 

asphalt paving. 

It was amazing. The bigger the project, percentages began to 

come down, and sometimes as low as seven percent. 

Is this not the same thing we are talking about here, it actually 

creates more jobs, leaves more money to do other projects when you 

can decrease the cost of the materials, is this not the same thing 

we are talking about here? Mr. McMinn or Mr. Leppo? 

Mr. MCMINN. I agree. It is exactly what we are talking about 

here. Mr. Leppo has 100 plus employees and you were just talking 

about 350. Read and Stevens has 25. We are a small business. We 

are clearly defined as a small business. 

Your premise is exactly what we are looking for, that opportunity 

to have that price set, and even though it may be a discounted 

price, as you just described, it is a stable playing field. It gives us 

the opportunity to have long term ability to contract for our crude 

oil and that is the point we are not at right now. 

Mr. LEPPO. The only thing I would add is oil is, as mentioned 

a couple of times, a global market. If the United States can produce 

more oil, we are going to get some of those efficiencies we are talking about. 

One example is how long it takes to drill a well in our area, it 

has dropped from seven to eight days to five days, just by the drilling crews getting more efficient at what they are doing. Those efficiencies lead to some of the effects you are talking about, where 

you would increase jobs, increase the amount of output by American oil and gas producers. 

Mr. HARDY. There is a belief out there that some of these restrictions, some of the reasons that people do not want more crude 

coming from the United States—we are being held up on permits 

all over lands out in the west that we know have crude oil but you 

cannot get the permit because they are public lands, so to speak. 

With that being said, the discussion has always been what 

makes a happy person or happy individual, and studies have 

shown it is faith, family, friends, and work, and work leads to the 

first three. 

By creating jobs, do we not create a better environment here in 

the United States for economic stability, a better environment for 

unemployment, people that are unemployed to have that quality of 

life that we all are here for? 

Mr. Slocum, do you want to address that? 

Mr. SLOCUM. Absolutely. I think an economy that works for as 

many different kinds of people is the kind of dynamic economy we 

want. 

The question is do we want to have an economy that is reliant 

upon, as has been stated here on this panel, globally priced commodities. Anyone that puts too much of their chips in the commodity basket is going to suffer through the volatility that produces. 

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When I look at the American economy, the value of the American 

economy is not pulling a raw material out of the ground and selling 

it on a global market. That is the Nigerian model of economic 

growth. 

What I see in the United States is the dynamic value added of 

manufacturing of products. I think that is the key to a robust economic future. 

Chairman CHABOT. The gentleman’s time has expired. The 

gentlelady from North Carolina, Ms. Adams, who is the ranking 

member of the Investigations, Oversight, and Regulations Subcommittee, is recognized for five minutes. 

Ms. ADAMS. Thank you, Mr. Chair, and thank you gentlemen 

for your testimony. As we explore the current ban on crude oil exports, we must take a full 360 view of this topic and the implications on policy and geopolitical matters. 

Mr. Slocum, it can be reasonably believed that if the U.S. were 

to start exporting our crude oil again there would be additional 

drilling and production activities in states that are endowed with 

tight oil resources, such as Texas, Oklahoma, and North Dakota. 

What impact will an increase in crude oil production have on the 

environment in areas where there is a natural resource, particularly with regard to water contamination and transportation related spills, and also what regulatory options exist or could be 

made available to potentially mitigate these risks? 

Mr. SLOCUM. Thank you. The bulk of growth of oil production 

in the United States has been through hydraulic fracturing or 

fracking, particularly in the Bakken shale, which is largely in 

North Dakota, and Eagle Ford in Texas. 

There is no such thing as benign oil production. There are always 

going to be risks associated with the water resources required, with 

risks of drilling, of whether or not the well is cased properly. There 

have been instances of water contamination in wells from fracking 

in both natural gas and oil. 

There are more than 100,000 or so fracked wells across the 

United States, so it is clear that fracking does not automatically 

lead to contamination, but neither is fracking an entirely sustainable activity. 

One thing to keep in mind is that as amazing and robust as the 

U.S. fracking boom has been, it has a relatively short shelf life. Rex 

Tillerson, the CEO of Exxon Mobil, gave an interview in March this 

year where he said the window on fracking is about a decade, and 

we are going to start to see production decline. 

We are already seeing in most fracked wells production declines 

after the first year of between 40 and 70 percent. That is because 

this tight oil is not located in a big easy to get at reservoir, it is 

dispersed throughout the formation, so you see extremely sharp 

production declines. 

We have been able to maintain steady rates of production because the fields are very large. As we drill in these fields, the production is going to drop off. 

I think it is erroneous to base a short term production phenomenon to make a long term decision about nixing the ban on oil 

exports. 

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Ms. ADAMS. Thank you. The European Union trade negotiators 

released a paper last year on the ongoing transatlantic trade and 

investment partnership negotiation, better known as TTIP, stipulating their desire to access U.S. crude oil exports. 

Dr. Medlock, Congress is involved in a heated discussion of 

whether or not to allow for fast track negotiations of the TTIP. Can 

you speak to both the positive and the negative impact that importing crude oil will have on future trade pacts, including TTIP? 

Mr. MEDLOCK. I am assuming you meant exporting crude oil 

from the U.S. 

Ms. ADAMS. Yes. 

Mr. MEDLOCK. I just wanted to make sure I got that right. I 

will actually address that by touching on two points, and I think 

it is important to touch on the first one because it relates directly 

to your question. 

The comment was just made about production decline and wells 

that are drilled in the United States, in particular, shale wells. Individual well decline is very steep. There are a couple of things 

that are very important to reconcile. 

First of all, you cannot actually translate individual well decline 

into field level well decline. They are two different things. They are 

entirely different. I am sure Mr. McMinn can talk about this. Entirely different sort of phenomenon. 

Secondly, if your concern is that the resource will decline as it 

is produced is what is driving your resistance to argue to lift the 

export ban, there is a fallacy in the argument because if the production declines, we would not be exporting anyway. It is sort of 

like a non-starter in terms of the discussion. 

As this relates to the TTIP negotiations, I think the inability to 

export crude oil from the United States, in particular, Asian complexes, the refineries in that part of the world are really well suited 

to handle the kind of stuff that is coming out of the light type oil 

wells in the United States. That is going to become a contentious 

point. 

At some point, those refiners would like to have access to the 

production that is coming out of the ground in the United States, 

and if we simply say no, you cannot have it, then that begs the 

question what is the next sticking point in the negotiations. I think 

it does have a bearing. 

Ms. ADAMS. Thank you. I am out of time. Thank you, Mr. Chair. 

Chairman CHABOT. Thank you. The gentlelady’s time has expired. The gentleman from Illinois, Mr. Bost, is recognized for five 

minutes. 

Mr.BOST. Thank you, Mr. Chairman. Thank you to the panel. 

U.S. Steel works in my District, produces steel that is rolled and 

used for oil exploration and everything like that. They threatened 

to idle about 2,100 jobs just this last year because of that. Now 

things have kind of changed around since. 

I need to know what else can be done in this process, besides releasing and freeing up and allowing us to sell our crude, that will 

make it to where we can still sell the product and still make things 

affordable. Do you understand the question? 

Mr. MEDLOCK. I think so. I think basically what you are asking 

is how can we be sure if we lift the export ban we do not have an 

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adverse effect on commodity prices that hampers activity. A very 

good question. 

As was pointed out, oil is a global commodity. Its price will be 

determined by a host of things that are outside the control of anything we do in the United States. 

Importantly, lifting the export ban actually allows transmission 

of that global price back to the well head, which will stimulate— 

we pointed this out in our report and I think IHS actually did some 

work that points this out as well—allowing that price to transmit 

back to the well head will actually stimulate a lot of investment in 

the development of pipeline infrastructure and the build out of various ports. 

A great example would be what could happen particularly at the 

Port of Corpus Christi, which is in Texas. This is a port, I think 

it was B&SF that has a rail yard, an unit train yard they just 

built, you are talking about a lot of small business enterprises that 

are engaged in that value chain. 

Turn that around, if you lift the export ban, that actually 

incentivizes the development of pipeline infrastructure to the coast, 

but it also stimulates more delivery of frack sands, so you have 

something that is going in both directions. 

All that said, there is no guarantee that the price of oil will not 

spike. Heaven forbid something were to happen to the Kingdom of 

Saudi Arabia, that would have dramatic implications for the 

United States as well as every other country in the world that consumes oil, much less imports or exports it. 

There are a lot of things that are frankly out of our control and 

the export ban does nothing to convey a benefit in that regard. 

Mr.BOST. My next question, Mr. Slocum, when you say it is very 

short lived on the fracking, I would agree with you if there was 

only one shale play. I know for a fact in my state, because I worked 

on the language for fracking in the State of Illinois, I was one of 

the specific co-sponsors back when I was a member of the Illinois 

General Assembly, that New Albany play has not even been 

touched. 

The long term production and the ability to export and actually 

put ourselves basically in the controlling seat that many other 

countries around this world have been in, do you not see that as 

an opportunity for us to become a controlling market? 

Mr. SLOCUM. You are absolutely correct that there are a number of untapped plays, and in that interview that Rex Tillerson, the 

CEO of Exxon Mobil, gave, he cited as an example the Arctic. He 

said here is a massive area with huge reserves that we need to tap 

into. 

The question continues to be in search of acquiring adequate petroleum supplies for our economy, for our domestic needs, we will 

have to continue drilling in new areas. That is definitely a path in 

the short and medium term that we have to take. 

Another alternative is is there a way to detach our economy 

from—as President George W. Bush said in his 2006 State of the 

Union Address, America is addicted to oil and we have to move towards alternatives to oil. I agree with President Bush on that bold 

statement. 

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We can continue turning over every rock and every shale play 

and every Arctic area and every offshore area. I do not think we 

can ever become energy independent as long as we continue using 

19 million barrels of oil a day. 

Mr.BOST. I do not disagree with that, that we should not do the 

research that is necessary. That being said, we are in a situation 

right now where this is what is available and what we have to use. 

My other thought, and I am down to my last moments here, and 

maybe Dr. Medlock can answer this, is it possible, in your study 

of the economics of this, that once we start to export to this level, 

all refineries would all of a sudden see an advantage and all of a 

sudden change our refineries to handle sweet instead? 

Chairman CHABOT. The gentleman’s time has expired, but you 

can answer the question. 

Mr. MEDLOCK. Thank you. I would say no. You need the margin for the refineries to cover the upfront fixed costs for investment. We will still displace all the light sweet crude. That will definitely happen because there is a competitive advantage in doing so. 

What we would effectively be doing is exporting the light sweet, 

which is a higher valued product, and importing the medium and 

heavier grades. 

It is effectively a swap that is actually creating value in terms 

of balance of trade. 

It also is important to point out that domestic refiners, where 

their margins would be squeezed a little bit, they are not going to 

be put at a competitive disadvantage relative to the European 

counterparts, for example. There are newer refineries that are actually much better equipped to produce the types of petroleum 

products that are needed globally, and one of the things that we 

often forget, the refining sector has benefitted tremendously from 

very low natural gas prices as well in the United States. 

Chairman CHABOT. The gentleman’s time has expired. The 

gentlelady from New York, Ms. Clarke, is recognized for five minutes. 

Ms. CLARKE. Thank you, Mr. Chairman. I thank the ranking 

member. I thank our witnesses here today. 

My first question goes to Mr. Slocum. In your testimony you indicated that the United States is not close to breaching our storage 

capacity for refined and crude oil. Do you expect to see a point in 

the future where we actually exceed our oil storage capacity, and 

if so, when might that occur and what would that mean for the 

U.S. oil market? 

Mr. SLOCUM. Thank you, ma’am. I do not see any concern about 

the United States breaching its domestic storage capacity. There 

were some articles written several months ago that we are looking 

at what appeared to be some bad data including that we are at the 

brim of storage capacity and this is a crisis. 

When better data was examined, the consensus now is we have 

plenty storage capacity yet to be filled. The issue is the refiners are 

running at very high rates of utilization, meaning they are almost 

at capacity processing crude oil. We are exporting record amounts 

of refined products out of the United States. 

What we are seeing is domestic demand for oil, as I noted in my 

written testimony, is picking up. The EIA noted that U.S. gasoline 

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demand is projected to go up more than four percent this year. Vehicle miles traveled, which is a key indicator of how much Americans are driving, is on the increase after going down after the economic crisis. 

We are seeing sales of less fuel efficiency like trucks and SUVs 

grow very quickly while sales of more fuel efficient cars are actually in decline. That paints a picture in the next few years anyway 

of steady increases in demand. 

As Dr. Medlock said, this summer we might see a driving season 

for the first time since 2006. That is more demand and that again 

relieves a lot of pressure on storage levels. 

Ms. CLARKE. You also concluded your testimony by saying the 

oil industry is sponsoring studies based on dubious calculations 

that Americans will be better off by lifting the crude oil export ban. 

Can you elaborate on how the oil industry might specifically gain 

from lifting this ban and in your opinion, how lifting the ban might 

actually impact small businesses and the end consumer? 

Mr. SLOCUM. Right. Like I began my testimony, ma’am, at its 

core, the issue is that the ban limits the ability of U.S. producers 

to sell their oil overseas, and as Dr. Medlock explained, the light 

oil coming out of the shale formations is more valuable. As a result, 

U.S. refiners are having access to that valuable crude oil at a discount relative to what it is selling internationally. 

If you are an oil producer, you do not want to sell your oil at a 

discount to some U.S. refiner. You want to have the freedom to sell 

that valuable oil overseas at a higher price so your shareholders or 

owners can enjoy a bigger return. 

I understand the oil industry’s desire to do that, but if we allow 

that, it will come at the expense of U.S. refiners having access to 

that discounted crude, and I believe the data show that the refiners 

have been sharing that discount with consumers in the form of 

lower gasoline prices. 

Ms. CLARKE. Very well. Dr. Medlock, it is my understanding 

that the Baker Institute receives corporate funding and even solicits corporate support on its website. In fact, both Chevron and 

Shell have sponsored lecture series at the Baker Institute. 

My question is how could you be free and unbiased in your opinion to lifting the export ban, given the Institute’s relationship to 

big oil? 

Mr. MEDLOCK. To be clear, the Institute through our corporate 

affiliates program has relationships to big oil, to small oil, to midstream operators, to EDP Renewables, which is a wind company. 

It is across the spectrum. That is the first point I will raise. 

The second point I would raise is the study that I am mentioning, as a matter of fact, the last two major studies we have released, one was funded by the Alfred P. Sloan Foundation, the 

other one was funded by endowment funding, which has nothing to 

do with oil. 

We actually do this by design. The critical thing that we get from 

our corporate relationships is we will host workshops during the 

course of studies, and the workshops actually allow us to engage 

with a variety of individuals and corporations on either side of the 

discussion, any discussion actually. It keeps us grounded. The last 

thing you want to do sitting in a think tank that is academically 

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oriented is become an ivory tower institution. You want to stay 

grounded. You want to stay in touch. That is what we use it for. 

Chairman CHABOT. The gentlelady’s time has expired. 

Ms. CLARKE. Thank you, Mr. Chairman. I yield back. 

Chairman CHABOT. Thank you. The gentleman from Missouri, 

Mr. Luetkemeyer, who is the vice chairman of the full committee, 

is recognized for five minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman, and thank the 

panelists for being here. 

The last thing I am is an expert on oil. This is an interesting discussion to me today. The only thing I know is I stick it in my car 

and farm equipment to make sure it all works properly. 

I hear the discussion going back and forth on the different kinds 

of oil that we have. Let’s start first with the amount of oil, known 

reserves. Somebody told me one time we have 800 years worth of 

known oil reserves. Is that figure accurate? Dr. Medlock? 

Mr. MEDLOCK. There is a definitional issue here. Reserves are 

something that are actually readily producible in a reasonable 

amount of time. It is really an accounting definition more than 

anything else. 

Where you get sort of beyond that, and this is from people who 

sort of get into resource assessment methodologies, you get into 

what are called ‘‘commercially recoverable resources,’’ which are 

things that can be produced given today’s technologies and today’s 

prices and costs, and then you get to technically recoverable resources, which are things that can be produced with today’s technologies, using today’s technologies, regardless of the costs. 

That number is obviously a lot larger than commercially recoverable in even proven reserves. Then there is something we call ‘‘resource in place,’’ which is just all the oil that is down there. That 

number is by far much larger than even today what is technically 

and commercially recoverable in light tight oil formations. 

For example, when you drill into the Eagle Ford or Bakken or 

even the Permian, which was another sort of shale oriented play, 

Utica, in the liquids bearing portions of those plays, what you are 

actually getting is on the order of about 10 percent of what is down 

there. 

That should tell you two things. (a) we are not really just barely 

scratching the surface in terms of the volume that is underneath 

our feet, but (b) it tells you there is a lot of room for technology 

to run. This is an area where upstream enterprises are constantly 

engaged in trying to improve rates of recovery. 

Mr. LUETKEMEYER. My point is we do not have to worry, we 

have been fracking for over 50 years, I believe. 

Mr. MEDLOCK. There has been over a million wells fracked in 

the United States. 

Mr. LUETKEMEYER. We probably have a few more we can drill 

to be able to go out and find some more oil. Then we come to the 

point where what are we doing with oil that we have. You are saying there are three different kinds, heavy, medium, and light 

crude. 

Mr. MEDLOCK. That is a rough characterization. 

Mr. LUETKEMEYER. Keeping it basic. Bear with me. The light 

crude, it is difficult for us to be able—we do not have really a good 

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market for it or refiners are not able to refine it in a way that is 

profitable for them at this point so they have been using mostly 

heavy and medium crude. 

Mr. MEDLOCK. It was actually explained to me once, every refinery has the kit to process light crude. It is not an issue of whether or not we can handle it. It is an issue of whether or not the refineries that were built in the 1990s to handle the heavy Venezuelan crudes or the heavy Mexican crudes, which is where largely our crude oil was coming from, but want to handle it. 

Mr. LUETKEMEYER. Basically, we have plenty of oil for the refineries to take care of our needs here. We have this light crude 

that they have to make a financial decision whether to refine or 

not, and if this is the kind they really want to export. Is that a fair 

assessment? 

Mr. MEDLOCK. The refiners will only be willing to take that 

light crude if it is competitive with the crude they could otherwise 

buy, which is a heavier grade. 

Mr. LUETKEMEYER. Okay. We have plenty of resource. We 

have to make a financial decision on whether or not it is a good 

deal to refine some of it or not. The question then becomes if we 

can reach a point where we are refining enough to meet our needs, 

to me it would seem there would have to be a financial benefit for 

them to go out and build another refinery, otherwise it is probably 

cheaper to just export the oil. 

Mr. MEDLOCK. I realized I did not get to completely answer the 

question asked earlier. That would beg the question why are we 

not building more refineries. Today, siting is a big issue. This is an 

issue that has come up over the last three decades, to be honest 

with you, related to siting. 

The expansion we have seen since the early 1990s have not been 

green field expansions. 

Mr. LUETKEMEYER. I have one more comment to make, one 

more question. It would get down also to the distribution system. 

We do not have enough oil tankers. We do not have enough trucks. 

We do not have enough ships to be able to get all this out. I come 

from Missouri. We are competing with our greens for train cars 

and barges up and down the rivers with your oil products. 

I am just saying this is a problem if we want to export, it is 

going to be a bottleneck for this whole situation. 

Mr. MEDLOCK. Absolutely. 

Mr. LUETKEMEYER. It has to be worked out at some point. 

This is not a panacea that everybody talks about here, but it is an 

opportunity, I think, that we need to take a look at. Thank you for 

your comments. 

Chairman CHABOT. The gentleman’s time has expired, but if 

you want to answer. 

Mr. MEDLOCK. This is actually an issue we raised in the lift or 

not to lift study and some research I am currently engaged in, and 

it goes back to some work I did on biofuels policy, to be honest with 

you. It has to do with what is the appropriate mode of transportation given the size of the market outlets. 

I think there has to be a hard look done internally within the 

United States to understand why there is so much crude being 

transported by rail and by barge now. It has to do quite frankly 

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with the fact that all the stuff that is coming on line, you cannot 

capture the economies of scale by building pipeline infrastructure 

to get to the coast because you cannot sell it to the international 

market. 

That means you do things in a piecemeal way, and you end up 

with the kind of competitive pressures that you are talking about. 

These are very real issues that I think if the ban is lifted, it is 

not going to completely address, because the capital has been sunk 

to move things by rail and barge. If production were to continue to 

grow, you would actually see those competitive pressures relieved 

because it would incentivize pipeline development, which will result in the lease rates on the barges and on the tank cars on rails— 

the competitive pressure would be to lower those lease rates. 

Mr. LUETKEMEYER. Yes, that is where I was headed. 

Chairman CHABOT. Thank you. The gentleman’s time has expired. The gentlelady from Michigan, Ms. Lawrence, is recognized 

for five minutes. 

Ms. LAWRENCE. Thank you so much, Mr. Chairman. Dr. 

Medlock, if we lift the ban on crude oil exports today, do we not 

lose our ability to offer lower energy prices all through the supply 

chain for industries and small businesses? Do you agree with that 

statement or disagree? 

Mr. MEDLOCK. I disagree with that statement. When you get 

to the products that are actually sold to petrochemical producers, 

those products are actually at a competitive level internationally 

because there is no restraint on exports of those products. 

The only thing there is a constraint on is the export of raw crude. 

That is actually where the discount accumulates. It does not actually pass downstream. Why would it? If I am a refiner and I can 

produce a distillate, why would I sell it at a discount domestically 

when there is an international buyer that will pay a competitive 

price for it. 

Ms. LAWRENCE. Would there be a risk to our economy in America today or benefit to some big energy companies, because if I can 

buy competitively, and we are talking about small businesses, so 

look at our larger oil industry and the smaller dispenser industries, 

would that be a risk, a benefit to the large ones and not for the 

small? 

Mr. MEDLOCK. Let me make sure I am interpreting your question correctly. I think you are asking me if the ban were lifted, 

would it represent risks to small business enterprises. 

Ms. LAWRENCE. To the benefit of larger. 

Mr. MEDLOCK. I think there is an important thing that needs 

to be put on the table here. The shale revolution, as it has been 

called, it is not a big oil story. It has actually been driven by small 

independent producers and mid-cap sized producers. 

Ms. LAWRENCE. This would have a direct impact? 

Mr. MEDLOCK. Absolutely, it does. 

Ms. LAWRENCE. Proponents for the crude oil export state the 

benefits for exporting crude oil to our allies abroad. You touched 

on the issue during your testimony. A May 2015 CRS report found 

that U.S. oil exports would do little to help Eastern Europe countries decrease their reliance on Russian energy. 

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I have concerns about the fact that are we overstating the geopolitical benefits of lifting the ban on crude oil to raise the profits 

of a small group in a short term at the expense of the long term 

picture. 

Mr. MEDLOCK. I think it is fair to say that if there is a perceived benefit, people will run with that benefit to try to make a 

point and will inflate it. The issue with Eastern Europe really is 

a natural gas issue much more than a crude oil issue. 

A lot of the discussion and really I think the focal report of that 

CRS report was related to LNG exports specifically. As you know, 

there has been a lot of rhetoric on Capitol Hill, we should be exporting gas to the Ukraine and these sorts of things. 

There would be a long lead time for that to happen, first of all. 

It’s not even clear U.S. sourced energy, oil or gas, would be competitive with the alternative, particularly when a country like Russia can consistently undercut because their cost of production is 

lower. 

The energy security benefits that could be conveyed more broadly 

to Eastern European countries, you can get that mixed up with stability in price at a reasonable level and source of supply. At the end 

of the day, if the U.S. were to allow more exports of both natural 

gas and crude oil, that introduces a competitive threat to Russian 

dominance in the region, and it does not necessarily mean that 

U.S. energy has to flow there, that the competitive threat itself 

would actually yield a difference in the pricing strategies of Russians to maintain that market share. 

I think that is what the Eastern Europeans would want, low cost 

energy at a reasonable price. 

Ms. LAWRENCE. Mr. Leppo, could you respond to that as well, 

please? 

Mr. LEPPO. We are one of those small businesses, and we are 

a support company into the industry. For us, the increased demand 

there would be for American produced oil and gas by lifting the ban 

on crude oil exports would create jobs for our company. 

It would not show up in any big reports anywhere because we 

are relatively small, but we are seeing the impact both on our business and businesses in our area where because of the lack of demand right now, job creation has disappeared in the oil patch in 

Ohio. 

Chairman CHABOT. The gentlelady’s time has expired. 

Ms. LAWRENCE. I yield back. Thank you. 

Chairman CHABOT. The gentleman from Kansas, Mr. 

Huelskamp, is recognized for five minutes. 

Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate the 

hearing today. This is a pretty important topic in my District, 

given we produce plenty of the sweet crude that is discounted because of years and years of policy. I am trying to figure out how 

we move forward. 

In doing research in preparing for this hearing, I found out there 

are not many things that we prohibit exports of in this country, 

plenty of those that deal with national security issues, nuclear materials, and such, but much of what we produce in Kansas ends up 

not only outside our state but outside this country. 

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I want to ask Mr. Slocum a few more questions to try to understand the position of Public Citizen, the group you work for. You 

are opposed to lifting the ban on crude oil exports; is that correct? 

Mr. SLOCUM. Yes, sir. 

Mr. HUELSKAMP. Natural gas exports, you are opposed to exporting those as well? 

Mr. SLOCUM. I have concerns that exporting significant 

amounts of natural gas would end up raising prices for domestic 

consumption of natural gas. 

Mr. HUELSKAMP. I understand that. Do you support or oppose 

that ban? 

Mr. SLOCUM. There is no current ban on natural gas exports, 

but I do believe we need to be very careful about allowing—— 

Mr. HUELSKAMP. That was part of the 1975 ban; correct? 

Mr. SLOCUM. It is. The Department of Commerce never put together rules to enforce that aspect of the statute. I do think it is 

worth taking a look at. 

Mr. HUELSKAMP. That is maybe. What about the import of oil 

products, are you opposed to imports of oil products? Your association has concerns about global climate change and has taken positions that would suggest you do not want the use of these products. 

Do you oppose the import of these products into America? 

Mr. SLOCUM. I think there have been problems posed on the 

national security basis of the United States relying on imports of 

oil from nations that do not share some of our geopolitical goals. 

I think that is a problem. 

Mr. HUELSKAMP. I think that is fair. You do still oppose imports along the Keystone Pipeline if it would be completed? 

Mr. SLOCUM. The Keystone Pipeline we opposed because it is 

designed to facilitate the export of Canadian land locked crude, but 

not for domestic consumption. 

Mr. HUELSKAMP. We cannot export the crude currently. 

Mr. SLOCUM. No, we cannot export U.S. produced crude. The 

Keystone Pipeline is designed to accommodate the export of refined 

products out of the Gulf Coast. We are getting a million barrels of 

Canadian crude every day. 

Mr. HUELSKAMP. You are not opposed to that? 

Mr. SLOCUM. It is part of the mix. The issue with the Keystone 

Pipeline is proponents were selling it as a way to lower gasoline 

prices, and that is not what it is designed to accomplish. 

Mr. HUELSKAMP. If we would prohibit the export of wheat, 

which is a main product in Kansas, would that reduce the price to 

consumers in America? 

Mr. SLOCUM. I am an energy policy guy. 

Mr. HUELSKAMP. It is supply and demand. If you are not allowed to export a product, it can only be used exclusively in the 

United States, almost in every case that would reduce the price of 

that product; is that correct? 

Mr. SLOCUM. Yes, especially like an issue like oil where—— 

Mr. HUELSKAMP. I was asking about wheat. 

Mr. SLOCUM. I understand that. 

Mr. HUELSKAMP. Most folks I talk to would say food is probably more important than oil and the cost to consumers is pretty 

critical. If you take your logic that we want to limit the exports and 

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reduce prices, I think Public Citizen probably should apply that to 

any exports, because it is so critical. 

You do or do not support limits on—— 

Mr. SLOCUM. I do not know what our current rates of domestic 

consumption of wheat are compared to our domestic production of 

wheat. I know what that ratio is for oil consumption. We use far 

more oil than we domestically produce. 

I think facilitating the export of that product does have negative 

consequences for the U.S. economy. I do not know what that demand situation is for wheat. 

Mr. HUELSKAMP. You have identified the negative aspects for 

consumers in your mind but not for producers. You would agree 

lifting the export ban would help oil producers in America? 

Mr. SLOCUM. Absolutely, it would allow them to sell their oil 

at a higher price. 

Mr. HUELSKAMP. You are opposed to that higher price for oil 

producers? 

Mr. SLOCUM. If it comes at the expense of higher prices for the 

American consumer and small business, absolutely. 

Mr. HUELSKAMP. There is no question it will come at the expense of those that are paying for it, the same thing for any ban 

on any product. 

As we talk about trade, Mr. Chairman, and this is a very critical 

issue, there are folks like we see here today, Mr. Slocum, that 

frankly do not believe in trade. We cannot live in a vacuum any 

more. It is not 1975, sir. For Kansas wheat producers, 50 percent 

of our product goes overseas, and you say hey, we are going to continue to ban oil exports from Kansas and elsewhere, but wheat producers are going to live in this vacuum. 

We have to recognize we are in a global economy, and we simply 

cannot rely on policies from the Ford/Nixon era. I yield back, Mr. 

Chairman. 

Chairman CHABOT. The gentleman’s time has expired. The 

gentlelady from American Samoa, Ms. Radewagen, who is the 

chairman on the Health and Technology Subcommittee, is recognized for five minutes. 

Ms. RADEWAGEN. Thank you, Mr. Chairman. My question is 

for Dr. Medlock. Recognizing the economic and geographic isolation 

of the home district I represent, American Samoa, and considering 

that energy consumption in island states and U.S. territories is almost entirely based on imported petroleum, what benefits do you 

foresee reaching the U.S. territories should the export ban be lifted? 

Mr. MEDLOCK. Good question. This gets into a logistical issue, 

right, in terms of thinking about where the products that are coming into American Samoa are sourced. They are not generally 

sourced from the United States. They are generally sourced from 

the Pacific Rim. 

When you start talking about the imports of the liquids, the petroleum products, Hawaii is the same thing, why not export products from California, for example, to Hawaii, well, that gets into a 

Jones Act issue, separate sort of issue, right? 

A lot of the products that come into Hawaii are actually coming 

from Singapore and Asia Pacific markets. 

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It is not clear to me, to be honest with you, there would be any 

real direct benefit, but indirectly benefits would accrue to the extent that petroleum product prices are affected in terms of stabilization, or affected lower by allowing more light crude from the 

United States—I am sorry. 

Chairman CHABOT. We have more water coming. 

Mr. MEDLOCK. Thank you. Can you come back to me on that 

one? Sorry about that. 

Ms. RADEWAGEN. You want me to give you the question again? 

Mr. MEDLOCK. Sure. 

Ms. RADEWAGEN. Recognizing the economic and geographic 

isolation of the islands I represent, American Samoa, and considering energy consumption in island states and U.S. territories is almost entirely based on imported petroleum, what benefits do you 

foresee reaching the U.S. territories should the export ban be lifted? By the way, some of our oil does come from the United States. 

Mr. MEDLOCK. Of course, it does. Lifting the export ban will 

have a bigger effect to global markets. That is what I was trying 

to convey in terms of the direct benefit. It is not clear to me there 

is a massive direct benefit. It is more clear to me there is probably 

an indirect benefit that would accumulate to American Samoa as 

a result of the lifting of the export ban. 

As has been identified by a lot of studies, a lot of the oil exports 

that would come from the United States would actually end up in 

the Asian Pacific market, and that would have an impact on the 

flow of all products as well as raw crudes in the Asia Pacific market, which would convey a benefit to American Samoa directly. 

My point is it is more of an indirect benefit because it has a market reorienting effect, and actually it has an impact on logistically 

what happens with petroleum products and raw crude in the international marketplace. 

Ms. RADEWAGEN. Thank you. Mr. Leppo, do you have any 

thoughts on this? 

Mr. LEPPO. Yes, I was very happy you originally directed that 

to Dr. Medlock. 

I am not an economist, so understanding what the impact would 

be on American Samoa is outside my realm of expertise. 

Ms. RADEWAGEN. Thank you, Mr. Chairman. I yield back. 

Chairman CHABOT. Thank you very much. Thank you. I would 

ask unanimous consent that members have five legislative days to 

submit statements and supporting materials for the record. 

I want to thank our very distinguished panel here this morning 

and this afternoon as well for their great testimony. Things were 

going great, Dr. Medlock, until it sort of went south there at the 

end. That just shows you how tough this Committee can be on witnesses. 

Whatever the point of view was, I think everyone did a very commendable job, and I think it was very persuasive. We had a lot of 

members here that I think learned a lot, and that is one of the 

more important things. 

This is a key issue. You all helped shed some light on it. Thank 

you very much for that. 

If there is no further business to come before the Committee, we 

are adjourned. Thank you very much. 

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[Whereupon, at 12:32 p.m., the Committee was adjourned.] 

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A P P E N D I X 

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Crude Intentions: The Untold Story of the Ban, the Oil 

Industry, and America’s Small Businesses 

Statement of Dale Leppo, Chairman, Leppo Group Inc., 

Tallmadge, OH 

Before the Committee on Small Business, U.S. House of 

Representatives 

June 17, 2015 

Thank you, Chairman Chabot, Ranking Member Velazquez, and 

Small Business Committee members for inviting me to testify 

about the impact of lifting the ban on crude oil exports on our 

small, family-owned business which employs 127 people in Ohio 

and has been in business since 1945. 

Leppo Group rents and sells construction equipment at seven locations throughout Northeast and East Central Ohio. In 2013 we 

opened ‘‘Razor Rents’’ in Carrollton, Ohio to serve the needs of the 

emerging Utica Shale energy play. Fifteen percent of our employees 

are involved in some way in supporting our energy-related operations. 

In the SECOND half of 2014, Razor Rents business DOUBLED 

vs. the first half of 2014 as the Utica Shale activity ramped up. 

Ohio had 48 drill rigs operating by the end of 2014. As a result of 

that activity we added inventory and we hired staff to meet that 

demand. In 2014 we: 

• Added 14 new jobs, many of which went into the support 

of the energy sector 

• Our Razor Rents rental fleet grew by 130% (from 154 to 

355 units) which also created jobs for our manufacturing partners 

• In 2014 we purchased 45 new pieces of equipment from 

JLG Industries, almost all of which are manufactured either in 

Ohio or Pennsylvania. Each machine represents an investment 

of $80,000 to $140,000. 

• We created 3 internships for students from Ohio State 

University Agricultural Technical Institute, who then joined us 

full time upon their graduation. 

When the prices of oil and natural gas fell, so did that increased 

activity. 

• The number of drill rigs working in Ohio has fallen from 

48 to 22. 

• The number of machines that we have on rent in the energy sector has fallen by 42% since the peak in late 2014. 

As a result, in 2015 we have: 

• Put an aggressive 2015 hiring plan ‘‘on hold’’ until our future activity level becomes clearer. 

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1 IHS Economics (2014). US Crude Oil Export Decision: Assessing the impact of the export 

ban and free trade on the US economy 2 IHS Economics (2015), Unleashing the Supply Chain: Assessing the economic impact of a US 

crude oil free trade policy 3Statement of Toby Mack, President, Energy Equipment and Infrastructure Alliance, to the 

House Small Business Committee staff briefing, May 27, 2015 

• Transferred some of our co-workers from the energy sector 

back to our ‘‘normal’’ construction and industrial equipment activities 

• That means that 6 positions we had planned to fill this 

year will remain open until it becomes clearer that we do (or 

don’t) need the additional capacity. 

• Significantly reduced our rental fleet growth. For instance, 

so far in 2015 we have ordered minimal new equipment for our 

energy markets—nine small units at last count 

• We currently have two interns from Ohio State University 

Agricultural Technical Institute, but time will tell if we have 

the level of activity needed for us to bring them on full-time 

after they graduate. 

So what can Congress do to help our small business create jobs, 

both in our company and for our customers and our suppliers? 

Congress can help INCREASE MARKETS for American-produced 

crude oil by lifting the ban on crude oil exports! 

Why would that help? I think there are several reasons: 

1) Crude oil moves around the world in what is a global energy market. By banning the export of crude oil we artificially 

put the U.S. energy sector at a competitive disadvantage by removing exports as a potential market at a time when I believe 

the US is in a world-wide battle for energy market share. IHS 

Economics estimates that lifting the ban would increase US 

crude oil production by up to 2.3 million barrels per day average between 2016 and 2030.1

2) This new production will drive substantial additional investment in products and services from the crude oil supply 

chain, generating up to $63 billion of supply chain economic 

output nationally, and up to $1.8 billion in Ohio.2

3) This investment would create up to 440,000 new supply 

chain jobs nationally, and up to 13,600 in Ohio alone by 2018.2

4) These export-dependent jobs and GDP growth are widely 

spread throughout the American economy. They will exist in 

all 50 states and throughout 60 different industry sectors. Of 

the national supply chain job gains, 10 of the top 15 states 

gaining jobs are non-producing states. By GDP growth, 11 of 

the top 15 states are non-producing states.2

5) The Energy Equipment and Infrastructure Alliance, of 

which my company is a member, estimates that there are at 

least 120,000 supply chain businesses supporting American oil 

and natural gas production, of which at least 100,000 are small 

businesses.3

6) 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 

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do would continue to 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. 

During the energy boom in Ohio we have seen significantly increased activity in the energy supply chain: 

• The manufacturing of steel pipe 

• The manufacturing, distribution and support of equipment 

used in energy markets such as forklifts, man lifts, pumps, 

compressors, generators and earthmoving equipment 

• Investment in infrastructure to produce and get oil and 

natural gas to market (well-site preparation, pipelines, separation plants, rail lines, roads and bridges) 

• Investment in gas fired electric generation plants to replace older and less efficient coal-fired generating plants 

• Investment in places for energy sector workers to sleep, 

eat and ship, including hotels, restaurants, car dealerships, 

etc. 

At a time when the United States continues to see sluggish 

growth in the kind of good jobs that the energy sector provides, lifting the ban on crude oil exports is a step that could yield almost 

immediate results. 

I hope we can move forward on expanding the markets for US 

exports of energy that I believe will be a source of good jobs for 

Ohio and much of the rest of the country. 

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

committee. 

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Mr. Chairman and Members of the Committee, my name is Rory 

McMinn and I am President and Managing Director of Read & Stevens, Inc., a small, privately held oil and gas production company 

headquartered in Roswell, New Mexico. I have served as a member 

of the New Mexico Public Service Commission and as a County 

Commissioner of Chaves County, New Mexico, and my wife currently serves as a County Commissioner in Lincoln County, New 

Mexico. I am pleased to have been invited to testify to the adverse 

impact that the current depressed oil price market has had on 

small companies such as Read & Stevens, and to convey to you the 

enormous value to small operators such as ourselves, our employees and our communities attainable from lifting the antiquated and 

destructive 1970s-era ban on the export of domestic crude oil. 

My trip to our Nation’s Capital to speak to you today would be 

considered unnecessary spending if not for the fact that my shareholders so urgently want you to be aware of our situation. If not 

for their encouragement, I would not have spent what amounts to 

one half of a pumper’s monthly salary to be here. The issue of 

eliminating the ban on crude oil exports is important to the livelihoods of thousands of people in New Mexico and the other producing states, as well as those many hundreds of thousands of people all over America who do not live in ‘‘oil patch states’’ but whose 

work and family welfare depends on making the goods and providing the services used by the oil production industry. Therefore, 

having the chance to have a seat at this table was incentive enough 

for my shareholders to want to be heard. 

Read & Stevens, Inc. was founded in 1972 and has drilled for 

and produced oil and natural gas within New Mexico and West 

Texas as a family owned small business ever since. Due to our 

firm’s longevity, we have mineral leases in some of the prime target rich areas of the Delaware formation of the Permian Basin. We 

provide the livelihoods for 25 much valued full-time employees, of 

which two have 32 years and one has 21 years of employment with 

us. Our patriarch is Charles B. Read, who at age 93 continues to 

be active in our operations. 

Small Producers Are Being Severely Impacted: 

Read & Stevens operates 150 wells and has an equal number of 

wells where we own an interest, but are operated by other companies. Many of the wells in our inventory meet the threshold of 

being considered ‘‘stripper’’ production with output of fifteen or 

fewer barrels per day. While we have up to 70 other cost-sharing 

working interest owners in many of our wells, as is very common 

for small producers in the oil business, the Read family finances its 

portion of the operations with cash flow and bank debt. 

Like many other small producers, there is no public funding of 

our stock and we have no access to private equity capital which finances operations by larger companies in the oil business. Therefore, anything that causes a constriction in our cash flow or devalues the oil and gas reserves that stand behind our bank debt 

causes great problems for us. Consequently, I want to make it very 

clear that the current depressed oil price market, and the associSBREP-219 with DISTILLER

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ated cut back in drilling new wells which would create new revenue for us, has had a very strong adverse impact on our financial 

situation, a most unfortunate problem shared by other small oil 

and gas operators all across the nation. 

Our 26-well drilling program that was started in 2014, with 24 

wells remaining to be drilled, has been cancelled. In fact, if we had 

not already signed contracts for drilling those first two wells, we 

would not have done so. The 2014 estimated well costs were $6.75 

million each and are now projected to cost $4.5 million each. The 

approximately one-third reduction in costs is made possible by our 

vendors who, facing a steep decline in demands for their goods and 

services from the reduction in new drilling, are eliminating jobs, 

mothballing equipment, deferring maintenance, eliminating advertising, closing offices, and cutting back their support for a wide 

range of civic and community organizations in a desperate effort to 

maintain their businesses rather than have their contracts simply 

cancelled—and I would emphasize that a lot of those vendor contracts have simply been cancelled already. Despite the one-third 

drop in well costs, the simultaneous 50% drop in the crude oil 

price, with its continuing inherent uncertainties, causes the economics to be negative. 

Just like our own vendors and suppliers, we operators are adjusting in a similar manner, only spending capital to maintain our existing production levels and eliminating all unnecessary spending. 

I can tell you in Roswell there are at least six other companies of 

approximately equal to Read & Stevens that have had similar experiences. All have cancelled drilling new wells and are only spending money as necessary to keep their current production pumping. 

My discussions with other small operators in Farmington, in the 

Four Corners area of Northeastern New Mexico, echo what we have 

been experiencing in Roswell. 

With small operators and their vendors and suppliers all cutting 

back on their activity, the Committee can see that the collective adverse impact on those small businesses, their employees, and their 

communities is widespread and immense. 

Read & Stevens is fortunate in that our mineral leases are long 

lived and are not in jeopardy of expiring because they are ‘‘held by 

production,’’ therefore we do not have to drill new wells to save 

leases as many operators are forced to do. If not for the need to 

drill to save their leases, most of the operators would be deferring 

drilling as we are. Oil and gas reserves are similar to a savings account, as you take oil out and thereby reduce the reserves you 

must constantly look to replace that amount either by new drilling, 

by finding additional heretofore untapped reserves in existing 

wells, or by acquiring reserves from others. We constantly have to 

balance our efforts based upon the production of a diminishing resource. Our preferred and best opportunity to replace our reserves 

is to drill new wells. But due to the current marketplace, our only 

practical alternative is to find additional reserves behind existing 

pipe, hence the cancellation of our 26-well drilling program after 

only two wells and foregoing all the economic activity and jobs that 

would have been generated by drilling the other 24 wells. 

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While Roswell, the community where our headquarters is based, 

has felt the drilling downturn by the loss of retail sales, the other 

larger Southeastern New Mexico communities where services are 

based such as Hobbs, Carlsbad and Lovington have endured a 

drastic decline in every level of wholesale and retail business, from 

drops in rental property values to steep declines in the volumes of 

sales of produce to the restaurants. The Red Wing boot shop in 

Hobbs now has enough steel-toed boot inventory to last several 

years because of the lack of demand. Our office is flooded with applications from people—from very unskilled workers to the most 

highly skilled and experienced field personnel. We have had other 

operators, especially those in the Midland/Odessa, Texas area, tell 

of receiving resumes of newly graduated petroleum engineers desiring a position at the lowest level. We have been in these boom and 

bust cycles before, but never have I previously experienced a bust 

during a period, as now, when due to American technological leadership that allows us to produce at world class levels, US oil producers are capable of competing with OPEC directly. But our ability to compete on the world market is frustrated by the export ban 

that prevents us from accessing that market with our oil. 

Broader Adverse Impacts on our State and Communities: 

Revenues from the oil and gas industry are the economic backbone of the state of New Mexico. New Mexico has been at the bottom of the list for recovering from the recent severe recession. The 

only bright light was the oil and gas industry, which is the largest 

private employer in the state and one of the few that was growing 

jobs until the last six months. Now our industry is laying people 

off. One New Mexico state agency says more than 2,000 jobs were 

lost in the first quarter of 2015 in this industry. 

The adverse impact of the downturn in crude oil prices is not 

limited to the private sector alone. The State of New Mexico’s revenues are down by $220 million dollars due to the crude oil price 

drop which affects public school funding projects. Lease bonus payments at monthly state land auctions have gone from record highs 

of more than $60 million to amounts less than $5 million. Revenues 

from the oil and gas industry accounted for 31.5% of the state of 

New Mexico’s general fund in 2013 and nearly 35% in 2014. In the 

most recent budget preparation cycle, New Mexico’s budgeting officials decreased their revenue estimates for the FY 16 fiscal year at 

least twice as the price of oil declined. This meant far less money 

was available for all state programs and operations. Preliminary 

figures for January 2015 revenues showed an average price of 

$42.70 per barrel which was down from an average price the year 

before of nearly $90 per barrel. The state economists are forecasting an average price for FY 15 of $56 per barrel, still well before the $90 figure from the previous year. 

In addition to their contribution to New Mexico’s general fund, 

revenues from oil and gas support the fund used for the state’s capital construction projects, including roads, college and school buildings, museums, senior citizen facilities, and much more. The severance tax collections supporting these projects decrease as the oil 

prices drop because they are based on a percentage of the sale of 

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oil and gas. Oil and gas support nearly 86% of this capital outlay 

fund. 

Further, oil and gas revenues support over 95% of the permanent 

fund that serves as an endowment fund for New Mexico’s public 

schools. The interest from the fund and a small percentage of the 

corpus fund school operations every year. 

Finally, oil and gas royalties from state lands are collected for 

other direct beneficiaries of development of New Mexico’s state 

lands. These beneficiaries include hospitals and colleges. 

These severe reductions in state and local government revenues 

materially impact every small business and every person in New 

Mexico. Reductions in jobs and in funding for state and local social 

programs, hospitals, roads, and education all mean bad news for 

everyone—and it is all attributable to the reduction in the price of 

oil and the consequent reduction in new drilling for oil. It is not 

a winning situation for small business in New Mexico, and I would 

conclude it is not a winning situation for small business—whether 

they are directly in the oil production business or in the supply 

chain that provides goods and services to the oil production business—anywhere in the country. 

We Need to Change America’s Oil Export Policy: 

Based on my 43 years of experience in the oil and gas business, 

I am convinced that the prohibition on the exportation of US oil is 

having a serious adverse impact on small production companies 

such as us. All the research I have seen convinces me that allowing 

US oil producers to compete for additional customers on the world 

market—just as we encourage producers of almost every other kind 

of product and service in this country to sell to foreign customers— 

will enable US producers to secure a more fair price for our oil set 

by the market rather than artificially constrained by an outdated 

oil export ban policy whose time has long passed. Read and Stevens, and other small producers such as us, will never contract 

with international buyers for our oil. But we don’t have to do so 

in order to benefit from lifting the crude oil ban. As other elements 

of the US oil industry with the capability to conduct those international transactions do so, the domestic price of crude oil will be 

favorably impacted for all US producers, including small producers 

like us. Moreover, that better price will provide the economic incentive for us to increase our drilling in the same manner as larger 

producers—we all will benefit and so will our communities. 

It makes no sense to me that as the world’s greatest international trading nation, we allow the export of refined petroleum 

products but not the export of crude oil. Our market for customers 

ends at the coast, trapping our oil here in record surplus volumes, 

and creating a heavily discounted price for our domestic crude oil 

compared to the world price enjoyed by producers outside the 

United States. It is time to rationalize our crude oil market so that 

American producers can compete for foreign customers on a level 

playing field. We will get a higher price than the artificially discounted price we get today, but in accord with the laws of supply 

and demand the increased supply of crude oil from the US will 

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lower the world oil price and in so doing put downward pressure 

on the prices of refined petroleum products which are set by the 

international price of oil—in my view a win-win situation for US 

oil producers and US gasoline consumers. 

Conclusion: 

In closing, I would say that the small producers in this country 

are critical elements of the social and economic fabric of the communities in which we operate and employ people. It is very difficult 

for small producers to stay abreast of regulatory developments adversely impacting the cost of doing business in our industry. I cannot understate how difficult it is for small producers like us to understand and comply with the numerous regulatory changes being 

imposed on us, such as the BLM’s hydro-fracking rule, the increasing of federal royalty rates, and the endangered species costs, just 

to mention a few. All these regulatory burdens can overwhelm a 

company of our size and their debilitating impact increases exponentially when we are faced with the depressed prices and limitation on our ability to find customers caused by the oil export ban. 

I would urge you to consider that the least Congress could do is 

allow us to secure the best price for our product, and lifting the 

crude oil export ban would be a very significant and welcome signal 

that Congress cares about the small oil producers in this country. 

I urge you to do all you can to allow US oil producers to find customers abroad by eliminating this impediment to free trade that is 

now very clearly hurting small producers and the communities they 

serve. 

Thank you for allowing me to present my views. 

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Congresswoman Radewagen (AS-at-large) Opening Statement for 6/ 

17/15 HSBC Hearing 

Crude Intentions: The Untold Story of the Ban, the Oil Industry, 

and America’s Small Businesses 

Thank you Mr. Chairman: 

I want to thank Chairman Chabot and Ranking Member 

Vela ́zquez for holding this hearing today to examine the impact 

that removing the ban on crude exports will have on our nation’s 

small businesses. This is an important issue, which if addressed 

properly has the potential to significantly and positively affect our 

rapidly growing national deficit and provide jobs to an estimatedadditional 500,000 to 1.75 million people by 2025. 

To me Mr. Chairman and Members of the Committee, this is a 

no brainer. It is time that we lift this ban, which is the result of 

outdated policy set in the 1970’s; a time that was the darkest for 

the United States in terms of energy availability and production. 

Those of us who are old enough to remember the long lines at gas 

stations and the rationing programs can attest to this. 

We are now in a time of abundance. Why we are not fully embracing this god-send is beyond me. The United States continues 

to let nations like Russia and Saudi Arabia, who let’s be honest, 

are not our closest of friends, continue to dominate the export market around the globe, while we tie our own hands to appease those 

same nations and certain domestic organizations, who are more 

concerned with their own agenda than that of the nation. 

Mr. Chairman, it is high-time that we lift this unnecessary, outdated and misguided ban, and move the United States forward into 

the 21st Century as THE world leader in energy production and exports. 

Thank you Mr. Chairman, I yield back. 

Æ 

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