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95–342 PDF 2015

21ST CENTURY ENERGY MARKETS: HOW THE 

CHANGING DYNAMICS OF WORLD ENERGY 

MARKETS IMPACT OUR ECONOMY AND ENERGY SECURITY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MARCH 3, 2015 

Serial No. 114–16 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

LARRY BUCSHON, Indiana 

BILL FLORES, Texas 

SUSAN W. BROOKS, Indiana 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

CHRIS COLLINS, New York 

KEVIN CRAMER, North Dakota 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

G.K. BUTTERFIELD, North Carolina 

DORIS O. MATSUI, California 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

PETER WELCH, Vermont 

BEN RAY LUJA ́ N, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

YVETTE D. CLARKE, New York 

DAVID LOEBSACK, Iowa 

KURT SCHRADER, Oregon 

JOSEPH P. KENNEDY, III, Massachusetts 

TONY CA ́ RDENAS, California 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

PETE OLSON, Texas 

Vice Chairman 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

ROBERT E. LATTA, Ohio 

GREGG HARPER, Vice Chairman 

DAVID B. MCKINLEY, West Virginia 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

BILL FLORES, Texas 

MARKWAYNE MULLIN, Oklahoma 

RICHARD HUDSON, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

PETER WELCH, Vermont 

JOHN A. YARMUTH, Kentucky 

DAVID LOEBSACK, Iowa 

FRANK PALLONE, JR., New Jersey (ex 

officio) 

(III) 

C O N T E N T S 

Page 

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

of Kentucky, opening statement ......................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Jerry McNerney, a Representative in Congress from the State of California, opening statement .................................................................................... 3 

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

opening statement ................................................................................................ 5 

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

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 7 

WITNESSES

Adam Sieminski, Administrator, Energy Information Administration, Department of Energy ..................................................................................................... 9 

Prepared statement .......................................................................................... 12 

Scott D. Sheffield, Chairman and Chief Executive Officer, Pioneer Natural 

Resources Company ............................................................................................. 23 

Prepared statement .......................................................................................... 25 

Charles T. Drevna, President, American Fuel & Petrochemical Manufacturers .......................................................................................................................... 52 

Prepared statement .......................................................................................... 54 

John Kingston, President, McGraw Hill Financial Global Institute ................... 65 

Prepared statement .......................................................................................... 67 

Additional information submitted for the record 1

Amy Myers Jaffe, Executive Director, Energy and Sustainability, University 

of California, Davis .............................................................................................. 82 

Prepared statement .......................................................................................... 84 

Brad Markell, Executive Director, AFL–CIO Industrial Union Council ............. 95 

Prepared statement .......................................................................................... 97 

Graeme Burnett, Senior Vice President for Fuel Optimization, Delta Airlines, 

and Chairman of the Board, Monroe Energy ..................................................... 106 

Prepared statement .......................................................................................... 108 

SUBMITTED MATERIAL

Letter of March 2, 2015, from Shawn Bennett, Executive Vice President, 

Ohio Oil and Gas Association, to Mr. Whitfield, submitted by Mr. Johnson .. 145 

1 Additional information submitted by Mr. Kingston has been retained in 

committee files and also is available at http://docs.house.gov/Committee/ 

Calendar/ByEvent.aspx?EventID=103071. 

(1) 

21ST CENTURY ENERGY MARKETS: HOW THE 

CHANGING DYNAMICS OF WORLD ENERGY 

MARKETS IMPACT OUR ECONOMY AND ENERGY SECURITY 

TUESDAY, MARCH 3, 2015 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND POWER, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 1:31 p.m., in room 

2123, Rayburn House Office Building, Hon. Ed Whitfield (chairman 

of the subcommittee) presiding. 

Members present: Representatives Whitfield, Olson, Barton, 

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

McNerney, Tonko, Green, Castor, Sarbanes, Welch, Loebsack, and 

Pallone (ex officio). 

Staff present: Nick Abraham, Legislative Clerk; Charlotte Baker, 

Deputy Communications Director; Leighton Brown, Press Assistant; Allison Busbee, Policy Coordinator, Energy and Power; Tom 

Hassenboehler, Chief Counsel, Energy and Power; Brandon Mooney, Professional Staff Member, Energy and Power; Tim Pataki, Professional Staff Member; Chris Sarley, Policy Coordinator, Environment and the Economy; Christine Brennan, Democratic Press Secretary; Jeff Carroll, Democratic Staff Director; Michael Goo, Democratic Chief Counsel, Energy and the Environment; Caitlin 

Haberman, Democratic Professional Staff Member; Meredith Jones, 

Democratic Director of Outreach and Member Services; Rick 

Kessler, Democratic Senior Advisor and Staff Director for Energy 

and the Environment; and Timothy Robinson, Democratic Chief 

Counsel. 

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

afternoon and certainly want to thank our panel of witnesses. We 

look forward to your testimony and your insights. And also we will 

appreciate the opportunity to ask you questions after you finish 

your opening statement. 

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

Today’s hearing is entitled ‘‘21st Century Energy Markets: How 

the Changing Dynamics of World Energy Markets Impact Our 

2 

Economy and Energy Security.’’ And I would like to recognize myself for a 5-minute opening statement. 

When it comes to energy markets, the transformation over the 

last decade has been dramatic. In fact, several longstanding energy 

trends have completely reversed themselves. America has gone 

from declining oil and natural gas production to unprecedented increases that now make us the world’s largest energy producer and 

a potential exporter. 

As a result, fears about rising import dependence and skyrocketing energy prices have been replaced with surging domestic 

supplies that are driving down prices so low, in fact, that they are 

now discouraging additional drilling in the U.S. 

The downstream changes have been every bit as dramatic. Domestic refineries, a number of which were optimized to handle imported crude, now have the option of transitioning to use more 

North American oil. And for manufacturers, the offshoring trend 

has stalled and, in fact, some of the manufacturing capacity that 

has been forced overseas by competitive pressures is now returning 

to America because of low energy prices. And North America’s new 

energy supplies have necessitated a major infrastructure build-out 

in order to deliver this energy to the consumers and businesses 

that need it. 

The changes also have significant geopolitical implications. Many 

of our energy-importing allies were resigned to growing dependence 

on OPEC and other unfriendly exporters, like Russia, but now they 

see America as a potential new source of reliable and affordable energy supplies. As a result, America has the opportunity to influence 

the geopolitical situation of these countries that used to dominate 

global energy markets and assert our own influence instead. 

There is no question that America’s oil and natural gas boom has 

been very good news for America, but that is not to say that it 

doesn’t bring new concerns. We have simply traded one set of challenges for another. Unfortunately, our energy policy is largely 

based on old laws rooted in assumptions of scarcity and may no 

longer be up to the task of addressing these new challenges and 

taking full advantage of emerging opportunities. 

So with these changing times, we think it is essential that we 

visit these laws, look at new opportunities, and whether or not it 

is in the best interest of America to bring about these changes or 

not. So today we are going to continue that discussion by exploring 

current and evolving energy markets. We hope to be able to better 

assess where we are and what new policies may be needed. Our existing energy policy was not created overnight, nor will any 

changes to it happen overnight. This will be a thorough and deliberative process and one in which all affected parties will be heard. 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

Today’s hearing is entitled, ‘‘21st Century Energy Markets: How the Changing 

Dynamics of World Energy Markets Impact our Economy and Energy Security.’’ I 

welcome this diverse and knowledgeable panel to discuss these issues. 

When it comes to energy markets, the transformation over the last decade has 

been dramatic. In fact, several longstanding energy trends have completely reversed 

themselves. America has gone from declining oil and natural gas production to unprecedented increases that now make us the world’s largest energy producer and a 

3 

potential exporter. As a result, fears about rising import dependence and skyrocketing energy prices have been replaced with surging domestic supplies that are 

driving down prices—so low in fact that they are now discouraging additional drilling in the U.S. 

The downstream changes have been every bit as dramatic. Domestic refineries, a 

number of which were optimized to handle imported crude, now have the option of 

transitioning to use more North American oil. And for manufacturers, the offshoring 

trend has stalled, and in fact some of the manufacturing capacity that had been 

forced overseas by competitive pressures is now returning to the U.S. because of the 

low energy prices. And North America’s new energy supplies have necessitated a 

major infrastructure buildout in order to deliver this energy to the consumers and 

businesses that need it. 

The changes also have significant geopolitical implications. Many of our energyimporting allies were resigned to growing dependence on OPEC and other unfriendly exporters like Russia, but now they see America as a potential new source 

of reliable and affordable energy supplies. As a result, America has the opportunity 

to fight back against the geopolitical influence of the countries that used to dominate global energy markets, and exert our own influence instead. 

There is no question that the America’s oil and natural gas boom has been very 

good news for America, but that is not to say that it doesn’t bring new concerns— 

we have simply traded one set of challenges for another. Unfortunately, our energy 

policy is largely based on old laws rooted in assumptions of scarcity, and may no 

longer be up to the task of addressing these new challenges and taking full advantage of emerging opportunities. 

We explored one such landmark law, the 1975 Energy Policy and Conservation 

Act, in a hearing last December. At the hearing, we learned more about the energy 

policy context under which this 40-year-old statute was enacted, and how its provisions may no longer be relevant. 

Today, we continue the discussion by further exploring current and evolving energy market dynamics. We hope to be able to better assess where we are and what 

new policies may be needed. Our existing energy policy was not created overnight, 

nor will any changes to it happen overnight. This will be a thorough and deliberative process, and one in which all affected parties will be heard. 

Mr. WHITFIELD. Thank you very much. I yield back the balance 

of my time. And I recognize the gentleman from California, Mr. 

McNerney, for 5 minutes. 

OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. MCNERNEY. I want to thank Chairman Whitfield and Ranking Member Rush for holding this hearing. Oil markets are changing rapidly. We have reduced oil and gasoline prices, increased domestic oil production. At the same time we have seen oil prices 

plummet from $100 a barrel to under $50 a barrel, and this has 

led to great savings for the American consumers. 

But we have learned in California that prices at the pump don’t 

always track the price of crude. For example, in my State we have 

seen the steepest increase in gasoline prices in history. It went 

from 20 cents a gallon overnight in San Francisco and Los Angeles 

last Thursday to Friday, and prices in Sacramento rose over 40 

cents per gallon in 1 week. 

So soaring wholesale gas costs are prompting higher retail prices 

at service stations and State refineries are switching over to pricier 

seasonal blends, while at the same time refinery problems have effectively lowered capacity. 

Given that we are experiencing these spikes at a time the rest 

of the Nation is enjoying lower gasoline prices, I think it is important to mention the dangers of depending on just one source of fuel 

for our transportation needs. 

4 

We should consider carefully the potential problems that could 

arise if we decide to alter our approach to managing crude oil resources. When we talk about exporting crude oil, we are mainly 

taking about the light sweet crude that comes from tight shale formations. To extract this resource requires a tremendous supply of 

another very precious resource, especially in California, namely, 

water. In my State, in my region, we know all too well how important water conservation is and how dwindling water resources can 

really harm our economy and our way of life. 

I am concerned that until we develop new, more efficient, and environmentally protective ways to use and conserve water in hydraulic fracturing, we will be wasting an endangered resource 

mainly to ship another resource abroad for the financial gain of a 

few. I think we need to carefully weigh the safety of our drinking 

water and irrigation supplies before we begin to extract crude and 

bypass U.S. refineries in order for producers to obtain slightly higher prices abroad. 

Low oil prices, combined with additional domestic production, decreases our reliance on foreign oil, which often comes to us from 

unstable regions of the world. I believe a major factor in this equation should be on supporting and enhancing our efforts at conservation. 

And this brings me back to the hazards of being dependent on 

one source of fuel for our transportation needs. It is time we diversify our fuel sources. We have made great strides in improving our 

fuel economy in the last 5 years. It is time to start improving our 

fuel options. We should be looking more toward plug-in hybrids, 

fully electric vehicles, natural gas, and even hydrogen-based transportation. 

I know that in recent years a barrel of crude oil produced in the 

United States has sold for less than a barrel of crude oil in the 

world market. I am interested to hear both sides of the debate on 

how allowing export of U.S. crude will affect both the global and 

the U.S. oil and gasoline markets, and equally important, how regional markets in the U.S. could be affected. 

We should also consider whether rushing into short-term production of as much oil as possible is the best strategy for our long-term 

national security. In the wake of the 1973 oil embargo, we created 

the Strategic Petroleum Reserve so that in the event of a worldwide unrest we would have petroleum to continue operating and to 

protect our national security. We should consider whether our oil 

fields in North Dakota and Texas might serve a similar purpose in 

the future. 

Finally, I want to consider the threat of climate change and how 

increased production, refining, and export of the new American oil 

fuels will impact the Earth’s future climate. 

Mr. Chairman, I look forward to hearing the witnesses, and I 

yield back. 

Mr. WHITFIELD. Thank you very much. 

At this time I recognize the chairman of the full committee, Mr. 

Upton, for 5 minutes. 

5 

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

Mr. UPTON. Well, thank you, Mr. Chairman. 

Energy markets are changing, and they are changing for the better. America is producing more while using and importing less, and 

the energy boom is translating into a jobs boom, and that is not 

a bad thing, not just in energy production, but also energy infrastructure and manufacturing. 

The combination of increased domestic oil supplies and decreased 

demand not only strengthens our energy security, but it also presents new opportunities for energy diplomacy. The days of energyexporting aggressors like Russia exerting uncontested geopolitical 

influence may be numbered now that America is emerging as an 

energy superpower. 

And while the overall effects of our domestic energy abundance 

are overwhelmingly positive, yes, they do create some challenges 

and complications when viewed under the lens of our existing Federal energy policy. For example, the recent drop in oil prices has 

been great news for consumers in Michigan and across the country 

who are finally getting a break at the gas pump after several years 

of prices above $3 and $4 a gallon. But at the same time, current 

prices pose a challenge for producers, their employees, and their 

communities in which they live, and in fact some energy workers, 

thousands of them, have already lost their jobs. 

Couple these changes with a new global petroleum landscape of 

enduring complexity and emerging volatility, it only further reinforces the point that the time to examine these issues is now. 

Clearly, the changes in energy markets affect different parties in 

different ways, and Congress needs to be aware of all of the impacts before considering any modifications to energy policy. That is 

why we took a very careful and deliberate approach on the issue 

of natural gas exports in the last Congress. For more than a year 

before we proposed legislation to expedite LNG export approvals, 

we thoroughly studied the potential impacts on natural gas producers and on users like manufacturers and consumers. We acted 

only after listening to all the interested parties and concluding that 

LNG exports would be beneficial for the economy and a net jobs 

creator, and we passed it in a bipartisan way. 

We also heard from many foreign policy experts and embassy officials about LNG exports and concluded that they promised significant geopolitical benefits. And I would note that with Russia once 

again threatening to cut off Ukrainian natural gas supplies, I believe that enactment of our LNG bill can’t come soon enough. 

When it comes to revisiting the 40-year-old restrictions on oil exports, we will take the same deliberative approach. We recognize 

that the export of oil and other liquid hydrocarbons presents different issues than natural gas. That is why we again are undertaking a thorough review and will consider all the perspectives, including producers, refiners, and consumers. 

That is the purpose of today’s hearing and why we are soliciting 

public comments on changing energy markets. If we choose to 

change the law on exports of oil and other liquids, it will only happen after an open review of the current policy. Our energy abundance has greatly changed energy markets and presents a wonderVerDate Mar 15 2010 10:16 Aug 25, 2015 Jkt 037690 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114_16WORLDENERGYNDBLBKEDITS\114_16WORLDENERGYPE
6 

ful number of new opportunities, and we will consider carefully our 

approach to all of them. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Energy markets are changing, and they’re changing for the better. America is producing more while using and importing less, and the energy boom is translating into 

a jobs boom—not just in energy production but also energy infrastructure and manufacturing. 

The combination of increased domestic oil supplies and decreased demand not 

only strengthens our energy security, but also presents new opportunities for energy 

diplomacy. The days of energy-exporting aggressors like Russia exerting uncontested 

geopolitical influence may be numbered now that America is emerging as an energy 

superpower. 

While the overall effects of our domestic energy abundance are overwhelmingly 

positive, they do create some challenges and complications when viewed under the 

lens of our existing Federal energy policy. For example, the recent drop in oil prices 

has been great news for folks in Michigan and across the country who are finally 

getting a break at the gas pump after several years of prices above three bucks a 

gallon. But at the same time, current prices pose a challenge for producers, their 

employees, and the communities in which they live. In fact, some energy workers 

have already lost their jobs. 

Couple these changes with a new global petroleum landscape of enduring complexity and emerging volatility, and it only further reinforces the point that the time 

to examine these issues is now. Clearly, the changes in energy markets affect different parties in different ways, and Congress needs to be aware of all of the impacts before considering any modifications to energy policy. 

That is why we took a very careful and deliberative approach on the issue of natural gas exports. For more than a year before we proposed legislation to expedite 

LNG export approvals, we thoroughly studied the potential impacts on natural gas 

producers and on users like manufacturers and consumers. We acted only after listening to all interested parties and concluding that LNG exports would be beneficial 

for the economy and a net jobs creator. 

We also heard from many foreign policy experts and embassy officials about LNG 

exports and concluded that they promised significant geopolitical benefits. And I 

would note that with Russia once again threatening to cut off Ukrainian natural 

gas supplies, I believe that enactment of our LNG bill can’t come soon enough. 

When it comes to revisiting the 40-year-old restrictions on oil exports, we will take 

the same deliberative approach. We recognize that the export of oil and other liquid 

hydrocarbons presents different issues than natural gas. That is why we again are 

undertaking a thorough review and will consider all perspectives—including producers, refiners, and consumers. That is the purpose of today’s hearing and also why 

we are soliciting public comments on changing energy markets. If we choose to 

change the law on exports of oil and other liquids, it will only happen after an open 

review of the current policy. 

America’s energy abundance has greatly changed energy markets and presents a 

number of new opportunities, and we will carefully consider our approach to all of 

them. 

Mr. UPTON. And I yield to the chairman emeritus of the full committee, Mr. Barton. 

Mr. BARTON. Thank you, Mr. Chairman. 

First of all, I want to compliment you on the statement that you 

just made. I appreciate what you said about deliberative process 

and keeping an open mind and having hearings like this so that 

we can get all the facts. 

The United States is probably the most blessed Nation in the 

world in terms of energy resources. Some of the people at the table 

before us have helped to develop those resources. Others have 

helped to conserve them and make sure that they are produced in 

an environmentally safe fashion. 

7 

As we go forward in this Congress, we need to work together, 

hopefully in a bipartisan fashion, to craft an energy policy that is 

acceptable to all sides and is acceptable to this great country. We 

have a tremendous opportunity in the world markets today because 

of our abundance of energy and the way we are producing it in an 

environmentally efficient fashion, and I look forward to hearing the 

testimony of the witnesses, Mr. Chairman. 

And I will yield 30 seconds to anybody who—Mr. Flores, if he 

wants it, or Mr. Johnson. Anybody? 

Then, Mr. Chairman, I yield back. 

Mr. WHITFIELD. Gentleman yields back. 

Some of the members are leaving because we do have one vote 

on the House floor, but before that I would like to recognize the 

gentleman from New Jersey, Mr. Pallone, ranking member, for a 

5-minute opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Whitfield. 

Our energy picture is rapidly evolving. Worldwide crude oil 

prices are at their lowest level in 5 years. U.S. gas prices have been 

hovering around $2 per gallon and domestic oil production has increased dramatically in recent years, while the growth of demand 

has slowed noticeably. And all this is good news for consumers in 

the near term. 

These changes reflect in part the all-of-the-above energy strategy 

that this administration has pursued, ranging from additional exploration and production of fossil fuels to development of alternative energy sources and increased fuel efficiency standards for 

our cars and trucks. The administration has also recently taken 

steps to facilitate the export of liquefied natural gas and other petroleum products. 

The current low oil prices benefit us all in many ways. Overall, 

low oil prices increase our GDP and decrease the amount Americans spend on energy, particularly at the pump. EIA projects that 

U.S. households will spend about $750 less in 2015 than in 2014 

and about $450 less in 2016 than in 2014, and the increase in U.S. 

production is meant to decrease imported oil with significant geopolitical implications. For the first time in decades, we have some 

ability to be partial price makers rather than price takers. 

However, these conditions are but a snapshot in time and there 

are many factors that could change the energy picture dramatically 

in the future. Lower oil prices can impact the economics of additional domestic production. Geopolitical instability can adversely 

affect our allies and our Nation. Crude oil prices can fluctuate 

based on global and domestic market forces. Although it is possible 

that we experience sustained low oil prices, it is also possible that 

oil prices and gasoline prices will rise over time. 

Last December this subcommittee held hearings on the decadesold crude oil export ban. I believe it is entirely fair to consider the 

merits of a policy that was enacted in the wake of the 1973 oil embargo. This is a very different world than it was in 1973, but I do 

not believe a clear picture has yet emerged as to what policies we 

8 

should pursue. Therefore, while this is a topic worthy of our examination, we need to act carefully and act based on fact. That is the 

essence of good policy and of regular order, which I will continue 

to insist on before we take legislative action. 

Last year the administration issued guidance that certain petroleum condensates could be exported without the typical restrictions 

reserved for crude oil exports. While these rulings remain controversial, it is clear that the administration retains the authority 

to authorize crude oil exports in specific circumstances, and some 

companies have already started to export petroleum condensates, 

but the extent of such exports remains uncharted. 

If we are to consider a more wholesale listing of the ban on exports, there are numerous questions that need to be answered. 

First, how would lifting the ban affect the short- and long-term 

price of crude oil, and, therefore, the price of gasoline? I don’t believe there is a consensus on that point. 

Second, how would such a change affect both our refinery capacity and the balance of jobs. Refinery capacity is a critical element 

of our infrastructure and can be an important source of middleclass jobs. In fact, both parties have long bemoaned the lack of new 

refineries in this country. 

How would exporting crude oil instead of refining and exporting 

finished petroleum products affect potential job growth in the years 

ahead? Is the rush to export crude oil beneficial to small refineries, 

as well as to large, integrated oil companies? 

And, finally, what are the environmental and climate impacts of 

lifting the export ban? In 1973 we did not yet have the Trans-Alaska Pipeline or widespread use of horizontal drilling techniques, we 

did not have large-scale domestic oil production in North Dakota, 

and we had not yet tapped into the oil and gas from other shale 

plays. But we also had not experienced the Exxon Valdez or the BP 

Deepwater Horizon oil spills. The term fracking was not in the 

common vernacular. Oil and gas pipelines weren’t sprouting up in 

backyards, parks, and farmland the way they are today. And most 

importantly, the concentration of CO2 in our atmosphere had not 

yet topped 400 parts per million. 

In today’s world it is no longer wise to consider energy policy as 

distinct from environmental policy. They are linked. Each is a facet 

of the other. Increasing crude oil exports means increasing domestic production of crude oil with attendant impacts on climate 

change, on public and worker safety, on property owners, and on 

protection of our above- and below-ground water supplies. Too often 

we eagerly embrace short-term profits and benefits without understanding the costs of our actions. We should not make such a mistake again here. Instead, we should take the long view to ensure 

we fully understand the enduring consequences of our actions and 

choose the cleanest and most sustainable path forward, and that is 

the essence of commonsense energy policy. 

So thank you, Mr. Chairman. I look forward to hearing from the 

witnesses, I guess when we return from the vote. Thank you. 

Mr. WHITFIELD. Mr. Pallone, thank you very much. 

And I want to apologize to our panel of witnesses once again. We 

think we only have one vote. There may be a second vote. But we 

have a five-star cafeteria downstairs, and it is open until 2:30. But 

9 

we hope to be back here by 15 or 20 after 2 at the latest. So thank 

you all for your patience, and we look forward to your testimony 

as soon as we come back. 

They told me to tell you to stay close. So don’t go too far. So we 

will adjourn until that time. 

[Recess.] 

Mr. WHITFIELD. Call the hearing back to order. Rather than introduce all the witnesses at once, I am going to simply introduce 

you and then recognize you for your opening statement. 

Our first witness will be Adam Sieminski, who is the Administrator, United States Energy Information Administration. Certainly 

no stranger to testifying before the Energy and Commerce Committee. 

So, Mr. Sieminski, you are recognized for 5 minutes. 

STATEMENTS OF ADAM SIEMINSKI, ADMINISTRATOR, ENERGY 

INFORMATION ADMINISTRATION, DEPARTMENT OF ENERGY; SCOTT D. SHEFFIELD, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, PIONEER NATURAL RESOURCES COMPANY; 

CHARLES T. DREVNA, PRESIDENT, AMERICAN FUEL & PETROCHEMICAL MANUFACTURERS; JOHN KINGSTON, PRESIDENT, MCGRAW HILL FINANCIAL GLOBAL INSTITUTE; AMY 

MYERS JAFFE, EXECUTIVE DIRECTOR, ENERGY AND SUSTAINABILITY, UNIVERSITY OF CALIFORNIA, DAVIS; BRAD 

MARKELL, EXECUTIVE DIRECTOR, AFL–CIO INDUSTRIAL 

UNION COUNCIL; AND GRAEME BURNETT, SENIOR VICE 

PRESIDENT FOR FUEL OPTIMIZATION, DELTA AIRLINES, 

AND CHAIRMAN OF THE BOARD, MONROE ENERGY 

STATEMENT OF ADAM SIEMINSKI 

Mr. SIEMINSKI. Chairman Whitfield, Mr. McNerney, and members of the subcommittee, thank you for the opportunity to be here 

today to address changing dynamics in the world energy markets. 

The Energy Information Administration is the statistical and analytical agency with the Department of Energy. By law, EIA’s data 

analyses are independent of approval by any other Federal office 

or employee, so the views expressed here today should not be construed as representing those of the Department of Energy or any 

other Federal agency. My testimony focuses on EIA’s oil market 

outlook and its economic implications and it draws heavily on our 

short-term energy outlook. I want to talk a little bit about prices, 

demand, and the overall outlook. 

Since the middle of last year, the global supply of oil has exceeded global consumption, leading to growth in oil inventories and a 

major decline in prices. In January, the monthly average price for 

West Texas Intermediate crude was $47 a barrel—that was kind 

of down towards the bottom or at least the most recent bottom— 

down from an average of $106 a barrel in June of 2014. Prices 

turned up in February with WTI, West Texas Intermediate, and 

Brent, respectively, averaging $51 and $58 a barrel. The recent rise 

likely reflects some optimism regarding the pace of market rebalancing, including lower rig counts, drilling, and capital expenditures on the supply side, and some positive news on the global 

economy that impacts demand. 

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Global supply of crude oil and other liquids grew more than 2 

million barrel per day in 2014, 75 percent of that from the United 

States alone. In 2015 and 2016 EIA sees non-OPEC supply continuing to grow under our price forecast, but more slowly. Lower 

costs should help support activity in the lower 48 State shale oil 

plays that have contributed to the majority of the recent U.S. oil 

production growth. 

The trend of slow decline in Alaskan production is expected to 

continue, while Federal offshore production, especially in the Gulf 

of Mexico where development projects have long lead times, grows 

due to projects recently brought online and startups that are scheduled for 2015 and 2016. Net, in 2016, we still see U.S. production 

rising close to the historic high in 1970. 

EIA expects economic growth to drive a pickup in global consumption through 2016, led by China and the non-OECD Asian 

countries. Consumption in Japan, Europe, and Russia, on the other 

hand, is expected to continue to decline. The rest of the OECD 

countries, led by the United States, is expected to grow modestly, 

and lower oil prices should add to demand growth. 

Recent prices of futures and options contracts suggest an unusually high level of price uncertainty with the implied 95 percent confidence interval for market expectations for WTI prices at the end 

of this year ranging from $32 to $108 a barrel. Mr. Chairman, I 

remember back in December when I was here, one of the members 

said, ‘‘That is a really big range you are talking about,’’ and I said, 

‘‘Yes, it is.’’ And that is what the market is saying, that is what 

investors are saying. There is a huge amount of uncertainty, and 

I think during the opening remarks some of those uncertainties 

were mentioned: geopolitical events, what is happening with the 

economy, and so on. Absent further sanctions or unplanned disruptions, EIA’s average price forecast for this year is $55 a barrel and 

for next year about $71 a barrel. 

Now, there is some good news, and the good news is that consumers are receiving a direct benefit from lower oil prices. U.S. regular gasoline retail prices, which were $3.36 a gallon average in 

2014, are now more than $1 below that. The average household is 

expected to spend $750 less for gasoline this year than in 2014. If 

that household has more than one vehicle or if you live in an area 

where you are on oil heat or propane heat, you will even be saving 

more. 

Mr. Chairman, I want to take the last few seconds and just mention some of the things that we are doing at EIA that I know members here in this committee have been very interested in. 

EIA has undertaken a huge effort to improve the quality and 

timeliness of our data and analyses. We just launched a monthly 

survey to improve estimates of both the volume and quality of oil 

production, that should help with this question of oil exports, related to which we are working with the producing States through 

the Groundwater Protection Council, which is developing a national 

database of well-level data. 

Next month, EIA plans to begin publishing monthly information 

on movement of crude oil by rail, another important topic. We have 

also begun working with our counterparts in Canada and Mexico 

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on validating cross-border flows of energy, improved infrastructure 

mapping, and energy trade. 

Recognizing the growing connection between the U.S. and global 

energy markets, we are redeploying resources to extend our international data analysis capabilities. And one key focus area is global 

oil demand growth, that has significant implications for future oil 

prices, and petroleum product and crude oil exports. Another is 

world supply and demand for natural gas, which we will determine 

the extent of opportunities for the United States given everything 

that is happening with LNG and LNG exports. 

Mr. Chairman, I want to thank you again for the opportunity to 

testify here, and I will look forward to the rest of the day. 

[The prepared statement of Mr. Sieminski follows:] 

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Mr. WHITFIELD. Thank you very much, Mr. Sieminski. 

Our next witness is Mr. Scott Sheffield, who is the chairman and 

chief executive officer of Pioneer Natural Resources. 

And, Mr. Sheffield, you are recognized for 5 minutes, and the red 

lights will come on when the time is up. So thank you. 

STATEMENT OF SCOTT D. SHEFFIELD 

Mr. SHEFFIELD. Thank you, Mr. Chairman. Chairman Whitfield, 

Mr. McNerney, committee members, it is great being here today. 

I represent Pioneer Natural Resources and its 4,000 employees. We 

are one of the most active independents in the U.S. I have 40 years 

experience as a petroleum engineer, 30 years as CEO of Pioneer. 

What is interesting today, listening to Netanyahu’s speech, what 

brought home to me is that I was raised in Tehran, Iran. That was 

the big topic today. I spent over 10 years traveling to Tunisia as 

we had an office in North Africa. What hasn’t changed in the last 

40 years, the world is very still very dependent upon Middle Eastern and North African crude. 

What has changed in the U.S. is this piece of rock—which I left 

one at your table—is that we have actually found six world-class 

oil fields. This represents the Wolfcamp field in west Texas. It is 

now the U.S.’ largest oil field that we have found, over 75 billion 

barrels. We used to get 50 barrels a day out of this. Now we are 

getting over 2,000 barrels a day out of this rock with new technology. 

The shale revolution has been a game-changer for this country. 

We now are the largest liquids producer in the world, surpassing 

Saudi Arabia and Russia. We have almost doubled production from 

5 million barrels a day to 9.3 million barrels a day since 2008, reduced imports from 60 percent to 30 percent in a very short timeframe. We have been the largest job creator in the country for over 

the last 6 years. Also, we have reduced the trade deficit. Our industry $200 billion 

annually. A combination of less imports, but we are refining and 

sending out over 4 million barrels a day of refined products. In addition, one-third gasoline that we refine is being exported. 

This is my fifth downturn in my career since 1981. We have seen 

over 900 rigs drop from a high of 2,000, almost 50 percent, we have 

seen 50 billion of CAPEX reductions by the industry over the last 

2 months going into 2015, industry layoffs of over 50,000 workers 

and continuing, leading to flattening to declining production going 

into 2016 at current prices. The strategy of OPEC is to preserve 

and grow market share. I can promise you, OPEC loves the export 

ban being in place in the U.S. 

Let me explain how oil is traded and how it works. For my entire 

career sweet crude internationally, sweet crude domestically traded 

at the same price. Over the last 3 years we have seen a big variance of $10 to $15 per barrel in those prices. Today it is $11 a barrel in those prices. 

There is no benefit for consumers. Consumers are paying world 

gasoline prices. Through studies that Adam has done at EIA and 

other independent studies, that has been proven, that the U.S. 

Consumer is paying a world gasoline price based on international 

oil prices. 

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Allowing U.S. crude to be sold overseas would increase global 

supply, causing gasoline prices to decline. So, for instance, if you 

lifted the ban today, we put 300,000 barrels a day on the market, 

it would compete with OPEC, it would lower the price of the international crude. The domestic price would move toward it, like it 

has over the last 30, 40 years. 

Removing the crude ban allows U.S. Producers to compete. Just 

a $10 swing in price makes a difference of this country growing or 

declining $2 million barrels a day. A great example, Pioneer was 

the first company to export processed condensate last summer 

through a Commerce Department confirmation. We are actually realizing $8 a barrel higher price by exporting to Europe, Japan, 

South Korea. We are taking that cashflow, drilling more wells, 

more production, more jobs in this country. 

With the ban lifted, U.S. remains the largest producer, lowers 

gasoline cost, adds U.S. jobs, increases Government revenues, and 

what is most important, is selling oil to our allies in Europe, 

Japan, South Korea, reducing dependence, their dependence on 

Iran and Russia. 

It is important to act now. If you lifted the ban today, I can 

promise you Pioneer would add more rigs today, more jobs, more 

U.S. investment, and the other 7,000 independents in this country 

would do the same. 

Thank you very much. 

[The prepared statement of Mr. Sheffield follows:] 

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Mr. WHITFIELD. Thank you, Mr. Sheffield. 

At this time, I would like to introduce Mr. Charles Drevna, who 

is the president of the American Fuel and Petrochemical Manufacturers. 

Welcome, and you are recognized for 5 minutes. 

STATEMENT OF CHARLES T. DREVNA 

Mr. DREVNA. Chairman Whitfield, Mr. McNerney, and members 

of committee, thanks for the opportunity to provide AFPM’s view 

on trends in today’s energy markets. 

I want to leave you with a couple of key messages today. First, 

I think we can all agree it is incredible that the U.S. is at a point 

where we are able to have a real conversation about lifting the 

crude export ban. Seems like just yesterday when the committee 

was hearing testimony from a trove of peak oil alarmists, and I 

was cautioning against market-interfering and counterproductive 

initiatives, including the RFS. 

Now, 7 years later, over the same time, we are producing more 

than 70 percent of our oil and it is projected to go higher. Imports 

are down, 66 percent to about 45 percent. But when you take out 

Canada and Mexico from that equation, we are down to around 20 

percent of imports. This is nothing but great news for our economy 

and the consumers, with the noted exception that 7 years later the 

assumptions used to promote the RFS have been proven invalid 

and the RFS continues to inhibit free markets and consumer 

choice. 

Takes me to my second key message. The distribution and refining systems are undergoing significant and rapid changes. These 

changes are happening for the most part because new production 

is not connected to the refinery delivery infrastructure that existed 

prior to the shale oil boom. As a result, upstream producers, midstream distributors, and refiners are rapidly adapting existing infrastructure while investing in new infrastructure, whether via 

pipeline or rail. 

Changing market dynamics have also impacted the economics of 

many refineries, including those along the east coast that were literally days away from closure. The ability of these refiners to utilize Bakken crude is a great example of this revitalized energy industry. 

The refining industry is also undergoing more significant change. 

The U.S. is home to the largest and most advanced refining complex in the world. That is a fact that should give all concerned with 

economic growth and national security an enormous amount of 

comfort. We produce about 20 percent of the world’s fuel and since 

2009 we have been a net exporter of petroleum products. With new 

domestic supplies coming on, the industry is undergoing even more 

changes to accommodate this vital resource. 

Leads me to my third message. You may have been led to erroneously believe that refiners are unable to process the light crude 

being produced. I am here today to categorically state that the refining industry is well equipped to handle all the increased production expected to come online in the coming years. Refiners already 

have significantly reduced imports, increased utilization rates, 

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changed their crude mix, and invested in additional refining modifications to utilize more light crude. 

For example, Turner Mason estimates that if the economics continue to be favorable, an additional 900,000 barrels per day of capacity is possible with existing capacity and the investments already planned. This would ensure refiners have the capacity to use 

all new crude for at least the next several years. 

Of course, an adverse regulatory regime and changing market 

dynamics could render this bright future moot. Whether it is market-distorting legislation and regulations, the manufacturing renaissance-destroying ozone NAAQS, or others in a litany of uneconomic and conflicting regulations, U.S. refiners continually face uncertainty in the way global competition doesn’t. As gasoline demand continues to drop in the coming decades, refiners will be increasingly dependent on export markets, which means competing 

penny by penny, gallon by gallon with global competitors who are 

subject to a very separate set of rules. 

I mention all this to set up my final point, which is that after 

AFPM believes that the right energy policy for America is based in 

free markets, which lower cost and increased benefits to consumers. As a result, AFPM does not necessarily oppose lifting the 

crude export ban. However, AFPM strong believes that a holistic 

energy policy that addresses other anti-free market policies at the 

same time is essential. Going back to what Chairman Upton stated, we have to get this thing right in a holistic approach, not do 

it piecemeal in a vacuum. We have done that for too long in this 

country on energy policy, such as it is. 

For instance, with the restrictive Jones Act shipping requirement 

in place and the world without the crude export ban, it would be 

cheaper to ship a barrel of crude from Houston to a European refiner than it would be to ship it to the Monroe facility. This makes 

zero sense. 

As Congress debates lifting the ban, I urge you not to make the 

mistakes of the past by narrowly focusing on one issue and leaving 

it in a wake of unintended consequences in the market. We have 

time to gather the facts and develop a more holistic approach. 

Thank you. I would be happy to answer any of your questions. 

[The prepared statement of Mr. Drevna follows:] 

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Mr. WHITFIELD. Thank you, Mr. Drevna. 

Our next witness is John Kingston, who is the president of 

McGraw Hill Financial Global Institute. 

Great to see you again, and you are recognized for 5 minutes. 

STATEMENT OF JOHN KINGSTON 

Mr. KINGSTON. Thank you. Chairman Whitfield, Congressman 

McNerney, and members of the subcommittee, good afternoon and 

thank you for inviting me to share the views of the McGraw Hill 

Financial Global Institute. I am the newly appointed president of 

the institute. 

We are McGraw Hill Financial’s thought leadership platform. 

MHFI provides independent benchmarks, credit ratings, portfolio 

and enterprise risk solutions and analytics, and is home to some 

of the most iconic brands in U.S. finance, economics, and business, 

including Standard & Poor’s Rating Service, S&P Capital IQ, S&P 

Dow Jones Indices, Platts, and J.D. Power. 

Prior to being appointed president of the institute, I spent more 

than 29 years with Platts, the MHFI brand that provides the energy industry with independent news, analysis, and benchmark 

price assessments that are used as the basis for billions in energy 

commerce throughout the globe. I hope to provide you with helpful 

insight from all of our brands, as well as additional unique insights 

from the institute. 

Over the last 30 years, oil prices have seen several booms and 

busts. However, the price slide of recent months is like no other. 

In 1998–1999 the boom-bust cycle could be attributed mostly to the 

Asian financial crisis and the collapse in demand from that region. 

The price collapse of 1985–1986 bears more resemblance to the current cycle. Key producers like Saudi Arabia were determined to recapture market share against a backdrop of some increases in supply and some cuts in demand. Despite the similarities, the mid1980s did not feature the enormous North American-generated increases in supply that we are witnessing today. 

While the Saudis and their Gulf allies are determined to hang 

on to market share this time, this is not the immediate reason for 

the price to climb. Instead, it is the growing imbalance between 

supply and demand that finally combined this year to send the 

market plunging. It would have happened earlier had there not 

been so much disruption of international supply lines due to various political reasons. 

Once Libya came back toward 1 million barrel per day in June 

and July, that tenuous balance could hold no more. It is interesting 

to note that since that surge out of Libya, that country’s output has 

fallen back significantly, yet the price remains at depressed levels. 

So while there are global factors contributing to the drop in oil 

prices, none compare to the scale of what the U.S. shale revolution 

has done in just a few short years. 

It is important to note that the amount of capacity in the world 

that is on the sidelines because of political issues is enormous. One 

recent estimate put it at about 4.5 million barrels a day. It starts 

with small countries like South Sudan and Syria, and it rises up 

to averages close to a million barrels a day in Iran due to sanctions 

and Libya due to civil war. And this does not even take into acVerDate Mar 15 2010 10:16 Aug 25, 2015 Jkt 037690 PO 00000 Frm 00069 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114_16WORLDENERGYNDBLBKEDITS\114_16WORLDENERGYPE
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count where political mismanagement of a country’s industry can 

and sometimes has given it a productive capacity far less than 

what it should be. Venezuela is obviously in this category. If there 

was any sort of significant move toward peace in these areas, since 

the cost of production in most of those regions are all significantly 

less than the U.S., oil prices would come under even greater pressure. 

The price slide has raised repeated questions just about how cost 

competitive the U.S. industry can be in the lower price environment and also raises the question of the competitiveness of U.S. 

crude exports should they be allowed. It is safe to assume that 

some, if not all refiners around the world probably have some models about how U.S. crudes would perform in their facilities if exports were allowed. 

The rise in U.S. crude exports to Canada, mostly via rail, indicates that Canadian refiners at least are finding U.S. crudes to be 

attractive. If they weren’t, those export numbers would be falling, 

not rising. 

So as to how U.S. crudes will do battle in an international market if export bans were lifted, all we can say is we will see. And 

I have some numbers to talk about later. 

I will now turn my focus to the impact the current pricing environment is having on U.S. producers. Based on earning calls, 

MHFI’s subsidiary S&P Ratings is seeing a 35 percent CAPEX expenditure cut this year. Those numbers go up to 50 percent in some 

cases, down to 10 percent for the major producers. And many are 

running capital expenditure budgets that just hold on to maintenance levels. 

This year S&P does not expect the price impact on companies to 

translate to significant debt defaults, although reducing CAPEX 

certainly affects the employment market. The oil and gas sector 

has been aggressively adding jobs during the economic recovery. 

During that period job growth for the oil and gas industry was 39 

percent, as opposed to the 8 percent growth in the U.S. job market 

overall. However, the industry showed job losses of 2,000 in January, and regions that are heavily reliant on the energy sector could 

see a greater negative impact on employment. 

While the regional impact of oil prices will differ, in the nearterm low oil prices are a boon, though, for the overall economy. According to S&P’s U.S. economist, savings could tally up to $87.6 billion for the national economy. That is $1,000 for the average household in 2015 alone. 

Out in the State capitals, operating budgets appear safe in the 

short term. In the long term, however, given a long-term secular 

slide in oil prices, States will need to react by altering their fiscal 

management. No two States are alike, even ones with similarly 

sized oil-producing industries. Therefore, many questions need to 

be answered, such as what oil price and production level did the 

State assume in their budget. 

I am glad to provide more information on any of these issues discussed here today or any others offered by MHFI in the questionand-answer session or any time in the future. Thank you. 

[The prepared statement of Mr. Kingston follows:] 

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Mr. WHITFIELD. Thanks, Mr. Kingston. 

At this time I recognize Ms. Amy Jaffe, who is executive director 

of the Energy and Sustainability Program at the University of California, Davis. 

And you are recognized for 5 minutes. 

STATEMENT OF AMY MYERS JAFFE 

Ms. JAFFE. Thank you very much, Chairman Whitfield and Representative McNerney, for this excellent opportunity to address the 

committee. I look forward to our discussions. I am going to focus 

my remarks on the geopolitical aspects of the questions at hand. 

But before I turn to that, I just wanted to make the point, also 

in the geopolitical context, that markets react to stimulus. So we 

had a very high oil price artificially imposed into the market by 

OPEC. That created opportunities for companies like Mr. 

Sheffield’s companies to pursue unconventional resources, more expensive resources. As a result, we are having this boom in the 

United States. Over time we learn by doing so the cost of producing 

the expensive oil comes down. 

That put OPEC back in a bind, right? So they thought they had 

the upper hand, Russia thought it had the upper hand, Iran 

thought it had the upper hand, and all of a sudden the market responded. 

So now we are at a juncture where Saudi Arabia had an opportunity. The markets responding, they have to come up with a strategy, they have to decide what strategy to come up with, and they 

have a unique opportunity to row the boat in the same direction 

as the United States and use a lower oil price to put geopolitical 

pressure on countries like Russia and Iran to come to the peace 

table and have negotiations on serious conflicts we are seeing in 

the Middle East and elsewhere. And I do believe that our allies in 

the Gulf Cooperation Council had those goals in mind when they 

set the policy to create a market share war in the market. 

We now have an opportunity as the United States to leverage 

that opportunity and to lead from the front. And we know from 

watching what is happened in the markets when OPEC tried to 

hold the price up and we have other kinds of barriers into the market that it is like the little boy with his finger in the dike. You can 

put your finger in the dike in one place, but if there is pressure 

from the water there will be a crack somewhere else and the water 

will pour out somewhere else. That is sort of how the export ban 

is, right? 

We now have 430 million barrels of oil, close to historic highs, 

sitting in storage in the U.S. southwest. At Cushing, Oklahoma, 

alone we have 49 million barrels. That is near the record high in 

history in the United States of 42 million barrels, right? So to say 

that the refining industry feels like over the next 3 years they will 

be able to refine those barrels, that doesn’t help us now. We have 

this giant stockpile of oil that is sitting with no place to go. 

And that is a market inefficiency. And we need to think about 

the way that markets balance. Refineries have accidents, and when 

we have a refinery accident all the crude oil that was going to go 

through that refinery has to go somewhere else or it has to sit in 

storage. We had put the ban in place at a time when there was no 

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futures market, there was no hedging, there was no transparent 

pricing, right? We are in a totally different market today and we 

need to think about the inefficiencies that we create. 

We are exporting gasoline. And we import gasoline, so we are a 

major participant in the global market for gasoline. The idea that 

somehow holding something in, like having our finger in one part 

of the dike, is going to product consumers from the global trends 

in gasoline is ridiculous because we are both an importer and an 

exporter, so all our gasoline prices are subject to international market prices. 

We just had a refinery accident in California. The pressure that 

that puts on the California market comes. And if we are exporting 

gasoline from California, then that contributes to the supply balance in the State, right? We cannot pretend that exports of gasoline don’t affect the price of gasoline but our crude import costs do. 

That is sort of a ridiculous way of thinking about a market. 

So my point to you is, for the United States to hoard our oil, for 

oil to be trapped now in inventory unnecessarily, I mean, companies are scrambling around trying to find another tank, and U.S. 

prices are depressed by $10 a barrel compared to the international 

market. So we really need to think forwardly about whether our export and import policies are consistent with our desire to help our 

allies, Europe and in Asia, to be able to remain independent of the 

energy weapon and the kinds of things we see today in the market 

coming from Russia and other countries, and we need to reconsider 

all of our policies for trade and energy in that context. 

Thank you very much. 

[The prepared statement of Ms. Jaffe follows:] 

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Mr. WHITFIELD. Thank you, Ms. Jaffe, very much. 

At this time I would like to recognize Mr. Brad Markell, who is 

the executive director of the AFL–CIO Industrial Union Council. 

Mr. MARKELL. It is a mouthful. 

Mr. WHITFIELD. Welcome. And you are recognized for 5 minutes. 

STATEMENT OF BRAD MARKELL 

Mr. MARKELL. Chairman Whitfield, Mr. McNerney, and members 

of the subcommittee, thank you for inviting the AFL–CIO to share 

its views on the important topic of 21st century energy markets. 

Growing domestic oil production is providing the United States 

with significant economic boost and a significant reduction in our 

dependence on foreign oil. In July 2014, the AFL–CIO Executive 

Council unanimously passed a policy statement opposing lifting the 

existing restrictions on crude oil exports, which I reference in my 

written statement. 

Our view is clear: Easing restrictions on crude oil exports threatens the long-run health of the refinery sector and the high quality 

jobs it provides. Simply put, if we lift the ban on crude oil exports, 

we will export both our oil and the jobs and economic activity associated with refining that oil. The threat of these job losses is concentrated in the Gulf of Mexico States. 

I want to raise a key point, one that I haven’t heard discussed. 

If the export restrictions are lifted, the amount of oil exported will 

over time far exceed the amount needed to balance the current refinery capacity that is optimized for medium and heavy oil. Refinery workers and their communities would be subject to the same 

offshoring trends that have devastated domestic manufacturing, 

from textiles, to apparel, footwear, autos, steel, electronics, and on 

and on. 

And the jobs that could be lost are very good jobs. According to 

the 2012 Economic Census, the average job in the refining sector 

paid over $100,000 per year, supported by over $1.8 million in 

value added per employee. These are exactly the kind of jobs we 

should be striving to keep in the United States. 

Some of these jobs are threatened by the recent Department of 

Commerce clarification of its policies regarding processed condensate, which may have already effectively breached the export restrictions, without a single hearing, public notice, or public comment. It seems clear that lots of very minimally processed oil will 

be exported. 

Much of the discussion on oil exports focuses on the mismatch in 

refinery capacity, and in this static view of the industry the easiest 

fix for the problem is to reduce imports of light crude oil and then 

export any remaining domestic light crude unprocessed. 

Rather than export domestically produced light crude oil that refineries are not optimized to process, there is another solution, one 

that emphasizes investment in America and expanding employment opportunity for American workers. In 2014, McKinsey examined the implications of increased domestic production of light, 

tight oil on refineries under scenarios where the crude oil export 

ban is not lifted. McKinsey believes that, quote, ‘‘The continued 

growth of light, tight oil in North America has the potential to 

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drive a fundamental restructuring of the downstream industry in 

North America and beyond.’’ 

Domestic production of oil is projected to remain above 8 million 

barrels a day through at least 2035. The question is not whether 

this oil will be produced, but where it will be refined. It should be 

refined in the U.S. so we can reap the full bounty of jobs, economic 

activity, and the energy security that our increased production of 

crude oil makes possible. 

As the American Petroleum Institute put it in 2011 when making 

the case for domestic refining, quote, ‘‘Because the refining industry operates on a global basis, America faces the choice of either 

manufacturing these products at home or importing them from 

other countries.’’ 

The position of the AFL–CIO is premised on the belief that in the 

end markets win out. Economically exploitable fossil fuels do not 

stay in the ground, they are produced when the price is high 

enough. The simple question before us is, where do we want oil 

produced in the United States to be refined and made into products? Would we prefer that billions be invested in the U.S. or overseas? Would we prefer to create management, engineering, craft occupation and production employment in the U.S. or overseas? 

For the AFL–CIO, the choice is clear: We are unabashedly for 

creating as many American jobs as we can from the increased domestic production of oil. That means keeping the current crude oil 

export restrictions in place, not sending crude oil and the jobs it 

creates overseas. 

Thank for your time and I look forward to any questions. 

[The prepared statement of Mr. Markell follows:] 

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Mr. WHITFIELD. Thank you, Mr. Markell. 

At this time I would like to recognize as our final witness Dr. 

Graeme Burnett, senior vice president for fuel optimization at 

Delta Airlines and also chairman of the board of Monroe Energy. 

So, Dr. Burnett, you are recognized for 5 minutes. 

STATEMENT OF GRAEME BURNETT 

Dr. BURNETT. Thank you. Good afternoon, Chairman Whitfield, 

Ranking Member McNerney, and members of the committee. 

Thank you for inviting me to testify before you today. I would ask 

that my full remarks be included in the record. 

I have been involved in the refining industry in locations around 

the globe for over 30 years. I am currently the senior vice president 

for fuel optimization at Delta Airlines, and in this position I manage Delta’s jet fuel supply, as well as serve as chairman of the 

board of Monroe Energy, the company that owns and operates Delta’s refinery in Trainer, Pennsylvania. Delta Airlines purchased 

and restarted the idled Trainer refinery in 2012 in order to manage 

our largest expense, jet fuel, and has created over 400 jobs. 

We, like other airlines, participate in oil markets on a daily 

basis. So we believe that as an end user of crude oil and as a refiner we are uniquely positioned to comment on the longstanding 

crude export law. We strongly believe the current law remains a 

critically important policy that provides significant benefits to 

American consumers. 

As a result of increased domestic production, the U.S. is importing less crude, which means that we are already directly impacting 

the global supply-demand picture without the need for exports and 

prices have tumbled as a result. 

The EIA has projected the average American household will spend about $750 less on gasoline in 2015 compared to the prior 

year, in addition to equally significant savings on home heating oil. 

Estimates have suggested that the total windfall to American consumers could top $230 billion in 2015. These savings go straight 

back into American consumers’ pockets, allowing them to use those 

savings on goods and services, thus stimulating the economy. 

On the other hand, the oil and gas production sector is still less 

than 1 percent of GDP. Compare that with consumer spending, 

which is 68.5 percent of GDP. Current crude oil export policy has 

broad-based economic value. 

So the question arises, why would any policymaker want to risk 

jeopardizing the current consumer benefits we are experiencing 

and institute a policy that would benefit only a narrow sector of the 

economy? Oil producers want to export crude to get higher prices. 

Producers claim that U.S. refineries cannot absorb new U.S. production, and that is simply a myth. Energy experts Baker O’Brien 

have conclusively demonstrated that the U.S. refining industry has 

been investing to absorb all the projected increase of domestic production through the end of the decade, resulting in lower fuel 

prices, creating jobs at home, and increasing energy security. 

Let’s not forget the U.S. continues to import 33 percent of its 

crude oil needs from outside of North America. Unlike LNG, there 

is no real excess requiring export as it can all be used at home. 

Should Congress eliminate restrictions on crude oil exports, lawVerDate Mar 15 2010 10:16 Aug 25, 2015 Jkt 037690 PO 00000 Frm 00110 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114_16WORLDENERGYNDBLBKEDITS\114_16WORLDENERGYPE
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makers also risk endangering energy security because repeal of 

current law would mean refineries in Europe could buy U.S. crude 

at a lower cost than refineries located on the east cost. Lower 

freight rates enable them to refine the crude and send products 

back to the northeast at a lower cost, leading to closure of domestic 

refining capacity. 

Energy security is not just about producing enough crude oil for 

the Nation’s needs. Energy security is about maintaining the domestic refining capability to transform that feedstock into the products we consume here in America. Put simply, lifting the ban will 

benefit European refinery workers at the expense of thousands of 

American jobs while endangering U.S. refining capacity that is critical to our national security. 

OPEC is a cartel and the global crude oil market is not a free 

market. Crude oil price is ultimately controlled by a few oil-producing states. Exporting crude oil will not reduce OPEC’s power, 

which represents about 60 percent of the total petroleum traded 

worldwide. Saudi Arabia’s decision last year not to cut production 

and allow prices to crash clearly demonstrates that they are the 

controlling factor for crude price. 

Furthermore, it is imperative to remember that public opinion 

overwhelmingly supports leaving the crude oil export law in place. 

Polls in New Hampshire and nationwide are showing that large 

majorities of voters across party lines oppose exporting more U.S. 

Oil to foreign countries. 

So Delta’s position is clear: There is no imperative to lift the ban. 

If export restrictions are lifted, feedstock costs will rise, U.S. Refining capacities will be reduced, jobs will be lost, and the consumer 

will pay higher prices at the pump. It is better for America to 

maintain present law and export the refined products. Our Nation’s 

economic and security interests are best served by allowing American refiners to add value to crude oil here and become less reliant 

on foreign crude oil from unstable and unfriendly countries. 

Thank you for this opportunity to testify before the committee. 

I look forward to answering any member questions. 

[The prepared statement of Dr. Burnett follows:] 

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Mr. WHITFIELD. Well, Dr. Burnett, thank you. 

And thank all of you for your statements. We appreciate it very 

much. 

As I said in the beginning, this is sort of an informational-type 

hearing because we want to focus more thoroughly on this issue of 

the pros and cons of lifting the export of crude oil ban. 

Let me just ask a generic question here. First of all, how many 

other countries in the world that produced a significant amount of 

crude oil prohibit the export of it? Are there some countries that 

do prohibit the export of their crude oil? 

Mr. KINGSTON. None that I know of, though Russia will have an 

export tax that sometimes they will really ratchet up if they want 

to keep the oil in-house. They would just raise that tax so high that 

it becomes uneconomic to try to send it anywhere else. 

Mr. WHITFIELD. OK. OK. So I know that we are exporting a significant amount of refined products, gasoline, diesel fuel, condensates, and so forth. And do any of you feel like that because we are 

doing that that it is putting pressure or causing gasoline prices to 

go up? Gasoline prices have been going down, and we are, I guess, 

exporting a large amount of gasoline products today and diesel. 

Did you want to make a comment on that, Mr. Drevna? 

Mr. DREVNA. I appreciate it, Mr. Chairman. 

I think it is fraught with peril when you start talking about what 

prices are going to do. Whether crude oil or product prices, as Mr. 

Sheffield said, prices are based upon the international market. 

What we have been able to show by taking a crude oil product, 

refining it here in the United States, and exporting it is a couple 

of things. It shows we are globally competitive, it shows we can 

keep jobs here, and keep those refineries running at optimal levels. 

That is the benefit of the exports. Without being able to export a 

finished product—mostly diesel too, some gasoline, but mostly diesel—we are able to keep those refineries up and running, and that 

is a national security thing. 

If I may say one other thing, sir, I think what we don’t need to 

have this devolve into is an upstream versus downstream kind of 

debate. We are all in this together. And the only thing that we are 

asking is that, whatever you do, you look at the whole picture and 

just not one time perhaps when there is some, because of some 

contango going on in the markets, that we have an overflow of 

stored crude. 

So let’s take our time, take a breath, and look at this think going 

forward and not just one snapshot in time. Thank you. 

Ms. JAFFE. I would like to also address that question. It is obviously a ridiculous thing to say, but because we are exporting gasoline it doesn’t affect the price. Obviously, if we banned gasoline exports we would get gasoline buildup in storage and that would depress the price of gasoline. And we have a particular problem in 

the State of California, for example. In different refining areas in 

the southwest maybe there is a little bit more flexibility, but in 

California where there aren’t a lot of pipelines to bring refined 

products, whenever we have a refining accident or problem it immediately hits consumers in the State. And there are difficulties 

because you can’t necessarily be cost effective to bring ships around 

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because of the Jones Act and so forth. Those things actually are affecting California refiners exactly today. 

And I don’t know what the statistics are for how much gasoline 

is being exported from California, but I can tell you that when 

Chevron had their Richmond accident, and when it caused this 

sudden burst in gasoline prices that were very difficult for average 

Californians, the industry was still exporting from California diesel 

fuel and gasoline. 

So it is a market, and I think that is sort of what was the point 

of my remarks, which is that if we are going to talk about a market 

dynamic we have to look exactly, I agree with Mr. Drevna, we have 

to look across the entire market. But it is not clear to me why we 

would have a restriction on crude oil but not a restriction on products. I mean, it seems to me that we believe in free trade or we 

don’t believe in free trade, and I am not sure why we are picking 

one product over another. 

Mr. KINGSTON. I want to kind of bring those two statements together. Mr. Drevna talked about refineries, they are better off operating at a high level. And then what Amy said was that, yes, if you 

export, if you stop the exports you would have a gigantic buildup 

of gasoline and it will push the price of gasoline down. The problem 

is it would also push down the economics of running those refineries. 

So at a certain point you can’t make the refineries run. So if you 

have some kind of restriction that floods the market and you don’t 

have demand to meet, and demand is not going to rise that fast, 

you are going to have terrible economics and you are going to have 

refineries start to cut down. 

This is why we all benefit from letting these refineries run at the 

highest level they can. If that means that they are going to export 

some, that is great. You know, in this country we have had minimal growth in gasoline consumption, minimal growth really in energy consumption, and there have been some year-to-year comparisons where we are down for the year. That is kind of a good thing. 

I think almost everybody agrees that unless it is being brought 

about by a weak economy, that is generally a good thing, it is a 

function of efficiency, et cetera. 

So you have got this world-class refining sector. If you want it 

to run, if want to create the jobs that the gentleman from the AFL– 

CIO talks about, let ’em rip. Let this great refining sector run at 

a high level. And if that means exports, so be it. 

Mr. WHITFIELD. Well, my time has expired. At this time I recognize the gentleman from California, Mr. McNerney, for 5 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman. 

I thank the witnesses for your statements. I appreciate Mr. 

Drevna’s comment about looking at the big picture and taking our 

time to make the decision correctly to benefit our country the most. 

I want to sort of paint a broad picture here. For opening up exports I see two big benefits. One is geopolitical. We can help 

Ukraine and the Baltic countries and a lot of the countries that are 

having problems because of their suppliers. Another benefit is it is 

going to create jobs in drilling, it is going to create profits for companies. Those are significant benefits. 

118 

On the other hand, my concerns are right now the domestic 

prices are pretty low for natural gas and for petroleum, and that 

gives our manufactures a real leg up. And I see a manufacturing 

renaissance, an opportunity for a manufacturing renaissance in 

this country. So I don’t want to give that away. I mean, we have 

the potential to create millions of jobs in manufacturing with a current price differential that gives our country an opportunity to create those manufacturing jobs. 

The other concern I have is environmental groundwater contamination, a big problem potentially in California where the groundwater is so valuable. And also climate change. I mean, encouraging 

more production, encouraging more consumption, it is going to create more greenhouse gas, it is going to put us farther down that 

dangerous path. 

So that is sort of a broad brush. Does anyone want to comment 

on my observations here? Mr. Sheffield. 

Mr. SHEFFIELD. Yes, Mr. McNerney, a couple on the water side. 

We are having droughts out of west Texas too, just like California. 

We started focusing on brackish water zones, we are going below 

the water table out in west Texas. We found a lot of water that we 

can use from the brackish standpoint. We have also signed major 

agreements with the cities of Odessa and we are working on Midland to use effluent water. Our goal is to use no fresh water after 

a period of time of about 5 years. 

On the environmental issues, we are going all out to install 

vapor recovery units to capture all the methane. We are working 

with EDF at Fred Krupp. I visit him all the time in regard to looking at ways to again capture all methane at the sites when we 

frack wells and so on. So the industry is going all out on both 

methane emissions and also using other sources of water besides 

fresh water. 

Mr. MCNERNEY. Well, I appreciate that, and I think most of the 

players are willing to go down that path. They are willing to make 

the extra investment. There may be a couple of bad players out 

there, and it is going to be up to the way that we regulate that 

market to make sure that the bad players don’t do much damage 

and hurt the reputation of the industry as a whole. 

So that is something I hope to work with my colleagues on in the 

future to make sure that we do that. 

Mr. KINGSTON. I would like to address the gasoline price. You 

know, this is not just theoretical. We had a Brent-WTI spread that 

for years and years WTI was over Brent. And then as the boom got 

going in the U.S. and crude stocks built up, not just in Cushing but 

everywhere, that price plummeted, and I think at its widest WTI 

was $27 below Brent. 

There was no evidence at all that that lowered the price of gasoline in the U.S., because as numerous commentators, including the 

recent Brookings Institute study have shown, the price of gasoline 

in the U.S., because the U.S. is a gasoline importer and an exporter, as a result of that we are tied to the world market. The 

world market is therefore ultimately tied to the price of Brent 

crude oil. 

Mr. MCNERNEY. So there is no differential between American gas 

prices and the world gas prices? There is a differential—— 

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Mr. SHEFFIELD. Ultimately, on a spot wholesale level, I mean, 

yes, there is a difference, but ultimately if one gets too cheap to the 

other they will just gather it up and export it to the other place. 

So they stay within a range. But the crude price, because a lot of 

that crude was stranded at Cushing, dropped significantly below 

the price of Brent and the price of gasoline did not follow. 

If the case is to be made that keeping a large supply of crude 

here in the U.S. lowers gasoline prices, it would have happened. It 

is not just theoretical. We had the experiment. Nobody set out to 

have the experiment, but we had it, and there was no evidence at 

all that that kept the price of gasoline in check. 

Mr. MCNERNEY. Mr. Markell. 

Ms. JAFFE. Let me just add one thing about our relationship with 

the Europeans. 

Mr. MCNERNEY. Well, I recognized Mr. Markell first. 

Mr. MARKELL. So this focus on gas prices is something I wish we 

could get off the table. It is important. I own two SUVs, I am very 

concerned about gas prices. But it is very clear that U.S. gas prices 

are set internationally based on those spot markets. There is a 

small swing from market to market and as the gap gets too wide 

then it closes. From my point of view, it kind of takes the focus off 

the jobs and economic angle that I think we are not paying enough 

attention to. 

So there is a lot of talk about gasoline prices. To me, the question 

is settled. U.S. gas prices are set on the international market and 

whether we export crude or don’t export crude, that is going to be 

the truth in the future as well. 

Mr. MCNERNEY. I have run out of time. 

Mr. OLSON [presiding]. The Chair now recognizes himself for 5 

minutes of questions. Welcome to our experts. 

December 22 of 1975, Gerald Ford signed the law that created 

the export ban we are talking about today. To show you the change 

in America that has happened since that time, that very next day 

he signed a bill to try to make our country adopt the metric system 

of measurement. The metric system. That world has been turned 

upside down and our energy world has been turned upside down 

since that time. 

We have seen a boom in oil production that means some parts 

of America are seeing some tremendous benefits, places like my 

own State of Texas and North Dakota. Energy means amazing opportunities for these small towns. But we have also seen the impacts on the global economy. Our reliance on foreign oil is slipping 

away faster and faster and faster, more than we could ever have 

dreamed 5 years ago. This benefits our trade balance, our energy 

security, and our economic growth. These are huge benefits and 

they are real. 

Growing supply has slashed the price of oil. That is great for 

Americans at home because the price is so low at the pump, but 

for my hometown of Houston this has meant good people have lost 

thousands and thousands of good-paying American jobs. It is a simple fact that fewer rigs are working and less money is being invested. 

Market forces and global politics are hitting my hometown hard, 

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ronment we shouldn’t be making it harder to drill. And that is why 

it is time we fix pipeline permitting. Energy means nothing if we 

can’t get it to the markets. And further, the Endangered Species 

Act should be a protection, not a weapon. And we should be more 

open to safe offshore development. And we need to keep our rules 

on our refineries reasonable. And that is why I am an unspoken 

critic of the ethanol mandates. 

Lastly, today I agree that is important to consider the ban on 

most crude exports, but exported oil won’t be a cure-all. But free 

trade is very important and no law should be above scrutiny, and 

this committee is at a very point in this early conversation. 

My first question is for every panelist. I hear from the oil producers that their oil is trapped. They say its unfairly marked down 

compared to global prices. I hear from refiners who say the opposite. They argue there is plenty of capacity and they are expanding 

every day to take more and more American crude. 

Which statement, one of three, best sums up your views about 

these two opposing views? Number one, we have enough refining 

capacity to absorb light oil. We are there. Number two, we have 

more light oil than can be refined reasonably or absorbed currently. 

And number three, we have the right amounts of oil and capacity 

in our refineries, but not enough pipelines to get from A to B. 

So three choices. Mr. Sieminski, you are first, sir, one, two, or 

three, with some comments if you want to. 

Mr. SIEMINSKI. Chairman Olson, thank you. Well, I think your 

number three, that we don’t have enough pipelines, I think that 

was the case for oil from Cushing, Oklahoma, 3 or 4 years ago. But 

the infrastructure to bring oil south from Cushing to the Gulf 

Coast I think is now in a lot better shape. So that leaves me with 

one or two. 

I would say, sir, that it is a combination. I think that the capacity to refine the crude oil is probably there, but not at an equal 

price between Brent and WTI. So in other words, if the West Texas 

Intermediate price is discounted enough, then refiners would be 

happy to take a lot of it. 

Mr. OLSON. I am sorry, sir, my time is up. 

One-point-five for you, Mr. Sheffield, one, two or three, please. I 

am pretty sure you are probably going to be a one, you have the 

capacity. 

Mr. SHEFFIELD. Yes, I think what we are not hearing from the 

refiners is the economic penalty. They invested $85 billion to redo 

their refineries because they all thought light sweet crude was declining and we would never find it again. It was all going to be 

heavy crude from Canada, heavy crude from Mexico, heavy crude 

from Venezuela. They invested $85 billion. So to refine light sweet 

crude, they have to charge an economic penalty. 

Secondly, they are keeping the $10. They are not passing on the 

$5 of it back to the producers to create jobs or $5 back to the American consumer. So I think it is obvious for me. 

Also, I left out a key point, you brought up pipelines, is that 

what is interesting about the law in 1975 is that Canada—I love 

Canada, we had an office there—Canadian producers, they can use 

our storage, they can use our refiners, and they can apply for a license to export their crude oil. 

121 

Mr. OLSON. And I have used my time as the chairman overly. So 

I will yield back the balance of my time and give my time now to 

Mr. Barton—or are we going to go—I am sorry. Oh. Gene. I am 

sorry. 

Mr. Green from Texas is recognized. 

Mr. GREEN. Well, I think it is appropriate that you have four 

Texans left over while we have that one vote on the House floor. 

So Congressman Flores and Joe Barton and I. 

I want to thank the Chair for doing the hearing today and thank 

our witnesses. 

We are here to discuss an important issue in the district I represent. Because I have at any given time—our district lines change 

in Texas all the time. I have had five refineries in my district, from 

Exxon in Baytown to Valero in the City of Houston. And so this 

is a balancing act. 

I am looking at our refineries now having the best margins that 

they have had that I can remember, and the price of gas is reasonable, $2.15 a gallon, $2.10, in Houston. But I also have a whole 

bunch of jobs that come from the Baker Hughes, the Halliburtons, 

and everyone else who are actually so—and I understand the problem. We are trying to balance it. We want the refinery margins, 

but we also want to keep those folks working in the oil patch. And 

so that is where the balance come from. 

And, if we can, we will see how it works. But, Administrator 

Sieminski, it is good to see you again, and thank you for the good 

work you all do. 

You mentioned that EIA is composing a study that would discuss 

crude oil in exports. Where are you at on that study? 

Mr. SIEMINSKI. Congressman, we have done this study on what 

drives gasoline prices, and I think you heard a number of people 

talk about the results of that. Gasoline in the U.S. seems to be set 

more in the international market rather than elsewhere. We are 

looking at options for petroleum refineries to process additional 

light sweet crude oil. We will have that study out in about a 

month. 

We have also a study underway to look at the implications of increased crude oil exports on the refining system, in general, and we 

will have that out, I think, sometime in April. 

We also published an oil import tracking tool that makes it easier to see some of the changes that have taken place down in Texas 

and Louisiana. 

So I would say over the course of the next 6 to 8 weeks we will 

have—we will have two or three more big studies out. 

Mr. GREEN. Well, Congress doesn’t move that fast. I think we 

will probably be able to see those studies before they do. 

Mr. Sheffield, first of all, thank you and Pioneer for some of the 

things you are doing because it makes it easier—when I drive 

through Eagle Ford, I hate to see the flaring for lots of reasons, environmentally, but, also, I know somebody is not getting paid for 

that product that they are producing. And we have pipeline issues 

and transmission issues there. 

What does the world condensate market look like for U.S. exporters? I know the Department of Commerce is doing that. Is that 

kind of a safety valve for what we need? Because we have a current 

122 

procedure for exporting condensate. Are we having some success in 

that? 

Mr. SHEFFIELD. Yes. We are exporting 20,000 barrels a day now 

at Pioneer of condensate, and it is going to Japan, South Korea, 

and Europe. They need it. 

About 8 weeks ago there were some articles written about that 

the market is closed. That is because, for a period of about a week, 

the international sweet price and the domestic sweet price narrowed to about $2 for just a period of 2 or 3 days, and now it is 

widened back. And that will allow—most experts are thinking that 

we can export about 200,000 barrels a day out of the Eagle Ford. 

Several other companies have been approved to be able to go and 

export their process condensate. And so that process will continue. 

And it will probably—it helps us for about 6 months on this inventory so that the biggest issue is the sweet crude from the Bakken 

sweet crude from Colorado in the Niobrara and the sweet crude 

from the Permian Basin. 

Mr. GREEN. OK. How long does it take Department of Commerce 

to review Pioneer’s application to export the condensate, the regulatory delay, and the timeframe? 

Mr. SHEFFIELD. Yes. It took a few weeks. 

Mr. GREEN. That’s amazing. We are waiting for exporting on 

LNG for years. 

Mr. SHEFFIELD. Obviously, we were very pleased. 

Mr. BARTON [presiding]. Keystone proposal. Let’s—— 

Mr. GREEN. Oh, yes. Well, and I know there was some testimony 

about—I actually have two of the huge tanks that Keystone has 

built in Channelview, Texas. And you are right about getting the 

Cushing crude oil down there, but we still need it to come from 

Canada across the border. 

But the export numbers you are talking about, 20,000 and up to 

200,000—you know, the five refineries off and on I have represented because I am real familiar with them—they all have been 

retooled in the 1990s to do the heavier crude—Venezuela, Mexico— 

and we don’t have small refineries in our area. In fact, all of them 

have been expanded over the years. 

We probably have the smallest, about 200,000, 250,000 barrels a 

day. And I remind people even from TransCanada, if that is a 

750,000-barrel-per-day, we use over a million just in East Harris 

County to do it. 

Charlie. 

Mr. DREVNA. Thanks, Congressman. 

I would like to make a comment about the retooling and the billions of dollars that we invested, which is true. But I think there 

is another myth out there circulating that, you know, the only 

thing those refiners do is just suck up all the heavy crude and that 

is all they use. They use a mix. 

And we are pretty good at what we do, just like Mr. Sheffield’s 

company is really good at what they do. We have—you know, we 

use light crude, we use middle grade, and we use heavy. And we 

can take more—more light by backing out the middle, backing out 

some heavy. 

123 

So it is not one of those all-or-nothing kind of things. Like I say, 

we have been doing this for a long time, and we can take the extra 

crude. 

And given what Adam Sieminski was talking about, I disagree 

somewhat that—‘‘OK. Well, we are OK. We have got some pipelines 

going, and we are good and we can go home.’’ No. We were pretty 

good going north and south. We found out that we weren’t. We are 

awful going east and west, and probably always will be awful for 

a long—you know, for a long time. 

Mr. BARTON. The gentleman’s time is expired. 

Mr. GREEN. I am out of time. But, Ms. Jaffe, it is always good 

to have you before our committee. I like to have a Texan from out 

in California. 

Mr. BARTON. The Chair is going to recognize himself for 5 minutes because I actually think it is my turn. So I am going to do 

that. We are doing the Pony Express. Yes. You know, we have a 

vote on. So we are going to vote coming back and changing the 

chairmanship. 

Mr. Sieminski, could you tell the subcommittee how many barrels per day of refined products we export and how many barrels 

a day of refined products we import? 

Mr. SIEMINSKI. Well, I could get the exact numbers for you for 

the record, Congressman, but the total amount of exports is now 

up to 3 1⁄2, 4 million barrels a day of products. 

[The information follows:] 

When excluding crude oil, the United States exports 3,834 thousand barrels 

per day and imports 1,884 thousand barrels per day of refined products. 

The United States is a net exporter of refined products by 1,950 thousand 

barrels per day. 

This data is based on 2014 monthly averages. EIA usually considers all refined products that are not crude oil, as opposed to just looking at Finished 

Petroleum Products. Furthermore, HGLs (Hydrocarbon gas liquid) and 

other liquids are included in the aforementioned refined products data. 

Mr. BARTON. But is it fair to say we are exporting more than we 

are importing? 

Mr. SIEMINSKI. We are a net exporter of products. 

Mr. BARTON. Net exporter. 

Mr. SIEMINSKI. That is correct. By a small amount. 

Mr. BARTON. OK. Thank you, sir. 

So if we were to eliminate the ability to export refined products, 

that would not be a good thing? 

Mr. SIEMINSKI. I think Mr. Drevna said that refiners are actually 

benefiting through capacity, and Mr. Kingston—that having the 

ability to export products actually allows you to run your domestic 

refinery system efficiently. 

Mr. BARTON. Better. Yes. 

Mr. SIEMINSKI. Yes. And that actually works to the advantage—— 

Mr. BARTON. We are for exports of refined products. 

Mr. SIEMINSKI. That is correct. 

Mr. BARTON. Now, Mr. Sheffield, I need—I mean, you all know 

this, but I am the sponsor of the bill to repeal the ban on crude 

oil exports. So I am pro crude oil exports. I think you all know that, 

but I guess in full disclosure. 

124 

You testified, Mr. Sheffield, that, if all companies—all producers 

were allowed to either sell in the domestic market or sell in the 

world market crude oil, that while you would get a slight increase 

in your price domestically, the overall world price would at least 

be pressured to go down because you would be competing against 

the Russians and the OPEC nations in the world market and, since 

U.S. production is going up, that would overall bring the world 

price down—or tend to bring the world price down. Is that correct? 

Mr. SHEFFIELD. Exactly. Anytime you put more supply in the 

international market, especially at this point in time, you are going 

to bring the international price down. 

Mr. BARTON. So it may be counterintuitive to some, but if we 

allow crude oil exports, at least over time we are going to stabilize 

world prices and probably bring them down because we are increasing U.S. domestic crude oil production. Is that correct? 

Mr. SHEFFIELD. Exactly. And lower gasoline prices for the American consumer. 

Mr. BARTON. Mr. Drevna, you and I know each other real well. 

I was very gratified to hear your testimony that your association 

is not automatically opposed to the repeal of the ban on crude oil 

exports. 

What would need to be done to expedite that? You had some 

qualifications, and I just want you to be able to put those on the 

record. 

Mr. DREVNA. Absolutely, Congressman. 

When you look at—as I said earlier, if you look at just lifting the 

ban on the exports of crude oil in a vacuum, there are a lot of other 

tangential things that must be looked at so we don’t try to solve 

one problem and create two or three others. And chief among them 

is the Jones Act. 

Now, I know everyone is going to say you can’t repeal the Jones 

Act. Well, you can’t even talk about it. Well, I think it is time we 

talk about it. 

Mr. BARTON. Well, we can talk about it. 

Mr. DREVNA. Yes. In the context of the crude oil—you know, we 

have had four or five refineries—some shut down, but we have 

three or four or five others that were—I mean, days—I am literally 

days away from shutting down on the East Coast. Bakken crude— 

getting that Bakken crude there saved them. 

So what all I am saying is, you know, for 40—ever since we had 

this thing in 1975 and the Arab oil embargoes, we have been having an energy policy here in the country that sort of goes—it 

lurches from crisis to crisis, and we never look at anything holistically. 

Mr. BARTON. So you just want to look at the whole picture. 

Mr. DREVNA. Look at the whole picture and see what it does to 

the total economics. If the price of crude goes up somewhat and it 

is still OK, fine. But—— 

Mr. BARTON. I have got 30 seconds. I want to go to Dr. Burnett— 

I am sorry, not Mr. Burnett. 

Delta is the Delta Airlines. Correct? 

Dr. BURNETT. Correct. 

Mr. BARTON. But does the parent company own the Delta refinery or are you a subsidiary of the—— 

125 

Dr. BURNETT. Yes. Monroe Energy is a wholly owned subsidiary 

of Delta Airlines. 

Mr. BARTON. OK. Now, does Delta Airlines use the total production of the Delta refinery? 

Dr. BURNETT. The way it works is that all refineries produce gasoline, diesel, as well as jet fuel. So we use the jet fuel directly into 

the New York Harbor to our airport hubs there. 

Mr. BARTON. But some of your refinery capacity results in refined products that you sell to others, and probably some of that 

is overseas. Now, I don’t know that. 

Dr. BURNETT. No. What we do is we actually swap with Phillips 

66 in traffic euro. We swap the gasoline and diesel for jet fuel in 

other locations. So we have a virtual jet refinery of about 170 barrels a day. 

Mr. BARTON. Your refinery would oppose us restricting your refined products to only going to Delta. Correct? 

Dr. BURNETT. Correct. 

Mr. BARTON. I just want that on the record. 

And my time has expired. 

Mr. McNerney, have you asked questions already? 

Mr. MCNERNEY. Yes, I have. 

Mr. BARTON. You have. 

Then we are going to go to—no, sir. I just—I remember that you 

have to go minority, majority. That is all. 

The Chair recognizes the distinguished gentleman from Illinois, 

Mr. Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Great hearing. It is a great discussion. And, of course, a lot of 

us have been talking about this. And I do believe—and I have mentioned this even in the last couple Congresses—you put more crude 

oil on the world market, world market price should go down. Pricing would be from Brent versus a captive West Texas intermediary 

anymore. 

I think the political concern is what Mr. Sieminski and I talked 

about on California prices. If we do this, but then some other variable raises the gasoline prices, not a supply and demand debate, 

but, politically, people are going to say, ‘‘See what you did. You exported the crude oil and gas prices went out.’’ 

It is very hard for politicians to be able to—without a 5-second 

sound byte, to be able to explain the macro- and the microeconomic 

issues that we are involved with. So that is probably why we are 

not going as fast on this as we are doing with LNG issues, which 

makes a—it is an easier argument. 

I want to talk just quickly—because Mr. Drevna opened the discussion on the Jones Act. The Coast Guard Admiral Paul Zukunft 

recently said—and I will just take one of the quotes—‘‘I think at 

the end of the day it would put our entire U.S. fleet in jeopardy 

where our fleet of roughly 80-plus international U.S.-flagged vessels will rapidly go to zero. And then there is a time of crisis. Who 

are we going to charter to carry out our logistics? Very difficult if 

we don’t have U.S.-flagged ships.’’ 

And, you know, we are having this big internal Homeland Security debate right now—I think the bill probably just passed—and 

national security issues. U.S.-flagged vessels on our inland waterVerDate Mar 15 2010 10:16 Aug 25, 2015 Jkt 037690 PO 00000 Frm 00129 Fmt 6633 Sfmt 6633 F:\114THCONGRESS\114_16WORLDENERGYNDBLBKEDITS\114_16WORLDENERGYPE
126 

way systems is a have-to. We are just not going to have—especially 

in the inland waterway systems, which my district borders the Mississippi, it borders the Ohio, it borders the Wabash. Just the national security implications of that I think is difficult to do. 

So does anyone disagree with that analysis? Charlie. 

Mr. DREVNA. No. I don’t disagree, Congressman. You have to realize, though, what we are talking about from the refining sector 

is solely the international fleet. You know, and we are free-marketers. 

Mr. SHIMKUS. Yes. But you are talking maybe from New Orleans 

or Texas to New England—to the New England coast. 

Mr. DREVNA. Right. 

Mr. SHIMKUS. Saying that that is international, but it is really 

national. 

Mr. DREVNA. Well, but we have international ships coming in 

and out of there every day. 

Mr. SHIMKUS. But they are not going from U.S. port to U.S. port. 

Mr. DREVNA. Exactly. 

Mr. SHIMKUS. I mean, we are—so, anyway, I think it is a very 

difficult proposition. 

Ms. Jaffe, I have been involved—I am headed to Lithuania next 

week for the 25th anniversary. I deal with Eastern European 

issues. That is why the LNG—I am going to go visit the LNG terminal. 

Talk through the international security implications for our allies, first of all, who are held hostage by extortionists who are not 

our friends, and, also, the—and so I got it confused. 

Because in that we put more competitive crude oil on the market, 

what does that do to our enemies and their ability to do the things 

that they are doing?Can you talk to that a little bit. 

Ms. JAFFE. Yes. So I think you raise a very interesting, important point. All of the oil that has been disrupted recently—Libyan 

oil where we now have ISIS attacking near the Kirkuk oil field— 

that would—when Iraq oil gets disrupted or Libya’s oil gets disrupted now, that hurts the supplies going to Europe. That gives 

Russia a tighter stranglehold on the supplies that they provide to 

Europe. 

So our goal, as their ally and as a world leader and as a believer 

in free markets, should be not only to make sure that we have 

enough oil here in the United States, but, also, that we are leading 

from the front on making sure that powers like the Russians or 

Iran are not able to use oil and gas as a geopolitical lever, as a 

weapon. 

Mr. SHIMKUS. And the import terminals in, like, Europe as a 

whole, there is more crude oil import locations than what you 

would have on LNG east to west. Is that safe to say? 

Ms. JAFFE. You know, I mean, Europe is a market. I mean, I 

think the interesting thing about the LNG export question—I 

mean, that seems obvious because we have this fear that the Russians would cut off natural gas supply to Europe. That would 

be—— 

Mr. SHIMKUS. Not a fear. A truth. 

Ms. JAFFE. Yes. Absolutely. 

127 

So my point to you is, but on the crude oil side, Europe has actually lost their supplies from Libya. And I think the President a 

year, 2 years ago correctly released supplies from the Strategic Petroleum Reserve to loosen up the light crude market at the time 

we were importing still because we want to help out our allies from 

Europe and we don’t want to see Europe having shortages. 

So, ultimately, we have to concern ourselves. We need to look at, 

if there is a refinery on the east coast of the United States whose 

economics are questionable, you know, is that how we are going to 

run our foreign policy. We are going to have our foreign policy be 

orientated to keep one refinery open in the United States because 

we have these allies. 

And during Rita and Katrina—I will speak as a Texan for a moment—you know, Europe lent us the gasoline that we needed to be 

able to reevacuate people and bring them back and forth safely to 

Texas, you know. And we are now telling them that we don’t want 

to provide them with any supply because there might be a competitive advantage for one refiner? That doesn’t make sense. 

Dr. BURNETT. I would like to respond somewhat to that because 

supply disruptions in Libya and elsewhere do affect the price of 

crude oil, but there is plenty of crude oil supply available in the 

world. That is why we have a low price today. The issue for our 

friends and allies in Eastern Europe and elsewhere is LNG and 

product availability, not crude oil. 

Mr. WHITFIELD [presiding]. The gentleman’s time is expired. 

At this time I recognize the—who is next on the list? The gentleman from Iowa, Mr. Loebsack, is recognized for 5 minutes. 

Mr. LOEBSACK. Thank you, Mr. Chair. 

Sorry that we have had to run back and forth. I think whoever 

is in charge of this institution wants to make sure we get our 

10,000 steps in today. And so I really appreciate—and I haven’t 

been able to listen to all of the testimony. I apologize. Just back 

and forth. A lot of meetings in the process, too. I have a lot of questions on this, as you might imagine. 

I do want to start out with Ms. Jaffe, if I could. First of all, I 

got my PhD at UC Davis. So I am glad you are there. But it was 

in political science. And the West Village, you know, is quite an undertaking, being a net zero energy undertaking, and I commend 

UC Davis for doing that. And I don’t know if you have—you must 

have some role in that. I know that you are in the graduate college 

of management. But thank you for being here today. 

And I kind of want to explore maybe with not just you this whole 

geopolitical thing that Congressman Shimkus brought up and others. 

First of all, which specific countries are we talking about that we 

can help if we are allowed to do so? Which countries? 

Ms. JAFFE. Well, I think that, ultimately, we are in a global market. Right? But when we have disruptions, the disruptions—and we 

are not out of the woods with international disruptions. 

The militias that are funded by ISIS have made a decision that 

they are going to try to capture as many oil fields as possible inside 

Syria and Iraq. You know, the response towards that has been, you 

know, not 100 percent effective. 

128 

We have the civil war in Libya which is disrupting exports. You 

could have a civil war, as we know, from watching events around 

the Middle East and in Africa. There is many different places 

where oil supply can get disrupted. 

Mr. LOEBSACK. But what—— 

Ms. JAFFE. And the people that it is hurting is—that is why the 

price of Brent crude, which is the global marker—— 

Mr. LOEBSACK. Right. 

Ms. JAFFE [continuing]. Is now $10 higher than our prices here 

in the United States. Because those are the countries—Europe and 

those are the countries that are losing their supply. 

Mr. LOEBSACK. But are we talking about specifically Ukraine 

or—I mean, where are we talking about where we can help folks 

so that they are not being extorted by Russia and whatever—you 

know, the arguments that are being made on that. 

Ms. JAFFE. I think it is any country in Europe that has a refinery. I mean, it is the whole continent. And it also affects availability of supply to Asia as well. 

Mr. LOEBSACK. So how does that—I mean, how do we then, practically speaking, put into effect that kind of a policy other than lifting the ban? How does it happen, then, that we can help those 

countries? Because we never really hear sort of specifically how 

that works. 

Ms. JAFFE. Well, we have several different tools. 

First of all, we now have this surge in light crude oil production 

in the United States. We have light crude oil sitting in the Strategic Petroleum Reserve. There is no—— 

Mr. LOEBSACK. I am sorry. But I just want to be more specific. 

Maybe somebody here can be specific. 

How does that oil then get to where we want it to go? You know, 

how does that happen if we have a policy that lifts the—— 

Ms. JAFFE. Well, we have to lift the export ban to be able to be 

an effective player in the global market. 

Mr. LOEBSACK. Right. 

That enables that to happen. But how does it happen specifically? 

Mr. KINGSTON. Well, I would like to point something out. It is 

entirely possible that you could lift the export ban and nothing 

happens. 

Mr. LOEBSACK. Right. 

Mr. KINGSTON. But that doesn’t mean that it is an empty gesture. 

Mr. LOEBSACK. Right. 

Mr. KINGSTON. I think back to the fight in the late 1990s over 

the lifting of the ban on exporting Alaskan crude, and there was 

a lot of effort put into this Congress to get that to be lifted. BP 

spent a lot of money. At Platts, we wrote a lot of stories on it, and 

they lifted it. And they made a lot of effort at selling—and after 

about 3, 4 months, the Asian refiners said, ‘‘You know what? We 

don’t really like this stuff. It doesn’t work that well.’’ 

Mr. LOEBSACK. I mean, because things are happening in the 

Ukraine that might not allow for this actually to happen. It depends upon the situation. 

129 

Mr. KINGSTON. But there is really a kind of a positive thing to 

it. Mr. Drevna mentioned Turner Mason before. They are a very 

highly respected engineering consulting firm, and we have a partnership with them for many years. And every day we publish refinery yields and netbacks and refining margins. 

And if you look at the domestic crudes, they are consistently the 

biggest winners in refining margins and not just because of the low 

price. 

Mr. LOEBSACK. Right. 

Mr. KINGSTON. So it is entirely possible that the export ban could 

be lifted and still the refineries in the U.S., which have certainly 

a big advantage in transportation costs and a big advantage in fuel 

costs because they are using cheaper natural gas to run it as opposed to oil in another part of the world—they are just the winners 

in this battle. 

But the fact that the possibility of exporting it is there tends to 

keep things in check. So the advantages that you would get from, 

let’s say, maybe keeping a lid on the Brent price, which affects gasoline price—that advantage still exists and, meanwhile, the refineries are still operating. So the jobs that the AFL–CIO is concerned 

about, they still exist, too. So the refineries can still win this battle 

even if the export ban is lifted. 

Mr. LOEBSACK. Yes. I will just tell you for the record that the 

concern I have—and you can say it is irrational that this is nothing 

like what it was prior to 1973 and 1974. But go back—we had a 

Drain America First policy. We all remember that before the crisis 

back in the 1970s, the first crisis. 

And just for the record, I have a lot of concerns that we not get 

into a situation like that. I know it is completely different in many 

ways. We have more sources of oil here domestically and around 

the world, that sort of thing, and we didn’t even have North Sea 

oil back then. But I still have a real concern about that. I just want 

you folks to be aware of that from a national security perspective. 

I think we have to be thinking about that. 

I do want to ask Mr. Drevna and Dr. Burnett about oil prices 

going down now, understanding how markets work. Obviously, we 

know that oil prices aren’t going to stay at the current level forever. 

So what strides is the industry taking towards future energy investments instead of asking for us to lift exports in terms of expanded drilling operations, et cetera? What are you doing to prepare for future spikes? I guess that is the question. 

Mr. DREVNA. Well, from the refining side, you know, we are continuing to upgrade. We are continuing to—not a technical term— 

we are continually changing the valves and making sure we can 

use the abundance of supply that we have here in the country 

today. 

So that is why I say it—but are we there yet? We are getting 

there very closely, again, because of what we talked about earlier, 

you know, the—unfortunately, the midstream distribution center 

was not built in this country to handle what we have today. 

It is going to take time for us to get caught up, but not that 

much time. So, you know, we are putting lot of money and a lot 

130 

of effort into upgrading the refinery so they can use the light sweet 

crude. 

One last thing I would mention. We talk about the upstream 

folks winning, the refining folks winning. This is not a win/lose 

game. We should be talking about what is best for America and the 

American consumer and whatis best for energy and national security. Then everybody wins. 

Mr. LOEBSACK. Thank you. 

And thank you, Mr. Chair. 

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

Texas, Mr. Flores, for 5 minutes. 

Mr. FLORES. Thank you. Had an equipment malfunction. 

Chairman Whitfield, thank you for holding today’s hearing on 

this timely issue. 

Several major studies over the last year, including CBO, Brookings and Columbia University, all agree on a key issue: American 

consumers and households will benefit if we repeal the outdated 

ban on crude oil exports. 

Some have countered that, if we lift the ban, OPEC will simply 

respond by cutting production, stabilize the price in their favor. I 

think clearly that the most recent actions by OPEC rebut that assertion, and I don’t think it is appropriate to try to reassert it at 

this point in time. 

Also, we have seen in recent months OPEC wants to keep market share by maintaining production even in a low-price environment, and they hope to undercut U.S. shale producers, thereby reducing the incentive to reinvest in a business. 

The Brookings Institution, along with respected economic consulting firm NERA, looked at different OPEC scenarios, cuts of production and maintaining current production levels. 

And here is what they concluded: ‘‘The benefits of lifting the ban 

depend on the energy market conditions and how other oil suppliers, especially OPEC, respond.’’ 

And then they go on and say—the key phrase they said is, ‘‘What 

is most important is our finding that in all of these modeling scenarios there are positive gains for U.S. households.’’ 

And so the shale revolution in the United States has fundamentally altered the global energy picture, and I think we owe it to 

hard-working American families and the consumers to facilitate the 

continuing improvements that we are seeing in this market. 

Columbia University also reached a similar conclusion, stating, 

‘‘While in the past market observers have generally assumed OPEC 

will offset a large share of non-OPEC production to defend prices, 

current OPEC behavior in response to the U.S. Shale boom casts 

doubts on the cartel’s ability or desire to offset non-OPEC supply.’’ 

Mr. Sheffield, like you, I went through five of these downturns. 

I had counted four, but you are right. I recounted after you said 

five. It is five. 

Mr. Kingston, my first question is for you. What is your view of 

OPEC’s potential reaction if we were to lift the ban on crude exports? 

Mr. KINGSTON. Well, I think you said it in your answer. 

OPEC is certainly not going to change its policy now, which is 

to hold on to market share, just because the export ban is lifted, 

131 

particularly, as I mentioned earlier, I don’t think you can necessarily count on how much oil is going to go out the door. 

I think certainly, as Mr. Sheffield pointed out, you know, the 

light condensate doesn’t have a great market in the U.S. So that 

would continue to flow. But that doesn’t look like that needs a 

change. The Commerce Department has clarified that. 

So if you are talking about, you know, crude out of the gulf coast 

or whatever, how much would OPEC cut, it doesn’t change really 

the global supply-and-demand balance. 

Mr. FLORES. Thank you. And try to keep your answers short because I have several questions for each of you. 

Would you agree that opening new markets for U.S. Oil producers would be good for both the U.S. and our allies, regardless 

of what OPEC does? I think you answered that affirmatively. So 

yes. 

Mr. KINGSTON. Yes. I would agree with that. 

Mr. FLORES. Mr. Burnett, given that the U.S. Shale revolution 

and OPEC’s recent response to keep market share, on what basis 

can you assert unequivocally that OPEC will respond by cutting 

production if U.S. Crude oil can be bought and sold in the global 

marketplace? 

Dr. BURNETT. Historically, Saudi Arabia and OPEC have cut production to maintain market prices. 

Mr. FLORES. But they haven’t this time. 

Let me move on to the next question. 

You make more products than just jet fuel. Right? 

Dr. BURNETT. Yes. 

Mr. FLORES. You refine the full distillation scheme. So do you export any jet fuel? 

Dr. BURNETT. We do not export jet fuel. 

Mr. FLORES. OK. Do you export any other refined products? 

Dr. BURNETT. We occasionally export some diesel and some gasoline, but it is mostly swapped for jet fuel in other locations. 

Mr. FLORES. Would it be appropriate to stop you from exporting 

those other refined products? 

Dr. BURNETT. I am sorry? 

Mr. FLORES. Would it be appropriate to stop you from exporting 

any of those other refined products? 

Dr. BURNETT. Of course not. 

Mr. FLORES. OK. 

Dr. BURNETT. It is a free market. Products are in a free market. 

Mr. FLORES. If we said that you could no longer sell those refined 

products and you were forced to sell them only in the U.S., what 

would happen to pump prices? 

Dr. BURNETT. What would happen if refineries are not allowed 

to export gasoline or diesel is that you would start cutting back refineries and closing refineries. 

Mr. FLORES. OK. 

Mr. Sheffield—— 

Dr. BURNETT. So, ultimately, the prices will go back up. 

Mr. FLORES. That is perfect. That goes right to where I want you 

to go. 

132 

Mr. Sheffield, if we keep the ban on crude oil and keep prices depressed, what does that do to reinvestment in the upstream industry? 

Mr. SHEFFIELD. I think you will see the drop of 900 rigs go to 

a drop another 1,000 rigs. It will lead to significantly declining production, and this country will be importing 60 percent, 70 percent, 

80 percent of our oil from the Middle East. 

Mr. FLORES. And so, Ms. Jaffe, if that happens, who gets hurt? 

Ms. JAFFE. All I can say, sir, is I am in the same direction as 

you. In either case, when you ban and try to do something to twist 

the market around, the consumer is the one that gets hurt. 

Mr. FLORES. That is exactly where I am going. 

So does anybody disagree with me that, if you put—well, I am 

out of time—if you put artificial constraints on the market of any 

kind, whether it is upstream, downstream, midstream, or anywhere 

else, you hurt the American consumer and hard-working families 

who have been crushed under this economy for the last 6 years? 

Thank you. I yield back. 

Mr. WHITFIELD. Gentleman yields back. 

At this time I recognize the gentleman from New York, Mr. 

Tonko, for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. 

I don’t think there is any doubt that there are competing private 

interests at stake as we attempt to answer the question of whether 

or to what extent we should allow exports of domestically produced 

crude oil. The real question is whether it is in the national interest 

and the public interest, for that matter, to do so. 

Even with new drilling technologies, the United States has lower 

proven reserves and higher production costs than many other oilproducing countries and we still use a lot of petroleum products. 

Mr. Sieminski indicates in his testimony that—and I quote— 

‘‘The implied 95 percent confidence interval for West Texas intermediate crude oil calculated for the current short-term energy outlook ranges between $32 per barrel to $108 per barrel.’’ 

Now, there is no insult intended here for the Energy Information 

Agency. That doesn’t seem very helpful. Basically, EIA is saying 

that, ‘‘We have no idea what the price per barrel is going to be.’’ 

So, Dr. Burnett and Mr. Drevna, how do you or your member 

companies make investment decisions in the face of this price volatility? Does the price matter less than other factors? Perhaps is demand for specific refined products the controlling dynamic? Just 

how do you make those decisions? 

Mr. DREVNA. Sir, you make them on what you think the demand 

is going to be. The refiners are somewhat different than our friends 

and colleagues in the upstream segment. We operate on demand. 

You know, if the price of crude is here or here or somewhere in the 

middle, it is going to depend on what the demand is and what we 

see that demand. 

As Mr. Sieminski will tell you, since a theory back in 2007, when 

we connected two dots and drew the demand through the roof, that 

has collapsed over the years. So we have had to scramble. We have 

had to do some different things. So it all depends on what we call 

that spread. 

133 

So we make decisions based on what we think the demand is 

going to be, what we think the regulations are—or what they are, 

and what we can do to adjust that spread to, A, provide the product, B, pay our employees, C, keep the equipment going, and, D, 

make a profit. 

Mr. TONKO. Thank you. 

Dr. Burnett. 

Dr. BURNETT. Yes. What we do is we look at the fundamentals, 

supply-demand balance, to set what we expect the crude oil price 

to be over a longer term. Refinery investments are done over many 

years. 

So we have to try and take a forward position on what the crude 

oil price is going to be based on fundamentals and then, as Mr. 

Drevna said, look at the demand side of products and try to get an 

estimate of what those differentials or what we call cracks are and 

look at the economics of each project based on those assumptions. 

Mr. TONKO. Does the fact that we have an export ban increase 

or reduce the uncertainty that you will see a return on refinery investment? 

Dr. BURNETT. I think what the industry needs is certainty on 

what the legislative outlook is going to be. The problem is uncertainty. 

Mr. TONKO. And Mr. Drevna? 

Mr. DREVNA. Yes. I mean, we do, as most industries in this country do, a really good job of handling economic uncertainty. What we 

don’t do a good job and can’t do a good job is handling regulatory 

and legislative uncertainty because that just creates paralysis. 

Mr. TONKO. So some order of predictability as to what that operating climate is is important? 

Mr. DREVNA. Absolutely. Because, as Dr. Burnett mentioned, 

these investments aren’t made on a 2- or 3-year basis or on an election-cycle basis. They are made on a long-term basis. 

Mr. TONKO. And if a low oil price sends a signal to slow production of domestic oil, what is the problem with doing that from a national perspective? Anyone? 

Mr. SHEFFIELD. We actually gave an exhibit to our testimony 

that we filed the last Friday by PIRA, and it shows a wide range 

of prices, from $40 up to about $100, and the effect of $10 swinges. And $10 swings is the difference between 2-million-barrel-a-day 

loss in this country or a 2-million-barrel-a-day gain. So it is a great 

chart to look at that is filed in our testimony. 

Mr. TONKO. Does anyone else have a comment on any of that? 

Dr. Burnett? 

Dr. BURNETT. Yes. I think that I need to go back and say that, 

if you lift the ban right now, the effect on the global supply and 

demand really is a zero-sum gain because you export more, but you 

will be importing more. 

So the issue is: Whenis the demand cycle going to pick up enough 

to support prices and enable domestic production to increase again? 

And so we are looking at—you have to look the world growth and 

GDP over the next few years to make that determination. 

Mr. TONKO. Thank you so much. 

I see my time is up. So I will yield back. Thank you, Mr. Chair. 

Mr. OLSON [presiding]. Gentleman yields back. 

134 

The Chair recognizes the gentleman from Ohio, Mr. Johnson, for 

5 minutes. 

Mr. JOHNSON. Thank you, Mr. Chairman. You caught me off 

guard there for a second. Let me move my chair. 

Well, thank you, gentlemen, for joining us today. 

Mr. Chairman, before I get started with my questions, I would 

like to ask that a letter from the Ohio Oil and Gas Association expressing their members’ support for lifting the crude export ban be 

submitted for the record. 

Mr. OLSON. Without objection, so submitted. 

[The information appears at the conclusion of the hearing.] 

Mr. JOHNSON. Gentlemen, as you know, I live in energy-rich 

eastern and southeastern Ohio. You have all heard of the 

Marcellus and the Utica shale. You can’t turn a corner there without seeing the renaissance in energy production. 

As you know, we passed a bill here in the House dealing with 

streamlining and quickening the liquid natural gas export permitting process. 

I would like to hear from each of you. What are the most significant differences, both pro and con, domestic and geopolitical, to 

LNG exports versus crude exports? 

The folks back at home, where we have a wealth of that resource, 

both of them, would like to know. And we will just start down at 

the end. 

Sir, if you would like to take a first crack at it. 

Mr. SIEMINSKI. Sure. Probably the most important thing in looking at the future prospects for LNG exports is what the price of oil 

is going to be because, internationally, the reason the U.S. can export LNG into the global markets is we had a big spread between 

the U.S. price of natural gas and the world price of natural gas because, in most places outside of the United States, natural gas 

prices are tied contractually to oil prices. 

So as oil prices came down or have come down, that is actually 

going to put some pressure on the idea of exporting LNG from the 

U.S. So it would make it less profitable to do that. 

Mr. JOHNSON. OK. 

Mr. SHEFFIELD. Yes, Mr. Johnson. We both have ample supplies 

of natural gas. We have too much of it in this country now. We 

have a 150-, 200-year supply of natural gas, and we have got a long 

supply now, finding over 100 billion barrels of recoverable oil in 

several key fields, in addition to liquid-rich plays in the Utica and 

the Marcellus, which is where people are focused. 

We need to lift the ban on oil. We need to be able to export it 

and expedite LNG so there is plenty. Europe needs it. The rest of 

the world—Japan, South Korea—they all need it. 

How can you ask Japan and South Korea not to take Iranian 

crude when we will not export them oil? Europe is taking 40 percent of their needs from Russia oil. They need exports from the 

U.S. in addition to LNG. 

Mr. JOHNSON. OK. Thank you. 

Sir. 

Mr. DREVNA. Congressman, it is interesting because, you know, 

when you look at the LNG, you know, we have an abundance. We 

135 

have more than we need. And, you know, this body did the right 

thing in passing the legislation to export it. 

We are still in that ‘‘maybe we are here, maybe we are there’’ 

stage. Mr. Sheffield mentioned we have got a lot. But do we have 

a lot right now? And how long would that last? 

You have to look at the oil export. And, again, I am not saying 

we shouldn’t export. I am saying just look at everything in total. 

The world supply, you know, is a big barrel and everybody takes 

what they want. The more we produce here, the less we have to 

export. That will have an impact on prices, just like the shale boom 

has already had an impact on global prices. 

Imagine what prices would be today—and I am not the, you 

know, fortune teller—but imagine what prices would be today if we 

hadn’t had the entrepreneurs like Mr. Sheffield and his company 

to get this stuff to market. With all the stuff that is going on in 

the global market, we would still be 40, 50, 60 percent. So we have 

had an impact on global prices. 

Mr. JOHNSON. OK. 

Mr. DREVNA. One thing we are saying is let’s do it the right way. 

Mr. JOHNSON. OK. Mr. Kingston. 

Mr. KINGSTON. Two things. 

One area where I see the big difference is that allowing crude exports would affect an international benchmark, Brent, to which we 

are tied, because our gasoline market is ultimately tied to Brent. 

It would work to probably push down the Brent price. Therefore, 

there is a benefit to us. 

In the case of LNG, you are not going to be pushing down—you 

would be pushing down an international benchmark that doesn’t 

affect us. As Mr. Sieminski noted, there are other prices out there. 

They would be affected. Our Henry Hub price would probably rise. 

But I think where it is a benefit to the U.S. is I get very concerned about the problem of stranded gas, where the U.S. just simply has so much gas that you start to see a rollback in production, 

you start to see wells shut in, you start to see workers go somewhere else. And you just need that safety valve to make sure that 

industry can keep running. 

Mr. JOHNSON. OK. Ms. Jaffe. 

Ms. JAFFE. So I agree with what Mr. Kingston said, but I would 

add the following thing. And I respect the other panelists who have 

made this point. We are really arguing about who gets the margin. 

Right? 

We are not really arguing about, if you put a lot of gasoline in 

the market, that eventually lowers the price that refiners in other 

locations can pay for crude oil and eventually brings the price 

down. So, either way, when you are having oil exit the United 

States in any form, it will eventually bring the price down. 

So we are arguing about who gets the margin. And what I would 

say to you—and, you know, it would take a careful study—is that, 

if a refinery operates at 88 percent of capacity or 85 percent of capacity, that doesn’t affect how many people get employed there. If 

Mr. Sheffield lays off 100 rigs, a lot of people lose their jobs. 

Mr. JOHNSON. Ms. Jaffe, I am sorry to cut you off, but I know 

I am out of time. 

136 

Mr. Chairman, can Mr. Markell and Dr. Burnett respond to this? 

Can you indulge me? 

Mr. OLSON. Without objection. 

Mr. JOHNSON. Mr. Markell. 

Mr. MARKELL. So the big difference is that, in crude oil, there is 

a lot of downstream processing and a lot of jobs. And, with all due 

respect, it is not just about the margins. It is about who gets the 

paycheck, how much overtime they get and, ultimately, how many 

people are employed. 

With LNG, there is minimal downstream processing, minimal 

downstream jobs. We are not importing it. And, from our point of 

view, we are looking for a price that is somewhere in the middle 

where we can keep the manufacturing competitiveness that we 

have. But certainly we have got a lot of stranded gas, and we need 

to find a way to build the pipelines to get it out. 

Mr. JOHNSON. Thanks, Mr. Markell. 

Dr. Burnett. 

Dr. BURNETT. I think there are two major differences between 

crude and LNG. One is, as you heard, LNG is a real excess in the 

U.S. Crude oil is not. We are still importing 33 percent. 

The other major difference is that LNG is sold into an absolutely 

free open market. Crude is still controlled by OPEC, whether you 

like it or not. They still can impact the price up or down. So there 

are two major differences. 

Mr. JOHNSON. OK. Thank you. 

Thank you, gentlemen. 

I yield back. 

Mr. OLSON. The gentleman’s time is expired. 

The Chair recognizes the gentleman from Oklahoma, Mr. Mullin, 

for 5 minutes. 

Mr. MULLIN. Thank you, Mr. Chairman. 

And I would like to thank, you know, our panel that is in front 

of us today because this is a very important topic. It is something 

that probably we should have discussed a few years back. But for 

Congress’ point of view, we are right on time. 

I want to talk to Mr. Burnett for just a second. I am kind of confused here why you would be so worried about our crude oil exports 

when, apparently, you are not too worried about exporting gas and 

diesel. 

When we are talking about you thinking the prices are going to 

go up, we haven’t seen that happen while your company, I am assuming, as you said a while ago when Mr. Flores was talking to 

you, that you export oil and diesel. Don’t you? 

Dr. BURNETT. OK. The issue is that, if you lift the export ban, 

you are going to enable European refiners who are currently struggling to have a more sustained life and you—— 

Mr. MULLIN. So can your company not compete with them? 

Dr. BURNETT. And the problem is that we cannot compete with 

them because they can buy their U.S. crude oil cheaper than I can 

in Trainer. They can then refine it and send it back to the Northeast cheaper than we can make it because of freight rates. So they 

can put us out of business. 

137 

Mr. MULLIN. Well, we are not hearing that from the other refineries. I mean, your other companies—there is other refineries that 

actually support this. 

So I am saying that your company can’t compete with them? 

Dr. BURNETT. The people that are supporting this are probably 

integrated oil companies. All of the independent merchant refiners 

like ours are part of the crude coalition, are against crude exports. 

Mr. MULLIN. Are you not buying that same crude to be able to 

produce gasoline and diesel? 

Dr. BURNETT. We are buying domestic crude—— 

Mr. MULLIN. Are you not bound to compete with those refineries 

at that time? 

Dr. BURNETT. I am sorry? 

Mr. MULLIN. I mean, are you not bound to compete with your oil 

and gas—I mean, your diesel and gasoline? 

Dr. BURNETT. What you have heard, I think, repeatedly is that 

product prices on the Northeast are set by Brent price. 

Mr. MULLIN. Sure. 

Dr. BURNETT. And so the European refiners are selling gasoline 

and diesel at a Brent price, but they can export it to the Northeast 

lower than we can produce it because of freight rates. 

Mr. MULLIN. Well, I guess I am just not quite wrapping my head 

around it just yet. Hopefully, I will because, to me, it is kind of contradicting yourself. And, I mean, I appreciate business. So the last 

thing I want to do is put any businesses out of business. 

But you have 400 jobs, and we have roughly 350,000 jobs, using 

a rough figure, that supports the idea of bringing that crude oil to 

you to begin with. And I think your company could possibly—I am 

not in the business—but could compete, maybe, without have to 

be—and just indulge me here for a second. And I don’t mean to be 

frank, but it almost sounds a little bit selfish. 

Dr. BURNETT. We want to compete on a level playing field. By 

lifting the export bans without dealing with other issues, it makes 

us uncompetitive. 

Mr. MULLIN. Well, I obviously don’t know your business as well 

as you do, but there is other refineries that are saying they can 

compete with it. 

Mr. Sheffield, can you enlighten me a little bit. You talked about 

storage capacity and the buildup, about the capacity running out. 

Can you expand on that. 

Mr. SHEFFIELD. Yes. Cushing storage—I know Amy Jaffe said it 

is around 50 million barrels—is at an all-time high. There is recent 

pipelines installed by Enbridge called the Flanagan South, and 

that is bringing a lot of oil down from Canada. 

So at the same time our sweet crude from our shale plays, some 

in Oklahoma, the School play, and, also, the Mississippi Lime play, 

everything, Niobrara Play, the Bakken play, they are all moving toward Cushing before it gets to the gulf coast. 

So storage is at a high. I know the Plains All American CEO, Mr. 

Armstrong, stated that we have about 60 to 90 days of storage left 

at Cushing. 

Gulf coast, what we called PADD 3, it is filling up, too. It is over 

210 million barrels, and it could be filled up shortly also over the 

next several weeks. 

138 

So it is a big issue. It is what Turner Mason says: The wall is 

coming, and it is coming faster. And that is why we have wide 

crude prices today. 

Mr. MULLIN. So if we were to lift exports, you would feel like 

there would be a little bit more stability in the markets, not necessarily being able to—I am switching gears with you and going 

from storage capacity to stabilizing the market with the big swing 

that we see right now in the prices. I mean, they will jump up $10 

and they will go down $10. 

Do you think, if we were to be able to control our own destiny, 

by having the exports out, by being able to compete and have a 

competitor against OPEC, would we be able to see more stability 

coming to the market? 

Mr. SHEFFIELD. Yes. Like I said, a $10 swing, we would put more 

rigs to work. I know 7,000 other independents would put more rigs 

to work. They would do it in Oklahoma. 

That would help stabilize U.S. production and actually increase 

it over the next several years. OPEC loves the fact that we have 

an export ban, I promise you. We are playing right into their strategy. 

Mr. MULLIN. Thank you. 

My time is out. I appreciate your time. 

Thank you. 

Mr. WHITFIELD [presiding]. Thank you. 

At this time I recognize the gentleman from Kansas, Mr. 

Pompeo, for 5 minutes. 

Mr. POMPEO. Great. Thank you, Mr. Chairman. 

And thank you all for bearing with us today. 

Mr. Burnett, you said that you want the ban on crude oil exports, 

but not on condensate, not on other products you produce. Right? 

Dr. BURNETT. No. That is not quite what I said. 

Mr. POMPEO. All right. 

Dr. BURNETT. Crude oil. 

Mr. POMPEO. Crude oil. Right. 

Now, Delta sells airplane tickets. So should we put an export ban 

on not allowing foreigners to purchase airplane tickets? 

Because that would help consumers, too, because American consumers would have that empty seat out there. There would be less 

competition for the seat. Prices would be lower. Right? Be good. 

Dr. BURNETT. We want an open playing field both in refining and 

in airlines. 

Mr. POMPEO. Right. 

What you really want is you want the things you sell to be available to be sold on the marketplace at the highest price you can get 

and the things that you purchase to be price-controlled. That is 

what you are really advocating for here today. 

And I have heard lots of different comments. Mr. McNerney says 

$50 is pretty low for crude. Mr. Drevna, you said you are not a fortune teller. I have got reports from Goldman Sachs not 24 months 

old that said crude is going to be at 200 bucks a barrel. 

Truth is we have no idea, none of us collectively, and we 

shouldn’t worry about that. It shouldn’t trouble us that we don’t 

know. 

139 

You know, Mr. Markell, you said we have got to keep the price 

in the middle. The middle of what? I mean, that is not a question. 

That is a rhetorical. I do have a question for you for you, though. 

Mr. MARKELL. LNG. Not crude. 

Mr. POMPEO. So where should we keep crude oil prices? High or 

low? You want middle for LNG. Where do you want crude oil 

prices? 

Mr. MARKELL. I don’t have an opinion on where crude should be. 

Mr. POMPEO. Yes. None of us should have an opinion. This is the 

unstated joke from so much of what I have heard from the folks 

in—— 

Mr. MARKELL. It is in the boost of our economy and low oil prices 

is—— 

Mr. POMPEO. Yes. Maybe that is is right. 

Goldman now thinks oil might go to 20 bucks a barrel, by the 

way. These are smart people who are putting their own money at 

risk, which is very different than us. We are putting everyone else’s 

money at risk. 

The person who has the best chance to get it right is them, and 

they are just wrong a lot. And that is OK. That doesn’t trouble me. 

But we shouldn’t put a set of policies in place that feign any knowledge on our part about what is really going to go on. 

Let’s go the other way. Mr. Sheffield, your export product is 

price-controlled. We have an export ban. Right? That is a price control. Would you agree? Crude? 

Mr. SHEFFIELD. Crude. 

Mr. POMPEO. Right? We can’t export it. It is a ban. It is a price 

control. 

Your inputs—steel, labor, all kinds of chemicals that you use— 

are any of those price-controlled or are you subject to market 

forces? Do you have to compete globally to purchase your inputs? 

Mr. SHEFFIELD. It is market forces. Then what is interesting by 

the comments about the—from the laborers is that we have added 

over 2 million jobs over the last several years with this shale boom, 

and a lot of that is in the steel industry, too. 

Mr. POMPEO. You bet. 

Union employees. Right? 

Mr. SHEFFIELD. Yes. 

Mr. POMPEO. In the steel industry. Good union workers getting 

paid good salaries. Yes. No. I think that is right. 

Mr. Sheffield, you had a chart, and I want to make sure I understood it. You had a chart that I think disagreed with what Mr. 

Markell said. He said that this oil will be produced anyway. Right? 

The idea was, even if we leave the ban in place, you are going 

to go ahead and produce this crude. And your chart seems to suggest otherwise, and I am just trying to reconcile these two ideas. 

Mr. SHEFFIELD. Yes. This is from a group, PIRA, out of New 

York. At roughly $50 a barrel, we will lose about 2, 21⁄2 million barrels a day. 

And so what is going to happen? They are not going to get it 

from us. They are going to get it from Saudi Arabia, Iran if they 

can, or other countries in North Africa. They are going to import 

it again. 

Mr. POMPEO. I appreciate that. 

140 

Mr. Drevna, you said in your testimony, if we were to move forward with lifting the export ban, that your organization would 

want to see other anti-free market policies addressed at the same 

time. You mentioned RFS. You talked a little bit about the Jones 

Act. 

I assume it is the case that, if we got to the Jones Act and we 

got to RFS, you would be thrilled to see the crude oil export ban 

lifted as well. 

Mr. DREVNA. Congressman, as I said, we are basically free-marketers. As a matter of fact, if I look up and down the panel, we are 

probably the most free-marketers sitting here because—— 

Mr. POMPEO. You are not including up this direction here. 

Mr. DREVNA. No. No. No. No. No. No. 

No. We want a free market and a level playing field for all U.S. 

industries. 

Mr. POMPEO. Thank you. 

Mr. Chairman, I yield back. 

Mr. WHITFIELD. The gentleman yields back. 

At this time I recognize the gentleman from Virginia, Mr. Griffith, for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. I appreciate that very 

much. 

In January, the Department of the Interior released a draft Offshore Leasing Plan covering 2017 to 2022, which proposed opening 

part of the Atlantic, including areas off the coast of Virginia, my 

home State. 

Although I represent the mountains and the coal territory and 

don’t have the coast, I do obviously care about what happens in 

Virginia very much, and they would open that up for oil and gas 

leasing. 

Mr. Sieminski, I would have to ask: They have made it 50 miles 

off the shore of the coast. DOD had some concerns there, and I am 

just curious. 

Does your organization have any idea of whether or not DODhas 

had problems in the Gulf of Mexico dealing with oil exploration or 

natural gas exploration? 

Mr. SIEMINSKI. Well, I am from the Department of Energy. 

Mr. GRIFFITH. I understand. 

Mr. SIEMINSKI. The opening of those leases—I mean, I think that 

we are now seeing production rising in the Gulf of Mexico, and that 

is, you know, in the aftermath of the Macondo spill. 

I think the issues associated with offshore leasing tend to be environmentally oriented. There are some people that are concerned 

about the impacts on water and the environment and, generally, 

climate. 

Mr. GRIFFITH. And, generally, we believe, if you open up the midAtlantic, you would agree—or the data indicates that there is an 

abundant energy source out there even though we don’t have any 

recent data—— 

Mr. SIEMINSKI. Yes. From time to time EIA has looked at what 

the resource base is around the United States, and there is a possibility that there are both oil and gas resources in the mid-Atlantic. 

Mr. GRIFFITH. And the last time any real research was done was 

back in, I believe, about 1980, and it takes about 10 years to go 

141 

from start to finish and we are just now getting started. But we 

are 50 miles out, which it would be better, I think, if we were closer in. I find that interesting. 

And you all wouldn’t have any way of knowing this, but I voted 

on my first resolution as a member of the Virginia legislature in 

2004, requesting that we go down this road. And am I not correct 

that it takes about 10 years to go from start to finish and that, if 

we had started in 2004 when the legislature first—— 

Mr. SIEMINSKI. In the offshore area, that is very typical. 

Mr. GRIFFITH. And so, if we had started then, we would already 

be seeing both tax revenues and jobs and all kinds of things in the 

eastern part of the State. Wouldn’t that be accurate? 

Mr. SIEMINSKI. I think the first thing that would happen is we 

would probably end up updating all of that geologic information 

with modern 3D seismic technology and that kind of thing. 

So the up-front part is actually spending money. Now, there are 

jobs associated with that. Whether the revenues come in depends 

on what you find and how quickly you can produce it. 

Mr. GRIFFITH. There is a pretty good indication that we have got 

a fair amount of natural gas and at least a little bit of oil. 

Even based on the older technologies, that showed up; did it not? 

Mr. SIEMINSKI. Yes. I mean, we know that there is oil and gas 

in eastern Canada and—and those trends tend to move right down 

the coast. 

Mr. GRIFFITH. And the Canadians are already—they have already got their straw dipped into that pool, don’t they? 

Mr. SIEMINSKI. That is correct. 

Mr. GRIFFITH. Yes. So one might argue that the Canadians are 

getting fuel out of that source and selling it back. It might actually 

be flowing up to Canada from—— 

Mr. SIEMINSKI. Well, it is a pretty long way from—— 

Mr. GRIFFITH. I agree. I agree. 

Mr. SIEMINSKI. That would be a big straw. 

Mr. GRIFFITH. I just want to see my folks getting some advantage 

out of all this. 

I will open this up for anybody who wants to take it. I think I 

already know the answer. 

But if the United States is getting more oil and more natural 

gas, what impact would that have on, say, Russia, Iran, ISIS, even 

China? Who wants to take that? 

Mr. SIEMINSKI. Well, my microphone is turned on. I usually try 

to avoid answering questions. 

But let me comment that, when you listen to the panel here, 

Congressman Griffith, I think that more production on the market, 

regardless of its source, is going to tend to lower prices and benefit 

consumers. 

So, you know, that is true whether it is natural gas or oil or airline tickets. I mean, the more that you can put out there, the better 

off consumers are. 

Mr. GRIFFITH. But when a country is basing a big part of its liquidity on energy and all of a sudden a new giant rises up or gets 

extra strength, that, in essence, would mean that at least for the 

Chinese, the Russians, and maybe even ISIS, that it will negatively 

142 

impact their ability to do things that we might be opposed to. 

Would you not agree? 

Mr. SIEMINSKI. That certainly—I mean, one of the factors that is 

out there—one of the—very quickly, on looking at the time, this 

question of why there is this wide range of views of oil prices, 

whether it is, you know, $20 or $30 or $100 and over, a lot of that 

has to do with not being able to pin down answers to many of these 

geopolitical questions. 

Is Venezuela going to have a problem in the near term producing 

their 2 million barrels a day of oil? What about Iraq? And because 

of ISIS, what about production outages in places like Libya? 

And then, on the downside, it is things like the economy in 

China and whether or not Libya’s going to return to the market. 

And it is true. Nobody has the—it is not—EIA doesn’t have the answers to that. 

Mr. GRIFFITH. Nobody does. 

Mr. SIEMINSKI. Nobody has the answers. 

Mr. GRIFFITH. If I might, Mr. Chairman, indulge. 

But aren’t we better off if the United States is controlling more 

of that by having more production? Because then, if the Venezuelans do something or if there is a problem somewhere else, at 

least our own internal economy is not negatively impacted as 

much. 

And aren’t we in a much better position today than we were just 

5 years ago? And, hopefully, we will be in an even better position 

10 years from now. 

Mr. SIEMINSKI. I suspect that everybody on this panel would 

agree with you. 

Mr. GRIFFITH. And I would say to you that, when this first started, our new boom in energy, which we can continue to use, particularly if we open up the mid-Atlantic and keep looking for ways to 

do this—I used to feel that maybe my children wouldn’t have the 

economy that we had. 

Now I believe, if we don’t screw it up here in Washington, our 

children and our grandchildren and our great-grandchildren can 

live in the United States, where we are still the number one economic Nation in the world. 

With that, I yield back. 

Mr. KINGSTON. Can I just say one thing? I just want to separate 

one country that you mentioned. 

This is a benefit to China. I mean, you mentioned Russia, Iran, 

ISIS, this hurts. This helps China. Huge net importer. 

Mr. GRIFFITH. OK. 

Mr. WHITFIELD. At this time I recognize the gentleman from Mississippi, Mr. Harper, for 5 minutes. 

Mr. HARPER. Thank you, Mr. Chairman. 

And thanks to each of you for being here and taking time to discuss what is a very important issue. 

And, if I may, Mr. Drevna, I wanted to ask you a couple of questions in the time that I have, since Mr. Griffith used up most of 

my time. 

Mr. GRIFFITH. I am sorry. 

Mr. HARPER. Hey, you needed some more time. That is it. 

143 

First of all, I want to say, you know, we appreciate each of you 

being present. But particularly, Mr. Drevna, I thank you that you 

are here to share AFPM’s insight on this issue. 

I would like to focus my time on your testimony. In your written 

statement, you noted that your organization is not opposed to lifting the ban on crude exports, but you mentioned two public policies, two areas in particular, that should be considered during this 

debate. 

So I would like for you to elaborate a little bit more on the RFS 

and the Jones Act and how they are related in this debate on the 

crude oil export ban. 

Mr. DREVNA. Thank you. 

And I only get 5 minutes to elaborate on the RFS. As the chairman can attest to, it is probably not enough time. 

But, in any event, if you are going to talk about a free and open 

market, if you are going to talk about consumer protection and consumer choice, if you are going to talk about getting the economy 

moving, the RFS, as I said in my written statement and my oral 

testimony, it is—in 7 short years, it has become an anachronism. 

All the assumptions that were made back in the day where 

theESA 2007 was passed, where EIA had gasoline demand going 

through the roof, and that has plummeted some 43 percent over 

those years, where we have a volumetric and not a percentage 

basis where we have, you know, 36 billion gallons, where the 

thought was, ‘‘Well, we are going to eliminate or reduce foreign energy sources.’’ 

We are doing that because of companies like Mr. Sheffield’s, not 

because we are producing ethanol. As a matter of fact, we are producing ethanol and we are exporting it and we are importing it. 

You know, what is the point? 

The environmental benefits have shown to be, if not nil, negligible—if not negligible, negative. So it is time to look at that because it is not a free market. Let the consumer decide. Do they 

want more ethanol or biodiesel in their gas tank or they don’t? 

On the Jones Act—and, again, this is a—whose ox is going to be 

gored is what you have to decide if you lift the ban today without 

looking at the Jones Act. It will be a zero-sum gain. There will 

probably be some job gains on this side. There will be job losses on 

the other side. That is a fact. 

So at least know the facts before you make the decision, and that 

is all we are asking. Again, we are not opposed to it, but, you 

know, for energy security and national security, let’s do it all. Let’s 

have all the above and not what we have now with all of the above 

and none of the below—or very little of the below. So that is basically what we are trying to say, Congressman. 

Mr. HARPER. Thank you very much. Out of mercy, I will yield 

back. 

Mr. WHITFIELD. The gentleman yields back. That concludes the 

questions. 

Once again, I want to thank the panel of witnesses. We do appreciate your insights. This is an interesting question, and certainly, 

with the changes taking place, we want to look at it thoroughly. 

So we may be calling you again very soon. 

144 

We will keep the record open for 10 days. And that will adjourn 

today’s hearing. 

And thank you all very much for your participation. 

[Whereupon, at 4:09 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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