Secondly, even if we are producing okay a few hundred thousand barrels a day more, that in no way changes our linkage to the Global Oil Price and the exposure to a price spike. In fact, if anything, its both the fact that we are connected to the crude Oil Global Market and the fact that we are and i believe will continue to be major oil product exporters. We are exposed just as in that anecdote i gave about britain in 2000, we are exposed to the Global Oil Price spike and thats really the modern issue in terms of what the sprol does for us. Point being, if were allowed to compete in the Global Economy well have a more robust oil and gas industry in this country than well have if were not allowed to compete with a more robust industry were less dependent on the sprol . Again, im sorry, senator i dont its not only the eia but the other studies that have shown that by lifting the oil export ban, we not only, panned our industry we create more jobs and Economic Activity in our country so why wouldnt we want to do that and, in fact, make ourselves less dependent on the sprol having a more robust industry . Again, the reference eia case and the recent report does not predict a big increase in production at all. It simply does not. Again, secondly, we have a very robust industry right now and it, again, just to repeat it does not shields us from the global oil you would argue even if we take were not able to get the global price, the brent crude price, and we have to compete in the Global Economy, that youre saying that wouldnt affect the size and scope of our industry . Again, if exports were allowed, you know, it certainly it certainly could lead to an increase if production. All im saying is, the eia reference case did not show any Material Impact to 2025. Only in the high resource case did it show that. But whatever it did know an impact. In the very high resource case. Only. And with whats going on now you wouldnt assert that thats having a dell tares you if effect on our industry in our ability to compete when our competitors purposely try to put our companies out of business . You dont think that impacts industry in this country . The Global Oil Price is affecting the industry and our country and everywhere else. It just reinforces the point we are exposed to the Global Oil Price. Which you would acknowledge is a function of how much opec and our competitors produce . Its what everybody produces and consumes. They may have objectives to maintain market share at our expense . Thats just thats the market. Nature of competition. Thats the nature of the competition of the market. You would agree with that . Absolutely. Let me shift to one other question as i have limited time here, in your Energy Review you talk about the importance of having the Energy Infrastructure we need to truly get Energy Security or Energy Independence in our country. Thats one of the key points in the Energy Review. So my question to you is, if somebody is going to follow all the laws and regulations and invest millions of dollars and still wait seven years for a siting decision whether somebody is trying to produce traditional or Renewable Energy whats the message there if they cant make the investment and rely on the laws and regulations and have to wait for a decision for seven years how will we get companies to maugs make the investment to make this Country Energy secure . Well, again, as was as senator capto said, lets face it, we do have challenges in terms of all kinds of infrastructure not only Energy Infrastructure, infrastructure construction, many parts of the country, and all we can do is we keep pushing on that to go forward. Our authorities with regard to International Energy is on lng exports and electricity. Would you invest millions of dollars in order to build either a traditional or renewable project if you might have to wait seven years to get a decision to cite the pipeline or energy line to move that to market . Successful Companies Make decisions under risk evaluation. So you would be whether you had to wait seven years or ten years, even when you spend millions of dollars comply with all the laws and regulations, that wouldnt deter you from making an investment . I said one makes decisions, thats what ceos get paid for to make decisions under risk and understanding the situation and then gentlemen were going to interrupt and wrap it up. Wouldnt you favor certainty in terms of trying to get investors and companies to make the decisions to invest i think its a fair statement in any of the dimensions its good to have certainty for a long time horizon. I would especially note for Something Like carbon emissions. Thanks for coming to our state and im not going to have time but i did want to bring up that subject since youve been to our state and understand what were doing in co2. I do. It was a great trip. Secretary, thank you for being here. We got off on some other issues that clearly relate to our nations Energy Security when we talk about lifting the outdated oil export ban. As we think about our emergency stock piles around the country i would remind the administration and remind colleagues that in alaska we have our north slope crude that is chemically similar to the oils we have in the Strategic Petroleum reserves. Weve stored it there in the past. As were thinking about these Petroleum Product reserves in certain parts of the country maybe we consider how, for instance, in alaska we can continue to supply our west coast refineries in the event of severe supply disruptions. Lot more to talk about and we barely scratched the surface. I wish we had been able to have a greater discussion about how we make sure that as we are responding to a release, that were making certain we are adding to the supply and that it is an incremental gain rather than just filling in. Theres an awful lot more that i think we need to discuss on this. I think its imperative we get this review so we understand when talking about modernization, really what that does entail. Its my hope that well be able to defer those that would tap into the Strategic Reserve before we have better understanding. We got a lot of work in front of us. We have a second panel and we have unfortunately lost the committee mers to other issues. Weve got a vote that is beginning at 1 00, but as a courtesy to those who have scheduled their day around this, im certainly going to be here to hear your comments and would welcome you to come to the witness table at this time. Secretary, we thank you for being here. And we look forward to continued conversation. Thank you, madam chair and Ranking Member cantwell. So at this time we will invite admiral dennis blair, former director of the National Intelligence and commander in chiefs u. S. Pacific command and also cochair of the commission on energy and geopolitics for securing americas future energy. We also have mr. Kevin book, who will join the committee. He is the managing director for Clearview Energy partners. We have mr. Jason boredove professor of professional practice in international and public affairs, founding director for the center on Global Energy policy at Columbia University and the final panel member will be sarah ladislaw, the director and senior fellow for frg and National Security program at the center for strategic and international studies. Admiral blair, youre at this end, miss ladislaw that end. And with that quick introduction and, again, just to thank you for your patience this morning, hopefully you have gained good insight from the questions that were posed by the Committee Members to the secretary and his responses as well, but again, thank you for your willingness to be before the committee. If you will please proceed, admiral blair. I would remind you all, that your full written statement will be incorporated as part of the records and would ask that you please keep your comments to no more than five minutes. Thank you and welcome. Admiral blair. Thank you very much. Madam chair, Ranking Member cantwell, i have the feeling that everything may have been said, but it just hasnt been said by everybody. We will try to fill in those thank you for recognizing that. Lines. But as we approach this 40th anniversary of the creation of the Strategic Petroleum reserve, a lot of the landscape Energy Landscape has changed, but there are three things that are really just the same. The oil market remains vol it till, american businesses and the American Families are vulnerable, and the spr is our only shortterm line of defense in interruptions. It would be fool hearty to draw down the single immediate weapon we have to counteract Oil Supply Disruptions and price spikes. Madam chairman, you emphasized you your your concern was National Security but Economic Security and National Security are tightly intertwined. If geopolitical actions are causing an interruption in the Global Supply, theres great pressure for military involvement, military action. When i was the Pacific Commander my counterparts in the Central Command knew the free flow of oil from that swing region was one of their most important concerns. However, when a crisis occurs we need time, we need time to work with allies, to apply political pressure, to negotiate, before we send in troops and the spr is essential to a smart region of National Security response. Todays low Oil Prices Make it easy to forget a little more than a year ago unrest in key Oil Producing regions w was pushing already High Oil Prices even higher. As isil advanced in 2014 sent oil prices to 115 a barrel on fears the 3 billion barrels could be knocked offline. Had isis interrupted the infrastructure prices would have soared an an increase would have been necessary to protect the u. S. Economy and that was only a year ago. Would any responsible american leader count on continued stability and steady petroleum supplies from venezuela, iraq, russia, libya, iran, even saudi arabia. Civil unrest, the impact of reduced revenues from current low prices, production manipulation, all of these are very real possibilities and in this turbulent geopolitical landscape why are we considering reducing our only shortterm means of offsetting supply interruptions. Yes, the dramatic increase in u. S. Oil production has reduced our dependence and has contributed to a drop in Global Oil Prices, but as the secretary repeatedly pointed out its a Global Market. 92 of our transportation sector runs on petroleum. A disruption anywhere affects prices everywhere. At the pum for American Consumers for american businesses. And the spr protects our economy from unpredictable violent swings in a Global Oil Market dominated by outside actors who share neither our values nor our interests nor are they particularly fond of us. Policymakers should take advantage of current low prices to upgrade and modernize the spr as you have recommended so it will be ready to respond when disruptions occur, price increases, prices will inevitably rise and just having the petroleum in the salt caverns is not enough as discussed repeatedly by secretary moniz, the equipment at the spr needs maintenance and modernization, the flows of crude oil and petroleum and changed over the last 40 years since the sprr is built and without modernization the spr could not do its job of offsetting a large supply disruption. We have to be able to deliver the oil that it holds at the right place and is extremely complex oil refining system that we have in the country. So i would make five recommendations. Congress should fully fund and the department of energy should accelerate the completion of deferred maintenance. The department of energy should construct dedicated docks and loading capacities so it can be loaded for delivery to the market as incremental supply without displacing privately owned oil on the market. Congress should update release criteria to clearly allow from release of oil from the spr in response to a supply emergency even if it does not affect Domestic Production or imports if, i think this is the criteria, if the interruption is likely to affect the price of oil, and, therefore, posing a substantial risk of severe economic consequences and i share the sentiments you described about doing this carefully, but i think we need that flexibility when the crisis hits. The white house and the department of energy should complete that study that the secretary mentioned about the appropriate size of the spr given the changes in the Energy Landscape, but my questioguess all is said and done an appropriate size will not be far from what we have today. It feels about right to me. After reaching a consensus on this size and the guidelines for using the spr then the department of energy should initiate a longterm program to update and upgrade and update that infrastructure so its reliable for decades to come. In todays uncertain and dangerous political geopolitical environment the spr is our most immediate defense against Oil Supply Disruptions and price spikes. It needs to be preserved and modernized not reduced. However its only one part of a comprehensive Energy Strategy to reduce americas dependence on oil. As has been mentioned in the Previous Panel we need increased efficiency, fuel diversity in the transportation sector. And a strong Energy Policy is imperative to improving our National Security and i think this committee can play a key role in forging that comprehensive national Energy Security policy. Thank you. Thank you, admiral blair. Mr. Book, welcome. Thank you. [ inaudible ]. I appreciate im not sure what how about now . Okay. Great. Thank you. I appreciate the work youre doing here to look at the Energy Policies of the past and the context of todays fundamentals including crude oil exports and Renewable Fuels and the topics that have come up during the first panel but i think theres one policy that stood the test of time and thats the spr. Its been an insurance policy as you described it, its been an asset as you described it and i want to make some comments about its attributes in that regard. It seems appropriate to ask if we have the right amount of insurance whether were paying a fire price and the policy we have has the right features. With regard to the size of the spr iea obligation is 90 days of Net Petroleum cover. In june 05 the spr had about 54 days. This june in that import cover exceeded 140. I think someone else mentioned earlier today that 41 of net imports this june came from canada and only 16 came from canada a reliable supplier in june of 05. This is good news but recent good news and time frame matters. Let me give an example from my own industry. Early last year analysts many of them thought oil prices would remain above 100 per barrel for years. That may seem silly now but over the last five years through august Real Oil Prices averaged about 100 a barrel. If you go back over the whole series of oil prices for the last 100 years, they averaged about 35 a barrel. So which perspective is correct . Its tempting to think that future is going to look like the recent ps past. And, in fact, it probably does look more like the recent past than the whole of history. But recent oil market lessons remind us its important to look at the longer trends, so i did in my testimony a thought experiment ill summarize. Starting with january 85, i calculated monthly results if the nation sold crude whenever inventories got above 90 days and bought crude whenever they fell below. Now over the last 60 calendar months, the average result is a win about a billion dollars of profit in dollar terms. Over the whole time series its a loss of about 500 million. So downsizing the spr could be a losing bet and it could be for other reasons too. Today has been mentioned opec producers are running flat out so Spare Capacity is falling, thats not going to be there to balance the market in a demand recovery. Demand isnt likely to stay weak forever. Spare capacity is supposed to come on within 30 days and stay on 90. Shale hasnt worked like that at least not yet. It didnt turn off quickly on the way down and it may not turn on quickly on the way back up because job losses among other things could slow it down. Meanwhile a large spr has other uses