May 3rd – May 9th 2015: Energy & Commerce Committee CODEL

/ Wednesday, 20 May 2015 / Published in 2015, Blog

Background

The Energy and Commerce Committee (E&C) over  May 3 – May 9 embarked on a Congressional Delegation (CODEL) to the European Cities of Lisbon, Portugal; Brussels, Belgium; and Kiev (also spelled Kyiv), Ukraine.  The purpose of the CODEL was to allow members of E&C to get a close-up understanding of the energy situation in Europe and develop relations with our European counterparts so that we can better form domestic energy policies as they relate to our growing ability to use energy exports as an American profit source and as a geopolitical tool.

I participated in the CODEL, which departed Washington, D.C. on Sunday afternoon, May 3rd, and arrived in Lisbon at 6AM on Monday. We then had our first meeting with Artur Trindade, Deputy Energy Minister of Portugal.  It became immediately apparent from this first meeting and at every meeting throughout the trip that the Russian behavior, and in particular, its aggression in Ukraine including its proclivity to use its energy dominance of Europe as a political and economic weapon to further its goals in Ukraine and elsewhere, weighed heavily on the European continent.

Portugal

Deputy Minister Trindade was relatively young, charismatic, and spoke English very well. This meeting had a similar format as all meetings we attended on the CODEL: a presentation by the host followed by an extensive Q&A session. Deputy Minister Trindade’s wanted to use Portugal’s Liquid Natural Gas, LNG, to help offset the Russian dominance of natural gas in Europe. Portugal and Spain, which together comprise Iberia, have seven operating LNG import terminals. Portugal’s LNG export and import terminal in Sines, a two hour drive from Lisbon, is the largest of the seven terminals. Portugal is a member of NATO and the European Union (E.U.) and a close and trusted friend of the U.S.  Because of political and physical bottlenecks of both gas pipelines and the electric grid between Spain and France, Spain and Portugal have an overabundance of both natural gas and electricity. Consequently, their LNG terminals and electrical generators are underutilized. Their strong preference is that instead of building expensive LNG terminals in northern Europe, the Europeans should utilize existing supplies from Iberia, hinting that the U.S. may be able to help improve market efficiency in Europe by working on the bottlenecks.

In the afternoon our delegation traveled to Sines to view, firsthand, Portugal’s LNG facilities. Sines is a very scenic location on the Portuguese coastline. The site was modern and well-controlled. We were given a quick demonstration of the temperature of LNG (-162° C or -260° F) and of its stored energy.

NATO

On Tuesday morning, after a brief meeting with the Portuguese Natural Gas Association, which reiterated the desire to ship natural gas to Europe, we departed for Brussels. The NATO civilian headquarters is close to the Brussels airport, and we stopped there first to meet Douglas Lute, the Permanent Representative for the United States to NATO. Mr. Lute, a retired U.S. Army Lieutenant General and West Point professor, spoke well and convincingly about the scope of the threat that Ukraine and Europe face from the Russian Federation.

Conflict in Ukraine

Mr. Lute spoke of the conflict in Ukraine.  It is a ground war – there’s no other way to put it. The Russians have control of a significant portion of the Russian-Ukraine frontier and have shipped modern weapons, including thousands of tanks, and are fielding a ground force of about 50,000 soldiers in eastern Ukraine comprised of Russian special forces, local rebels, and mercenaries mostly from Chechnya. Russia’s modern army could overwhelm Ukraine forces if it decided to do so, but so far would prefer to utilize a combination of limited military force, energy as a weapon, and heavily financed propaganda to cause the collapse of the Ukrainian government and establishment of a government that can be controlled by Russia. Mr. Lute’s message: Russia’s actions are a threat to Ukraine and greater Europe, and we must counter this threat by supplying Ukraine with defensive weapons, by keeping or strengthening the existing sanctions, and move ahead with U.S. LNG export infrastructure development.

E.U. Commission

Next, we took a short drive to meet with Michael Ruehle, head of the Energy Security Section on the Emerging Security Challenges Division of the E.U. Commission. The E.U. Commission is the executive body of the E.U. and consists of the heads of the 28 E.U. member states. This meeting was instructive of how the E.U. Commission works, namely that any policy decision, such as imposing sanctions, requires unanimous support from among its 28 member nations. The development of a unanimous consensus among all the members takes time, but once attained, is rock solid. The E.U. is imposing sanctions on the Russian Federation for its aggression towards Ukraine, and a renewal vote on extending the sanctions is expected this summer.

That evening we met with several members of the industry, Technology, Research & Energy Committee of the E.U. Parliament, including Committee Chairman Jerzy Buzek, who was the former Prime Minister of Poland and President of the E.U.. Mr. Buzek.  He is certainly charismatic, who thoroughly enjoyed debate, and is committed to the democratic principles we care about.

Our first Wednesday meeting was with Anthony Gardner, the U.S. Ambassador to the E.U.  Ambassador Gardner had a very calm demeanor and delivered another sobering assessment of the challenges Russia poses to the European Union. This was followed by a meeting with Cristina Lobillo-Borrero, Head of Cabinet to the Commissioner for Climate Action and Energy of the E.U. Commission. Ms Lobillo-Borrero and her staff emphasized European infrastructure development to provide energy security that would meet the European commitment to the 2030 climate framework. Their vision is to make the E.U. the world leader in renewable energy and energy efficiency. The E.U. has an Emissions Trading System in place, but the economic downturn has caused the carbon trading prices to be low enough, at this point in time, to have little impact on emissions. Trading prices are expected to increase with economic improvement.

After meeting with Ms. Lobillo-Borrero, we had the opportunity to meet with the Vice President of the Energy Union of the E.U. Commission, Mr. Maros Sefcovic. He was impressive in his breadth of understanding of the European energy challenges and the roadmaps to solutions.

Climate Change

An interesting conflict arose during these two meetings on the subject of climate change. The Republican members of E&C seemed mystified by the commitment of the E.U. and the European public to take steps to combat climate change. The American people seem to care about climate change, but it rarely registers as important when it comes to taking action, and no U.S. action is likely in the foreseeable future. The European representatives indicate that climate change is consistently one of the most important, if not the most important, issue in Europe.  There was no discussion of why there is such a difference between the U.S. and European approach to climate change. My feeling is that the American system has significant propaganda that brings into doubt and even ridicules the threat of climate change, which softens our resolve to address climate change. The Europeans feel that some economic pain is worth it to tackle the issue and that they will benefit in the long run from taking steps today that puts the E.U. in the front of this challenge.

Regulations

We next had a hearing-like exchange with several members of Chairman Buzek’s Committee. The exchange was a friendly and instructive exchange on various energy-related topics.

The American Chamber of the E.U. participated in a roundtable discussion with the delegation. Views were exchanged, including the view held by my Republican colleagues that American regulations are choking out American business. I hear plenty of that from the Republicans in D.C., and wonder if they would really want to return to an era of little regulation and more corporate excess as is currently happening in China. Let’s not forget that the economic collapse of 2008 was caused, in no small part, from a lack of regulation of the financial sector in the U.S., and Europe, causing the loss of millions of jobs and untold hardships in my district, the U.S., and beyond.

The AMCHEMEU meeting was followed by a meeting with DG SANTE, which may be described as the E.U. version of the Federal Trade Commission. It was a good opportunity to compare the U.S. versus E.U. government agency protections.

Kiev, Ukraine

On Thursday, May 7th, we had an early flight to Kiev. After landing, we headed right to the U.S. Embassy to meet with Ambassador Pyatt. The Ambassador was very responsive to our delegation and joined us in several subsequent meetings with local officials. His assessment was that the threat posed by Russian aggression is multi-layered, well-financed and planned, and extends far beyond Ukraine. Russia, in his estimation as well as in the estimate of all the people we met in Ukraine, is attempting to re-establish itself as a major power to be respected and feared as it was during the Cold War. He posits that Mr. Putin means to establish a sphere of influence, to include Ukraine and other European nations, and is willing to use all the tools at its disposal to do so. The feeling is that this will bring us back to the Cold War with an implied threat of nuclear weapons.

After that meeting, we were transported to the Ministry of Defense to meet with Minister Poltorak.  In response to my question of how effective non-military steps have been in deterring Russian aggression, he said that military conflict should be avoided by civilized people. He emphasized the mobilization and training of his soldiers, but pointed out that no country has supplied Ukraine with weapons, which has strongly limited his army’s effectiveness. He added that they need “defensive” weapons. He also wanted to make it clear that Ukraine had given up its nuclear weapons with the understanding that its sovereignty would be respected, which it has not been.

Our next meeting was with Ukrainian Prime Minister Yatsenyuk.  He was young and very open and frank about the challenges they face. His assessment is that the economy is in tatters because of the legacy of corruption of the communist rule followed by 20-years of rule by corrupt Russian puppets who dismantled the military for personal profit. They are fighting a war with Russia, have severe energy shortages because Russia has steeply curtailed its energy deliveries to Ukraine and threatened European nations that could supply energy to Ukraine, and are mounting a massive $16 billion per year propaganda campaign in Ukraine and throughout Europe, the U.S., and elsewhere to make the conflict appear as if Russia is not the cause of the problem. Russia is trying to drive a wedge in the E.U. to weaken unanimous support for sanctions and other responses to Russian aggression. The Ukraine desperately needs defensive weapons, E.U. and U.S. unity, energy supplies, help countering the propaganda war, investment, and long-term, low-interest loans.

That evening we had a reception with the U.S.-Ukraine Business Council. E&C chairman Upton, Representative Pitts, and I met several U.S. oil producers including Chevron, Halliburton and investors. The producers were very frank about the difficulties of tapping into the extensive petroleum reserves in Ukraine. Chevron has all but given up hope after 5 years of effort. There were some excellent ideas discussed, including a model which would require up-front costs to developers with an agreement that no taxes would be required until profits had made up for the up-front costs. We also had the opportunity to meet with members of the DiXi Group, which provides energy consulting and an energy transparency and information web site. They are helping to produce transparency and market efficiency in the energy sector. I was more than impressed by their dedication to Ukraine.

Our final day

Consisted of very interesting encounters. The first was with Ukraine’s Energy Minister Demchyshyn, a talkative and confident financial expert with little energy experience prior to his appointment four months prior. He had a head full of facts and figures and spoke about how he managed the energy sector during the crisis of last winter, which led to his unpopular decision to import energy from Russia.  He also spoke of the problem with the coal mines under Russian control, the low capacity factor of their nuclear generators, component shortages, how they raised energy prices by factors, and Ukraine’s gross energy inefficiency. He emphasized that Ukraine urgently needs modernization of its energy system.

Second, we met with Mayor Vitali Klitschko of Kiev. Vitali is a large man, and a champion boxer with very good cheer. He is very proud of Kiev and wanted us to love his city. He also spoke of his fight against corruption (he dismissed 80% of the city staff as part of this effort) and Ukraine’s desperate need for defensive weapons. He is very patriotic and feels that Russia fears Ukraine’s success and needs to end monopolies in Ukraine.  He noted that Kiev has 80% access to the internet and Ukraine has 36% of the world’s black soil reserves. But despite this, 70% of Ukraine’s young people wish to leave Ukraine. He said, somewhat humorously, that he would be a personal bodyguard for foreign investments.

Next we walked to the central plaza where more than 100 peaceful demonstrators were gunned down in February of last year, sparking Ukraine’s freedom revolution. Central plaza serves as almost a sacred shrine with pictures of the fallen, national symbols, and memorial candles.

After lunch we had our final meeting with several members of their parliament and exchanged views. These mostly young men and women were completely dedicated to the success of their democracy. They emphasized the need for transatlantic unity, continued sanctions against Russia, and the need to end corruption at home. They have huge energy challenges ahead since the Ukrainians use 3-5 times more energy per person than do Europeans: per unit of GDP, per square meter of building space, or any way you measure it.

Conclusion

In general, I was inspired by how determined the people we met were to bringing about a free, democratic nation and a transparent and market driven economy. They admire the U.S., and want our help and friendship. Our challenge is to understand how we can best help their cause. Clearly, appeasement of Russia will not work. We need to supply LNG as soon as possible, maintain European unity on sanctions, begin to counter Russian propaganda, and encourage investment in Ukraine. The question of weapons needs to be thought out carefully. The Europeans are reluctant to supply weapons, and if the U.S. were to supply weapons unilaterally to Ukraine, the E.U. unity in applying sanctions would likely fall apart.

I commend Chairman Upton for heading this CODEL, which in addition to providing useful and valuable information on domestic and international energy policy, also gave me an opportunity to get to know several of my Republican colleagues better – which can only benefit our Congressional duties. Lastly, I must say that the staff, who arranged the CODEL and the U.S. Air Force team who carried it out were efficient, professional, and a pleasure to be around.

 

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