 Good afternoon, everyone. Thank you all for coming in a kind of steamy afternoon, but I was going to say we have a steamy subject that doesn't really fit either, but it's really great to have such a large turnout for this impressive panel that we have with us this afternoon. I'm Guy Caruso with this energy and national security program here at CSIS and welcome you all on behalf of Sarah Ladislaw who runs the program and you'll hear from Frank who's the vice chair of CSIS and Schlesinger chair, but we have a good CSIS representation here, but we're very pleased that we're able to host the discussion of the IHS study on the Crudall exports and as you all know it's probably among the energy issues the hottest topic in town I'd say, certainly beginning with least the senator Murkowski's presentation at Sierra Week in March and we've had hearings and now a major study by IHS which Dan Jurgen will introduce in just a few moments and then he'll be followed by one of the project directors Kurt Barrow and then we're gonna have comments from Kevin Book and Frank Verastro so I think we'll have a full full discussion here and as you all know the shale revolution as some of calling it has brought forth a number of issues that we have discussed in this room and in this house and over the last couple years a lot of them were surrounding the infrastructure issue and the logistics of what all this surge resurgence of gas and like tight oil means and and one of those issues that we've discussed is is the ban on crude oil exports this study is does it takes a comprehensive look at that and we're very fortunate to have the IHS team many of the team here in addition to Dan and and Kurt so you might even meet meet some of the other principal authors sitting here in the in the front row as the day goes on so I won't go into a lot of introductory discussion about Dan and Kurt and Frank and Kevin Dan certainly as you all know one of the leading communicators of energy issues and so it's very appropriate Dan that you can communicate to us about this latest issue on crude oil exports so we're very pleased to have you here and welcome you as chairman and of IH vice chair of IHS as in addition to your other roles thank you very much guy are we able to get so we are getting more chairs here so people don't have to stand thank you for bringing them in thank you guy and want to say thank you to CSIS and the opportunity to be in this beautiful new building in this incredibly well-lit conference also and we pleased to have the chance to talk I see many people in the audience I know some of whom were intimately involved in the era and what all these controls were put in place and now here we are several decades later sort of unscrambling an egg that was put together and it is striking that we would be talking that you know the Scott guy said the centrality that we'd be talking about this issue and there would be 200 people here to discuss it and it's kind of something you would just not have imagined before US oil production up 64 percent since 2008 and of course the US probably just a year and a half away from being an LNG exporter and a recognition that the impact is felt of this kind of great revival and energy production across the economy we've done earlier studies where we've looked at the job numbers which are quite significant the economic activity of the investment and at our some of you were at our sir week conference in Houston where Ben Bernanke came and joined us and I asked him about the economic impact of this unconventional oil and gas revolution and he said it was one of the most significant one of the most positive if not the most positive development since 2008 in terms of the economy so a really big impact and now it's the issue of oil exports last year's issue was natural gas exports and we're really talking about history here because we're talking about an artifact of history that is still in place we went back and said kind of where did the ban on exports come from and of course the general it's all goes back to beginning of the modern age of energy the 1970s when there's crisis and panic about supplies but it was more specific we traced it through the regulations and the legislation and there really seemed to us to be two things that drove the specific ban on exports the first we were talking about a little bit before we came out was price controls because if you had a system of price controls on oil you didn't want a system where people could take the oil that was the old oil the cheap oil and export it to the world market at a higher price and take it out of the country and that was really the main driver in the 1975 legislation again there's some veterans here of that period who remember the main discussion arguments about price controls in the oil ban the export ban was a rather small thing and then later in the Export Control Act of 1979 it was much more hinged on the subject of whether Alaska oil was going to be exported to Japan or not and the aim was to prevent that from happening and the 1979 legislation said the president is required to make and publish an express finding that such exports if he gives an exception to the export restriction will not diminish the total quality or quantity of petroleum in the United States and sold within the United States and kind of that was the premise of it well 1981 the price controls were eliminated summarily eliminated and then in October 1981 interestingly the ban on exports of products was eliminated and at that point the Commerce Secretary said it was no longer needed to ensure adequate supplies of gasoline and other petroleum products for American consumers so price controls went away in 81 the ban on petroleum product exports went away in 1981 and this ban remained and you know what it didn't matter it didn't matter for several decades because of the position of the U.S. as we went up to a point in 2005 of importing 60 percent of our oil but it has mattered in the last couple of years with this great revival in production that I talked about and what we see now is what we describe and what Kurt Barrow will describe more is a situation of gridlock this imbalance between on the one hand this rapid growth in production 3.2 million barrels a day since 2008 some by the way a volume that is larger than the total production of 9 out of the 13 OPEC countries so this great growth in production at the same time a refining system in which 85 billion dollars just on the Gulf Coast was spent to reconfigure it to deal with heavy crudes and so it's an imbalance between the system and Kurt will describe more about that but I think the points the few points that I would like to make is the issue we focus on because of this gridlock is a decrease in the price for domestically produced crude and discounted to such a degree that it will affect investment in the level of output and so Kurt in his remarks will go through the industry and market response but our point we see in the price discount is that it will really have a negative impact on investment and in our view what we really did is we delivered develop two cases one the base case and the other what we call the potential production case and the potential it is not to say one is more likely than the other but we took the base case because it's a more conservative of the two cases and in that case we are our conclusion is that US oil production would be 1.2 million barrels day higher in the base case over the forecast period then will be the case where we are today and if we find the potential case which is really based upon more innovation and the faster spread of innovation production we would be looking at something like 2.3 million barrels a day of production above that. In terms of gasoline prices the point in Kurt will develop it is gasoline prices are priced off world markets and not priced off what happens in North Dakota and more supplies in the world market will mean lower prices than would otherwise be the case. The what we concluded in terms of investment is that if we released the span we would see something like about 750 billion dollars of additional investment going into the upstream gasoline prices 8 to 12 cents lower the employment numbers were very interesting that if in the base case we would add about 400,000 people jobs over the forecast period but because of the surge of investment in the early period we would be looking at something 964,000 jobs as a peak and one other number that is quite significant is just in the base case over the forecast period 1.3 trillion dollars in additional government revenues so significant number there. And then there is we didn't go into it in the study but as you watch crises like Ukraine and others you also see that there are other factors that result from lifting an export ban and we have seen it with LNG we will see it with LNG and we will see it with crude oil exports it adds to the dimension to U.S. influence in the world. There is a foreign policy implication as well it is not something you can model in an equation but I think it is another significant consequence and impact of this. So this gives you sort of a picture of what we have done and when we stand back and look at it all it strikes us that this is what we are really looking at is an archaic ban that is left over from another era and era that is long gone and it is kind of maybe the last vestige of it. So that is the conclusion. Let me ask Kurt now who is the vice president of oil markets and downstream at IHS to just take you through kind of the key aspects of the market and the industry. Kurt. Thanks, Dan. Thanks, Guy and thanks to CIS for hosting us today. I appreciate the opportunity. If I can have a clicker, that would be the next thing we maybe forgot about. I have a graphic. So I will talk a little bit about our crude production outlook here on the next slide when we get around to it. Maybe it is in here. Great. Okay. As Dan talked about we have a base case production and a potential case production. I think it is interesting to look back. This great revival has really reduced, reversed a very sharp trend. We have been in declines for many decades. As recent as 2008 we were producing about 5 million barrels a day of crude production. The last month of data, as many of you know, you will rub around 8.2 million barrels a day currently. We have these two different cases that are both very realistic based around really known resource space. I would say in the base case production case we have taken a relatively conservative view, really very minor additions or improvements in technology and innovation going forward, and really using just the plays that are fairly well defined. In the potential case we are taking some other resources that we know are there. These are not just unknown resources but they are not quite as well delineated and defined today. And then some improvement in technology, getting a little better, faster, smarter in the oil field, which we have certainly seen a lot of in the last few years. I think one of the other key takeaways from this slide and we will get into this a little bit more when we start talking about refining is the quality of the crude that we are producing. The vast majority of that of this light tidal that we are refining is a category we call light sweet crude. And that is kind of a broad category and that is just not a particularly good fit with the refining system that we have. And the refining capacity that we do have for that light sweet crude is already full. And we can get into a little bit more. I have got a slide to get into a little more details on that. Bottom line, our base case outlook is at 11.2 million barrels a day peak. The initial case is, you know, 14.3. But that is not for certain, right? So the data that I have shown on that slide is for our cases with free trade. And we believe in our modeling and, you know, the crux of the study is that with the constraint on trade we end up with very steep price discounts. Those discounts are there today and are quite volatile. We think those discounts get more and more severe over the coming years as we have more and more tidal production and get really to the point that, you know, Dan alluded to, they get deep enough, large enough discounts that we actually affect the upstream activity. And so what this chart here shows is the actual wells drilled for the base and potential production case with free trade in the solid line. And then what happens if we keep the current policy in place under the restricted trade, you know, the scenarios that we ran? You know, we get a very sharp discount the first few years. We do have a refining response. We can talk a bit more, you know, in the Q&A about why we think, you know, the refineries will invest in what type of refineries, but we never get back to the kind of activity that we would get under a free trade environment. And that's the crux of that is around the gridlock that I'll talk a bit more about in the next few slides. You know, various different outcomes out of this study, different impacts, jobs, government revenues, some of those Dan talked to. I think trade impacts is one that's, you know, particularly important for the U.S. So what we're showing here is really the reduction in the U.S. net petroleum import bill, okay? So you can think of this as a lot of this is due to the fact that we're exporting crude, but also that it's offsetting the import of crude. We're going to continue to import crude no matter what scenario we'll go forward with, but that's really a case of importing the lower costs, lower quality, heavy, sour, and sour crude oils that are really configured for our refining system and exporting, you know, the higher quality. Some pretty significant numbers, right? You know, $67 billion per year in the base case, $93 billion in the potential case, you know, on average. That obviously enhances our energy security as foreign policy benefits as Dan alluded to. And we can talk a little bit more about export destinations and where that crude goes, right? So this is high quality light-sweet crude oils. Europe and Asia are the primary two markets that we really expect those to go into. In Europe, what that will do is displace West African crude that's currently being imported and potentially displace Russian crude oil as well. Europe imports about 4 million barrels a day of Russian crude. And the European refining system has configured a lot of the northern refining systems here for the North Sea crudes that are in decline. So it's a very good fit from a refining point of view. Asia is the other market that it ultimately will go to, which would, you know, reduce Middle East crude production. So let's talk a little bit about the refining constraint. I've got a slide here. Really, you know, people ask me, okay, when do we run out of refining capacity? Where's the wall, right? And it's really not a wall. It's more of a slope. Not necessarily a linear slope either. There's really different tiers. And so we put this into four different refining tiers that really describe different segments of the refining system as a whole. And we've really modeled this around the PAD-3, Gulf Coast region. That's where over half the U.S. refining capacity is, and that's really the nexus where all these crudes come and equalize in the marketplace. And so it's really in the NAF... You can think of this broadly and simplistically as being a constraint in the NAFTA part of the refinery, okay? So you bring crude oil into the first unit in the refinery, the crude distillation unit, and you essentially distill out, boil the oil, as they say, you know, out into the different broad boiling ranges. And it's that light NAFTA cut that really is in surplus for light tidal oil. It has a very large yield of NAFTA, far greater than the... than many of the crudes that are processed in the refining system. That's really where the constraint is. And so really step one, which isn't necessarily on this chart, tier one down at the bottom left is displace the light sweet crude imports. You know, we did that very rapidly. There's various charts out there and charts in our report about how quickly we reduced, you know, bonny light in Nigeria and other West African crude oil imports. The price to do that for the refiner to make a switch from one light sweet crude to another light sweet crude, pretty small, probably 50 cents to a dollar a barrel. You know, and so it doesn't take much of a price signal or price discount for the light tidal oil to make that work, right? Tier two is...so then after you do that, you're really talking about putting light tidal oil, sweet crude, into the refining... into the sour refining system, right? And there's some capacity in that system to do that and make all finished products, particularly gasoline. So that's really the tier two in the upper right-hand corner, where you've got the ability to run, you know, a light tidal oil into a sour refining crude tower and make gasoline. Discount for that, a dollar or two. That's, you know, the sweet sour spread in crude oil pricing. And so it takes a little bit bigger price signal to go into tier two. Tier three is really when you've filled your gasoline processing capacity and now you're really selling an app that's an unfinished product. You'll still do it at the right price incentive when you do the economics and the refining. The price signal for that, $2 to $4, right? That's larger where we are today on an annual average basis. If you look at where we are, if you look at the WTI brand or LLS brand, if you look at the refining economics of sweet sour crude on the Gulf Coast, we're getting a $2 to $4 type discount on light tidal oil. It's a price that's not fully reflective of its pre-market economics. The concern and what we think we saw really in the last quarter of last year is that we move into tier four as we add more and more light oil to the system. Tier four is a much more severe step for the refinery and that's really when you lose the ability to pull any more napped off your crude tower. You're at a boil-up limit draw a limit on your NAFTA system. At that point, you've really got to derate your whole refinery. You've got a refinery that's 100,000 barrels a day. You can run a little more tidal oil in there, but to do that, you've got to take that refinery and shrink it and run only maybe 80,000 barrels a day of crude. You lose the margin on that 20,000 barrels a day of lost throughput. You'll do that at the right price signal. At the right price signal, you can discount the LTO stream enough that you'll take the hit. You can make up the margin that you lose on the medium side of crude. But that's a much larger price signal. And that price signal really doesn't have a top to it because if you start running against different grades of crude, you can get numbers that are 10, 15, 20, 25, 30 dollars a barrel discount at which there's points at places where pretty much any refinery will bring in some light tidal oil and displace out some greater crude oil. Again, if you look at the prices that we saw on the Gulf Coast in the fourth quarter of last year, you know, when we had some very important some of the 201 refineries offline, it appears that we were already in that. As we bring more light tidal oil on and we're bringing, you know, our outlook is for a million barrels a day of additional light tidal oil growth this year. Another million next year. And so as we're marching up that supply curve, we get deeper and deeper discounts. Those discounts, right, flow right back to the well head. And so in our modeling, that's what we did. We modeled that, take that back to the well head, what's the drilling response and the production response out of that and then ultimately the macroeconomic output. So gridlock. You know, what is gridlock? It's this term we came up with to try to describe and to, you know, visualize, you know, it's more than just an oversupply. It's not just a bottleneck or a buildup or, you know, a filling up of the bathtub. It's really created by the oversupply combined with the uncertainty over the future policy on crude oil trade. And it's related to the investments needed in both the upstream or the downstream in order to relieve the gridlock. If you leave the policy in place, you need more investment in one place. If you take the policy away, you need more investment in the other part of the industry. And so if you think about this, you know, the gridlock defined really to invest in the light-tide oil developments, to invest in the tide oil production, you know, on the field, if we leave the restrictions in place, effectively what we're doing is we're making the producers rely on refiners for investments going forward, right? There's just essentially every additional field, every additional well you drill, you need a refining investment to go with it to process that crude, right? So you're tying those together, right? But if you go over to the refining side and talk to the refiner about making investments in topping capacity and processing capacity for light-tide oil, he'll tell you, I'm really making my money off this because I've got a price discount. It's because I have an oversupply, right? It's that oversupply, a price discount that makes that investment possible and profitable because in a free market environment, a topping refinery loses money. It's not economically viable. And so the refiners rely on the producer to continue to produce, invest, produce, and oversupply the market, and the producer is relying on the refiner to continually invest in refining capacity to allow him to do that. So you got the two at odds with each other and neither is willing to invest at the same rate or with the same certainty that they would in a free market environment because if the policy remains in place, that creates risk for the producer. If the policy is removed, it creates a risk for the refiner. And not knowing where that policy goes just slows and retards the investment all the way across the industry. That's the gridlock and that's really at the essence of why we, along with all the drilling and wells and so forth and the economic impact that we see in our study. So condensate. Troublesome. It's a troublesome stream to define. There's not a good industry definition for condensate. There's been much discussion around on this. Do we define it by well type? Do you define it by API? In reality, there's not really a difference between an oily gas well and a gaseous oil well. It's really a continuum. The IHS has its way of defining it that's slightly different maybe than the states and how producers define it. We don't even, we're not sure of the precise production. I mean, the EIA came out with their analysis on API ranges and stuff. We think the industry in general thinks around 6,800,000 barrels a day of condensate production. That production though, a lot of that historically, and Eagleford's a bit of a special case, historically, a lot of that condensate has been blended with crude oil in or near the field. Just because of the fact that you get better value if you put the condensate in the crude and the synergies of the infrastructure. You can blend that condensate in the crude, use those tanks, pipelines to deliver it to market. That's 6,800,000 barrels a day. Only a portion of that is really segregated marketed condensate stream today. Again, Eagleford is a bit of a special case because where it's located. Really, I think one thing to keep in mind on the policy is how you define that and without adding additional complexity and so forth to the market. But liberalizing, all that said, liberalizing the export of condensate would be an interim step towards removing this gridlock and move us towards a free trade environment. It's not the final answer and you wouldn't get all the benefits we have in the study with it, but it is a possible first step. I'll talk real quick about gasoline prices here. I'm cognizant of my time. Our analysis shows that gasoline prices actually go down by allowing free trade and really the logic behind that is one of free markets. Free markets of crude trade as well as free markets and trade of gasoline. And the logic really flows on this chart that if you allow the free trade, you increase the crude price, you remove this discount, you get additional production that's in the world market, we're in a world market, that additional production then increases the world spare capacity and you get a relaxation of the world's oil prices. Those oil prices flow right back into the U.S., right? And we've shown, and the data is pretty well out there that proves that the gasoline price in the U.S. is tied to international gasoline prices, not domestic crude prices. Then it makes logical sense if you think about the free trade, the fact we export gasoline out of the Gulf Coast, import to the East Coast, and the data really proves that out. 8 to 12 cents a gallon depending on the case, that's substantial savings over the 15-year period. 265 to 418 billion dollars. Continent-wide impacts, I think is the other key finding out of our study that was pretty interesting. So we did not just the national analysis, but drove that down into the States. The chart, the figure on the right is really kind of a separate piece of analysis we did just looking at the oil and gas upstream industry. It's pretty interesting, right? This is far from a complete dataset. We just looked at some of the big industry producers supplies to the upstream industry, found 200 manufacturing facilities that sit in 36 States, right? And the macroeconomic results of our States are very similar to that. A quarter of the future jobs supported come from States with essentially no crude production. Okay. So with that, I think I'll leave it here. This is out of the executive summary. We have some reports, by the way, over here on your right if you're interested. I think we have enough executive summaries for everybody and we have enough reports for some of you. So you have to whoever wants to meet. All right. Thanks again. I look forward to our discussion. Thank you very much, Dan and Kurt. Now we're going to hear from Kevin Book, who's a managing partner of Clearview Energy with a few comments based on the IHS study in the summary that we've just heard and then after Kevin, Frank Verastro, and then we'll get to the floor for questions as well. Kevin, thanks for coming. Thanks, Guy, for the invitation and congratulations to IHS for a substantial body of work. I've got my tape flags on my pages. No one take my copy, please. I think when you get down to it, we're having this discussion for a reason and I have four questions that situate the reason for the policy discussion that surrounds this great body of economic and policy analysis in the report. The first question is what are the policy goals of the export decision? Second, what are the leading indicators of gridlock or as I like to refer to it, saturation. Although I confess gridlock seems like a much better term. And third, what are the how long before the drill bit is up turning? And maybe fourth, what's on the other side of the decision? What do the answers know? And what does it mean? So just a few very short comments on each of these. First with regard to the policy goals I think that it's pretty well framed. It's a question of economic opportunity in the future, the way this study very optimistically looks forward. But there's a reason to also think about it in terms of the economic gains of the recent past and preserving them. Now those gains take two forms. They involve the export trades that have happened on the basis of refined products. But they also the considerable upstream high multiplier jobs. And clearly there's a policy effort underway to try to optimize the balance between the two of these. You probably never encountered any sort of discussion like this before, say with natural gas exports. The second question is a little bit more complicated. What are the leading indicators? Rig count as the EIA has very capably illustrated isn't always the best indication of what to watch to see what the productivity of a well is. Nor is it obvious what the best indication will be when we've hit gridlock. But there are some at least coincident indicators in crude differentials and that's been discussed in this room before. But there are essentially three short firm outlets that the report discusses. Refinery utilization, exports to Canada and the substitution for imported light sweet. And arguably all three of these have been used intensively and relatively close to balancing, at least by our numbers, the growth in production since the boom began. But then there's the fourth outlet which is the investment decision that Kurt referenced. And it's the question of whether or not you build more refining capacity because you don't think you're going to export this crude. And you can't get to the question of whether or not to do that until you've figured out where you are in the overall scheme of things, which brings us to the question of how long do we have? If you look back at Bakken production from say 2008 forward and you look at the WTI price, you'll find that the correlation is relatively strong between rig count, which I just dismissed as a really good indicator of anything, but it's what we have in the data set, and the WTI price and it's strongest at about four months over the data series from 2007 to the present. And if I look in the last three years, it's strongest at about seven or eight months. In English what that means is there's somewhere between four and eight months of skid marks between the time the price plummets and the time the drill bits stop turning. And this is something that's different about this kind of investment. And it's really the nature of a five to 15 million dollar well with considerably more granularity than a 200 million dollar deep water project. The startup time and the investment decision being more granular means that the breaking distance is actually quite short when you consider how supply responds to price in most environments in the non-OPEC world. Finally, what's on the other side of the tradeoff? I think that it's impossible to ignore the benefits to the refined products producers, not just as it was mentioned from low cost natural gas as a process fuel and all the other benefits provided hydrogen etc. But also from the discount the artificial discount of crude trapped here that can't reach the world price, crude desperately yearning to be free. And the perception is that if that crude were to stay here forever maybe the benefits would stay here forever. And I would submit that there's at least two things to think about when considering the alternative case. The first is that on the other side of gridlock for sustained period of time is in all likelihood of production slow down and maybe even a reduction in the actual volumes of crude coming out of the US if the price is seriously depressed for seriously long. And that reduction would drive the price back up eliminating some of the advantage from the crude price differentials today. The second is that if it never leaves and you build lots of refiners that are bidding for that crude you might drive the price up that way too. In other words there may be something of a false choice here as important as it is to again balance and optimize the economic gains of the recent past against the economic opportunities of the near future. We also want to be careful not to imagine that the world the way it is will stay as it has been for the future as we know it. So those are my comments and thanks again and congratulations on a terrific study. Thanks Kevin. Okay so note to self you never follow Kevin because he takes away all the good points. The best thing I can add is the context and perspective. When you look at these and everybody in this room as I look at this audience has dealt with models. Guy and I talk about this all the time. EIA's forecast 10 years ago of what 2025 would look like. So this is a future that could be it's not necessarily the future that will be in fact in all likelihood it's not the future that will be for a variety of reasons. To focus on so just keep that in perspective the three things I want to talk about though is supply, demand, refinery investment and then we'll go back to this kind of question because this is a big question and distortions in the market and is that where we really want to be. So starting with what Dan laid out and I know no one better that can lay out the history of this discussion is we are actually in a very new place. So coming out of the 1960s or the 1970s when we looked at supply disruptions USGS told us we didn't have a lot of natural gas or oil and demand was going up because we had built a highway system. In the 1970s early 1971 we instituted price controls which actually minimize the amount of new production that was coming out of the field. There was a lot of imported oil that was available and because New England was becoming more import dependent we got waivers to the oil import program and that's how our import dependence went up between 1969 and 1975 right it went up exponentially. So we thought ourselves in a position like that. When we finally instituted decontrol which happened early in the 1978-79 period Reagan got credit for doing it but it was actually President Carter over a period of two and a half years the idea was to stimulate new production by decontrolling old oil and letting people get the value of a new oil barrel by releasing old oil. But it was done over a 30 month period you could minimize the inflationary impact if those of you recall President Ford and whip inflation now that's kind of what we were dealing with. And then the world changed. We had the Iran-Iraq war, the Iranian revolution prices skyrocketed and then they plummeted because oil prices got too high and the economy couldn't deal with it. We are in a new reality now and I would argue we actually have two new realities. So our gas reality I think is different from oil now that we're in the source rock of natural gas we're actually generating the hydrocarbons. We've taken away any geologic risk. Once you're in the source rock you don't have to wait for the molecules to percolate, get caught by a capstone and then you go find them. Once you're in there it really is a manufacturing process. Our oil situation I would argue is slightly different. So there's times geologically speaking where you're in the oil zone and the oil zone is under certain temperatures and pressures you generate long chain hydrocarbons which is oil as opposed to short chain hydrocarbons which is gas or no hydrocarbons at all. So what we've seen in the Bakken and in some cases in the Eagleford is that we're now in that place it's not clear that it's replicable in other fields. We just don't know. We're less than five years into this. So the supply piece almost everyone shows you a production profile that goes up through 2022-2025 then levels off and then declines and the theory and I'm a big advocate of the industry finding technology I spent 25 years in the industry. But this notion that you offset the decline with new technology if the recovery rate in the Bakken is four and a half or five percent if you improve that and it's 20 billion barrels you have a lot more oil to deal with. What we're finding now in the Permian is not so much the fracking but extended reach horizontals in conventional resources that we never got out before because the price is higher. There's 13 sub basins in the Permian so we don't know what that looks like in terms of the next slug of new production. And then we've got the offshore production and I was telling Dan earlier that one of the things that struck me in the Sarah conference this March was the statement made by a very reputable economist from Connego about how the next slug of offshore production 2016-2019 looks to be medium to heavy grade crude oil. So you wouldn't necessarily convert a lot of heavily configured and sophisticated refineries in the Gulf Coast to run light oil producing a lot more gasoline when you're not optimizing your throughput. So you have to figure out where you're going to be. The other side of this is demand. So I'm a clear believer in exports in a global market I think that's a good thing and I think an incremental barrel on the world market tends to lower prices all of things being equal. That means no other country goes down open doesn't take the equivalent amount of supply off the market. But we also have a lot of other light oil that is currently now distressed and isn't on the market. Libya and Nigeria there's a statement and I talked to Kurt about this at the beginning that our light oil effects boarded will displace this whether in Asia or European markets and I think that's right to an extent. I don't think it's right in total. If I was Angola or Nigeria or Libya I might wonder how I can combat U.S. light oil taking my market share going forward. The investment as Kevin just alluded to and this is a terrific point and Kurt talked about it too. If you get in a situation where the prospect of not lifting the export ban encourages people to make investments that make no sense to run more light oil that's not economic and then you switch it three years out those investments are worthless but they're big investments and over time and you're going to want to go back to the heavier oil nicely and figure to fit your refinery and producing distillate products that the world really wants so we have to be careful on this. The distortions in this debate however are many and Kurt talked about the condensate issue my suspicion is that while condensate I think actually gives more money to producers and would help out the economics of production and prolong that production because now you'll split the stream what you'll probably do and this is good for you day traders in the audience is that you can invest in companies that make and install stabilizers and crude oil splitters and put them in the field to segregate the streams and then you'll export that as a condensate. I'm not sure that's the right policy decision but this is kind of where we are at this point. And then you look at the other infrastructure and bottlenecks and thankfully IHS has also brought three of their substantive experts on macroeconomics on transport and on upstream and we've actually talked about when questions come that are in more detail we're going to direct them right to the front row so that's a good thing but the amount of rail traffic that we're moving now in terms of oil because it's displaced some coal and it's a good and economic way to move things how much more are we going to move two million barrels a day of oil by rail if safety concerns or prices change and then if we export the light oil what markets does it go to if it gets discounted with a transportation cost adder what's the net back to producers so we're at the beginning I think that we started this discussion actually probably a year ago more than a year ago now there's at least three studies out now there's three more to come that will add context to the discussion I think the administration as Kevin pointed out is balancing the benefits to refiners in the economy and benefits to the global economy by having lower price crude oil and a lot more availability and the security of U.S. supply and I think we overlooked that but that's got to be a key factor if we add more oil to the market is that better than a less stable country adding oil to the world market so we have to keep this in context and the discussion will go on but we're more than at the beginning of this stage but it'll be interesting as we go forward and I too like Guy and Kevin I really appreciate what IHS has done because they teed up a lot of these questions and I think actually the Q&A session can draw a lot more of this out but this is a terrific study and I'm glad you came here. Thank you both maybe I might respond to a few of the comments first it is striking how stable the oil price has been the last few years and you noted all of the issues that have been going on in the world and you see without the growth of U.S. supply and Canadian supply we'll be having a very different discussion about oil prices today we'll be talking about a much tighter market and much more concern, much more pressure on key producers like Saudi Arabia which has also played an important role in helping to balance the market so I think in answer to one of your last points I think the basic rule is a better supplied world market is a more stable and secure world market and part of the argument our conclusion is here that we'll have more if normal market forces are allowed to work rather than this partial ban because I say it is a partial ban because we're now exporting almost 4 million barrels a day of product by far the world's largest exporter of product and these is a very large number and so just from logic you say well products okay but crude oil is not why not why not let the market make those decisions secondly on the refiners I think our conclusion is U.S. refiners will remain competitive inexpensive natural gas combined with the price differential that will exist and Kurt might talk a little bit more about what the recent past tells us about that so they will continue to be competitive in this I think you've all alluded to the risk that if the ban is more like an iron curtain that's not going to move we're going to have an iron curtain on crude oil exports in that case not some but a lot of investment in splitters and topping capacity but that will evoke in some people's memories the notion of the tea kettle refineries and the risk that you are making investments in facilities that might in 3 or 4 years not be economic having done it for short term Frank I think your point that this is early days on oil is true I mean gas is you know there's more confidence as you say we've had a longer period we've seen the supply picture so there is certainly a question what is interesting so often as we know in projections reality doesn't actually catch up with the projections in this case the projections are struggling to catch up with the reality as supply is continually outgrown and we have a chart in the study that we use that and I think Kevin you left us with a very interesting question which is what I guess it's your skid zone I guess we would call it the time lag between gridlock in the system and how quickly it shows up in terms of productions that something we might more fruitfully discuss Kevin do you want to take up Kurt rather do you want to take up any of the other points or elaborate yeah my dad thanks so I might just expand just a little bit on your question your Kevin's question about competitiveness and I think so what we found really as we look forward we do a lot of work in refining economics and thinking about crude parity values and transportation costs and so forth but kind of the bottom line was when we do our modeling and think about free trade the U.S. refiners are going to be benefited we still get a lower sweet crude price because effectively we're exporting and so you're getting an export net back you're effectively selling that crude to some offshore market at that market price minus the transportation costs but if you look at that in kind of the 16 17 18 time frame out over the forecast in free trade and look at that price relative to what the refining industry has actually paid for crudes over the historical time frame from 11 12 13 it's very similar level it's not the kind of discounts we've seen like in the fourth quarter when we had these very very steep discounts it's not the kind of benefits the refiners would get from severely discounted crude but over that time period over the same time period that we were displacing light crude imports starting to put light tidal oil into our sour refining capacity and greatly expanding the export of refined products from the U.S. refineries were very competitive in the market that kind of price level is what we see in the free trade going forward so we do think the refineries stay relatively competitive moving forward the other question maybe you just talked about briefly about to your point Frank kind of where does this go where does the crude go and your points well taken in the crude offline today I think in our mind we look at where the crude flows and how those flows have changed and if you look at the northern European market we've had a real growth and imports into that European market really in response to the decline of the North Sea and so that's a logical market that we could take we're really bringing West African barrels all the way from West Africa and into Northern Europe and so if we did export out of the U.S. that's a logical market to send our crude into Europe and then take those West African barrels load them on ships in West Africa and sail them east versus west Asia is a very rapidly growing market they're building new refining capacity on the scale of 600 to 800,000 barrels a day every year of new refineries being built in Asia and so they'll build those refineries and at the end of the day the refineries is just the manufacturing facility that takes the crude quality available and makes the products as demanded and you can build that kit to process pretty much anything and so that to us is a logical market going forward Kurt you might also just say something about we've had some dress rehearsals for gridlock turnaround you might just expound on that in other words what we've seen in some of the tightness when we have seen that express so we saw actually if you go back a little farther we saw these types of crude price discounts that we're talking about in the study here, the 16 time frame when we get 20, 25 dollar barrel price discounts those seem pretty extreme but those are the same kind of price discounts we saw in the mid-continent that it was for a different reason it was for the bottleneck in the logistics system but we saw that type of discount really in the fourth quarter last year and when we saw that was in a time period when we had a couple of these light sweet crude refineries offline and so we really shrunk that Tier 1 capacity available for some months of time for normal routine down times especially when we saw the response and really as we think forward and Jamie Webster is here who does a lot of our forward thinking on short-term markets we'll be moving back into those turnarounds going forward so those periods of time is really when we think we're going to see seeker and seeker discounts Yeah, just two points and I take the point totally on bottlenecks especially seasonal I think we're actually going to see it the next big thing we're going to be looking at is storage inventory being built either in the field or towards the refining because if you go back so refineries on the Gulf Coast when they know they're going to go on a turnaround season they build up product stocks to supply their customers they don't hold a lot of crude stocks because they're not going to be in operation they schedule then the landings of cargoes that are coming from overseas has become more domestic refineries so as production goes out of the field think of the pipeline as a straw coming down to the Gulf Coast if there's nothing at the end of the straw unless you open up an export option it backs up in the straw unless you build storage and storage is just an interim way of extending your pipeline so that needs to change the one or the piece on the European I would argue and what we've seen is that European refineries are under part because of the advantages to domestic refineries so at some point Europe has to decide because there are demands declining whether or not they want a vibrant refining industry as a strategic asset because it could be that an option for Europe is they become dependent on products coming in from the Middle East or the United States or Asia if they don't keep those refineries going because utilization rates are low and they're not really competitive so this whole notion of where this extra crude and big volumes goes and I think it's just a matter or we're talking about it as a matter of degree so some of the stuff gets displaced but I would just argue that there's a lot of light oil offline right now as well okay well let me stand up so I can see this side of the room we have time now questions from the audience and really appreciate your patience and look forward to your questions only guidelines are please state your name and affiliation and try to keep the question as concise as possible in the back there there'll be a microphone coming Jennifer DeLoe with the Houston Chronicle thanks so much for this discussion I have two quick questions one we talked a lot about the domestic market for light tight oil wonder if you all could address the potential global market for it is there enough for us to supply and then also if you could address the transparency around the BIS process I'm wondering in particular if the limitation on BIS releasing transactions and transaction data is actually helping or hurting the cause of oil producers who want to export I mean because as you know a lot of people don't really know we're exporting records amount of product at the current time well I think the second questions for Frank or Kevin and we can address the first yeah so your question was really the market for the US light tight oil or for the capacity to take it I wanted to share your question was that or whether it was the potential for light tight oil production outside the US but it's the former I assume sorry yeah so we think if I recall the numbers right 2 million barrels a day 2.5 million barrels a day of export of light tight oil potentially going forward we think because you effectively access the Asia market that that's there's the market there for that again you know if you in the broad context of things we're growing you know in our view our demand outlook for the next 10 years or so 800 to a million barrels a day of new growth every year right and so our ramp up of exports our ramp up of production can fairly easily be absorbed into that market I certainly take Frank's point is there's some optimization around refining grades and and refining capacity I mean the Asia market seems like it's a long way away and it is but if you think about the in the context of crude trade flows we're already taking crude out of you know the essentially the new production that comes out of West Africa the new production that comes out of Brazil is incrementally flowing around the Horn of Africa into Asia you know essentially into North Asia and South Asia already and so once you get in that flow you know you don't have a transportation cost disadvantaged from you know from what the producers you know the deep water producers in West Africa producing so you know we see that is a little bit into Latin America a couple hundred thousand barrels a day Latin America doesn't actually import much light sweet crude they've got a lot of their own production you know 600 800 into into Europe could be more kind of depends on what the other importers decide to do there depends on Libya right which is a very key importer into into Europe how fast they come back online and then the rest you know really into Asia right and Asia is actually the other I guess interesting little side note here is Asia is actually a very good fit for the quality of light tidal oil right because we are fundamentally long nap the molecules in the Atlantic basin right we don't we don't really run much nap the for petrochemicals particularly in the U.S. because of NGL there's more competitive the nap the demand for petrochemicals in Asia or in Europe is fairly stable we're long gasoline we're long nap the Asia is short right so getting those molecules over into Asia these nap the rich crude grades actually makes fundamental sense and you get a decent net back from that yeah and if I could just expand on that I agree with what Kurt said I think the nap the split the the fact that we're splitting molecules now is really interesting right because demand is gone from the gas to the liquids to the oil so depending on what demand is and what supplies availability people will make new investments and the fact that this is new I think adds to the complexity because I would argue the geopolitics as Dan has done for a while now that for the last several years as China looked to new suppliers they looked to the Middle East and they looked to lower quality crudes or mid-grade crudes joint ventures between the Middle East and Asia if you see a long term supply of stable lower priced light oil you'll make that investment in the absence of that I don't know that you will so you're going to have to watch how this plays out do either of you want to offer a view on BIS I'm happy to say that whether or not it helps producers to have such a black box of an agency it is certainly no help to us analysts for those who've ever had the pleasure of querying the ITC database with a total sales volumes dividing by days of month and dollars per barrel in month you'd find out in April that you've got 260,000 barrels per day going to Canada but boy is it a pain and what about all those pending transactions I think there's a legitimate argument to be made in favor of transparency when the only way to get the data out seems to be by FOIA request and experience is that that's not the fairest way to do things and protecting confidentiality is very important good afternoon my name is Rosemary Seker I'm the president of Sekeros International Group I'm best here in Washington DC I'm from Kenya how do you compare now that you talked about Africa now that the Chinese are taking the refineries in Africa and trying to export by themselves how do you look at the imports of China from Africa and Africa exporting to international countries compared now that they are doing the same thing into refineries getting the crude oil mining and all that how do you compare that to the export market the US and the African market and the Asian themselves going to import to their own countries I think I understand your question I think the way we view crude trade and crude interactions is really the economically optimum solution to us a producer that's producing out of West Africa really has a choice of where they sell their crude outside of the Middle East the African crude is one of the few that's really a truly international flows before we had the great revival the West African crude is traded in the US both Gulf and East Coast traded into Europe traded into the Med before we had so many Caspian barrels traded around into really into South Asia into India and up into Northeast Asia and so in our mind that's one of the swing kind of swing flows if you will not swing producer but swing flows and so as we have more and more type of crude in the East versus the production we have more growth and we have production in the East as well we think more and more the West African flows to the East and that's part and parcel I think why the Chinese see West Africa as an investment environment as well I'm not sure if that answers that I just came back from the US African ministerial conference in Addis Ababa and was struck for East Africa the question of timing in terms of getting projects done more so for natural gas than oil so that they don't miss out on the window in terms of the market for LNG in the years ahead and anecdotal I mean I think it's a great question anecdotally I would argue that so there's a lot of Asia right but on the China side I think there's been some discussion about how reliant China would want to be on the United States whether it's on gas or oil so diversification of suppliers is a big thing Yes on the left side Nicholas, thank you Hi, my name is Ben Salisbury I'm with FBR Kurt I was wondering if you could talk a little bit you talked about the competitiveness of the US refineries do you actually model any US refineries closing? I mean you mentioned the 2011 to 13 period but weren't we about to close some refineries in 2012 and what does that look like on the outside? Well let me first say just something about our methodology because the databases we have starting with the upstream we have the data on just practically every well in the United States as well as every play and then these very large databases on each refinery so those who look at it in detail it's very broken down by that and then we put it into the macroeconomic model so I think the question is sort of about the middle of that process about the refining models No, and you're absolutely right we were looking at shutting some refineries down and really the great combination of the great revival and crude supply that's given us lower price crude as well as well as the natural gas really has allowed more refining capacity to operate in the US than otherwise would have been the case I think as we we look forward and this is I think tied in a little bit to maybe Kevin your question of what's on the other side I think you said right if we don't allow this export ban you know a lot of the investment a lot of the runs today are for the 4 million barrels a day of refined products that we export right and I think if you talk to refineries and think about a refiner investing in the environment today I'm talking about investments in full refining refineries that make finished ultra low-salt for gasoline and diesel jet fuel you've got to remember the context of the investment environment that they're facing right I think most analysts and IHS is one of them believes we have a flat to declining long-term outlook for product demand in the US driven by vehicle efficiency and demographics we have a refining industry that's more and more reliant on export markets but those export markets are often to countries that have NOCs and other domestic investors that are looking to build their own refining capacity so those are good markets if you can have them but do you really want to invest for export markets and I guess part of why we see we believe the refining industry is going to invest in relatively simple type of refining capacity which is really what they're doing today if you look at the announcements and stuff they're mainly toppers toppers and splitters and such so I think the question really is what happens to the export markets right and so because if you come back and those export markets start to close off we can certainly have refinery rationalization in the US right because we are tying ourselves to those international markets going forward. Yes, right down here in front. Hi Paul Bollinger my own company Bollinger Associates but Mr. Jurgen and I was your host at the first Air Force Energy Forum so it's fine enough to address for us so good to see you again. My question since this is Washington and image and semantics or everything the analysis is fabulous but when it goes out and plays in Peoria and people are thinking that by exporting you are therefore reducing supply and the cost will go up here in the United States what is going to be the tipping point to get the discussion back into a proper framework so that people can understand that potentially the exporting of the US crude will drive down the price of petroleum in the United States. Well we thank you for your question I think we do use the term counterintuitive a couple of times to capture the point that you've made I mean I don't know if the answer is six export studies will do the trick but it may be the economic benefits that will flow from it I think will depend upon circumstances but I think that is the political challenge. Kevin you spend a lot of time thinking about that you know the correlation of forces, political forces. Well yeah thanks Dan so when you talk about energy in the US the common metric is gasoline prices and if the perception is that the gasoline price is going to go up then it doesn't really matter how many studies come out and say that. I suspect this issue will gain more traction on a retail politics level when it translates into jobs that would be lost not necessarily the optimistic look here which is very important and probably should drive the discussion but we have a very reactive policy mechanism here in this country and unfortunately most of the gridlock and the investment misallocations and losses lie ahead and so from a political perspective there isn't a problem now. Gasoline prices certainly aren't the problem at least as it relates to this issue and the job losses haven't yet shown up so I think that the issue is vulnerable to being distorted by those who want to portray it for polemical value but the debate gets won when it comes down to the first upstream jobs that get lost. I also think there's a timing question so the narrative if you go back and look at natural gas from four years ago the discussion natural gas now the thought that we will be exporting natural gas because people have looked at the resource base have looked at the amount even though we had a winter where prices went up and they think it's the right thing to do. I think free trade is part of the narrative will save the day as people get more familiar and comfortable with the resource base and this notion of global trade and interconnectedness I think is still a really good thing so while I think I mean I think there are a number of studies that can help with empirical evidence on this but until the government does its own study my feeling is that that will be dispositive of where we're going and the politics of this we have to get through this election season the condensate may be one thing that people take up and I would just caution folks that while I think it's a step in the right direction as Curtis said it creates other distortions that we'll then correct later on Jones Act we've been at this an hour now and Jones Act hasn't come up this is one of the other things in terms of transport so a lot of things that we put in place a long time ago just really need to be revisited it doesn't mean you throw them all out but you at least take a critical eye and look at how they fit with the new reality and that's I think where we need to be just the other thing to go back I mean the anomaly is we export almost 4 million barrels a day of product and a lot of that's gasoline and life goes on and so it kind of is just why is products okay including gasoline but crude's not so it may be a matter of time after all this time in Washington's day and you're using logic now yeah Charlie Curtis with CSIS I remember a book written back in the 70's called Energy Future in which Dan Jurgen and his co-author warned against setting policy on the base of the conometric bottles which was I think Bob Strobel and his appendix destroyed the bottling that was underway in those days so it's good to see you Dan offering this conometric modeling exercise in support of the export also logic I once had a member of Congress said look voters don't use crude oil they use petroleum products and if you can hold the analysis that says gasoline prices aren't going to go up if anything the additions to world oil supply will reduce gasoline prices and you can make the energy security argument that Frank and you both commented on it's hard to see where the politics of opposition to this really are it wants me to ask is there a can you time interval this our election our congress thinks in two year election cycles and is there any suggestion that the impacts in the early years might be discernible in adverse ways to the political judgment of the congress in your modeling or is there a variability over time of the impacts which I shouldn't think so that's you do see the positive impacts in terms of jobs and so forth happening pretty quickly because of the additional investment so I think that goes back to either Kevin or Frank's point about you know what it means in all these other dimensions and you know it's kind of interesting Charlie your comment that it's hard to see broad opposition to this since the focus is on gasoline not crude oil I mean I think no one would expect anything to happen this year but question is whether it would happen next year particularly if some of the things that we see foresee happening actually do happen in terms of the the supply picture in the Charlie's point when Ernie Moniz made the point that the industry I think he made it at your conference industry hasn't really done a good job of making their case isn't it because the industry itself is divided based the Kurtz points about the refiners actually benefiting from the discounted midcontinental crude how's that playing out in terms of the industry itself being united in this issue I don't want to speak for others but I think a lot of the refiners actually do want to just move to a system that operates with a kind of rational market some clearly don't you know I think if you divide it by refining capacity probably more the refining capacities would be in favor of just letting the market determine where the oil goes so one of the things that we need to talk about if you can get out in front of this a bit is you know beware of the forward curve one of the concerns is that these plays aren't homogeneous producers the independence versus the larger players the independence operate on cash flow and once they set those rigs down and lose the ability to make cash when the price goes back up it takes a while to get back in so to Kevin's point about what's the proxy to know when we've crossed over and we're in dangerous territory and while it used to be the rig count it is no more so the question is if you play this wrong and it'd be great if we could get out in front of it but if you play this wrong you could actually lose production in the field and if that's what we have to wait for is jobs to be lost or production to be shut in you know you're way behind the curve I mean this is one of those things and Kurt said it and Dan said it you can see coming so do we have to be hit no pun intended by the train do we have to be hit by the train or can we get out of the way and figure out a way around this I'd just say that just to add to that if you calendar it out turn around start in late 3Q early 4Q this year take 4 to 8 months on top of that and you're not really waiting that long I mean you might start to see the response in 2Q 15 that's soon John Kniece I'm with hard energy and appreciate CSIS excellent panel great work and very interesting based on that last comment Frank then we see a market that kind of starts moving into a gridlock production shut in price changes you know the reverse happens et cetera so what do you think it takes to get action by Congress for legislative change is it going to be somewhere in January whatever 20th 2017 so like everyone on this panel I don't see Congress moving before the election so the question is can you get some administrative remedy that at least sends the right signal and I think there's a two weeks ago people talked about how this is being discussed then it's not being discussed of course it's being discussed if it's not being discussed you should all be very worried but the question is what conclusions do you come to and how fast and I think the danger is that you wait as you said you wait for the sign and then it's too late it's like ah that's the sign we're already heading in a bad direction and I'm not sure that we have the metrics to figure it out ahead of time to head it off otherwise we make bad investments and that's my concern about the content states I understand how it can be helpful to producers I understand how it's more money in certain people's pockets it will give extra production a boost but then we also invest in stabilizers, separators splitters I'm not you know is that a waste of investment or is it a good temporary investment I don't know we're in that awkward phase right now yeah I think the other thing Kevin pointed out is that if we we get a response right so if we do get steep price discounts political process starts to move and the price comes back up and those discounts go away then the pressure is kind of off again right so I think the other thing is we don't really know what we might be missing in upside opportunity just because of the uncertainty around this this is kind of the gridlock and we've played this out as modeled this out as these steep discounts but there's the fear of the discounts as well right and I think the forward curve right now is maybe reflective of that right with forward curves there's not much forward hedging going on in the upstream as well so that plays into it it's another nuance of it is the forward hedging and how much you're hedged and that goes to how fast and how deep those skid marks are it is right here Rob Almeida from the website gcaptain.com thanks Frank for mentioning the Jones Act there a lot of our readers are very pro Jones Act but I guess on that subject looking at you've got a company who has just announced that a Philly tankers they're investing in and new product tankers built in Aka Philadelphia and you have companies like OSG and Crowley and APT wondering what's going to how this is really going to affect their world as well as independent refiners like Valera and Sonoco how would you address them looking at the situation right now what is the future for those guys so I think some of the east coast refiners are actually in danger and this is what we talked about earlier if we don't get more rail capacity moving west east at a discount that's what saved them so it's low price natural gas as a feedstock, as a fuel and as a source of hydrogen and then lower cost crude that's available when Libya went off the market even though we didn't take Libya everyone else was scrambling for Algerian Nigerian and Angolan and prices went up but their products were set at a global level and their margins got smaller and some of them were losing a million dollars a day in some cases so I think the light tide oil saved those facilities I think that the first thing that has to happen on Jones Act to be perfectly honest is that there has to be an airing of what the purpose is because there's many positive reasons why it exists people just don't know what they are because we haven't dealt with them publicly before is there a better way of doing that if we actually are going to increase barge traffic do we want people building barges because we're using inland waterways if we're going to use stuff in the gulf coast to go back and forth I'm not sure these articulated barges in the place of dankers was necessarily a good idea and some people on an economic basis have a hard time understanding why you can't send gasoline from the gulf to the east coast and it's less expensive to bring it in from overseas so those kind of distortions just need to be explained there may be valid reasons why we're doing it say you revisit this stuff and look at it see if it's relevant and workable in today's market and then if it's workable and that's the decision you make on a policy basis you leave it alone Charlie, we make this great point when we did the NPC study a couple years ago we built this triangle and the triangle basically had economic performance, national security foreign policy considerations in the environment and the notion on the energy side people said well your energy policy is an optimal it's like well the energy policy is an optimal because it then would run over your environmental policy or your economic policy is an optimal well that's because there's some safety nets that we have because that's what government does this is a trade off of policies that makes sense in a continuum and in totality so any individual policy decision may be a bad indicator of where you're going but it's a complex issue and now we haven't talked about the climate issue either I mean one of the things to me is that this has been a boon for us natural gas has created jobs from an environmental standpoint we backed out coal, we're now exporting coal right but at some point if you look at your climate objectives and you perpetuate a fossil fuel future because now you've got what 60 countries potentially that have shale gas or oil what does that future look like so there's this balance that's going on and you know we talk to Sarah think tank not an answer tank so part of this is to think through where you want to be and figure it out and there's no clean cut answers but it's also I would just argue that it has to be a bigger perspective and that's just we need to step back and consider Jones Act in that context I'm not a Jones Act opponent necessarily I think what kind of ties it all together is things change and sometimes takes time then for thinking to catch up with the changes and it takes time for policy to catch up with the changes and I think that's what we're looking at in the subject that we're talking about this afternoon I think that's an excellent summary point to end on and please thank our panelists Dan, Kurt, Kevin and Frank thank you all for coming