shake up the pemex and it will transform it and make it really move much faster because now change is a matter of life or death to pemex. and the past it was really impossible to make pemex move the protection, the company was so big. the incentives for the company and for the people in the company to move in a different direction were limited. now come in my view is a caveat in the reform, and something i still don't understand why the government did not include that, and that is that they kept pemex wi ..

in this reform in my way, critical issue there is too much intervention of the treasury in many of the decisions that should be have left to pemex by itself without intervention of the treasury. the other thing is the reform also reaches the electricity sector. it allows the participation in generation for third parties. the private sector is already the mexican electricity sector. you have a lot of other

activities done for cfe but now you will, basically the change allows private parties to get in contact as providers, suppliers of electricity with, with the consumers, big consumers. what they call the qualified consumers, which is basically a matter of size. they would also allow for other companies to, for the cfe, which is a national utility, to outsource several of things that were limited. they had to do it by themselves. now they will be able to, the private sector will be able to finance, install, maintain, manage, operate and expand transmission and distribution structure by means of contracts with the utility. sound as if minor change but it's a major change because you will see very significant increasing efficiency of operations, efficiency of the cfe due to the possibility of

relying on private parties. this basically gives you a notion of the speed, the pace at which the reform will move forward and i will not take up all the time here. obviously constitutional reform was enacted in december last year. pemex started, the first step was for pemex requesting what areas or fields or place where pemex is already working or has intention to do so. pemex would like to stay. pemex did so. in last march. then, the government sent 21 initiatives to congress to change 21 different laws, to change or even, some, some new laws. you have then, in september the areas will be defined, what areas will pemex keep, will be

defined by the government in, the decision of the government, of the state, of the mexican state. that will be september 17th. it is already, it is a -- the constitution and you will have all things like recreation of mexico energy forum. the very important thing is that the constitution mandates that the national energy regulatory commission has to defind the rules and regulations that will apply to the, to the transportation and warehousing of fuels. and that will have to be there. those regulations will have to be there for january of next year. so this is one of the areas where, there is a huge need for additional invests. there are many bottlenecks in the mexican system because pemex was not allow to invest in the past in expanding its network of fuel pipelines and warehousing

facilities. so the, it is really, i would say, an emergency that has to be deal with very quickly and lot of investment opportunities will emerge for the private sector as a part of that. there are other things, other important changes will come along over the next few years and you can seen see december of 2025. that is because it is for then that the domestic content of, of the, in the energy projects will have to reach 35%, which is a very, in mexico it was curious, pemex was not a, very much had not long-term relationships with a lot of suppliers. and the epc companies because the way procurement of mexican public sector entities did not allow for pemex to establish a long-term relationship with of

its suppliers and epc companies. now there is this 35% will be defined for, will be enacted for 2025. it will be enacted gradually. you have 12 reforms, new, nine new laws. now, what, in the very, very short term the first priority and that is to basically address mexico's gas deficit that increases very speedily since 2008. fuel deficit is increasing. since 2003. there are many u.s., there are many bottleneckses in the capacity for, for mexico to import from the u.s. now that the u.s. is gradually becoming a, a net exporter. it will become gradual.

net exporter of gas. we've been exporting gas to utz for some time. the ambassador mentioned this before. this is gas sector was opened in 1992 and the first investments was done in 1996, '97. so the, this, these are the pipelines that are being now under construction and this is where a lot of activities already going on. you can see on the, eastern part of mexico very important one called that is a big pipeline. it goes to the center. it is 850 kill meters and it is a $3.2 billion project. it is under construction and very important project. in the center and the west the national utility, the cfe, is

building all these pipelines you can see there in the map. and, there are six more coming up, will be announced over the next two weeks let's say, in the next weeks which will really create the network of gas pipelines in mexico because now it's not really a network. what it is a couple of branches that come, some from the north, importing gas from the u.s. and some from the south, bringing to the north, to the center and to the north where the economic activity and industry is, that mexico produces mostly in the southeastern part of the country. now, be these, these, this is a simple, i tried to put it in simple as possible, the investment opportunities that emerged in mexico with the reform, and the horizontal

actions, you see complexity of the projects and complexity is associated with the time that it will take for these projects to be, to materialize. you know, that you can see that the things are happening. and in the vertical axis you have the amount of investment of different projects. so you can see for example, when we were talking about gas pipelines. it is already there. it is happening. it is not a matter of the future and they're expensive. pipelines are not unexpensive project. so you are required. so the gas in mexico, there is no production of coal gas. coal seam gas. after the legislation is passed and it is expected to happen within the next, within the next, within this month so the day after that immediately comes

in project, coal seam gas production project will emerge. i give you list in a minute. you see in the northeastern quadrant of the graph you can see obviously 17 is up because it will take more time to see the things happening in terps of the deepwater. and it will require a lot of resources but things, that we have to, the purpose of this graph is really seeing that what has been triggered with the constitutional reform is a process and it is a process that will show up, first in some activities, some other activities, depending on their complexity and of the, a constitution and illegal reforms themselves. you can see 16, heavy oil, exploration and production in shallow waters. it is further, further, while it is, less expensive and it is soon that it will be sooner.

-- in each of those but basically think each of those panels correspond to about a year. it is not exactly possible to really do a precise exercise, but you can see let's say, one, two, three, the fourth, in the south, in the southwestern panel you can see there you have a lot of activities already. in 23, et cetera. what does it mean? it is here. so you can see from gas pipelines that are open now, and then you will see fuels, stations until 2017. this is still being discussed in the congress because people think it is too far away. that a lot of congressman really want to shorten that period. they have, it is quite clear they reached agreement on that and will do it earlier than what regional proposal of the government. that distribution systems now,

oil pipelines starting in 2015 of next year and so you can see step by step when that will occur. and it is easier to see here. you can see more with some details what is, how the reforms will evolve, and you see january 5th fifth as a critical, as a critical date because the, storage and distribution terminals of fuels will be opened up. oil pipelines and low gisttic pipeline terminal and dry gas production in 2015, also next year. production of material fields in the new regime the next year. so you move along over time and you can see in general 2018 domestic marketing of hydrocarbons. this is what nobody understands real well why is the government proposing to be so far away the

end of its administration, the administration of mr. pin net toe in 2018. this is amended by congress to make it sooner rather than later. if you move to the left you can see shale gas production in 2017. exploration and production project in 2017 and heavy oil, oil,emp and shallow waters in 2017. it would be feasible as long as the government doesn't leave that for pemex this is what ground zero looks like. what is what pemex requested from the government, to from the government to keep in terms of exploration and production? you can see it in the top, in the top, in terms of the research. the, what pemex keeps in blue and what the state would be able to actually grant to third

parties in contracts or contract with third parties, in three piece, 29%. two, 27% and so on. it is more important in terms of the lower, in the lower, the top of three of those above is what, in terms of prespective resources. pemex only keeps 31% or requested 31%. we don't know if the government will grant pemex 31% or less than that. they say you want it but you are not going to keep it. and in prospective resources you have 69% for the state that. woo would be contracted with private parties. in terms of type, the type of field, you can see there the reserves and the, the

prospective resources that each of those are. the most important, the most important one are obviously, in shallow waters. deepwaters is not bad. that is what is now 8.1 billion barrels of oil equivalent. you can see in terms of onshore, you basically the prospective resources that will be available for the state to grant to private companies is our equivalent to 82% of the known, the known reserves. so i stop here and, and then let's see how the conversation evolves. thank you for your attention. >> thank you very much. [applause] i neglected to mention in thigh introduction your current position is advisory services

for heco in new york. pedro, thank you very much. >> i will start doing something shocking for somebody that spent 14 years at mckenzie, that i'm not going to speak off of slides. i am not going to present any slides. so i apologize to my mckenzie educators who spent a lot of time teaching me how to draw slides. i'm not going to use it. i think jesus gave us a very complete, comprehensive, overview. i would like to, of the mexican energy reform. i would like to talk very quickly about a few points and then please stop me if i'm spending too much time. one is that the, the energy reform has been, to a large extent, you know, public

attention in mexico and even political attention has been focused on the enp part of about mexican energy reform. -- e&p part. that is natural because it is most politically contentious part of reform. it is the part that really required more than any other a review of the constitution and that has still to this day, gets the juices flowing when you have discussions, political discussions and discussions between panelists. however the, the energy reform is quite comprehensive. it spans the entire energy sector and there is a very interesting symmetry between the attention that has been spent on exploration and production and

the complexity of the reform. i don't want to, you to understand by this that e&p side is not complex and difficult but the rest of the reform is enormously difficult. it has a very large scope. so when you think about domestic fuels, residential fuels like lpg or consumer fuels like gasoline and diesel you think about the midstream and the infrastructure, you think about residential power sales and direction networks. all of those things are going to require a very significant overhaul and the, the creation of that entire regulatory, legal, regulatory and contract wahl framework is difficult to

fathom. -- contractual. i'm not belittling importance of e and n side, but just from execution complexity the non-e&p side of reform is pretty big. the other issue that would like to focus on, i think the ambassador mentioned it and i think we all agree with hem, that the reform is going to happen. it is slipping by months or weeks. we were told it would be ready at the end of last year and went into this year and we were told it would be done in june and july. now it is end of july, perhaps, first few days of august. it is going to happen. i don't think anybody has any doubts about that. the question is the amount of work remains to, to be done, in terms of, that once the legislation is passed. after that, we have to get the

regulatory framework in place and we have to get contracts in place. and more importantly than, just getting these things done, there has got to be a continuum between the constitutional reforms, the secondary legislation, the regulation, and the contracts, all of that has to hang together in a way that, you know, kind of makes sense. the fundamental dilemma, that i think the government and the regulators are going to find themselves trying to solve once the secondary legislation is passed because i think we're at the point where, whatever is going to be in secondary legislation is pretty much defined, although there is still some discussion, is that, if you leave the secondary legislation

excessively open and you rely, to a large extent on the regulation, which the government can pass without having to go to congress, you are putting a lot of weight on the authority of individual civil servants to take responsibility for decisions. they, it is going to be hard for them to kind of say, i'm just, you know, executing what the legislation has said. on the other hand if you create the legislative structure that is acceptably detailed then you know you're not going to get it right because nobody ever does, you know. you're going to have to make revisions. and so you don't want to have to go to congress for that. so there is the practicality and a, practicality issue that where

you have different, you know, you have tensions between different kinds of, of desirable outcomes and it is a difficult balance to find. so this is going to take, you know, i'm not saying it is not going to be sorted out but i think it is going to take weeks and months to get this just right and i know for a fact that we've heard that, you know, all of those texts are ready, in fact they're not. thank god they're not because i think they deserve a lot of attention. the other point i want to make is about operating challenges. pemex, and i'm going to focus on pemex because i spent 14 years there and so it's what i know, so i apologize for not talking as much, or you know, not at all about cfe. but pemex is a self-contained

animal and it's had operating legal regulatory discretionalty. so it can operate, you know, the assets, and it can make decisions to make whatever it needs to happen happen. let me give you an example. if you are producing offshore and you have several assets producing different types of crude offshore and you have a pipeline system that is gathering that production and transporting it to shore, whether you shut one pipeline down or you open up the valves on one particular, you know, field, more to compensate for another, that has to go into unscheduled maintenance, all of that can happen instantly and pemex makes it happen to make the production reach 2 1/2 million barrels a day which is what it is doing today.

now the problem is, if you take those pipelines and you turn them into open access common carrier pipelines, open access pipelines, now you have different producers, you know, that are connecting themselves to those pipelines possibly and then pemex can not just decide overnight that, i've got to shut this pipeline down because i need to do some unscheduled maintenance on it. all of a sudden that has production consequences on other players. now take that example and multiply it across the entire pemex system. pemex is going to have to transition from a monopoly situation to a situation that is rule-driven and it's not only because it is going to be competing but because the authorities, particularly the cre and cnh, the two regulatory bodies, are going to create a

series of rules. now you're not going to be able to have a system where these two regulatory bodies are, you know, credible in front of private sector investors when they are able to enforce the rules in front of, you know, enforce the rules for private sector investors and not for pemex. so this is going to create a lot of issues. let me show an example of this. right now, we have an issue, and i have some numbers here that i can share as an example. pemex has a plan, this year, the operating plan, to produce 2 1/2 million barrels a day. well, along this production. and i'm not, these are public figures. i'm not talking about secret figures of any kind. in, if you, if you compare

production with distribution, and distribution means refining plus export, you have differences of anywhere between 100 and 150,000 barrels a day and that is water. and it is water that comes from the several areas of production and particularly the canterel field. in month of may that number has reached 260,000 barrels a day. there is, it is a net number of about 150 and the difference is because there is a significant amount of production, that has not been able to processed either through separation or, or tankage and has had to be injected into the salt domes.

and so, those, that crude is going to be, you know, the water is, eventually separated, et cetera. but the water cut is increasing. so i have no idea whether there is a trend that is going to rise or whether it is going to stablize. but 150,000 gallons of water a day to clear as crude is a lot. apparently pemex is paying taxes on 150,000 barrels a day on water, but it wants to consider it crude oil production because it wants to be able to report that it reaches the 2 1/2 million barrels a day. now this is a number that can not continue like this. at some point the government is going to have to recognize this is water and not crude and it is going to have to claim down from that number, which is as i said already there. the statistics if you care, you know, to dig a little bit. so, you know, this issue with

statistics becomes absolutely crucial when you have to introduce private sector actors into the picture. for example, we know that there has been some issues with investors in the incentive-based service contracts where some of the baselines that pemex had originally given were proven not to be, you know, once they had been reported originally. in the future, when you're talking about farm outs for example with psas, if pemex goes ahead with some of these farm-outs and some of the baselines prove not to be correct then the private sector investor is going to litigate. obviously the original data and the -- are not correct. so anyway, there is is a big

issue. all i want to say in this respect that shifting from a state monopoly to a market solution is a very complex endeavor and the, the managerial transition in addition to the regulatory transition, the managerial transition for pemex is very difficult. and remember, some of these issues that pedro mentioned like the tax, the budget issue have not been changed and particularly importantly, the lable gore relationship between pemex and its union has not been changed. so, you know, i fail to see at this point to visualize how this transition to a more efficient market-driven company is going to happen. i was also asked to mention how the the energy reform was

visualized by the private sector. let me talk about one thing first, how it is visualized by the mexican public opinion. jesus also mentioned and he made a reference to it too. one key difference i think in general the public is not very keen on the energy reform and it is not that it doesn't see the need to modernize pemex and cfe. i think the public is not stupid and it recognizes that these companies need to improve. i think the key problem is that there is a fear of corruption and there is a fear of ineptitude in the management of this transition and there's a sense that whatever improvement is going to happen is not going to mean anything for me, the citizen. that, those are the big issues

that the government has. this is really important because in my mind, the test of the success of the reform is not whether it brings gazillions of dollars flowing into mexico. in fact i disagree with the government vision that this is the thing that is going to bring, put the economy into a higher gear. but, i think the key issue is that the durability of the reform. and the durability means two things. first of all, credibility with private sector investors, over the long run. and secondly, legitimacy in the eyes of the mexican people. and, achieving that balance over a long period of time, that is what is really complicated.

and that is what's, you know, tough to achieve. now the second part of the impact is, with private sector investors. and there, i think that you're going to see, a wide variety of attitude. i think deepwater offshore, companies are pretty comfortable in the sense that they don't have to deal with any of the insecurities onshore. they can, they understand more or less the geology because it's not-too-distant. particularly some parts around perdido, et cetera, it is not-too-distant that what they're looking at on the other other side of the border. the problem there is actual drafting, the detail of the legislation and, the potential, the long-term potential that these companies can see there

and think you're going to have, would i guess, that unless the regulators, the regulation and the contract wall arrangements are -- contractual arrangements are suicidal, you will see a lot of interest. it will be complicate indicated and depend very much on a company to company basis. to me the biggest danger there that the regulatory, it is a gresham's law kind of problem. it is a situation where the good operators stay away and the, not so good operators essentially, you know, manage the regulatory complex they're, the security complexity, the water issues, et cetera. one of the big problems that we had in previous deregulation like the gas deregulation is the fact that we never really

managed, the mexican government never really managed to coordinate the federal, the state and the local level. so i could see a situation where, you know, you have your federal permit. you have earned your acreage. you show up with a drill rig and state authorities or local authorities prevent you from drilling and that's a big issue that is going to have to be addressed at some point. there are some mechanisms to do it. but i think it's got to be addressed in greater detail. i think the private sector, there is a little bit of a, i will finish on this point, a bit after disconnect and disappointment on the part of some people from the mexican government because they feel would have expect ad bit more enthusiasm from the private sector and the private sector is now in a wait and see attitude.

the problem is, that if you're the head of business development or exploration for one of these companies, whether small, medium or large, you have to propose to your investment committee or our executive committee or your board a project that is quantified and that is risk-adjusted to the umteenth level of detail and that level of detail today is not known. so there are people who think it is going to get done quickly. there are some people who think it will take, you know, a much longer, maybe, two, three years, to get there. some people who are going to be first off of the, you know, the starting line. and there are some people who are going to wait and see, to see how it evolves. so, i think it is, you know, the timing is more or less the one that, that hay sues -- jesus

described. the actually details and translation into investment opportunities and decisions is going to be, is still to be defined. >> thank you. [applause] >> senor morse. >> thank you very much. honor, privilege to being with you. thank you for the participation. i address global markets what might be unfolding in and unfolding no north of mention coand other parts of -- mexico and north america. let me first note that so far the unconventional revolution in the u.s. and canada has not been kind to mexico. it is not as though the u.s. is intentionally or not following a

good neighbor policy it has been a pretty bad neighbor policy in terms of making the gulf of mexico market in the united states extremely competitive and less rewarding financially for pemex and the mexican government where, if there were a big, open, global system that could process mexican crude undoubtedly the net back to mexico would be higher, if not substantially higher than is currently received on the u.s. gulf of mexico coast. i will talk a bit about this as i go through the story there. the other thing i might note in terms of timing and it is the only subject that plan to raise outside of the implications for global markets is that time something pretty exquisite in terms of the potential opening of mexico to foreign investment. if you are a big international oil company or, an even more modest-sized oil company and you are looking for a place to invest where there are opportunities for large-scale

rewards, they are canada, united states and the others are russia, iraq and iran and that doesn't leave much room. so i think, given the light of geopolitics recently that companies will find mexico with all of the difficulties of defining on risk adjusted basis, the risk/reward opportunities will likely be moving towards acceptance of risk for the potential reward just in terms of where else one can go. mexican supply is the third leg of a north american energy revolution. i think we can debate, and we have to make assumptions on that debate about where mexican output could go, what is used, kind of government general numbers, increase in production of half a million barrels a day by the time of president pain i can't's end of term and -- pena's end of term and that is

conservative number in terms of the resource base and in terms what might be possible. just looking across the divide in the eagleford where recoverable resources on mexican side exceed those on the u.s. side of the eagleford, it would not take much if this were the united states to get non-conventional production up to a half a million barrels a day, let alone, whatever might be happening on the conventional side. so let's use these as working numbers. canadian production is likely to continue. these are quasi-official numbers based on the cap so current production in canada is roughly 3 1/2 million barrels a day and, we can kind of readily project five million barrels a day adjusted where the price of oil may be but there will be up lift as canadian oil reaches water-born markets even back to

the wellhead even if global prices falter. in addition to say half a million or 700,000-barrels a day by 2020 for mexico, there's another million 1/2 from canada and on the u.s. supply, our own view is that there is going to be around 4.3 million perils a day more production by 2020, in comparison to end of last year. 3 1/2 million of that is onshore. hundred thousand offshore, mostly deepwater -- 800,000. two million barrels a day ever natural gas liquid. if you add all of those things up, we see u.s. production having risen to a total of over 12 1/2 million barrels a day, maybe close to 19 million barrels a day actually if you all of these things together in terms of increments including, including ngl liquid this is very robust

probably fastest growing sustainable area of production growth in the world and it is north america and i actually have used these slides in this room before. we just saw the u.s. side see the net balance going positive on the u.s. net oil side before the end of the decade, if you take into account where oil demand is going. so we see the oil and gas tray balance combined becoming net positive by, by 2020. i know guy talked about north american self-sufficiency as did jesus a little bit but i think the atlantic basin versus the rest of the world. the atlantic basin is a self-sufficient environment. that is result of decline in european refinery requirements and the growth of north american production. growth of western hemisphere

production in general. any growth from now on is going to make the atlantic basin a surplus area. if you just look at the supply demand balances in the atlantic basin, and that means there's a lot of crude oil coming into the atlantic basin that is kind of trapped there i will talk about it very quickly. the late atlantic basin crude deficit is really fading so fast that it is likely to end by the end of this year. the u.s. has pushed out almost completely imports from africa. we are pushing out imports from the middle east. but the problem is not by enough because imports from the middle east still are well above a million 400,000 barrels a day and by the time we get to the end of this year and have

pipeline capacity to bring canadian crude to the u.s. gulf coast, that reliance on crude from outside of the atlantic basin is going to fade substantially. we can talk about u.s. exports restraints loosening to the degree there is a loosening of u.s. export constraints. it will feed into a growing surplus in the atlantic basin. i've also used part of this slide in this room before, indkaying in our own view that under the current regime for oil experts, that the u.s., if not by end of this year, certainly by this time next year without any change in policy will be exporting, probably over a million barrels of day of crude oil and we'll see canadian crude coming into into the u.s. through increased pipeline capacity in the mid continent of the u.s., bringing crude to u.s. gulf coast where it will compete with crude oil from saudi arabia

and kuwait, venezuela, colombia, mexico and iraq which practically sees no crude oil imports. already mexican crude oil exports to the u.s. is falling even more than production is falling because there is not enough room in the u.s. gulf refining system to refinal of the crude oil coming from mexico. we're seeing diversion of crude to europe and to the pacific basin where, again, the pipeline at salinas crude has been exporting into the pacific basin, including into the u.s. west coast and in growing numbers. the real, the real place where crude oil exports are needed from the americas is really asia where the deficit currently around 21 million-barrels a day

will grow to 24 million barrels a day by the end of this decade if not more. and mexico is no exception looking increasingly to asia and europe. one of the other places that one can find incremental north american crude going into the pacific basin is from canada but pipeline politics in canada are very difficult and it looks as though we'll see significant amounts of crude oil from alberta moving east to the atlantic basin by pipe and rail and south to the gulf of mexico by pitch and rail. and that taking advantage of the higher that can be realized in the pacific basin. so mexican crude may be the only north american crude to take advantage of that. . .

the problem is worsened by the fact that some of the exporters to the western hemisphere, saudi arabia and kuwait have the exports relatively sticking on the saudi side because they don't want to lose market share, and rely on east asia and south asia for market growth. and kuwait because they believe

exporting 330,000 a day to the u.s.-gulf coast market no matter how primitive it may help keep 15,000 us troops there. so there's a sticking amount of oil that won't leave the atlantic basin making it more difficult for the crude produced in both mexico and canada to achieve a kind of fair market value in the global marketplace. even though canadian crude as likely to have the highest net back, it might have by exporting through the pacific, that's not likely to be the case. in the liberalization of u.s. crude oil exports is going to even make the atlantic basin market more crowded. so the challenge for mexico today, exacerbated by a growth of 500,000 a day, maybe by 2018, 700 or 800 i 2020 and a minimum of a million by 2025 is where to

maximize value, we are to optimize the maximization of value of that crude oil, and it looks like that won't be easy. anyway, thanks for the opportunity to share this little addendum to the other remarks. [applause] >> thank you, ed. well, thanks to all three of our speakers for a comprehensive overview of the reform by jesus, and i think a very sobering realistic view of the challenges faced by the implementation that pedro outlined, and then ed's view of how these might affect the global market. and one thing i can say about ed is, i look at those numbers and i said, looks like it's going to be a challenge to get those into

the market without causing downward pressure on price. but when you think about all of the uncertainty we are now facing. 2020 still as ways. with uncertainty in iraq, iran, nigeria, et cetera. i'm glad that we do have these potential news sources of supply because we're probably going to need them. and with that, i know we are getting tight on time so political right to cuban day. so please identify yourself and your affiliation, and keep your questions as concise as possible. i appreciate it. >> hello. and dr. donna wells, an expert in the russian -- happened to be a major -- native texan. we reading about mass graves and heads on pikes down the. should private investors be concerned about cartel violence or possible growth and political power of the cartels?

thank you. >> you're a cartel expert. >> i certainly -- you know, i think that there are parts of mexico where you will have to contend with these issues, and in some of the companies present their like schlumberger, halliburton, already are. i was told recently that control risk that manages the security risk for schlumberger, great northern mexico along, on the same level as southern iraq. although that was before the situation we have right now in iraq. but i do think there's some issues that the companies are facing. when you talk to some of the players fatality, well, you

know, i'm in yemen, i'm in nigeria, i think i can deal with northern mexico. so it's not that they disregard the security issues, but it's a that oil companies are pretty, a pretty hearty lot. and some of them, not all of them, interestingly, i mean, if you're an operator in south texas or west texas, and you're going to mexico for the first time ever, it's going to be all bit of an issue and you're going to need to find crews that are willing to go to mexico, et cetera, which you might not. on the other hand, if you are let's the and oxley, for example, oxley is in pretty rough places. are they going to feel comfortable there? not comfortable i didn't think they can manage it? i think they can. there's another dimension which

and what he focuses issues. i think there's also big issues in terms of community relations. this is a big issue that happen when we're talking about the gas reform. because pemex has ways of dealing with it that are not nested open to the private sector. and in areas, for example, offshore in the south of mexico and tabasco, you have a lot of kennedy relations issues. i understand there's one particular service contract that is operated by schlumberger where they haven't been able to operate the first day. they haven't been able to go at all. so those are issues that are going to have to be dealt with, no doubt. >> maybe we could take a couple of questions, starting with one year and then any over on this side, and that would be second.

>> i'd like to become something that was said, and ask a question based on his experience as director general of the next. given that you have an entrenched bureaucracy in pemex which is used to doing things in a certain way and that now the rules are changing it takes away a lot of the authority and power and ability to act as a monopoly, and also how do you think that transition will go and how long it's going to take before you reset the mindset of these people that have been used to running things for so long? and what's the impact of that on retention of these mid- and senior level executives in those institutions? >> thank you. next question and then we will answer them both. >> inter-american development bank. i was just wondering, i didn't hear much about environmental assessment impact, and i've

noted in several other jurisdictions that you move one reform ahead but you will also need all the environmental proposed to be able to move several projects ahead. how do you see that working out together with the communities approval and so on for several of the projects? >> jesus, maybe you can answer the question that pemex and then whoever -- >> well, i think that pemex cannot be changed from within. i mean, i probably am living proof of that, no? so it needed a major shakeup and it had to come from outside. this does the trick, obviously, these reforms, because it really puts pemex in competition in every aspect of the whole chain. now, the big issue is, i think

from within pemex, if you sort of, obviously the top top management is convinced of the reform and they are working for it. the issue is how successful they will be to implement the changes within the company so that pemex is able to cope with competition, and at the same time by doing so allowing a significant and rapid expansion of the private sector in mexico. actually a lot of companies really want to go to mexico partnering with them. but, i mean, there are some, they might raise, might arise in questions related to the capacity of pemex to be a good partner. which in turns has to do with the regulations and with the treasury and the way the

treasure is going to treat pemex. i think that the critical issue is that within pemex some of the most important layers of the guys were in the field, the supervisors, they accept the notion of eliminating the exclusivity of pemex. it was a very important discussion about this in relation with the reform of 2008. taboo of discussing these issues was eliminated. in 2061 entered into it there was a prohibition got to talk about it opening of pemex in the sector. this is only six years ago. it's a completely different ballgame now, and everybody is discussing that come every

political party includes this topic in their agenda and so on. so i think my perception is this, this letter of executives to accept the fact that the exclusivity had to go and that pemex had to compete with other companies. but, and this is a very important but, but in a level playing field. and it's there where the fact that they took pemex out of the budget and the, i will say excessive intrusion of the treasury in many of the decisions of pemex creates a problem. because some of those middle layers and high layers are completely unhappy with that. okay, you want and we want pemex to compete, let us compete. but do not put us in an un-level

playing field. if you're really making an assessment, it seems that the big loser of reform as it is is pemex paradoxically, because one would say that within the mind of the government, strategically thinking, they need to understand that they need pemex to be the dominant company for quite some time, some years, for the country to keep moving ahead. the other thing is impossible to imagine from day one today to end the monopolies is gone and everything else is done by someone else. and that is not, in my mind, is not clear that they really get it. it's a complicated thing and had to put a lot of attention to that so as not to become an impairment of the reform. there are other aspects, a taxing aspects and other things but i leave it here. >> in answering the question, is

the environmental protection regulations, are they part of this secondary legislation or are they different? >> will actually the constitutional reform did include the creation of a commission on a security issue -- not security, safety, labor safety issues and environmental aspects in the energy industry. it will become a new agency. and i would say pemex has made a lot of strides over the past years, so i have no concern with it. actually if you see the records of pemex compared to other national oil companies, pemex does very well. the issue is the environmental, and environmental has to do, i'm not very concerned about current operations of pemex in regard to

the environmental impact. there are some, as every company in the world has, but if you see the standards with which pemex operates currently, they are relatively high standards. the question has to do more with the issue of shell operations. how will all the discussion that is really going on in the u.s. and in other corners of the world in regard to the technique be dealt with in mexico by the agency and by public opinion and by the government. that i think is a critical issue. now, there's an important difference. if he saw the map that actually presented here, it's very interesting that some of the areas where there's potential for shale operations in mexico are on the coastal area. and that makes a big difference in regard to the issue of water. because there are some, not just

bordering with the u.s. and very north, it's a dry area, but as soon as you move a little bit further south, especially in veracruz, there's a lot of water. it's a completely different thing. now, we are not going to pollute the water. the issue is what techniques to use to return the water in the same condition that they were taken from nature. and that well, the good thing is that there's a lot of ways that have been already, progress that has been made here and then the u.s. with technologies and with no house of how to do that. -- the no house. that will benefit mexico just by sort of receiving the know-how with investors that would be interested in doing that. the downside of that is most probably there will be a contamination of the discussion

because the discussions of these are transnational and they will clearly raise the issues. it's already starting an interesting debate about those issues. those are the ones, i'm not talking about there. that's a different, and missions of co2 or something like that, that's different. i'm talking about more the water issues. >> okay. we've got three more questions. i think that will have to wrap it up because i know to for speakers have type travel schedules. one, and then to overhear. >> thank you very much for your presentation. there have been many comments about the excess of optimism in the goals and benefits from the energy reform recently, the oxford institute which i believe mr. haas is somewhat fully because it was a paper recently released that was highlighting the lack of services for deep

water exploration, that the new fields would hardly offset the production in mature fields, and one of the current ceo of, not current pemex counselors said that the government should address in the secondary regulations and the secondary legislation whether the country should follow model of production with the dominant regulator or a dominant producer. and my question on the international aspect is that the discussion about international prices, self-sufficiency does not necessarily mean independence from markets because we recently saw the instability of prices with the iraq war. so in this context, how will the mexican government will address and will try to attract and retain foreign investment? >> let me have a few more and then we will finish.

>> hi. i'm a student at penn state university. i was wondering if the panel could elaborate more on the fiscal structure of the proposed exploration and production contract, and also, what are pemex is strategies relating to the diversifying their international trading partners and what role do u.s. and chinese firms play in this investment? >> good afternoon. i'm doing an internship here in a consulting company, but i'm a mexican citizen so i'm going back to mexico, and mr. haas mentioned that there are a lot of questions between mexican people about how these reforms are going to be a benefit as a mexican citizen. as far as i know, the taxes that pemex paid, it's about a 44 cents annually for the mexican

budget. so i think that if we bring new companies that are going to actually sell this thing product that pemex cells, i think, so pemex sales are going to drop. and if mexico is abiding other companies to invest in mexico, i think mexico needs to offer something that is attractive. so my question is whether these copies are going to pay the same amount of taxes that pemex paid, or if not, what is this money, this money that pemex is going to stop producing, how mexico is going to produce this money, or where is this money coming from? >> and ed, maybe you could answer the global -- do you have a time? >> let me start with the fourth and then we'll go backwards, if that's okay. because i think the fourth is very important.

the guidelines that are in the legislation about how the contracts will be are very similar to international, the international guidelines. the are a couple of issues. but there are like four variables that the government will actually move when crafting contracts with private parties in terms of granting them a permit or license to exploit some areas. i think the bottom line of all these discussions is the following. mexico will have to have a competitive contract scheme. because, otherwise would be an absurdity in the context of the reform. you make the reform because you want more investment, both private and public, into the

hydrocarbon sector. it's not bringing private investment instead of pemex investment, because that would then, it would be a subzero -- sums are again. you need to keep pemex investing and bring other players in competition or in partnership with pemex to bring additional resources so that you can multiply the number of wealthy drills and the installations and facilities being constructed and so on. so the contract, the taxing aspect of those contracts will have at the end of the day to be competitive to international, all factors that have to be considered. so that is the basic point. it doesn't matter which one of those four variables a move. that depends a lot of if the government is eager to get some

resources sooner than later, or if they are willing to sacrifice some resources, some income from those contracts in the short term for the future. and then you can do all sorts of plays and models and all that. but bottom line i is a number at the end that the government takes, that mexico's government is going to take from the contracts that will be negotiated with private parties and with pemex will have to be internationally competitive. and the clarity is there. there are some other issues that may be the scheme is a little too complex because the treasury wants to have an opinion in each contract, things like that, bureaucracy. in my view not needed and should be done in a more systemic way. but as those our second eyes, the issue is competitiveness.

i don't know if i responded to your question, okay? >> i have a complementary take on this. i think that one of the issues that the government faces is the selection of the assets that it wants to put on the block, and the sequencing. that's really important. let me just give you an example to stop speaking conceptually. let's say that you start the auction with deep water offshore in areas where pemex has actually, you know, it says it has found something but it's uncertain how much. there's no reserves and the prospect this kind of doubtful. well, you know, you have attended 12 years been between discovery and first oil. you have very low prospects.

you have some seismic data but not really a lot. so you're taking a lot of risk, and if you want to go into that, if you want to start your auctioning of acreage that way, you're going to get very few players because there's not too many people who play in very ultradeep water and as low prospect of it and there's lots of risk, and a very long life cycle to first oil. if you start on the other hand, and nobody knows where the energy reform is going to look like and what of issues, all that remains to be tested. so you're starting with very high risk stuff and with a very uncertain practical application of the reform. now let's say you do it

otherwise. you say, i'm going to go to shallow waters offshore. you know, i'm going to auction the block that's between the two sites. those blocks right there. prospectivity is very high, a lot of hydrocarbons. you know, if you're an oilman, where do you look for oil? where there's already oil. and so you have shallow waters which are very easy to operate in. it's 150 feet of draft that you have a lot of undersea infrastructure because the pipelines were designed for 3.5 million barrels a day and you are now at 2.5 million barrels your country and country and country and country. is relatively low risk in comparison to ultradeep water. so the amount of money that people are willing to pay for that acreage, the enthusiasm that you going to have for that acreage is a lot higher.

so it doesn't only depend -- i mean, i agree with what jesus was saying but it doesn't only depend on the marginal tax rate and the royalty rate, et cetera. it also depends on how you want to start. and i know that pemex gets ulcers when taking that the mexican government could auction blocks in shallow waters offshore, because that's their turf and that's where they think they have a chance. but the question is, if you're thinking about the development of the mexican oil sector and you're thinking of attracting foreign investors, if it was my money i would start with shallow waters. and then you prove the concept, bringing people with low risk issues, and you're going to have a lot of competition. you have many more companies that can operate in that environment. and once you prove the concept and you start, you know, filing,

you know, sending the rough edges -- standing the rough edges, then you get a much sturdier legal infrastructure and regulatory infrastructure. you have proven the concept, and then you can move ont move on te comforted areas. so there's a big decision on the part, i have no idea what they're going to decide. i'm not privy to the discussions, but they have to make design discussions. they have to make sequencing discussions. they have to make decisions based on sequencing, based on how much they're going to give to pemex, you know, of that request that jesus was talking about. and all of that is going to have an impact on the unfolding of the reform. >> does the changing situation in north america have, change the policy goal or the targets

about whether mexico would sell that oil now? i think, i think one questioner asked whether new oil will be going to china or -- >> listen, i learned many years ago, i spent 12 years in international trade, and then i consulted for many companies worldwide on international trade issues. crude oil is cash. basically, okay? there is no problem. >> i remember that hedging. >> there is no problem with selling crude oil. the only question is at what price you will sell it and that has two dimensions to the one is efficiency. are you getting the market price? you will not get more than the market price. you have to be careful not to get less than the market price. and the second is whether you're maximizing the net back a treasure going to the right market. that's all there is. pmi, i think, has the international trade subsidiary

of pemex has the capability, analytical and commercial, to market their crude oil where every makes the most money. it's a question of whether mexican energy policy will give it the freedom to execute whatever sales strategy is needed to maximize the return. but that's all there is. i don't think there's any particular ministry in it. >> did your questions get answered? [inaudible] >> i don't think they will meet economy, the government has a 3 million-barrel a day go by the end of this administration. the number is not to million and a half current production. it's 2,350,000, as i mentioned.

plus you have the decline, and to make up for that i just don't think that they're going to be able to reach 2 million barrels a day. now, i think there's another issue, which is that one of the problems we have is that the government i believe from the very beginning, because it had all these political constraints and it had to make sure that the whole legislation would pass, et cetera, has been making a lot of commitments and promises. you know, balkans the production, declining prices to the public, et cetera. i just don't think those are tenable. added don't think people believe them. and i think the government can get in trouble because it promises things that it's going to have a hard time delivering. does that mean that it invalidates the reform? i don't think it invalidates the reform. this is a very ambitious, complicated reform. it's going to take some years to

get done and polished and executed in a way that, you know, has never been done in mexico. and so it's normal that we're going to have bumps in the road. the problem is if you promise that you'll not be any bumps and then there are bugs, people will say, you lied to me. come on, i mean -- >> the exceeded expectations part of the process of selling the reforms. every government tries to push for reform, regretfully falls into promising things that are too optimistic. and that happens also with the energy reform in mexico. it has different implications in mexico and outside. so the issue here is managing the expectations because the reform is a very serious, very profound reform. the government finally after years of discussion in mexico actually made -- the ball is

rolling. it's going to be a huge ball when it gets down. so let's not hope, let's not lose hope, not hope about perspective of that. that is true now. expectations of short-term and changes and so on. that will happen but it's a really. i want to add one element in regard to that, it one has to also be confident about the capacity of mexico. just think about the changes in the energy and gas reform of 94, 96, whatever. at the end of the day it didn't work. at the time. the regulations were there. nafta before that, nafta, institutions are there. the country has been able to build up the institutions that are needed to implement a big changes like that. and the country is an open country. so there are many questions, the

mexican economy will have the capacity to respond to a very, you know, demanding, a high demand for labor. you talked about that for labor and supplies and companies and engineering capacities and so on. and the response is mexico by itself, no. but it's an open economy. and just it's enough to member of the u.s. and canada right there. so with that the capacity -- i'm not concerned about the capacity of mexican response in that aspect of it. regulations can have 10, nine, eight, five. you can read them but it's there. >> i have a problem there, and this is a discussion we might need to have at a later date. but i think the gas regulation to me, and i will see with pemex gas when it happens, was exactly

the example we have to avoid. we had constitutional reform. we had regulatory reform. we created the cre. we had all the and whistles, and i think the reform failed and the proof that the reform failed is that the economy has had gas alerts, gas supply a large, and that it has been impossible to build the infrastructure to supply mexico with the gas. and that's the thing that we have to avoid. we have to avoid a regulatory -- a legal and regulatory and vibrant that does 95% of the work, and then falls short of the last 5% that you need to actually execute the point. and there is that risk. i think it's going to be -- i think it's going to work, but i think it's going to be complicated. i do think there is a risk in this particular case that we also fall short, because of x, y or z, just like we did at the

time of the gas reform. i hope it's not the case, but it's a complicated issue and i think that unless we are very, very aware that it may happen to us again, i think we run the risk that it will. if we are aware that it happened to us and that we are able to go back and see what went wrong and we avoid the same mistakes, i think then we have a better chance. but it's not that easy. it's not, you know, a piece of cake. >> well, thank you all for a very realistic discussion. [applause] >> thank you, ambassador, for coming and joining us. and thank you all for joining us. >> to senate hearings today. first, at 10 eastern the senate homeland security committee hold a hearing on security of the u.s.-mexico border with the

heads of fema and u.s. customs and border protection. you watch it live on c-span3 and c-span.org. at 2:30 p.m. eastern a senate commerce committee hearing on college athletes and role of the ncaa in governing collegiate sports. that will also be live on c-span3 and c-span.org, and we would like your reaction to both hearings on twitter and facebook page. >> now you can keep in touch with current events from the nation's capital using any phone anytime with c-span radio and audio now. simply call (202)626-8888. congressional coverage, public affairs forms and today's washington go program and we can listen to a recap of today's events at 5 p.m. eastern on washington today. you can also audit of the five networks sunday public affairs program beginning sundays at noon eastern. c-span rate on audio now. call (202) 626-8888.

long distance phone charges may apply. >> education undersecretary ted mitchell recent talk about how local, state and federal officials can work together to improve education and make college more affordable. this is from a meeting of the education commission of the states, the group that advises state legislators on legislation research a policy. it's 40 minutes. >> [inaudible conversations] >> good afternoon, everybody. this is our final plenary session of the 2014 national forum. i think this has just been a fabulous, fabulous conference. if you all agree, please clap. [applause] >> i personally want to thank you all for attending. and you know, i shouldn't be

such a cynic. i thought we would have as many folks as we do here for this final session because everyone needs to get over the holidays. but if it shows your commitment and dedication to education, so i appreciate what to do. i hope that you agree with me that since, during the conference that the speakers have been challenging to your thinking. that you've been exposed to new ideas, that you've met people from the state and across the country and really gathered some new ideas. i know i have. of checksum at the table my problem now is there have been so many good ideas that i want to bring them all home and my staff, it drives my staff crazy because let's do this, this and this. but my superintendent is nodding. but in any event, i do want to take a minute to thank our corporate partners. they have helped make this national forum a complete success. so we need to thank ge foundation, lumina foundation and usaid funds. please give them a big hand.

[applause] >> and now it's my pleasure to introduce ted mitchell, the undersecretary of education. the undersecretary overseas policies, programs, and activities related to postsecondary education, adult career and technical education, federal student aid, five white house initiatives and the center for faith-based and neighborhood partnerships. partnerships. can't believe he is made time for us. that's a lot, but please join me in welcoming undersecretary mitchell. [applause] >> thank you, governor. and thanks not only what sounds like a great conference, a terrific invitation. so pleased to be here, but thanks for the great work you are doing at home. you are a champion for high quality education for all the kids in your state, and we are

the beneficiaries of that, so thank you. it is terrific to be here today to talk with you and as i look out literally in the room there are a handful of very, very dear friends and it's great to be back doing this work with you in d.c. before i start, just a moment of personal privilege to tell those of you i don't know a little bit about what i do this work and what got me into it. i'm a hearty teacher, speak of which, or any of the state teachers of the year still around? [cheers and applause] thank you, thank you, thank you. you are what it's all about. the rest of us just exist to try to make your work better and easier. so thank you, thank you for what you do. i want to talk about teachers and teacher education in a little bit. i'm a teacher at heart i think all of us have spent time in the classroom, why we do what we do often comes back to us years

later. so i got a letter from a former student of mine a few years ago, and it started out the way so many of those letters do which is i'm not sure you remember me, but. and you always do, don't you? you always remember. so the students and images and the stories come back. this is a young woman who had been a student of mine when i was teaching education policy courses and she was a great student, went off to be a teacher and high school principal in rural area of vermont to the occasion for letter was a tragedy the. she was in a campus tragedy and a young man had died. she wrote to me and she said, you know, on reflection i don't think that i could have gotten through that experience and understood the dynamics, the coveted dynamics between the school, the committee, the press, the media without the things that we learned in your class. but as a result, i've gotten

through it, the school is gotten through it and the community has gotten through it. thank you for what you taught me. so it's not about me but about the power of education. that story i think is what we are all here for. it's because we believe in the power of education to transform individual lives, and for educators to transform the lives of their schools and their communities, and ultimately the nation as a whole. i think that's what brings us together and it's certainly what drives my work. so my message to you is a simple one, and i'll start and end with it. and that is that none of us can do that transformative work alone, whether it's the school or a state or district or the federal government. we have to find ways to work together. to make the education system work. and especially to make it work

to change the trajectory for young people who were not dealt a hand of high cards, the most vulnerable children and youth in our communities. in its fifth dashing in his fifth state of union address president obama laid out a clear vision, that every child in america must have a chance to succeed. he said and i quote, opportunity is who we are. the defining project of our generation must be to restore the promise of opportunity. and equity and opportunity are the core of that. and they are core american values. everyone in this country regardless of income, home language, zip code, gender, sexual identity, race or disability deserves the chance to learn and achieve. and today as never before our collective comfort and our national security rests on the

quality that all, not just a few, but that all of our young people have. and there is no issue more central to promoting stability, prosperity and mobility than preserving the american promise, the route promise that through education, children can succeed, achieve and move into the middle class. i believe strongly that history will judge our generation by our success or our failure to reach and realize that vision of fair chances through education. ..

those low-skilled well-paid jobs are gone and they are not coming back. today's knowledge base global economy jobs will go to the best educated workers and the work force. just a generation ago the nation was first in the world in college completion rates among young adults and today we have fallen to twelfth place. secretary duncan put it recently, quote, whether you care most about the possibilities of a young girl in detroit along term nation's economy the conclusion is the same. we cannot be twelfth in the world in college completion and still be the country we want to be. we are not what we want to be when 9% of students from

low-income families expect to earn a bachelor's degree, not when 35% of the students in massachusetts still need remediation before they can begin true college work. now more than ever before post secondary education whether four year, two year, technical or trade training is the ticket opportunity to the middle class. they are the best investment in the individuals can make in their future and the best investment in the nation can make in its future. that is why president obama made the goal of regaining our global leader in college completion america's educational north star. we made progress. the administration worked hard to alter the landscape for the better. our reform agenda aims to create world-class free k through 20 education system to boost

student outcomes through higher standards, better assessments, to recruit and retain more highly effective teachers especially in high need schools and to dramatically reduce the dropout level of all levels. the agenda is focused on making college more accessible and affordable, ramping up quality in post secondary certificate and to agree completion rates for all students. we can celebrate signs of progress. you know this year for the first time the nation's on time high school graduation rate reached a high of 80% in 2012, that is a testament to the hard work of our nation's teachers, school leaders, and families. college enrollment, college completion are also on the rise and i think the best news is those rates are being led by

african-american and latino students. these achievements drive our 2015 priorities and i want to name five for you. priorities for the next year our first, increasing equity and opportunity for all students, second making quality preschool available for every 4-year-old in the nation, strengthening support for teachers and school leaders, making schools safer for positive learning environments for all children, last improving affordability, quality and success for post secondary education. achieving these goals is fundamentally important if we want to make sure every child has the opportunity i mentioned earlier. i would like to think of the first priority, the equity and opportunity priority as the umbrella under which all others exists. the administration commitment to equity underlines every

significant piece of work, and we acted on the idea of education as an engine of opportunity in program after program. race to the top, promise neighborhoods, investing in innovation program. these all have equity and opportunity team that is palpable. this year we are proposing a new competitive fund that focuses laser light on the issue of equity. raised the top focus on equity and opportunity. that will aggressively target opportunity and achievement gap in that school and on the state level. in the interest of time i would like to focus on three priority areas for the rest of my time, early learning, teaching and leading and higher education. let's start with early learning. the foundation of a thriving middle-class started in the

home. it continues through quality preschool program and it is one of the few places where social science research is unambiguous. the research again and again demonstrating children who have richer early learning opportunities are better prepared to thrive in kindergarten and prosper throughout their rigid racial career. every public dollar spent on high-quality preschool returns $7 in social investment through reduced need for expenditures on other services and increased productivity in earnings when these children become adults. early learning, one of the best investments we can make in the future of our country and an area of refreshing agreement in this town. both democrat and republican leaders stepping forward as all of you are in your states to improve access and quality for programs that serve our earners

and the public agrees the time is now for increased opportunity and access to early learning programs. we have got a way to go. fewer than three in ten 4-year-olds are involved in a high quality program and variation in quality is extreme. that is why president obama committed to a historic new investment called preschool for all which would build the state system needed to provide all low and moderate income 4-year-olds with high quality public preschool. preschool is voluntary, and builds on the federal-state partnership in which the federal government takes early investment lead and gradually states take over the funding and calculations show this can be funded especially in the federal years with no additional to the deficit. finally, preschool promotes access to all day kindergarten

and encourages expansion of high quality program to include kids in low-income populations and low middle class as well and we have a $256 million grant program for preschool development which will help education agencies and local governments builds the fundamental components of that high-quality preschool program. you heard it here first, applications will be available at the end of july for that program. we will continue to work with all of you and with state and communities to ensure our youngest citizens have access to high-quality early learning that prepares them for success in school and life. let me turn to teachers. the president's plan for 2015 continues and builds upon the significant focus on teaching and learning from the administration's first term. for instance several years ago

the administration officially launched the recognizing educational success professional excellence and collaborative teaching, or respect project. throughout the year 2012, department staff and teachers held conversations across the country to develop a shared vision for transforming the teaching profession. as a result last year we release the respect blueprint we hoped which was a tool for districts and communities that reflects the shared vision statement for transforming the teaching profession. was co-written by leaders of national organizations representing teachers, district and state superintendents, school boards, the department of education and teachers themselves. the obama administration has proposed significant investments going forward that support teachers and leaders who are doing our daily working class rings and communities.

technology, you heard yesterday the power of technology to transform the classroom, how is he, by the way? is your right? as a former bed -- board member and need to check in on him. i will let him know. the technology, whether it is south con or things you are working and then using your own classrooms can empower teachers to provide effective instruction and personalize learning at a level we had never been able to imagine until now. 30% of america's schools have a broad band they need to connect to today's technology. under the administration connect did it initiative 99% of american studenstudents have ac next-generation broadbent. this is particularly important rural communities that are afterthoughts in education

reform. not anymore. that connect to the will transform the classroom experience for all students regardless of income. earlier this year the president announced federal communications commission will invest $2 billion over the next two years to dramatically expand high speed internet connect to the for both america's schools and libraries. we are also working with the national board for professional teaching standards on a project we are calling to each to lead. is an initiative that aims to expand student outcomes by creating opportunities for teachers leadership in their local schools and districts and is aimed particularly at teachers who want to stay in the classroom but also want to find a broader scope for their work, leadership and ideas. too long the idea of leadership was connected with leaving the classroom and we want to create opportunities for the should to be expressed through the

classroom. [applause] >> teaching as you know is very hard work and learning to teach is a very complicated process so one of our other initiatives is to work to make teacher preparation programs as good as they can be and in particular to meet the new challenges teachers are facing whether it is focusing more doubling down on s s.t.e.m. subject and getting girls and people of color in those programs, we need to prepare teachers to excel in those environments and help teachers learn to incorporate technology into teaching and classrooms. we need to challenge teacher education, to do all those things and more. that is why we are moving forward with a comprehensive plan to strengthen teacher preparation starting this summer

with a nationwide conversation to gather broadbased influence for new regulations we aim to propose later this summer. our ultimate aim is to build on state and district hard work in developing systems that recognize excellence and identify programs that need improvement. we want to encourage states to incorporate more meaningful outcome measures as they think about the quality of teacher preparation programs and we are thinking of things like placement in high needs schools, retention rates in the profession, satisfaction of program graduates, satisfaction of district and school employers and student learning outcomes. we want to help states and districts identify and spotlight programs that produce teachers, who are creating the kind of learning environments that create opportunities for students no matter where they

come from. finally let me talk about improving affordability, quality and success in post secondary education. now i am getting to something i am responsible for instead of the other stuff. improving college access and completion is no longer a luxury for us as a nation or for individuals, when it comes to job attainment, employment security, or national security, national economic development, we know we need to prepare more people to get through college successful. but there are issues. rising costs are pricing the middle-class out of college. student debt levels, whether individual student debt levels or aggregate student debt levels are rising alarmingly.

despite a recent rise the percentage of students who enter college in their first year, who graduate, has been stagnant. we can achieve president obama's goal of making america first in the world again but it is not going to be easy and we are going to have to do all we can to make high re-education more accessible and affordable and to focus as we do so on increasing completion rates and the ultimate value of the degree. we made some good progress. for instance, the number of students able to afford college with pell grants has grown by 50% to nearly 9 million program recipients. we published new tools to help students and families make good choices where to go to college. wakulla scorecard and the financial aid shopping sheet are two examples. we secured 100 commitments from

college and community leaders to expand college opportunity and access from a wide range from small liberal arts college to giant state universities. they made that commitment in a place where you are always held accountable to the white house in front of the president, bringing them back in a couple months to figure out how well they are making progress. although it is going to sound like the small thing it is a big thing. i don't know how many of you subscribe to the week magazine, they have a section called boring but important. file this away in the boring but important category. we have dramatically simplified the federal form students use. [applause] >> thank you. i wish i could take credit for it. because we now can monitor these things, just yesterday the director of student financial aid told me the average time

that it takes someone to fill out the form online has gone down to 20 minutes. which i will say again, i said it before, is 20 minutes too long? we will work on it, but that is as you know a major barrier for students applying for financial aid. we are happy to have gotten down to the 20 minute mark but we have to do more which is why we propose significant funding to increase the affordability and access over the next several years. just this may we announced a grant competition, first in the world competition, $75 million investment fund that hopes to see innovation in higher education that either increase access of low-income students,

lower-cost and price of education on those campuses by using technology or other means, that improve outcomes, higher completion rates and a measure of the ed to the value of the student's degree. we purposefully left it broad because we wanted people's best ideas. the application process closed on june 40th and as the computer system was regaining its breath after the onslaught of applications we tallied them up and there were 595 applications under the first in the world program which i think suggests the higher education community is ready, willing and able to bring forward its great ideas around this agenda. we are also proposing $7 billion over ten years for the college opportunity and graduation bonus which would provide annual grant to institutions based on the number of on time graduates who are pell grant recipients

directly reporting institutions for doing what we know we need to do which is increase the graduation rate of low-income students. as you may have read through executive action, the president has taken decisive steps, students and families are able to manage student debt by increasing access to income based borrowing plans. the most prominent of these is the pay program where in seneca fixed dollar amount students pay a fixed percentage of their income no more than 10%. this will help students having difficulty in the challenging economy but it also helps students who are moving into professions that are tragically and woefully underpaid but very necessary and welcome in our

society. overall the 2015 budget reflects the administration's commitment to the pell grant program and will fully fund the maximum award of $5,830 in 2015. we are investing a lot. over $150 billion a year in student aid with good reason. every one of those dollars goes to help promote student success. we have also been investing resources to increase transparency and using data to better inform student choices, family choices and institutional action. we are investing in the creation of a sensible and constructive college reading system that will help inform students and families about outcomes, graduation rates and simultaneously encourages institutions to improve by giving them easy ways to compare

what they are doing, what institutions are doing. in rewards schools that provide the best value for those most in need through recognition and we hope eventually financial rewards like that just mentioned. ultimately the aim is to reward schools with the best value for those most in need so those schools can continue to expand and be models for others. secretary duncan pointed out we are very much aware of how much we will need the benefit of your guidance and why is council as we move through each of these programs over the next year. positioning all of our students to succeed and positioning our nation to lead in the 21st century will require our best collective thinking.

as the president has said, america has never come ec. our freedom, our democracy has never been easy. the america we want for our kids are rising america, where honest work is plentiful and communities are strong, where prosperities law widely shared and opportunity for all, let's us go as far as our dreams and will will take us. none of that is easy. but if we work together, if we summon what is best in each of us, it is within our reach. with that in mind, let me tell you that as i embark on this work, i will always call on what is best in me to do this work and our hope you will also let me call upon you as we do this work. let me thank you again for

bringing such energy to this conference and this meeting, for allowing me to talk with you today and for working everyday to ensure a rising america and bright future for all of us. let's work together to make this year to year of powerful, constructive and break through action in serving kids who need our service the most. thanks a lot. [applause] >> the clock tells me we have time for questions or comments. >> can be seeny, new jersey teacher of the year. >> congratulations, thank you.

>> mental health and first-aid in the schools. is that still in the works, training for the teachers? >> it is still in the budget. thank you for reading it so closely. >> joe garcia, so many questions i don't know where to start. i know you said it has been simplified. areas of proposal that might take it down to a few questions or link it to one's tax form and is there anything else on low or bison that will further simplify and make it possible for more kids to get access? >> you are inviting me to seek out on that issue, i will resist but not entirely. there are active proposals to

either eliminate, or reduce it to two or three questions. in either scenario, one of the other things -- sorry i will beat out for a minute, the length of the form is just one of them. the timing of the notification, is all backwards. we want students to know how much aid they are going to receive when making their choices but which college to apply to? we can solve that problem and a lot of the other problems by using irs data and not doing all the asset list but using prior -- if we can get to the prior prior tax year then i think we get close to solving those problems too. allows students to know what

their eligibility is, reducing the burden on families. >> i want to thank you for your leadership, to new models of learning the past the device and i'm curious to know, with acquisition and the house preparing to do the same, what can we do in the higher education act, preparing teachers to teach in new learning environments. there's a big disconnect of what they are prepared to do and in reality. >> how many deems of schools of education and the room?

i can almost get away with it. yes. thanks for your question. there is lots to do, one of the things we ought to be looking at is a competitive grant program and it is not in the president's budget proposal, interesting to see if it could be maneuvered in a different way but i think we need to do for a teacher ed -- teacher colleges, a teacher prep programs what we have done for colleges, first in the world which is to say here are some objectives that we have. we are not going to foist our answers to the question on

education. fbn but we won -- to be able to license nontraditional education bill program providers to be able to give teacher education institutions a race to their money but more importantly to create new models that might be incorporated into digital programs and create an innovation sector and teacher read that is less regulated than occurrence system. we and states need to set up

criteria for evaluating teachers ed programs could that create metrics on the things we want teachers to know, we need to ask if they have learned that and find evidence of them incorporating in practice in the classroom and see if those are having an effect and feed that information back so they can improve. >> the u.s. senate will start the day with a couple hours of general speeches before voting runs several nominations including julian castro as housing and economic development, and the sportsman's bill they have been working on several days expanding hunting and fishing on federal land. live coverage on c-span2

the presiding officer: the senate will come to order. the chaplain, dr. barry black, will lead the senate in prayer. the chaplain: let us pray. eternal spirit, we rejoice in the hope we receive from your mercies. fill our lawmakers with strength for today and faith for tomorr