will be knocked off the market at low prices. there are other factors that play. there is no doubt a side benefit to weakening iran, there is no doubt a side benefit to hurting russia which supports -- has tended to support the shia side and the shia-sunni conflict. but there is also the factor that saudi oil is heavy-medium oil, meaning it's sour oil.

they are not the same people dedicated to producing the light, sweet crude that's produced in the oil sector, for the most part. so if you offer discounts to asian consumers at large so that they become beholden to your type of oil and they build refineries specifically dedicated troo processing your type of oil it's going to be harder for them to switch to somebody else's oil down the line. so it makes sense to keep the price a bit lower right now so that asian consumers build up refinery capacity for medium and heavy sour sulphur rich, saudi type oil, and you try and guarantee your market down the road when you will be putting on the brakes and sending prices back up. okay, this is kind of thinking about the supply and demand side of the market, but there are other factors that we need to think about that i think people

don't often like to consider. and that is that the saudis, the qataris and their friends in the gulf on the sunni side of the aisle have created a monster. by funding radical islam throughout the world, they've now created a cancerous growth in the middle east that has turned on its creators if you will. they have lost control over their creation. they tried to funnel the anger and aggression of their populations of being controlled by what the population may see as frivolous and wasteful royals towards religious fanatacism, and the result is very clearly seen. and isis and other related groups, isis isn't the only

phenomenon. just because you put a label on it doesn't mean it's the only group. i don't see any difference between the people that beheaded daniel pearl and the people that beheaded kenji goto, and the people who burned alive the jordanian air force pilot. the people who are willing to do this and are willing to fly airplanes into buildings and murder 2,977 people and surely would have been willing to murder more, if those people get their hands on weapons that give them the capacity to murder hundreds of thousands or even millions do you think that they would ba krrks hrks arksbalk? atness atness -- the answer is clearly no. what does that have to do with the oil market? it has a lot to do with the oil market. because the cheapest and able to

lift and produce sits in the middle east. we see a shia conflict raging out of control, slowly and surely we see a sunnyi conflict raging out of control. we see an enemy that cannot be negotiated with, that cannot be contained, that can only be destroyed, and we don't necessarily see a desire to destroy that enemy, a willingness among the world powers that are capable of doing that to do so. and when you think about the fact that the region of the world that relies on for oil has so many volatile dangerous factors that impact its future stability, that impact its ability to continue producing oil for the rest of the world, even though countries do not necessarily import a great deal of oil from the middle east, we have been reliant on the middle

east for the price of oil much more so than for the black liquid itself. if you think about it the united states has never, in its history, imported more than 15%, that's 1-5, percent of its oil needs from the middle east. but it has been opec that has determined the price of oil. so we import from the middle east the price of oil, whether it's a $50 price, a $100 price, a $150 price. if we get to a situation in which iran gets a nuclear weapon, the saudis buy a nuclear weapon off the shelf from pakistan a nuclear program that they subsidized because they will not tolerate having a shia power in their vicinity with nuclear capability while they do not. and if we do not think about what that means for non-state reactors in the region being able to get their hands on those

types of weapons and what that means for the global economy at large, then we're being very, very short-sighted. so where we are going forward this is a very bleak and unpleasant vision i know. but i think that what is very important to consider is how the united states, europe, asia the growing energy consumers most importantly in china and india, can utilize the energy resources that the globe has in abundance to make oil a much less strategic commodity. and to make these type of unexpected black swan events they can send oil price spiking very, very high can bring the global economy to its knees can make them much less relevant. how we can inoculate ourselves, if ulyou will to a region we

cannot control and we can't stabilize no matter how much blood and treasure we wish to commit to the effort. i think to that end we need to focus on the transportation fuel market. because oil strategic importance derives from its virtual monopoly over transportation fuel. the fact that almost all of our transportation fuel is petroleum based means that when oil prices spike, moving people and goods from one place to another which is, after all, the engine that moves the global economy, becomes very much more expensive. and that means that every single service and good that we consume becomes a lot more expensive. and so much like years ago salt was a strategic commodity because it was the only way to preserve food, so war was caused over salt, and countries decided where to place colonies due to where there was an abundance of

salt. today oil is a strategic commodity because it has a virtual ma noponopoly over transportation fuel. unfortunately for us this virtual monopoly is married to the opec cartel. even though they account for less than a third of global production, if we think about what would happen if it were exxon, chevron, bp and shell that were sitting on 72% of conservative oil, does anybody think oil would be at $75 a barrel today? does anybody think that with 72% reserves, they only accounted for a global supply? barrels of oil would be 20 10, much, much lower. assuming opec is not lying about how much oil they have. we have no way of

reserves. but assuming the reserves they have is what they have there is no excuse for straining their production capability at that point except of course, something that is perfectly rational for them to do, which is to maximize the revenue prospects for their regimes now and in the future with periodic drops in price to kick the competitors out of the market. so what we need to do because opec as a collective acts as a monopolist, essentially, in the oil market and because oil has transportation fuel and because opec acts as a monopolist in the global fuel market what we need to do is destroy that monopoly position in the global transportation fuel market. it's not enough to expand production of oil in the u.s. and other places. while that's fantastic and it certainly has tremendous trickle-down benefits to local economies, that's not enough to keep prices of transportation

fuel down in a long-term and sustainable manner. but if we open the transportation fuel market to fuels that are made from coal, from natural gas, from biomass, from other resources so these resources can be arbitraged against oil so that sufficient capacity expansion and fuels made from non-petroleum resources, we eventually get to a situation where there is competition over market share in the transportation fuel market. that will drive transportation fuel costs down in a sustainable, long-term manner. and that will make the global economy able to withstand craziness in different parts of the world. we can't negotiate with the evil that is isis okay? we can't talk them down, we can't do anything to stop their current brutality and murder. and their cohorts al qaeda and

the other, all the various names they go under, the same idealogy. what we can do is attempt to inoculate ourselves to them even as we work up the will to seek to destroy them eventually. if we don't do that, i guarantee you that we're going to be lulling ourselves into a sense of complacency that prices are low now, and everything is good, and we can forget about all the post-9/11 franticness and the 2008 oil barrel franticness and go back to sleep. i guarantee we'll be waking up to a very nasty shock down the road if we don't open up our cars to fuel competition. thanks, and i think i move to you, matt. [ applause ] >> thank you, anne. when i was putting together this panel, i decided that the other

component we needed was someone to talk about how this drop in oil prices is going to be viewed and embraced by the new gop congress. and the person who i thought could give us the most insights into that and also in the way in which the new gop congress looks at energy issues generally that person was matt leggitt. matt is kouncounsel for the usg policy committee, basically the policy steering committee that thinks through the issues that the new congress will be talking about and the prism through which they see those questions. matt is a former staffer for representative tim murphy who heads the congressional natural gas caucus and who represents

the 18th district in pennsylvania, which is one of the hubs of america's emergent shale industry. so these are issues the issue of america as energy roproducer and shale energy that matt has balanced and reviewed with members on the hill and with leading policymakers as well as something which he has been connected with personally through representative murphy's office. he also has a law degree from vanderbilt university. he's one of the most thoughtful people that i know on the hill on america's emergent energy issues and ways to address them ways to address the questions of how america's emergence as the leading natural gas and oil producer will have an impact not just on our economy but also on

our national security. and for that reason i'm very happy and very pleased to introduce you to and to have as our last panelist, matt leggitt. >> thank you arthur and the hudson institute for having me today. any opinions i express today are my own and do not necessarily reflect the opinions of the senate republican policy committee or any republican senator. who doesn't like paying $2.24 for a gallon of gasoline? that's today's national average price, down $1.09 from last year. this is a slide from yesterday in richmond. it got as low as $1.99.

low gas prices act as an enormous tax credit distributed to every american family that immediately stimulates business activity across the economy. americans are likely to have as much as $115 billion more in disposable income in 2015 this year. if gasoline averages $2.50 per gallon, a typical family could save $1100 annually. that's money they can spend on other things. importantly, low gasoline prices act as a progressive tax cut. they provide proportionally greater economic relief to low-income households and senior citizens on fixed incomes. even better they do not require a dime of taxpayer money, and no one has to wrestle this tax cut through congress. low prices for other petroleum products are also boosting spending power. diesel down $1.13 since last

year. residential heating oil, down $1.33. residential propane down $1.40. every dollar consumers save while fueling their cars or heating their homes is one they can use to purchase other goods and services. this is all great news for american consumers but not everyone is celebrating lower energy prices. at $56 per barrel, brent crude is below break-even prices for many u.s. adversaries. russia iran and venezuela need brent crude oil prices well past $100 per barrel to balance their budgets in 2015. u.s. petroleum product prices have been cut in half in the past eight months mostly because brent crude prices have plummeted by 50% during the same time frame. on monday, brent crude traded at $57 per barrel, that's $58 less

than its peak of $115 in june of last year. russia needs brunt to trade around $175 venezuela needs prices to go to $151. russia derives 68% of its current energy earnings from oil exports and around 50% of its annual budget from the oil and gas industry. according to a december 16, 2014 article in "the financial times," the russian ruble lurched toward a financial crisis. it has fallen more than 50% since the start of the year reviving memories of the 1998 crash when russia fell on its rustic death. as much as 75% of iran's

revenues. at today's prices, their economies are also in a tailspin. with oil revenues slashed in half, these countries are less able to pay for government services they need to ensure social order and to maintain regime stability. they're in weaker positions when negotiating with the u.s. and other foreign powers over their military aggression nuclear ambitions and other provocative positions. at home and abroad, their power correlates with oil markets, and it declines as oil prices fall. at $50 per barrel u.s. producers face challenging economics, bringing wti crude to market. american energy producers are finding the economics of oil production challenging in

today's low price environment. though they remain largely competitive and are not under as much duress as russia, venezuela and iran. a november 2014 ihs report found 80% of domestic production anticipated in 2015 will break even between $50 and $69 per barrel of wti. on monday wti crude traded at $53 per barrel. that's $55 less than its peak price of $108 in june of last year. american energy producers are aggressively repositioning their operations to better withstand the low price environment. they are generally delaying capital investment, new wells, shutting down production of higher cost existing wells. they're refocusing their attention to lower risk, more economically competitive wells currently being produced in

shale oil-plagued sweet spots. as of last friday the total number of active gas and oil drilling rigs active for developing oil and natural gas fell to 1,056. that's down 17.8% from a year ago and it's the lowest level in five years. energy companies are scaling back capital expenditures in 2015. this, of course, means layoffs, and they will not just be in the oil patch. exploration and production companies, equipment manufacturers, hotels, restaurants, transportation, construction, they could all take a hit if this low oil price environment exists. lower oil prices are in large part a function of booming u.s. oil production, which has increased by 4 million barrels a day in the last six years. to keep up with the floef oilw of

oil producers need to raise their costs. on one hand, we have lower oil that america celebrates. on the other hand, we have oil we need to keep supply up and prices low, and we have a lot of workers being laid off. how can washington help? mostly by getting out of the way. a good place to look for cost savings is reducing the expensive burden of needless regulations and red tape. a short-term snapshot of oil markets the moment prices are low should not be used as an excuse to block long-term energy projects. that would be like deciding to cancel a long-needed bridge repair because one's morning commute was lighter than normal.

one thing congress can do and now the president, is prove energy infrastructure like the keystone e xlx krrks erks xl pipeline. the keystone xl pipeline would act long past its environment. there were nearly three times the number of amendments that were voted on in all of 2014. many of those amendments were offered by democrats and nine democrats voted for the legislation. the house passed at 247 to 152 with 29 democrats voting yes. the pipeline would transport 830,000 barrels of oil per day, including 100,000 from montana and north dakota to market in the most efficient and environmentally responsible way.

president obama has delayed making a decision on this pipeline for more than six years. during that time, the project's costs have increased by 48% from $5.4 billion to $8 billion. this is exactly the kind of unnecessary and burdensome costs that mismanaged infrastructure permitting can impose on energy producers. the president should sign legislation a improving the keystone xl pipeline into law immediately. instead he will veto it. open federal lands to oil production. the federal government manages roughly 640 million acres of surface land, approximately 28% of the 2.3 billion acres of land in the united states. the federal estate goes to mineral resources underground and offshore including 7

million onshore acres and 1.7 billion offshore acres. the federal government only released 2.8% of onshore and offshore federal lands for energy production in fiscal year 2014. this was not by accident. president obama has utilized designation authorities under the national wilderness preservation system the national wild life scenic river system, the national trails system the antiquities act to block production on federal lands. this is contributing to crude oil production falling to 6% on lands the federal government controls from 2009 to 2013. by contrast crude oil production has increased by 61% on state and private lands. despite his repeated attempts,

the president cannot claim credit for america's shale oil revolution. and the lower gasoline prices it has brought to consumers. these game-changing developments have happened in spite of his policies, not because of them. i should know, too, that the federal government has great difficulty effectively administering existing federally protected land. the maintenance backlog of the four federal land management agencies totals as much as $22.65 billion. we ought to focus on effectively managing existing federally protected land before we designate new ones. we certainly can provide energy producers with greater opportunities to access federal lands for oil and gas production. the bureau of land management has a backlog of 3500

applications for permits to drill on federal and gas land leases according to the attorney general last year. it took an average of 228 calendar days, or about sef skpnven and a half months to process an a.d. during fiscal year 2012. states take 80 days or less to process an abd. like the keystone xl pipeline the blm permitting backlog is another example where permitting applications are routinely delayed, adding unnecessary and burdensome costs for energy producers. last december the congress passed, and the president did sign into law the blm permit process and improvement act to address blm's backlog of apds. general brasso sponsored the legislation which six legislations and six democrats

co-sponsored. not only legislation but a good example of bipartisan to urge the president not to veto every reform. we need to stop unburdensome regulatory relations. the environmental protection agency proposed a new 626-page plus a 500-page appendix standard of 65.75 parts per billion. this would be down by 75 parts per billion applied by the bush administration. they said it would save $15 billion per year on the nation. that's not including california. another 106$106 billion per year on california alone after 2025. the national association of manufacturers warns, this new

ozone regulation threatens to be the most expensive ever imposed on industry and america. at 65 ppb the ozone standard would push large swaths of the country into non-attainment with national ambient air quality standards or states in localities to curb energy production refining operations, manufacturing development agricultural operations and economic growth. crude oil exports could also help producers shore up the economics of their domestic production by giving them access to foreign markets. this is a topic that is just starting to be discussed. there have been several studies that have projected positive economic benefits to the u.s. if crude oil exports were to occur. the refining community has some questions about what that policy might mean for them.

and certainly on the hill, it's an issue that continues to receive increasing attention. these are just some examples of the types of regulatory burdens that can add unnecessary and burdensome costs to energy producers or remove them. there are plenty of others. proposed hydraulic fracturing rules, planned methane admission rules, endangered species act listings, national monument designations, the five-year offshore oil and natural gas leasing plan, just to name a few. the outlook for oil prices is uncertain. you've heard that from both of our previous speakers. one closing point i think cannot be overemphasized, energy producers and infrastructure developers plan their projects over long-term horizons. the federal government should not implement policies according to short-term snapshots of oil

markets. oil prices are not guaranteed to stay at today's low levels. they could move up if supply falls, demand increases or both. if opec cuts oil production or the middle east ignites into conflict supply could fall. if our economic growth picks up speed, demand could increase. in either case, oil prices could rise. on tuesday the energy information administration estimated brent crude will rise from $57 to $75 in 2016 and wti crude will rise from $55 to $71. on tuesday the international energy agency said, quote the price correction will cause the north american supply party to make a pause. it will not bring it to an end.

baclov schneil noted in an article for the american enterprise institute what is now unfolding is the eighth oil price decline of more than 40% in the last 30 years. relatively sharp price rises followed those drops. as consumers we all like low oil and gasoline prices. but there is a lot of uncertainty about the future of oil prices. what we can be sure of is that the more cost-competitive energy producers can operate within a low oil price environment, the more likely they can sustain production that helps bring us those low prices. we have tremendous opportunity to better position our energy producers, our energy consumers, our energy policy. thank you for your attention. i look forward to the discussion. >> thank you, matt. are you hearing me okay in the microphone? now, this is usually the point

of a panel discussion like this in which i exercise my prerogative -- it's not royal prerogative, exactly, but it is a host and moderator prerogative of asking the first and very often the most, interesting question of my panelists. but you know what i think in this case and given our audience, i think it actually will be more interesting and maybe even more entertaining if we open up the discussion to questions first, and i'll reserve my final big question for the end if we have any time left. so if you do have questions for any of our panelists, singly or as a group, if you could just go -- raise your hand, stand up someone will come to you with a microphone, and tucked justif you could just speak into the microphone and also introduce yourself in any affiliation you care to

disclose. down here. >> tom dusteberg from the aspen institute. i would like to ask anybody on the panel their opinion as to whether or not the low prices that exist now will decrease future exploration and development outside of the united states. countries like mexico, brazil, canada, russia all have huge reserves and had plans to increase production. do you have any comments on what we can look for in the future on that? >> did everybody catch that? the early returns are that the longer term the project the more likely it is that whoever is sponsoring it is continuing with it. however, we have started to see some declines and expect the capital expenditure in some of the higher cost jurisdictions, and as well, more caution among explorers

explorers. in the case of canada, companies have been announcing capital expenditure decreases on the order of between 10 and 25% so far. that's through earnings through the third quarter. fourth quarter things are coming out now, so we're getting a sense of what they're saying. more globally, i think that a lot of the projects seem to be longer duration types of projects and oftentimes even have some element of state sponsorship, so it's really hard to get a handle. in canada that's what we've seen, and in the united states what we've seen so far is interesting. we've seen the rig drilling dropping and similarly capital expenditure. however, profits for the companies still remain highly contingent on volatility and the oil prices are adaptive. the global projects, and the shale projects could be started or stopped. it's a one to two-month type of window in order to get them going or in terms of

exploration. that's what's so interesting about this production surge in the united states that it's highly flexible, highly adaptive, dissimilar to the high cost of oil exploration elsewhere in the world. >> just to add a quick data point, we just saw an announcement from she will and bp that they already cut spending by $40 billion and there have been layoffs of around 100,000 people in the industry. so companies are definitely reacting to the lower prices and either shutting production or reducing investment in certain projects. >> i might add one thing. dov mentioned in his presentation about the declining rig counts but how we're still producing a lot of oil despite that because of a lot of technological efficiencies. i think that's a big question mark for a lot of analysts to this question. what kind of technological efficiencies are energy producers going to be able to achieve in this low price

environment to operate at lower prices? that's a big question mark. i think it will be a fascinating thing to watch going forward. >> if i could just add one thing. i'll cite my friend vikram rowe at the science institute in the carolinas. he was a cto of haliburton, and he says these low prices essentially, in a way, are healthy for the industry because they force more efficiency in terms of the way technology is utilized, less of a brute force approach and opty mization of technology. they also force higher cost producers, the less efficient producers out of the market. so while that's certainly bad for jobs, so on and so forth in the long run it might prove to be a better use for technology in the industry and a lower cost in the industry overall when you look at shale. >> if i might add, there is also a paradoxical relationship

between shale producers and conventional producers, the big oil companies that have been involved in the kinds of projects you're talking about. and that is because shale producers can react so quickly to changes in prices, either in cutting back in exploration and production or ramping up you know, when the price goes up. what that means is that they have the ability to affect prices, and we're going to see this tested out, i think in the next couple of years. the ability to affect prices and provide, in effect a kind of price support that larger retail big producers, conventional producers, will be able to use to their advantage to be able to fund long-term products knowing that if prices reach a certain kind of level, the shale production will wind down and the price will bounce up, as it's already done. so we may have a very interesting kind of relationship between shale and conventional production with each in a way, sort of supporting the other's continuing growth and

development. other questions? here in the front? >> hi. i'm stefan groeber with union development. do you think lower oil prices will slow down the development of vehicles? >> i love what tesla has been doing, because by focusing on the high-end luxury consumer that gives you a lot of room for charging much higher prices than the average 15,000 or $20,000 caray buyer is a buyer is able to stomach. i think vehicle electrification is fascinating. they're a lot of fun to drive. but when you're looking at spreading -- there are two

questions here. one is the development of the technology and the second is the movement of the technology into the mass market. and that's all about price. that's all about the battery price, that's all about if you're looking at hybrids as opposed to pure electrics, the hybridization of the system. i think there is a lot of room for growth in this sector of the market, but it's going to take a long time. and for that reason while it's very good and we should apply the companies that are working on this and certainly remove any regulatory barriers that stand in their way in the u.s. and in other parts of the world, it's important not to focus on electric electricification as the sole option in the vehicle market. and liquid fuel is is a good

choice. if you look at liquid fuels from coal and biomass, and i'm thing of alcohol fuels like methanol for example which in china has been increasing at a phenomenal rate methanol from coal. the u.s. we have a lot of low cost natural gas and an industry that really wants to build up demand for that. if we look at the vehicle side cost, and we look at $100 to open up a car to fuel competition. so the car can use not just gasoline but coal is made from natural gas and biomass. if we look at how we can expect the market to move going forward, assuming we remove barriers of competition so the lawmakers have a strong incentive to open their fleets to field choice-enabling vehicles, we can expect we will first see a lot of flex in vehicles, and down the road, as

battery costs go down, we'll see more flex plug-in vehicles, and there's always going to be room for pure electrics as well. not mentioning others doesn't mean i don't think they're good, i just focused on these two examples. >> i'm going to take your question and re-serve it up to matt, and that is, matt, the degree to which a lot of growth in electric automobilesc in this country has been sustained by, wub one, what is the mood within gop congress with sustaining those kinds of incentives in regard toxd electrification and what do you see would be the impact -- forget the3w issue of lower oil prices, but the other impact, and that isó the way in which these kind of subsidies and

incentives have really pushed that market forward. >> well, i think first of all, certainly the republican conference is interested in an all of the above energy strategy, including technologies like electric vehicles. we have some members of our congress that are real leaders on electric vehicles specifically others that are more interested in natural gas vehicles. so there is a really healthy debate within our conference as to what vehicle technology should look like going forward. i think taking a step back and just looking at the government's role in these types of policies certainly our conference and quite a fewp, democrats as well or more interested in focusing on the research and development aspects of any of these types of technologies. when you get into the commercial deployment of it and you use government resources to incentivize that commercial deployment, you have a lot of

people who have become concerned with, you know capture of federal agencies with picking winners and losers, with forcing technologies into the commercial space that aren't yet ready for the commercial space. i think a lot of people agree that one of the major innovations that can not only help electric vehicles but renew renewables is energy storage, battery technology. more need to be done on that front. there was an interesting report maybe last year by itif that policymakers should focus less on commercial deployment and more on research and development, ask this isnd this is coming from a group that would typically be for commercial deployment policies. so i thought that was an interesting shift, maybe, on, you know the more democratic side of the aisle, or at least

from a think tank. and i would suspect that senator morkowski, who is the energy committee chairwoman, will certainly bes7 looking at policies focusing on research and development in particular. she's promoted those in the past, probably will in the future, and that's where i would look for action on our side. >> can i add one quick comment? >> sure. >> if you're buying a $100,000 tesla, aá16 tax credit isn't going to make that much of a difference for you. it might be nice, but if you cared that much about the tax credit, you would ask for a less nice stereo on your car or less expensive paint job or something like fáthat. i think by focusing on the higher end of the market, you make yourself more immune to -- >> and also to changes. that's a very good point. >> arthur, one more thing i might add, these discussions on capitol hill also there is a debate about how to do them

whether to do them in a targeted way or not. obviously a lot of people would like to get fundamental tax reform done. do you address tax credits for electric vehicles, for example within the context of a larger fundamental tax reform package?2ru do you do it sort of as a rifle shot approach? that's another question, you know, for all of these types of technologies when the government is looking at tax credits for them. >> more questions?t( >> thanks. abe shelsky from hudson. some people have argued that given the ability of the shell oil producers to come into the market relatively quickly because it doesn't take two, three years to get something going like it does with the deep sea drilling, for instance, but also to exit relatively quickly because their wells are shorter

live than if you don't keep reinvesting, you're going to draw down your production. all of that taken together implies that for the future we should see much more stable oil prices and that some of the things that we've seen in the past of these very rapid swings in oil because of the inelasticities of supply won't be characteristic of the oil market in the future. i wca just wondering what the panelists thought of that theory. >> sure. i think that's the hope. the hope is that there is a new and more adaptive oil production system in the united states. what are some of the caveats? one is at4 least thus far the major players, shell oil, are highly reliant on financing that is not as stable as the financing offered&ñ to a large global oil company. so the big question is whether

or not there will be even the ability or at least the financing, exploration production mechanism that's been operating at a systemic level in the united states for the l:c- number of years to continue in an environment ofñi more volatile prices. tbd. the reason why i try to characterize where we are right now as a moment of tremendous pricing discovery is because there is actually a brand new oil production system in out nitd states, the one in which you, i think justc characterized. given the fact the system is only a couple years old, we are really not certain how it's going to react to the kind of volatility that we've all of a sudden seen in a new price area than had existed when the technology first began to be deployed in a large and meaningful way. so i don't think there really is an answer, but i do think that the hope is that this system that has been operating for the last number of years will continue to and operate in(g. the manner described in the

question. so will it? can't answer. do i hope it will? seems as though it's been a good thing thus far and that's the most i could really offer. >> i'm going to take this question and give you a shot at it. we talked about u.s. shale and the shale revolution. we're really talking about two different revolutions, aren't we? we're talking about the oil, of course, in which we think about very much because of its impact questions about whether these price drops have to do with oil and oversupply, but we also have the natural gas shale revolution. so the question i'm going to pose, taking abe's point and opening it up and i'm going to ask you first, anne is it perhaps the way in which the shale revolution will really, in a sense, provide us with a certain kind of cushion with regard to prices protecting us from large swings up or down.

is the real cushioncñ maybe not in shale production of oil but in shale production of natural gas? >> uh-huh. i really do think that's the case. in fact, if we do the right things, if we open our cars to fuel competition, natural gas -- the shale production of natural gas could be the game changer in the global oil market. right now natural gas goes into the electricity sector into the chemical industry and so forth. it's not arbitraged against oil. natural gas is competing against coal, it's competing against nuclear power. we want to force arbitrage between natural gas and oil. we want natural gas prices to rise as oil prices fall okay? and for that -- of course not natural gas prices in asia which are very high because natural gases( defer around the world, but i'm looking at natural gas prices here. we want natural gas prices to be able to be used as a lever

against oil. when we think about this if we do that, that will be fantastic for the shale proproducers. it will give them a much morefá innovative reason for the natural gas shale producers. even a year ago it wasn't economic to produce a lot of gas from fuels that weren't producing wet gas. it wasn't economic. we want to see a lot more gas production. for that to happen you have to have increase in demand and for that to happen you have to introduce the fuel market in the gas. can i refer back to the previous question? i really must. we can't ignore the motivations and imperatives of other actor is around the world. the saudis have three-quarters of a trillion of cash reserves, they're very steadily running through right now. that's why they can manage keep these prices lower and can't cut by half a million barrels or 3

million barrels a day. they like balance budgets and won't keep burning through their cash reserves forever once they consider their goals accomplish accomplished however they consider them to be. they have a strong motivation to keep their heads attached to their necks. to that end they need to keepu subsidizing fuel prices domestically and massive salaries going to government>2ñ employees and most saudi citizens work for the government. they need to keep subsidies for food and everything else. they need to keep spending lots and lots of money which means they need a much higher price of oil as matt showedr we can't ignore that fact and can't just think about the normal kind of supply and demand dynamics of a purely competitive market because we're not dealing with a competitive market. we're dealing with a market in which a cartel has a very important and substantial role to play.

the other thing we can't ignore when we think about hoping for stability in this market we simply cannot ill nor the black swans. it would be folly to do that. we can't ignore the middle east is this craziest region in the world right now and likely will be in the foreseeable future for all our lives and lives of generations to come. >> i will come back to dove and matt. shale revolution is it really two revolutions? arq;uz going to see in the process, a two-stage process in which oil, the dominance of oil will fade and rise of natural gas driven not just shale revolution but natural gas economy. this was tim murphy's home turf, matt, you know that. what's the picture? >> i currently work for senator

john boras so from wyoming. he has oil and natural gas. we view both of these as important, major economy moving forward. we believe they will not only provide domestic benefits, provide us geopolitical benefits and we think we should use them for both of those purposes. i think when you're talking about the competition between oil and natural gas, it's an interesting question and i think it will evolve over time. one thing i would caution about the optimism of natural gas not a caution something to consider. there are a lot of competing demand centers for natural gas and a lot of people want a piece of natural gas going forward. whether the transportation sector export sector

manufacturing sector. we believe that the market should sort out natural gas's role going forward. we do believe natural gas is expansive enough in the u.s. now we can probably fill most of those needs without putting too much upward pressure on prices. but, you know, do i see it as a replacement for oil? as a transportation fuel? not any time soon. that is not something discussed in congress for sure. >> i will leave us time for one more quick question down here in the front. we want the audience to catch it. hang on to one second and we want to know who you are. >> my name isn the union of concerned

scientists. i just wanted to bring up one thing. we were talking -- anne was talking about issues that can't be ignored. in a long discussion about energy and oil, i wanted to ask about the influence that environmental considerations climate change may have on energy policy, and the thinking that's going on around energy policy. matt, this is actually more directed at you. i'm from wyoming, so you can say hello to senator barrasso for me. in looking what you went through here in some of these policies they tend to be somewhat devoid of thinkingfá around the influence on the environment. how long is the gop going to continue kind of talking about

energy policy but avoiding looking at the elephant in the room, if you will, which is the continuing accumulation of carbon in the atmosphere and what are the relationships that need to be considered between policy making and virmtal stewardship? >> well, the republican conference just like the democratic conference wants clean air, cleanu water cleveland. i think everyone can agree on that. we believe there are environmental regulations in place that provide us with that. the carbon question is a separate question from the criteria pollutant question. in terms of carbon emission ss, there is a wide range of thought within the republican conference. if you followed the keystone pipeline bill you saw there were amendment votes that demonstrated to varying degrees

where people not only on the democratic side but republican side are on these issues. in general, i believe everyone agrees the climate is changing. beyond that i think there is a difference of opinion in terms of how much man contributes to climate change and how important and urgent it is for us to act.v another point is should the u.s. actzv unilaterally or should it not. as it is today we are acting unilaterally. in fact, the president is acting unilaterally without congress's consent. the people have rejected thew3 policy repeatedly since rejecting president clinton's btu tax in the early '90s. we still don't have consensus on these issues as a public much

less congress. beyond that, when you look at the price and cost to american consumers, american household mortgage$x consumers, manufacturers, economic development, all these things, you have to weigh those with the potential benefits of carbon emission redestruction strategies. you have to weigh what are other countries going to do in response to what we're doing. >> i'm sorry matt. winding down. i promised ann the last word on this a >> i just came back from china. thank you. if you think abouteu

use electricity around the world is coal and preventing that because of concerns of climate is wrong and the united states shouldn't have any hand on supporting that. >> on that uncontroversial and highly ambiguous statement, i am going to have to wrap this up. thank you again, audience for coming. thank you also, c-span audience. let's thank our panel. [ applause ] thank you very much and look forward to seeing you again very soon.

today on c-span3, three members of president obama's cabinet testifying before congress about their budget requests for fiscal year 2016. first, we'll hear from health and human services secretary, sylva burwell and then sally jewell,s who department is seeking 13$13 billion in the next fiscal year and then secretary of state john kerry discusses the the fight in ukraine, isis cries crisis and iran's nuclear program. health and human services secretary sylva burwell testified before congress last week about her department's budget request for the next fiscal year. much of the question for the commerce subcommittee on health focused on the legal challenge

of the subsidy on people who focused on insurance for the health exchange. chairman joe pits chaired this almost three hour hearing. >> the subcommittee will come to order and the chair will recognize himself for an opening statement.4n2ó> i would like to thank certificates burwell for coming before the administration for discussing the budget request for the department of haelt andealth and human services. earlier this year, madame secretary secretary you stated quote the hallmark is transparency and accountability end quote. these are all laudable goals. i appreciate your verbal commitments to these principles, however your department's

actions have failed to adhere to the same standard, for example we have only heard silence from the white house on how the administration is preparing for an adverse ruling in king v burwell. we did receive a reply from you and i thank you for that courtesy. but your letter contained no substantive answers to our questions. during testimony to the senate finance committee, you were again asked about the administration's plan plans and again you repeatedly declined to provide a direct answer. this is not the transparency we hoped for. understandably, we were very frustrated with the administration witnesses artfully dodging the questions that we asked here. so i'm asking you today, please let your guard down a little and give us direct and complete answers to our

questions. in 2009, the president correctly said, quote, the real problem with our long-term deficit actually has to do with our entitlement obligations. end quote. since then we've had the simpson bowles commission a super committee, sequestration and a government shutdown and never once in all this time did the administration propose a plan to get the nation's fiscal house in order by recommending reforms to entitlements. the 2014 medicare trustee's report which you signed tells us that medicare will be bankrupt very soon. we recently had senator joe lieberman and former omb director alice rivlin here and they told us much the same. and we stand ready to do the hard work of saving and strengthening medicare. but we need a willing partner. once again, the president's budget fails to propose serious

entitlement reform and the proposals in medicaid amount to saving just 15 days worth of program spending over the next ten years. the plan apparently is to let medicare expenditures continue to grow without any of the structural reforms needed to strengthen and save this critical program and this is not taking ownership. if we are going to save and strengthen our safety net programs for the most vulnerable we have to do better than the president's budget. both parties have to work together, you, we, the president need to work together to save our entitlement programs and make them sustainable so we ask that you please work with us. on another subject you may remember that in early november of last year, we spoke on the phone about why hhs has so far failed to hold california accountable under federal law. as you know, in august 22nd, 2014, the california department

of managed health care, dmc, issued a directive mandating that all plans under dmhc authority immediately include coverage for all legal abortions. this is in direct violation of the weldon amendment, a civil rights statute that prohibits federal taxpayer funding for federal agencies and state or local governments that discriminate because a health care entity does not provide or pay for or provide coverage or refer for abortions. what california is doing is clearly illegal and morally wrong and violates the fundamental freedoms and principles that our democracy is founded on and it is your job to stop them. and so far that hasn't happened. so i'll have more to say about this when we get to the questions. in the meantime, madam secretary, we look forward to your testimony and we hope you will stay to answer all of our questions and with only five minutes of questions per member,

we respectfully ask that you keep your answers precise and to the point. dr. burgess, do you want your remaining time? >> thank you. that is kind of you. and secretary, thank you for coming to our humble little subcommittee. i am frustrated over the administration's lack of transparency and the ability for congress to get information that realistically we've been asking for for the last four or five years. but specifically, around aca created entities. the center for medicare and medicaid innovation, the prevention of public health fund, the consumer -- the office of consumer insurance oversight and the -- and the patient center for outcomes and research initiative. year after year they have failed to achieve the mission of improving health care cost and quality. we can't hold them accountable if we don't know how you are spending the dollars. and we have spoke about this and

we do look forward to your responses in finally getting that information from the agencies. >> thank you. and chairman. now recognizing ranking member mr. green, five minutes for the opening statement. >> good morning, and thank you, secretary burwell for being here to discuss the president's fy 16 budget proposal for the department of health and human services. the budget is more than a line of items on the page, it is a reflection of the priorities of our country. our commitment must be to protect the progress we made and make strategic investments for project in the future. this year marks the 50th creation of the medicare and medicaid. since the children's health was created to make sure america's children have insurance middle east recently congress passed the affordable care act. the affordable care act took historic and significant steps toward laying the foundation for a better and more efficient health care system and expanding

access to cover for millions of americans for whom it was previously out of reach it. took important steps to restore the physical solvency of our health care system. according to the most recent estimates by the congressional budget office, the affordable care act will reduce the deficit by more than $100 billion for the first decade and by more than a trillion in the second decade. as we have seen through the second enrollment period the affordable care act has already succeeded in insuring every american can have access to coverage. thanks to the aca, nearly 30 million have gotten coverage. these are people who would otherwise been uninsured. we have made great progress but the work's not done. i appreciate the agency continuing to work with us to build on these successes. in addition to prioritizing central services and programs, i was pleased to see the budget makes strategic investments to improve our health care system and clear the way for the progress into the future.

this includes funding to support training to the next generation of health care providers and national preparedness to threats against help, viable medical research and the budget invests in health care centers for support for 22 million patients in their role to provide+j primary source of communities and health centers are a critical element of our health care system. the president's proposal takes a critical important step by including four years of funneding for the children's health care insurance program. currently more than 10 million children get health insurance through chip. additional funding for chip must be authorized so there is no disruption in coverage and the states are able to continue operating the programs. the budget propose the increase nih funding. since its creation nih has fostered remarkable advancements for human health.

for the past decades, nih has suffered inadequate funding. without more funding it will lose its status as a global leader in science and innovation. additional resources will help defeat our nation's most harmful diseases and ensure that united states continues to lead bio medical research and scientific break-throughs. the budget proposal strengthens national preparedness for threats to public health including national threats and deliberate attacks and funding to reinforce the ability to move quickly to detect infectious outbreaks through new advanced initiative maintaining strong prevention of disease control and prevention. these are just a few highlights of what is included in the hhhhs budget. i look forward to hearing more during today's hearing. thank you, madam secretary for joining the hearing and discussing the hhhhs budget.

if someone would like 1:20, my colleague from california, miss matsui. >> thank you for the time. i appreciate the goals the president and you have laid forward in the hhs budget. building on the the improvements made by the affordable care act, we are seeking to reward volume and forgetting about the waste business. so what we try to do is working to achieve the triple aim in health care, better care, better outcomes and reduced cost. we do this by making health insurance more affordable, and emphasizing prevention and public health and encouraging clinical research and taking advantage of the benefits of technology and building up our nation's mental health system. many of the proposals in the budget find savings in the medicare and medicaid programs by stream lining processes and

realign ing realigning the services at the right service and the right time. the budget would make the fcr permanent for doctors and seniors and people with disabilities in the medicare program and extend the children health insurance program or chip that provides much needed pediatric coverage for the nation's children. the affordable care act is working. over 11 million americans signed up this year, including 500,000 in california alone. the administration just announced that since the law was enacted in 2010, 9.4 million people with medicare have saved over $15 billion in prescription drugs. this is what we set out to do and i appreciate working with you as we move forward. thank you. yield back. >> chair lady yields back. the chair and i recognize the chairman of the full committee. mr. upton. five minutes. >> thank you chairman. secretary burwell, welcome. today marks your first official appearance before the health sub-committee but i know this is not your first time in this room as you participated in one of

our 21st century cures round tables last year and we very much appreciate that participation. your testimony does come at a very pivotal point in health policy from our exciting cures effort to next week's supreme court oral arguments. we look forward to hearing the administration's perspective on the very important issues facing the important people. you have said during your tenure at hhs that transparency are important values to demonstrate and we welcome. in that spirit we look forward to getting straightforward answers about implementation of the president's health care law. there have been quite a few red flags raised in recent weeks on the continuing struggles of key pieces of the health care law. just in the last week 800,000 households learned that key tax forms contained key errors and they were asked to delay tax filing and delaying refunds. a recent analysis from h&r block estimates a majority

of obama care customers are being forced to pay back some of those subsidies. millions of americans are also learning about the irs fines for failing to comply with the individual mandate. the backlash has been so intense that the administration has resorted to yet another special enrollment period to quell some of the anger of those who are just coming to learn about the individual mandate penalty. in this last week the healthcare.gov ceo suggested the backhand function would undergo a two-year development plan and that means this key part of the law will not be fully complete until president obama leaves the white house. collectively, these revelations suggest that the health care law is still not working. our constituents deserve better and we know that and that is why i worked on introducing the patient care act the health care reform blueprint with my colleagues in the senate, chairman hatch and mr. burr. i look forward to working with

my colleagues to improve these ideas about health care by empowering states and family, not washington. yes, we have concerns with the president's signature law but there are other important health care areas that we believe are fertile for our collaboration. for the past year, almost a year and a half this committee has undertaken the bipartisan cures initiation to accelerate the pace of discovery and development and treatment and new cures for american patients. i would like to thank you for your personal engagement on the 21st century cures initiative as you know this is a top priority for our committee this year. patients and families in my district of michigan and as well as across the country are looking for hope and that is what we seek to instill. and this effort is also important to many job creators as well whether it be striker or perig yo or pfizer in southwest, michigan. i want to thank the staff at the fda and the nih for their work and time and effort to help us improve the ideas released by

our committee at the end of last month. we've established a good foundation, i thick for bipartisan success. and i will yield to other republican members on this side. seeing none, yield back. >> chair. thank you, gentlemen and now recognizing ranking member. five minutes for opening statement. >> thank you chairman, pitts and welcome secretary burwell. thank you for being with us today. today we'll hear about the president's fiscal year 2016 health and human services budget proposal and there are many provisions in congress must work to support. i was pleased to see a funding increase of $1 billion for the nih investing in early stage basic research as one of the most promising ways that we can accelerate the discovery of new treatments and cures. and support for nih is critical to building our economy as well. every dollar of nih funding generates over $2 in local economic growth yet we have let nih purchasing power decline by

over 20% since 2003 and that is why finding a way to significantly increase funding for nih will be my top priority as a 21st century cures initiative continues. i was also pleased to see the budget fully funds a four year extension of the children health insurance program or chip. we must act on this proposal immediately with more than four-fifths of state legislatures adjourning by june, lack of action and clarity from congress will make budgeting purely impossible. by every measure chip has become enormously successful and has had strong bipartisan support so extend ing extending chip should be a top priority for this committee for millions of children who depend on this program. i think we can all agree no child should be left worse off because of the lack of action of congress. and it adopts the bipartisan sgr repeal and replace legislation that congress agreed to last year.

i believe because the sustainable growth rate is an as a result of a budget gimmick and we spent $169 billion paying to fix the problem, that off-sets, especially those within our health programs are not necessary. if we must include offsets, the war savings, which are known as the overseas contingency operations could be used. i know the other sides of the aisle don't share this view but we can agree that sgr should be paid off -- should not be paid off for the facts of the beneficiaries. beneficiaries will already pay for their share of the costs of sgr repeal through higher premiums and half of the beneficiaries already live on less than $23,500 per year. that's why the president's budget proposal concerns me. and the president will increase part b. and d. premiums and increasing the part d. for new enrollees and impose a new surcharge for beneficiaries with

certain policies and institutes a $200 copayment for home health and this increases out of pocket on beneficiaries and we've seen enough of that. beneficiaries may forego necessary services and as a result use more high care acute services and such policies will affect middle income beneficiaries who are not poor enough for medicaid nor have access to employer sponsored medicaid. so i urge my colleagues to consider impact on the seniors. the last thing i -- last thing i want to mention is to commend you on implementing the affordable care act. because of your efforts, 19 million uninsured americans will be covered in this year 2015 and i recognize the challenge your agency faces in implementing this law with limited resources but despite what i call republican obstructionism, the affordable care act is working.

in sum i think this is a sound budget and i look forward to hearing from you today and i yield the rest of my time to the gentle woman from florida miss castor. >> i thank the ranking member for yielding time and i welcome secretary burwell. we are very excited to hear about the budget, the investments in medical research improvements in medicare and centers for disease control. i couldn't help about ask for a minute to highlight the florida enrollment numbers under the aca. it is remarkable. and i know you've seen them and we've talked about it. as of february 15th, over 1.6 million floridians have signed up for health insurance in the federally facilitated market place. we were surprised. this exceeded all of our expectations to beat california and texas and especially in a

state that had many fits and starts over whether to assist our neighbors in signing up. but i wanted to highlight a couple of stories. a 27-year-old third year law student at the university of south law who got assistance, from the navigator. his income is $16,000 a year in scholarships and he was able to find insurance for approximately $10 per month, zero deductible and it is his second year of enrolling in the market place he is very happy with his coverage. there are stories like that again and again and so i look forward to talking about it. thank you. >> gentle lady yields back. that concludes the oral opening statements. as usual, all of the written opening statements will be made a part of the record. and so we'll go now to secretary burwell. first of all, thank you for appearing before us today, madam secretary. your written testimony will be made a part of the record. you will be given five minutes to summarize your testimony and we appreciate you being here this morning and you are

recognized for five minutes for summary. >> thank you chairman pitts and chairman upton and ranking member pallone and ranking member greene and members of the committee. i appreciate the invitation to be here today. i want to thank you for the opportunity to discuss the president's budget for the department of health and human services. i believe firmly that we all share common interests and therefore we have a number of opportunities for common ground. from preventing and treating substance abuse to advancing the promise of precision medicine, to building an innovation economy and strengthening the american middle class. the budget before you makes critical investments in health care science and human services and innovation. and maintains our responsible stewardship of the taxpayer dollars and strengthens or work with the congress for our key challenges at home and abroad. for hhs, it proposes 83$83 billion

in budget discretionary authority and this is a $4.85 billion increase which will allow our department to deliver impact today and lay a strong foundation for people. it is a fiscally responsible budget which in tandem with accompanying legislative proposals would save taxpayers a net estimated $250 billion over the next decade. and in addition it is projected to continue slowing the growth of medicare. it could secure 4$423 billion in savings as we build a smarter healthier, better health care system. in terms of providing all americans with access to quality affordable health care, it builds upon our historic progress in reducing the number of uninsured and improving coverage for families who already have insurance. we saw a recent example of this progress with about 11.4 million americans who either signed up or re-enrolled in this past open enrollment it extended chip for

four years and it covers newly eligible adults in states plus d.c. which have expanded medicaid and it improves access to health for native americans. to support communities throughout the country, including under-served xhubtsz -- communities, it invests 4.2$4.2 billion to bolster our nation's work force. is supports 15,000 national service corp clinitians serving 15 billion patients across the country. with health center mandatory funding ending in 2016, we estimate that more than 7 million americans may lose access to a central cost primary care and this could approximately result in 40,000 jobs lost. to advance our common interest in building a better and smarter healthier delivery system, the budget supports improvements to the way care is delivered and providers are paid and

information is distributed. on an issue for which there is bipartisan agreement, it replaces medicare's flawed sustainable agreement and supports a long-term policy solution to fix the sgr. the administration supports the type of bipartisan bicameral efforts that the congress took last year to advanced our shared vision for leading the world in science and innovation, it increases funding for the nih by a billion to advance biomedical and behavioral research and in addition it invests $215 million for the precision medicine initiative, an effort to focus on developing treatments and diagnostics and prevention strategies tailored to individual genetic characteristics. to further our common interests in providing americans for the building blocks for success at every stage of life. this budget outlines an ambitious plan to make affordable child health care available to every working middle class family. to keep americans healthy, the budget strengthens our public

health infrastructure with $975 million for domestic and international preparedness, including critical funds to the global health security agenda. the budget will support cdc's critical infrastructure and cross cutting research to facilitate rapid response to public health emergencies and other public threats like the recent measles outbreak it also invests in public health science sciences in behavioral health sciences and substance abuse prevention. and finally as we look to lead the department stronger and we look to cut down on waste, fraud and abuses initiatives and are projected to yield 22$22 million in growth savings for medicare. we are also addressing our medicare appeals backlog with a variety of approaches and investing in cyber security. as i close i want to make one final point and that is i am personally committed to responding quickly and thoughtfully to the concerns of

congress and members. since i was confirmed, i've made it a top priority of our department to respond promptly and thoroughly and work with you as we can. i also just want to take one moment to thank the hhs employees for their work on eb and all the other children issues. with that i look forward to your questions. thank you. >> thank you, madam secretary. i will begin the questioning and recognize myself five minutes for that purpose. let me start with king v burwell. in a few short days the supreme court will hear arguments in king v burwell, a case that could have major impact in obama care. in january we asked you a letter asking for analysis and/or contingency plans that hhs has undertaken to prepare if the irs rule is overturned and while we received a letter from you earlier this week, your response failed to actually answer our questions. the letter simply stated that

you believe no administrative action by hhs could reverse the effects of a decision in favor of the plaintiffs. madam secretary your statement of opinion in the letter does not answer our simple question. let me ask you the question this way. have you or senior department officials instructed counselors within hhs to prepare any potential actions or approaches if the supreme court rules against the irs? >> mr. pitts and mr. chairman, with regard to what is in the letter, one of the things i think is important to reflect in the letter is the analysis of what would happen. that is a part of the letter. and in terms of what would happen and i first should state we believe the court will decide in favor of the position we hold which is we believe that this law says that people -- i've practicaled practicaled -- traveled across the country. people in texas should have the same subsidies as people in new york. and an important part of

answering the question. first, what would happen is when those subsidies go away, 11.4 million people the number i gave you when we did our most recent analysis 87% of the individuals in the market place are eligible for the subsidies they are on average $268 per individual per month. those subsidies number one would go away. that would lead to a number -- >> madam secretary, i understand that. i'm asking if you know of any plan to respond to approaches if the supreme court rules against o the irs? has the white house, has omb or other administration officials directed or asked you about any approaches in response to king v burwell or to work with the

treasury department on potential responses? that is my question. >> so in order to respond to the question, mr. chairman and to think about the question of a plan, one needs to analyze the problem which is what i was articulating in terms of the three major things that would occur if the court decides with the plaintiffs. >> let me ask it a different way. i would like to provide you some more information as why we expect you -- an answer from you today. the committee received recently specific information from a source within your department about the existence of an approximately 100-page document related to potential actions hhs may take if the supreme court rules against the administration in king v. burwell. are you or senior staff at hhs aware of this document? >> mr. chairman, this is a document i'm not aware of. with regard to the question that you have asked, as i said in the

letter, we believe, and i think it is very important to understand the damage, because it is related to the answer, the damage comes in the number of uninsured that would occur, number two it occurs in what happens in the individual market place where a group of less healthy individuals come in and that drives premiums up in that market place and number three, the indigent care that occurs from the uninsured and what that means in both those states in terms of their economy as well as what it means for employer base. those are the ramifications. with regard to those things which we believe are the damage, as i state in the letter, we believe we do not have any administrative actions and therefore there is not -- >> let me ask -- go on to another issue. i, as you know, as we discussed over the phone, i'm deeply concerned about the lack of hhs action regarding california and the dmhc authority to immediately include coverage for abortion. and this california mandate is a

clear violation of the weldon amendment which provides civil rights protections and prohibits funding to government entities to discriminate against health care for following their conscience. do you agree that the weldon amendment prohibits funding for states that mandate abortion coverage in insurance plans? >> we take the weldon amendment very seriously and since you spoke with me, mr. chairman and we received those letters we have opened an investigation in the office of civil rights at hhs to investigate the concerns that you and others have articulated. we take this seriously and are trying to move through that investigation as expeditiously as possible. >> so since it is clear that california is in violation of federal law, can you project a date by which you expect the violation to be stopped? >> with regard to the issue of the investigation, mr. chairman, that is not something i need to let the investigation go -- and i have asked the team to make sure they do it as expeditiously as possible, but in order that i

stay away from the investigation in terms of my interference in any way, i want to let them go forward but i have asked for due speed. >> we'll follow up. thank you. chair recognizes the ranking member for questions. >> thank you, mr. chairman. madam secretary, it has been almost five years since the affordable care act was enacted and i have lack to -- yet to see votes of repealing it and given this talk of repealing the act have you received any technical assistance on legislation that would replace the affordable care act with a credible proposal to provide comprehensive health care coverage to millions of americans. >> i am not aware of those requests. >> madam secretary over the last couple of days, we've heard about contingency plans of millions of americans who receive health care would lose them.

are you aware of republican proposals that would provide millions of americans with the financial assistance to help them with affordable health care coverage. >> i am not aware. >> secretary, i want to get your input on an issue that i know you are concerned and i appreciate you addressing in your opening remarks that myself and a lot of members of our committee. there is a funding cliff that is facing our community health centers, health centers serve nearly 22 million patients and projected to serve 28.6 million patients in 9,000 locations in the fiscal year of 2016. because of the current patient demographics and statutory mandate to locate under served areas or serve under served populations health centers are well positioned to provide health care service to millions of newly insured americans. they're particularly underserved in our district of the community of houston, texas. secretary, i was pleased for the president to include funding for

mandatory budgets for health centers and they face a major loss of access in a few months if we don't act or prevent the funding cliff caused by the expiration of the mandatory funding at the end of the fiscal year. can you speak about the importance of community health centers within our health system as we look at the issues of access, quality and cost? >> we believe they are a fundamental underpinning and not just in health care communities but they are an important part of economics of communities when you think about the fact we could lose up to 40,000 estimated jobs if we don't extend. but if you think about the numbers, thinking one in 15 americans are actually served by the health centers. how integral they are to providing primary care throughout the country and so we think it is extremely important to continue that, so that we can, as we've reduced the number of uninsured we want to make sure those who have care and still have access to the care, especially in our under served

communities across the country, not all but many of which are very rural. >> can you comment on the impact the funding cuts would have on patients' access to care and can you estimate how many people would receive access at our health care centers? >> our estimates are if we are not able to extend, it could be up to 7 million patients that could no longer have access to that care. we estimate over 2,000 of the centers would should down without that. and then there are the patients who would not be served because people would have to scale back in a number of the centers with reduced funding. >> in those 2,000 centers do you know how many jobs would be lost? >> approximately the estimates are up to 40,000. >> thank you. the health centers are a crucial part of our nation's primary care infrastructure for 50 years and have long had a truly bipartisan support. last year, along with my colleagues on both sides including secretary lance in

health centers calling for a bipartisan solution, we had 250 co-signers including 31 members of our committee. the senate gained 66 votes and more than 100 national organizations have called for a fix. consensus is something that must be done and we have to act as soon as possible. this issue is a top priority of mine and i know a lot of other members, literally republicans and democrats across the country, who look forward to working with you and our colleagues on a bipartisan basis to find a solution to avert that funding cliff. mr. chairman, i have 43 seconds left and i'd like to yield to somebody for that 43 seconds. on our side. anybody want about 30 seconds now? okay. well, mr. chairman, i yield back. >> thank you. the chair recognizes the the chairman of the full committee for five minutes for

questions. >> thank you again, mr. chairman. there are a number of healthcare law implementation issues that continue to trouble us. in the interest of time i'd ask that you submit answers to the following questions in writing within two weeks. the ceo of healthcare.gov recently stated there's a two-year development plan for the back end of the healthcare.gov. if you could provide us an estimate of when the back end will finally be fully automated, would be great. the second one is hhs recently announced that 800,000 americans enrolled in coverage through healthcare.gov received inaccurate tax forms under the aca. we would like a detailed assessment on when the department expects these taxpayers will have accurate information in hand so they can file their taxes. third, many americans were automatically re-enrolled in exchange plans, raising concerns that individuals and families may be getting unexpected premium bills or inaccurate exchange subsidies in 2015.

we would ask that you submit specific data on the number of americans who have been automatically re-enrolled in those exchange plans. that would be helpful. >> be happy to. >> now i'll return to 21 century cures. i appreciate your personal assistance with this. i for the record, want to thank dr. collins, commissioner hamburg, dr. woodcock and dr. sheren for the help on 21st century cures. because of that participation and participation of folks across the country we've been able to learn more about the status of innovation in this country and we hear about ways to accelerate the discovery, development, and delivery of cures and treatments for patients. as we heard in our first roundtable, there are over 10,000 diseases and we have only cures and treatments for about 500, so we have a great deal of work ahead. we released a discussion document last month and have been working with the

congresswoman to get members of our committee on both sides of the aisle, we want to improve that document. one area that includes a place holder is precision medicine, something the president talked about in the state of the union address and subsequently a white house event a couple weeks ago. we did put that place holder into the draft and look forward to continuing to work with you and the white house, the administration, on that important issue. could you give us some background on the administration's precision medicine policy and what we should look for. >> thank you. and thank you for the partnership as we work through these issues together. it's exciting to have the energy around these issues, including the precision medicine which is i think a subset of the broader issues you're looking at. it's $215 million as we think about it from a budget perspective. but i think thinking about it from the pieces and what it's doing, one part of the initiative is creating a very large database of a million people through nih but we'll access that through other channels so we're drawing from existing databases to get

the information we need. as we're talking about, what this is, precision medicine or personalized medicine is getting the information so we can do treatments to the individual. i was at nih recently and had the opportunity to both see the tumors and meet the cancer patient of a kidney cancer patient where he had had a group of tumors removed and they came back. but then using precision medicine which meant looking specifically at the genetic makeup of his tumors to be treated in a different way. i met him. that happened months ago, and now the patient was there discussing with me and is in a very different place. so one, that large database. two, specifically focusing on the area of cancer because we already are seeing some progress there and we believe that place is ripe for it. the other thing we need to do is fda, make sure that as we think about precision medicine we regulate and think about how to

improve these things in ways of a different type of medicine. finally, we need the health records, the office of national coordinator for electronic health records to be a part of making sure this will do with payments and how clinicians will use. those are the elements. >> i just want to say, that's very helpful. and we're excited as well. though i've been out to the nih a number of times in the past number of years, i want to remind members here that we have got a committee trip, invited, i think, all the members on this subcommittee to go out to the nih next monday morning. dr. collins has been very interested in having us out to kick the tires like you saw yourself. i know that because we have votes tomorrow and friday and again on monday and perhaps over the weekend there may be more of us here over the weekend than originally thought, so i want to remind members that they're invited to join with us and not miss votes come monday on a trip there. i yield back. thank you very much.

>> chair thanks the gentleman. now recognize the ranking member of the committee, mr. pallone. five minutes for questions. >> secretary burwell, i'm sure you can sense that i'm very proud of the affordable care act and concerned about republican efforts to repeal it or now take it to court in the case of king versus burwell. are you aware of any republican bill that would reduce the number of uninsured in this country by 11 million people -- i said 11. it's actually 19 million people, the way that the affordable care act does? obviously i'm saying this because i don't see them coming up with any alternative. >> we haven't and i think it's important to reflect historically. when one looks at the history and actually i've gone back to teddy roosevelt forward and the republican and democratic

administrations. we see whether it was president bush, president nixon, republican and democrat, president clinton, the conversation about how we make this next step forward with regard to reducing uninsured is something that we've struggled with as a nation. this is the first time and someone reflected on the anniversary of medicare and that 50-year anniversary this is the first time we've seen that. the plan that we have in place, the implementation of the affordable care act, has done that, but we have not seen any alternatives. >> let me ask you about chip. all the democrats on the committee recently introduced a bill to extend the chip program. i want to emphasize that we have to act on this legislation immediately when we consider sgr which expires at the end of march. while funding may not expire until the end of september for chip in fact 20 states will finish their legislative sessions by the end of april and more than half by june 1st, so it's clear that congress needs to act swiftly to ensure states can budget appropriately for chip and to avoid any disruption in children's coverage.

given the bipartisan history of this program, i see no reason why congress can't act very soon. can you comment on the impact on states if the chip funding isn't extended soon. >> i would comment on that from two different perspectives. one as a former director of omb and the issues of pre-deductibilitiability of funding and the issues of management and ability to manage. and so far the states to be able to do that, this is something that is important. when we've had predictability we've seen the benefits of that throughout the past two years. having just spent a lot of time with the governors this weekend when they were in town, this is a very important issue. we have seen that letter that 40 governors have signed with regard to knowing that they have that predictability of a program that is providing great benefits to the children in their states. >> the senate and house republicans have released a chip proposal this week. however, this proposal would institute a 12-month waiting period. needlessly forces low-income children off of medicaid and on

to chip and reduces or completely discontinues coverage for children above 250% of the federal poverty level despite the choice of 28 states around our nation to cover those kids. can you discuss the impact of policies like this on some of our most vulnerable children?ok vsq&!,dñ]=/ i >> we think that the chip romud/yz t+ %k*r(artisane ñixd program and a program working and delivering results in terms of quality health care for those children. has worked. we believe it is in our budget a four-year extension of the program. it is a very important thing and we need to do that in a timely fashion to both make sure those children are covered and receive care that they need but also to have the predictability for states especially those states in their legislative process right now. >> you mentioned the four-year extension. the budget includes a four-year extension of the chip program. can you talk about why that full extension of four years is so critical for kids that depend on this health coverage, and maybe

also mention as part of the extension the budget includes a permanent extension of express lane eligibility. if you'd talk about the success of express lane eligibility as an option for states. >> the express lane eligibility, those issues, folks ask us to try and figure out ways to simplify and make things easier. that's making things easier in two ways. when we hear from folks. it is about both the customer in terms of when they came in as well as the states. we believe this is a program that's been successful in getting to the simplicity and the simplicity often can work to create a, either better quality or jb or b, lower cost. why think that's important. we believe four years is the right amount of time for us to do this extension. there will be interaction with the affordable care act. we believe the four-year period is the right period for us to understand and look at that. >> thank you. i'd like to submit for the record two chip articles. the first an op-ed published

in the "new york times" this month discussing long term bipartisan history of the program and importance of a four-year extension. the second article was published in the "new york times" last month showing how health coverage for children pays for itself and all the research showing that when children have health coverage future earnings are boosted. if i could -- >> without objection. >> thank you. >> gentleman yields back. chair now recognize the chair emeritus of the full committee. mr. barton. five minutes for questioning. >> thank you, mr. chairman. thank you for being here. as i have talked to you before, there are lots of problems that we have to deal with, you in your position and the committee in our position. but there are some opportunities for bipartisanship. one of them is a piece of legislation that we call the ace kids act. the original co-sponsors are

miss castor of florida, i think miss eschew of california, mr. green on texas, myself on the republican side along with several other members of this committee on the majority side. you said in your opening statement that medicaid is going to be about $345 billion this year, an increase i believe of over $16 billion. where there is one piece of legislation we can pass on a bipartisan basis that would save money in medicaid and that's the ace kids act. it creates a home for families that have medically complex children based on an anchor hospital concept with the major children's hospitals in america. i think there are about 60 of them. so if a parent has a child that's medically complex and qualifies for the program, that child gets access to the network

on kind of a one-stop shop. all the specialties, all the various procedures are provided. medicaid is billed one time. medicaid is billed one time. we think there are about 12 million children that would qualify for the program. and we believe that it will save billions of dollars over a ten-year period. it's been introduced in the senate the identical bill with three republican co-sponsors, three democratic co-sponsors. here is a rare piece of legislation that both sides of the aisle support. republican leadership supports it, chairman upton supports it, chairman pitts supports it. does your department have a position on the bill and if so, could you explain to the committee what. that position is? >> with regard to the specific legislation, i don't think we as an administration have issued and s.o.p. the idea that we can improve both quality and cost for these

children who are very complex and who are moving state to state and the current system doesn't afford us the opportunity both with regard to making sure we don't have duplicative payments. we obviously do not want that from a fiscal responsibility. and we want that ease that the parent can have the child at the right place with the right care even if it is across state lines. i would just say we look forward to working with you. welcome the opportunity if there are questions and ways that we can provide technical assistance and other things as part of this. we welcome that opportunity because we agree with the fundamental of what we are trying to do here and believe this is something that can improve both cost and quality. >> i would encourage you and your department to take a look at the bill. it's not illegal or immoral for the administration to issue a letter of support. and this is one that i think

with chairman upton and chairman pitts, ranking member of the full smith and subcommittee on both sides of the aisle, this bill could go. could be part of chairman upton's 21st century effort or it could be a stand-alone bill. i also in the brief time i have want to concur with what ranking member green said about community health centers. i hope we can work together in a bipartisan fashion to find an answer to keep those funded. i know there is a funding issue this year that we need to address and reauthorize a program. i have a number of those health centers in my congressional district and they are very helpful providing indigent care. finally, i wasn't going to ask this question but i'm a little bit puzzled. when chairman pitts asked you the question about this report that deals with planning in case the health exchanges at the

state level under the affordable care act are found to not be legal the way they're currently funded, if there was a plan and if you had seen the plan, i take you at your word that you haven't seen the plan. but don't you think it is prudent that there should be a plan? i mean i hope i don't have a primary opponent. i hope i don't have a general election opponent, but i have a plan in case i do. i know you hope the court upholds your position, but shouldn't the administration and your agency have a plan in case it fails? >> congressman, what we state in the letter and what we believe is, if the court decides -- which we don't believe they will. but if the court decides on behalf of the plaintiffs, if the supreme court of the united states says that the subsidies are not available to the people of texas, we don't have an administrative action that we could take. so the question of having a plan, we don't have an administrative action that we

believe can undo the damage. that's why when i was answering the chairman, i think it is important to understand what the damage is. because then it comes to the question of we don't believe we have any administrative -- >> so my time is expired but if the court strikes it down, the administration's just going to hold up your hands and say "we surrender"? >> what we believe is, we believe the law as it stands is how it should be implemented. >> i understand. >> and with regard to when the supreme court speaks, if the supreme court speaks to this issue, we do not believe that there is an administrative authority that we have in our power to undo it. and so that's something we don't believe we have. >> that's puzzling but i accept it. thank you, mr. chairman, for your courtesy in the minority for letting me have extra time. >> the chair thanks the gentleman. and now recognizes the gentleman from new york, mr. engel, for five minutes of questions.

>> thank you very much, mr. chairman. and welcome, secretary burwell. let me piggyback on back-up plan. i was part of this committee. i participated in months and months. deliberations for the affordable health care act. we had weeks of mark-ups. this committee did. and not once was there mention of subsidies not being able to individuals in states that did not set up their own exchanges. i've heard a lot of complaints on the other side of the aisle about the law but never was this issue discussed until they lost at the supreme court in 2012. some of my friends sign on to amicus briefs and wasting incredible time forcing votes on the floor, for repeal of the law, yet they are upset the administration doesn't have a back-up plan for 8.6 million americans. i think it is somewhat ironic that my republican friends are demanding that this administration fix problems that they themselves created and have shown zero interest in fixing. should republicans get what they want and the supreme court rules in favor of king, i would urge my colleagues if that should happen to pass legislation to ensure that americans have

continued access to affordable coverage for the federally facilitated exchanges just as democrats intended. next month the affordable care act will have been the law of the land for five years. it is not a perfect law and there are issues that need to be changed with it. but i would like to see those issues addressed and unless unless both of us in a bipartisan way turn our focus to improving the law and enabling more quality coverage options for our constituents instead of trying to kill it, repeal it, take it to court and things like that. i just want to say that i'm sure that you agree with what i just said. >> we look forward to moving forward and we do want to make improvements where we can. >> i want to use my home state of new york as a great example of what's possible when the federal government has a willing and enthusiastic partner in the affordable health care implementation. as a result of our successful exchange and medicaid expansion,

more than 2.1 million new yorkers have quality health care coverage. our state's uninsured rate has dropped to only 10%. there is clear evidence we are reaching the right people since 88% of people who obtain coverage through the exchange reported being uninsured is at the time they enrolled. so it is really working in new york and the health insurance options available for new york state of health are, on average, 50% cheaper than the comparable coverage available before the exchange was established. so i want you to know -- i'm sure you know it -- the aca is working well and working well in new york. that's why i think it is terrible that i've been forced to take more than 50 votes to repeal some or all of this law. we should fix what's wrong but in my state, which has really been a tremendous success.

>> fortunately, i've had the opportunity to travel the country and see the individuals. those are the numbers and the individuals and whether it is laura in florida, 26 years old, married to someone who is a truck driver who does not have coverage. she's training to be an x-ray tech. they have two children. they did not have insurance. she now has insurance with a premium of $41 a month. or a woman who had ms in the state of texas and for 17 years she had not had health insurance. and so how people go about -- she treated her ms through the emergency room and she has four children and she works. so when it would get bad enough, that's what she would do. the stories of what it means to people in terms of their financial and health security i think numbers are important, but it is those stories which really make this real. >> secretary burwell, i understand that we have seen i] robust exchange enrollment nationwide even in states where republican governors refuse to set up a state exchange or expand their medicaid programs.

isn't this true? >> so the numbers -- i spoke to this yesterday when we've looked at numbers. 53% of the enrollees in the marketplace this year, in the federal marketplace are new enrollments. so i think that is indicating the demand for the product and the need for the product. >> thank you. i want to second mr. pallone's positive discussions about chip. i've always been a strong supporter. as of july 2014 an estimated 476,000 children were enrolled in this affordable coverage option for their care in new york. so i think that that is really, really important. i was pleased, therefore, to see with the budget proposal for fy 2016 included funding for chip for the next four years through fy 2019. so can you elaborate on why you believe increasing tobacco taxes is a viable means for funding this program while we sort out

the transition issues associated with the affordable care act? >> we believe one of the things in trying to be fiscally responsible and indicating how we are paying for things, we 5"7 believe this is a legitimate way to pay for things especially in the context of we are providing health care and something that will hopefully create a deterrent and help health care in the issue of a tobacco tax. as one analyzes across the department and whether it is at cms or cdc, the impact that tobacco has on health in our nation and the cost of health care in our nation is one that we think is a fair place to go to pay for this care for the children. >> i agree with you. and finally, i want to talk about graduate medical education. i was concerned that the administration's proposal to cut indirect gme funding, 1 in 6 physicians obtains training in my home state of new york and we have some of the finest academic medical centers in the country. so it requires significant funding and time to develop the infrastructure and expertise