Chris Coons Chairs Senate Appropriations Committee Hearing On Strengthening American Competitiveness

5 months ago

On Wednesday, Sen. Chris Coons (D-DE) chaired a Senate Appropriations Committee hearing on strengthening American competitiveness.

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Transcript

00:00:00 Ladies and gentlemen, this hearing of the Senate Appropriations Committee Subcommittee

00:00:05 on State and Foreign Operations and Related Programs will come to order.

00:00:08 I'd like to thank our three witnesses today and the members of this subcommittee who will

00:00:14 be joining us.

00:00:16 The subcommittee meets today to review the fiscal '25 budget request for three important

00:00:20 agencies funded by this subcommittee that play a central role in strengthening American

00:00:25 competitiveness, the International Development Finance Corporation, the Export-Import Bank,

00:00:31 and the Millennium Challenge Corporation.

00:00:33 Our witnesses are Scott Nathan, the CEO of the DFC; Rita Jo Lewis, the President and

00:00:38 Chair of the Board of Directors of EXIM; and Alice Albright, the CEO of the Millennium

00:00:43 Challenge Corporation.

00:00:44 They each have had distinguished careers in public service and in the private sector and

00:00:50 have been in their current role since being confirmed in 2022, so you have valuable perspectives

00:00:56 and insights to share from your experience.

00:00:59 Since I became chairman of this subcommittee, one of my goals has been to ensure we're using

00:01:03 U.S. foreign assistance to enhance American competitiveness.

00:01:08 And to do this, we have to strengthen our standing as a partner of first choice by supporting

00:01:12 economic resilience and growth in ways that have mutual benefits for our partner governments,

00:01:17 local communities, and our own domestic economic interests.

00:01:21 State and AID played critical roles in this effort, but we have to ensure we're leveraging

00:01:25 other agencies under this subcommittee's jurisdiction, including the three agencies you represent.

00:01:31 The unique and valuable roles of your agencies will be the main focus of our hearing.

00:01:36 First, the DFC, our country's development finance institution, focused on private sector-led

00:01:42 development in some of the most critical sectors of our time, for which the FY25 request is

00:01:47 just over a billion, an increase of 25 million above enacted; the Millennium Challenge Corporation,

00:01:53 a development leader with a model that emphasizes transparency, accountability, country commitments

00:01:59 to fighting corruption, economic freedom, and civil liberty, for which the request is

00:02:03 937 million, an increase of 7 million over enacted; and EXIM, as the U.S. export credit

00:02:09 agency with a mission of supporting American jobs, for which the request is 145 million,

00:02:15 an increase of 5 million above enacted.

00:02:18 You are all critical to advancing economic resilience and growth and promoting U.S. interests.

00:02:23 That's why in the FY24 appropriations bill, we provided for a new initiative called the

00:02:28 Economic Resilience Initiative, which provides 265 million in new and more flexible funding

00:02:35 for investments in strategic infrastructure, critical mineral supply chains, energy security,

00:02:41 digital security, and macroeconomic growth.

00:02:44 The ERI – we have to have an acronym, it's government – provides new authority to leverage

00:02:49 the unique roles of the State and Foreign Operations Subcommittee-funded agencies like

00:02:54 DFC, EXIM, and the Treasury Department in a more comprehensive and strategic manner.

00:03:00 This funding will support our ongoing efforts to counter malign influence and address mutual

00:03:05 interests, including in the Pacific and Southeast Asia, where, for example, the Treasury Department

00:03:10 has just announced a plan to leverage new funding provided through this initiative to

00:03:14 guarantee billions in loans for infrastructure, transportation, and energy transition work

00:03:19 in partner countries.

00:03:22 The application of this ERI is global.

00:03:25 Chair Murray and I recently traveled to southern Africa to discuss the potential strategic

00:03:30 impact, for example, of investments in the Lobedo Corridor, a project that aims to lay

00:03:35 or improve over 1,000 miles of railroad to help transport critical minerals from Zambia

00:03:40 and the DRC to a port, Lobedo, in Angola.

00:03:44 But this is not just about mineral extraction.

00:03:47 Along that corridor, EXIM and DFC are making investments, including through financing for

00:03:52 U.S. exports, to enhance sustainable development for local communities.

00:03:57 And the Millennium Challenge Corporation will be soon signing a compact with Zambia to further

00:04:01 leverage the profound benefits of this corridor.

00:04:04 MCC will focus on transportation and logistics for agriculture to help increase private sector

00:04:10 investment in partnership with the work being done by EXIM and DFC.

00:04:15 Zambia is a priority as well for USAID's economic resilience work, including through ERI, where

00:04:20 we're helping the government demonstrate the dividends democracy can pay while mitigating

00:04:24 the risks from a significant national Chinese debt burden.

00:04:29 So we're demonstrating that even in this tightly constrained budget environment, there's more

00:04:34 we can do to coordinate across what's called the interagency to leverage all of our tools

00:04:39 to enhance our economic diplomacy and facilitate sustainable development, and your agencies

00:04:44 play a key role in that.

00:04:47 Investing in emerging markets and strategic sectors alongside our likeminded partners

00:04:51 and allies, consistent with international best practices for environmental and social

00:04:55 safeguards, and ensuring U.S. businesses have the chance to compete on a level playing field

00:05:00 is both good development policy and an effective way to strengthen U.S. national economic security.

00:05:07 That's particularly true when we're talking about countering Beijing's monopoly on critical

00:05:11 mineral supply chains and processing, and the need to build and secure new digital networks,

00:05:17 or in helping our partners diversify their energy production and sources.

00:05:22 We're never going to outspend the PRC dollar for dollar in official development assistance,

00:05:26 but we can outmatch them when it comes to leveraging our coalition of likeminded partners

00:05:32 and the incredible depth and strength of the American capital markets and our private sector.

00:05:36 We also differentiate ourselves from the PRC by upholding values of transparency and accountability,

00:05:42 promoting local ownership, protecting human rights, and other foreign investment best

00:05:46 practices.

00:05:47 So in conclusion, I look forward to discussing how each of you view the unique roles of your

00:05:51 agencies, how we can help you better align your authorities and your resources to allow

00:05:57 you to best bring your agencies to bear to these tasks.

00:06:01 And while we continue to make the most of every appropriated dollar, we cannot do more

00:06:05 with less.

00:06:06 So this is also a chance for you to discuss the challenges you're facing and the opportunities

00:06:10 we can seize if we increase our investments in you.

00:06:14 Thank you.

00:06:15 Senator Hagerty, would you like to make any opening remarks?

00:06:19 Well thank you, Senator Coons – Chairman Coons.

00:06:21 It's good to be with you, and it's good to be with this esteemed group of leaders

00:06:25 here today.

00:06:26 Mr. Nathan, I'd like to start with you, if I might.

00:06:29 It's good to see you again.

00:06:32 You and I have talked about this on numerous occasions.

00:06:33 The DFC has incredible potential to be a strategic tool for America on a worldwide basis.

00:06:40 I'm concerned, though, that the agency has been distracted by ideology and that we're

00:06:46 not offering the clear and compelling alternative to predatory Chinese funding that is such

00:06:52 an important aspect of your strategic mission.

00:06:55 And I'd like to start out with what I view as perhaps the most critical geostrategic

00:07:00 tool that we can deploy, especially in the region that I'm talking about, the Indo-Pacific.

00:07:06 When I served in my previous role in Japan, I worked very closely with the Japanese to

00:07:11 displace Russian energy from the energy supply.

00:07:14 Senator, if I might interrupt briefly.

00:07:17 We were going to let the witnesses give their opening statements and then turn to questioning.

00:07:22 Were you making just an opening comment about the three agencies or launching into questioning,

00:07:26 sir?

00:07:27 I was – I'll let the –

00:07:28 Let the witnesses make their opening statements.

00:07:30 My apologies if I missed.

00:07:31 No, you're all right.

00:07:32 I was just inviting a brief opening comment, which is typically what the ranking –

00:07:35 Just say this.

00:07:36 Welcome to all of you again.

00:07:38 I look forward to your testimony.

00:07:40 Thank you, Senator.

00:07:41 So we'll now invite Senator Schatz.

00:07:43 Did you have a comment you needed to make?

00:07:45 Unfortunately, just for the awareness of our witnesses, we will have a two-vote series

00:07:48 that begins in about five minutes.

00:07:51 So we will either have to suspend and just go vote and come back, or we may have a transition

00:07:57 to who's chairing to allow some members to go and vote and come back.

00:08:00 Let us worry about that.

00:08:02 You focus on your testimony.

00:08:04 The Honorable Scott Nathan, let me invite you to make, in five minutes or so if you

00:08:08 could, your testimony to the committee today.

00:08:11 Thank you.

00:08:12 Thank you very much, Chairman Koons, Senator Hagerty, Senator Schatz.

00:08:15 It's a pleasure to be here, and I appreciate the opportunity.

00:08:19 I want to thank Congress and especially this committee for its continued support of the

00:08:23 Development Finance Corporation.

00:08:25 Since Congress established DFC, we've used the tools you provided us to deliver on the

00:08:30 Build Acts mandate to make development and strategic impact around the world.

00:08:35 DFC's financing for the private sector enables reliable access to energy and supports high-quality

00:08:41 infrastructure, including railways, ports, airports, and safe and secure digital connectivity

00:08:48 throughout the developing world.

00:08:50 We're investing to strengthen health and food systems while also supporting the small businesses

00:08:55 that are vital to generating jobs and opportunity.

00:08:59 Unlike the development approach of the PRC or other strategic competitors, DFC's efforts

00:09:04 are directed towards supporting private entities, mobilizing private capital, and building resilient

00:09:10 market economies.

00:09:12 We're guided by the belief that developing a robust private sector is the best way to

00:09:16 alleviate poverty over the long term and strengthen the economic and strategic positions of our

00:09:22 partners around the world.

00:09:24 We need to show up and offer our partners a choice so they don't feel trapped into accepting

00:09:29 too much debt or end up with projects that aren't needed or of poor quality.

00:09:35 In the nearly five years since Congress created it, DFC has made great progress in this regard.

00:09:41 Last year, DFC committed a record $9.3 billion across 132 transactions, nearly double our

00:09:49 FY20 total.

00:09:51 And we did this in a cost-effective and efficient manner.

00:09:54 We deployed roughly $500 million into equity investments, but with the remaining $8.8 billion

00:10:01 in transactions requiring only $110 million of appropriations.

00:10:07 That's great bang for the taxpayer's buck.

00:10:10 By mobilizing additional private capital, our investments are making an impact, driving

00:10:15 economic development where it's needed most and advancing U.S. strategic objectives.

00:10:20 DFC is promoting energy security by helping to diversify Eastern European energy supplies

00:10:26 with large-scale projects in Poland, Moldova, Bulgaria, Georgia, and Greece.

00:10:33 All these projects have helped the region shift away from dependence on Russian gas.

00:10:39 We're focused on securing the critical inputs and supply chains for the industries of the

00:10:43 future, investing $150 million in graphite production in Mozambique, $50 million in rare

00:10:50 earth oxides in southern Africa, and almost $1 billion for multiple solar panel manufacturing

00:10:56 facilities in India to ensure no one country has a chokehold on price or availability.

00:11:04 Wherever we go, DFC works to ensure our projects meet the needs of local communities, and we're

00:11:08 investing to improve public health through improvements to local health infrastructure,

00:11:14 and we remain committed to helping the small businesses that are the engines of their economies

00:11:19 get access to capital they need to thrive.

00:11:23 DFC has active projects in 112 countries, but our primary focus is the world's poorest

00:11:29 countries.

00:11:30 In FY23, nearly three-quarters of our projects were in low- and lower-middle-income countries.

00:11:35 I'm proud of the DFC team and of this track record, but I know we can do much more.

00:11:41 The global demand for high-quality, high-standard development far outstrips the supply.

00:11:46 We want to do more projects and have deeper collaboration, broader reach, more meaningful

00:11:50 impact, and better metrics.

00:11:52 For FY25, the administration requests a budget of just over $1 billion for DFC to empower

00:11:59 this agency to better meet its mission.

00:12:01 The FY25 request includes $763 million in program funds that would allow us to grow

00:12:08 our overall portfolio and continue strategic and developmental projects around the world.

00:12:14 The budget request also includes administrative expenses of $245 million.

00:12:19 This funding underpins the work DFC does around the world, and it's our hope that the small

00:12:24 increase in operating budget will help us become more capable and efficient as an organization.

00:12:32 The request would extend our fee authority, giving us the ability to use fees collected

00:12:36 from clients to pay for project-specific transaction costs.

00:12:41 Not only is this financially beneficial, but it will also create an incentive for projects

00:12:46 to reach completion on schedule.

00:12:49 The FY25 budget requests additional resources to attract and retain the talented and highly

00:12:54 in-demand workforce that DFC needs.

00:12:58 Finally, a high priority for DFC is working with Congress to pass a reauthorization bill

00:13:03 for the agency.

00:13:05 We see this as an opportunity to reaffirm the goals of the BUILD Act and make improvements.

00:13:10 These include fixing the budgetary treatment of equity to make full use of this important

00:13:14 tool Congress gave us, improving the method for determining country eligibility, and raising

00:13:20 the maximum contingent liability so we can increase our deal flow and better keep pace

00:13:25 with our competitors.

00:13:27 We want to use reauthorization to fix these issues and best position DFC to meet the challenges

00:13:32 of this current moment.

00:13:33 We're eager to work with Congress to chart the best path forward for DFC.

00:13:38 Thanks for this opportunity.

00:13:39 I look forward to your questions.

00:13:40 Thank you very much, CEO Nathan.

00:13:42 Thank you for your service and leadership.

00:13:44 We look forward to President and Chair Rita Jo Lewis of the Ex-Im Bank.

00:13:49 Chairman Coons, thank you so much and for your distinguished members that will be joining

00:13:54 us for inviting me to testify on the administration's fiscal year 2025 budget requests from Ex-Im

00:14:01 Bank.

00:14:02 It is an honor to appear before you as Ex-Im's chair and president, and thank you for your

00:14:06 support in passing our historic seven-year reauthorization in 2019.

00:14:11 I'm also pleased to join my counterparts from DFC and MCC today.

00:14:14 Like our fellow agencies, Ex-Im plays a vital role in promoting and sustaining U.S. leadership

00:14:19 around the world.

00:14:21 But while Ex-Im's activities may have development impact, as you know, it's not a development

00:14:25 agency.

00:14:26 As you know, Ex-Im is the official export credit agency of the U.S.

00:14:29 Our congressional mandated mission is to support U.S. jobs by financing or facilitating exports.

00:14:34 The agency does that through our direct loans, loan guarantees, and insurance programs in

00:14:39 cases where the private sector is unable or unwilling to provide financing or where such

00:14:45 support is necessary to level the competitive playing field for U.S. exporters.

00:14:50 A multi-year lapse in Ex-Im's charter, a lack of quorum on the board of directors, and the

00:14:54 COVID-19 pandemic had a devastating impact on morale, staffing, and operations.

00:14:59 Building on my predecessor's success in reopening the agency, I have worked to rebuild and revitalize

00:15:04 Ex-Im and set it up for even greater success in our next chapter.

00:15:08 In FY 2023, because of the dedication of our talented workforce, Ex-Im supported nearly

00:15:14 8.8 billion in authorization and an estimated 40,000 jobs across the country.

00:15:21 We strive every day at Ex-Im to fulfill our congressional mandates by sector, size, and

00:15:26 scope.

00:15:27 On sub-Saharan Africa, Ex-Im approved nearly 1.6 billion in authorizations last year, including

00:15:33 the largest renewable project in Ex-Im's history.

00:15:36 On small business last year, it marked the first time that authorizations surpassed $2

00:15:41 billion since FY 2020.

00:15:44 On our China and Transformational Export Program, or CTAP as we call it, saw a nine-fold increase

00:15:50 in year-over-year growth since FY 2022.

00:15:54 And we authorized our first-ever Make More in America, MMIA, transaction.

00:15:59 This initiative allows Ex-Im to extend our medium and long-term financing to domestic

00:16:04 projects that facilitate exports, re-sure manufacturing, rebuild the domestic supply

00:16:09 chain, and support American jobs.

00:16:12 In our FY 2025 request budget justification, Ex-Im has requested $130.1 million for administrative

00:16:20 resources, plus $15 million in program budget, which will enable the agency to offer competitive

00:16:26 financing while meeting appropriate reserve requirements.

00:16:30 This request will support recruitment and retention of highly trained staff required

00:16:37 to successfully complete very complex international financial transactions and support underwriters

00:16:44 in engineering.

00:16:46 The request will support also a projected $11.3 billion in new authorizations, an export

00:16:52 value of $17 billion, and estimated 56,000 U.S. jobs.

00:16:57 These numbers anticipate growth in Ex-Im's transportation program and an increase in

00:17:01 green energy-related transactions, particularly in nuclear plant refurbishments and hydro

00:17:07 and solar power generation projects.

00:17:10 As part of the FY 2025 request, Ex-Im is seeking a default rate cap exemption for both nuclear

00:17:18 projects because of their size and for CTAP, China Transformation Export Program, transactions,

00:17:24 which would allow Ex-Im to better counter predatory PRC financing in transformational

00:17:30 export areas and higher-risk markets.

00:17:33 Finally, while reauthorization is not the subject of today's hearing, I would be remiss

00:17:38 if I did not mention that Ex-Im's charter will expire at the end of 2026.

00:17:47 When Ex-Im's charter lapsed between 2015 and 2019, the world saw a 35 percent increase

00:17:53 in the number of foreign export credit providers.

00:17:56 Other official credit providers evolved their philosophy and substantially expanded their

00:18:01 roles.

00:18:02 And U.S. manufacturers lost out as foreign governments promoted their domestic industries,

00:18:08 creating a fundamentally uneven playing field.

00:18:11 An early reauthorization, backed by large bipartisan majorities, would send a strong

00:18:16 signal to the world that Congress is committed to empowering the agency to advance Americans'

00:18:21 national interests by facilitating exports and supporting jobs.

00:18:25 I look forward to working with you, all of you.

00:18:28 Thank you again, and I look forward to receiving your questions, Mr. Chairman.

00:18:32 Thank you very much.

00:18:33 I, too, look forward to an early bipartisan reauthorization vote.

00:18:38 And to the CEO, Alice Albright, of the Millennium Challenge Corporation, thank you so much for

00:18:42 your leadership.

00:18:43 We look forward to your testimony today.

00:18:44 Thank you.

00:18:45 Chairman Coons, distinguished members of the subcommittee, thank you so much for inviting

00:18:46 me.

00:18:47 Thank you.

00:18:53 Thank you so much for inviting me to testify today.

00:18:56 I also want to thank you and your staff for ongoing support and collaboration with MCC.

00:19:01 MCC has always benefited from bipartisan backing.

00:19:05 We deeply value this and welcome your continued counsel.

00:19:09 I'm deeply proud to lead an agency with a proven record of partnership, accountability,

00:19:14 and delivering results for the American people.

00:19:16 MCC emerged as a bold experiment in 2004 to test innovative, cost-effective, and data-driven

00:19:22 approaches to ending global poverty.

00:19:25 It represented a new approach, a focus on strong economic policies, good governance,

00:19:30 democracy, and country-led solutions and implementation.

00:19:33 Now, 20 years later, having invested nearly $17 billion in 47 countries, benefiting an

00:19:41 expected 400 million people, we are no longer the experiment, but humbly the exception,

00:19:47 a leader in how to bring about a better life for those people who need it the most.

00:19:52 MCC delivers values-driven, high-impact, and sustainable infrastructure projects to meet

00:19:58 the needs of low- and lower-middle-income countries and to support the United States'

00:20:03 economic and national security interests.

00:20:05 The agency not only responds to immediate development needs, but reinforces a network

00:20:10 of partner countries, both nascent and thriving democracies, that share the United States'

00:20:15 belief that ruling justly, investing in people, and upholding human rights creates durable

00:20:20 pathways to prosperity.

00:20:22 I am reminded of this constantly when I travel.

00:20:25 Just last week, I was in Dallas marking our 20th anniversary with President Bush.

00:20:30 We hosted heads of state and senior leaders from more than a dozen countries who offered

00:20:34 powerful testimonies on how MCC catalyzed democratic change and created the conditions

00:20:40 necessary for economic growth.

00:20:42 MCC also serves as an important counter to malign influences of some other nations.

00:20:48 In particular, as China reduces its development aid in favor of more lending, there is a real

00:20:54 opportunity for MCC partnerships that promote open, sustainable, and inclusive development.

00:21:00 Our model of country-owned development and conditioning our investments on good governance

00:21:05 enables us to incentivize partners to undertake difficult reforms.

00:21:10 Having funds on hand 9 to 12 months prior to signing assures our partners that funding

00:21:15 is available when they tackle these reforms.

00:21:18 It also ensures that projects are scoped appropriately prior to negotiations.

00:21:23 Without funding in advance of program signings, MCC risks losing meaningful leverage, undermining

00:21:30 the commitments and our credibility when there is strong competition.

00:21:35 When MCC was established, the agency's budget matched its ambitious mandate.

00:21:39 For the past decade, however, MCC's budgets have remained largely flat, while development

00:21:44 challenges have grown significantly.

00:21:46 MCC is balancing a surge in portfolio signings and funding commitments, along with increased

00:21:52 security, supply chain, and inflationary costs.

00:21:56 With these rising costs combined with $1.1 billion in rescissions over the last three

00:22:00 years, MCC's available balances have been significantly reduced heading into fiscal

00:22:05 '25.

00:22:07 As a result, MCC requires full funding in fiscal '25 and budget predictability to achieve

00:22:13 strategic and lasting impact.

00:22:15 In addition to resources, the fiscal '25 budget requests a legislative change that could bring

00:22:20 MCC's impactful model to a broader range of countries, including eight in the Western

00:22:25 Hemisphere, nine in Eastern Europe and the Caucasus, and five in the Asia and Pacific

00:22:30 region.

00:22:31 This would also supercharge the MCC effect, whereby countries are incentivized to pursue

00:22:36 reforms to qualify for MCC assistance.

00:22:39 I want to thank the Senators and the staff of this subcommittee for supporting this change

00:22:44 in your fiscal '24 bill report.

00:22:46 I hope that this provision will be formally enacted soon.

00:22:50 In sum, MCC's fiscal '25 budget will build upon more than 20 years of experience as a

00:22:55 leader in international development.

00:22:58 Although MCC is a small portion of the U.S. government's foreign assistance spending,

00:23:02 it is often the largest and most visible of U.S. government investments in countries where

00:23:06 the agency works.

00:23:08 We also have earned the distinction of being named the most transparent bilateral donor

00:23:12 in the world seven years in a row.

00:23:15 With a robust portfolio, MCC has built a track record of helping democracies deliver for

00:23:20 their people.

00:23:22 This includes a pipeline of strategic new programs that will be ready for approval by

00:23:25 MCC's board of directors in fiscal '25.

00:23:29 With your support for MCC and our fiscal '25 budget request of $937 million, the agency

00:23:35 is poised to create building blocks for stronger and more vibrant economies around the world

00:23:40 and to foster greater security here at home.

00:23:43 Thank you so much, and I look forward to answering the committee's questions.

00:23:46 Thank you.

00:23:47 MR.

00:23:48 BUSH: Thank you to all of you.

00:23:50 My colleagues, I know, are currently voting, and so I'm waiting for clarity from my staff

00:23:56 on when I have to go vote.

00:23:58 So I'm going to enjoy an open field and a chance to just question you all.

00:24:03 We are going to conduct this hearing in seven-minute rounds, so I would expect that each senator

00:24:07 who comes will really just get one round.

00:24:09 We won't do a second round, likely.

00:24:12 Let me just first start about the sort of broader unifying theme in some ways is leveraging

00:24:18 the approach, the values, the priority of the private sector, both metrics-based and

00:24:24 facilitating economic engagement and crowding in private capital.

00:24:30 Broadly speaking, over the, I guess, 14 years I've been here, private capital is significantly

00:24:36 outpacing official government-to-government development loans or grants, and that's a

00:24:41 good thing because global development needs far outweigh available government funding,

00:24:46 particularly U.S. government funding.

00:24:48 And this subcommittee is facing severe budget constraints, as we did last year.

00:24:53 I'd be interested in hearing whether you're confident that you have all the tools you

00:24:59 need to maximize your ability to leverage private capital and how we can be more helpful

00:25:06 as you try to advance your goals of sustainable development and creating more U.S. jobs by

00:25:11 expanding U.S. exports and providing investments in developing countries, if you would, Mr.

00:25:16 Nathan.

00:25:17 Well, thanks for the question, Mr. Chairman.

00:25:22 We do have the tools we need.

00:25:23 The BUILD Act gave us them.

00:25:25 We just need to unleash them in the appropriate way in order to really fulfill our mandate,

00:25:33 as you mentioned, which is to mobilize private capital and tap into the deep pools of private

00:25:39 capital that will be necessary to fill the global infrastructure finance gap.

00:25:46 So for us, that means fixing the budgetary accounting of equity, whether that's before

00:25:52 reauthorization or in reauthorization.

00:25:55 In order for this tool to be used the way I understand Congress intended it, we need

00:26:00 to have a fix that takes into account the net present value of our investments.

00:26:05 Currently, it's as if we're making grants or going to lose 100 percent of every dollar

00:26:10 we invest.

00:26:11 And while I don't expect that DFC will be the best equity investor, it's not going to

00:26:17 be that bad where we are guaranteed to lose 100 cents on every dollar.

00:26:21 So something needs to be fixed on that.

00:26:23 Just put a dollar value on this roughly.

00:26:25 You made $500 million in equity investments, I think, this past year.

00:26:29 What would the impact actually be?

00:26:31 What more might you be able to do if this were fixed?

00:26:35 So I think it's instructive to look at the other part of our portfolio.

00:26:37 We did $9.3 billion total in transactions.

00:26:40 $500 million of that was in equity.

00:26:43 That cost $500 million of appropriations.

00:26:46 The remaining, if you subtract $500 from $9.3, you get $8.8 billion of transactions that

00:26:52 are debt and insurance.

00:26:56 That cost $110 million of appropriations.

00:26:58 The leverage effect, the cost savings to the taxpayer, the impact with the dollars that

00:27:04 this committee can allocate using an MPV model and the subsidy model that is then resulting

00:27:11 in order to account for appropriations gives enormous leverage.

00:27:17 So somewhere in between that leverage ratio, the, you know, basically 85 to 1, and 1 to

00:27:26 1 has got to be the right answer.

00:27:28 I would expect we'd probably get to 4 to 1.

00:27:31 That could allow us to make $2 billion of investments with equity.

00:27:34 We can invest in infrastructure, in energy, in nuclear with that tool unleashed.

00:27:40 If I could really briefly just mention two other authorities that would be great to have

00:27:45 unleashed.

00:27:47 Our full guarantee authority and our ability to make political risk insurance contracts

00:27:52 on debt investments or on to lenders.

00:27:57 I think this authority needs to be clarified.

00:28:00 We're in ongoing discussions in the interagency to make sure that we have that tool.

00:28:05 These are critical tools for being able to mobilize capital in the way that you mentioned.

00:28:09 Thank you, Mr. Nathan.

00:28:10 Ms. Lewis.

00:28:11 Senator, Mr. Chairman, the tools that we expressed, that I expressed in our opening statement

00:28:19 about the fact that as it currently stands, EXIM loses our ability to conduct new business

00:28:25 if our default rate equals or goes over 2%.

00:28:29 We have been working diligently with members as well as the administration as we are seeking

00:28:36 a exemption, especially around very large projects like nuclear and very large projects

00:28:43 that are somewhat more riskier like CTAP.

00:28:46 We believe that that exemption would allow us to also continue to send a signal to the

00:28:53 market that EXIM is continuing to seek those types of transactions, but it also gives us

00:29:00 an opportunity with that exemption for our underwriters to be able to take bolder and

00:29:06 riskier opportunities because that's who we are.

00:29:09 We believe that rather than having that exemption from that 2% gives us a greater cushion and

00:29:18 enables us to take advantage of some other calculated risks.

00:29:21 And then finally, Senator, we have seen the convening power that three different Senate

00:29:26 committees have done in bringing together the private sector with all of us in government

00:29:32 who are in the economic cone, and it has, I believe, yielded some great results, especially

00:29:37 around sectors like nuclear, digital, and critical minerals.

00:29:41 Thank you.

00:29:42 I'm particularly interested in our engagement in nuclear power and refurbishment in Eastern

00:29:47 Europe and the developing world and look forward to hearing more from you about that.

00:29:49 Ms. Albright.

00:29:50 Thank you, Chairman Coons.

00:29:52 We have great tools, and for this topic in particular, grant financing.

00:29:57 Grant financing with no time limits on it is a significant advantage for the agency

00:30:01 and I think for the U.S.

00:30:04 I will say there's a couple of points on timing.

00:30:07 One of the things that we do is work with countries to put in place different types

00:30:10 of regulatory changes that set the table and set the stage for private sector companies

00:30:15 to come in.

00:30:16 We spend a lot of time out on the road in the U.S. meeting with private sector companies

00:30:20 and doing roadshows with chambers of commerce.

00:30:23 I was in Texas last week doing one, encouraging them to bid on our business.

00:30:28 But if we don't have the funding well in advance of when we need to start engaging in contract

00:30:34 discussions, it tends to have a chilling effect on whether or not we're actually going to

00:30:38 be able to go ahead.

00:30:39 So we do face timing challenges, and I would appreciate the opportunity to follow up with

00:30:44 your staff on that.

00:30:46 I also want to come back to this candidate country reform bill that we mentioned earlier.

00:30:52 If we add another 30 countries with whom MCC could work, if they become eligible, it would

00:30:58 introduce a whole new range of countries that private companies may also be interested in

00:31:02 working in.

00:31:03 So I think it provides significant opportunity for us to begin to work with the private sector

00:31:08 in different parts of the world.

00:31:10 We're particularly interested in Central and Latin America, in Eastern Europe, and

00:31:14 out in the Pacific.

00:31:15 And I think, for example, in Eastern Europe, with some of the energy issues that are there,

00:31:19 that we could really make a difference.

00:31:22 Thank you.

00:31:23 And I duly noted the impact that rescissions have had on your ability to deliver advanced

00:31:30 commitments and the importance for reliability as you enter compacts.

00:31:35 Well stated.

00:31:36 Thank you.

00:31:37 Senator Hackerty.

00:31:38 Thank you, Senator Coons.

00:31:40 Mr. Nathan, I'll go back to you now.

00:31:43 And back to the point about, I think, one of the most important strategic elements of

00:31:47 your mission, and that is to effectively counter the predatory practices of China – the CCP,

00:31:54 I should say.

00:31:55 I think that one of the most incredible geostrategic opportunities that we have is the use of U.S.

00:32:03 LNG.

00:32:04 And I've mentioned this to you before, but in my prior role as U.S. ambassador to Japan,

00:32:08 I worked very closely with the Japanese to displace Russia from their energy supply chain.

00:32:13 And the discussion certainly centered around economic security and energy security, but

00:32:18 it was always aimed toward national security.

00:32:22 And as I think about the entire region of the Indo-Pacific, where China is behaving

00:32:27 in such a predatory fashion, that region consumes 70 percent of the world's LNG, 80 percent

00:32:33 of whom are using coal out there now, it strikes me that there is a tremendous opportunity

00:32:38 before us with American LNG that would provide them with a safer, cleaner, more economic

00:32:44 alternative, and it would create a geostrategic linkage that's continuous, better than any

00:32:49 piece of infrastructure.

00:32:51 It's a relationship that becomes extraordinarily powerful for us.

00:32:56 So I want to ask you if you could just clarify me how you – how the DFC approaches LNG

00:33:03 projects and how you think about them in terms of economic and national security.

00:33:09 Well, thanks for the question.

00:33:11 And I mentioned in my testimony the work we've done, particularly in Europe, since February

00:33:16 24th, 2022 and Russia's outrageous illegal further full-scale invasion of Russia to help

00:33:23 Europe diversify from Gazprom and Russian gas.

00:33:28 And I can run through some of those projects for you.

00:33:30 Yeah, I took the countries down, but I'm very focused on the Indo-Pacific region right

00:33:34 now.

00:33:35 So there were the countries in Europe – Moldova, Bulgaria, Poland, Greece – that we helped.

00:33:44 We've done projects in Africa.

00:33:47 Our board just approved $412 million of financing for a project to generate power from gas in

00:33:55 Sierra Leone, one of the poorest countries in the world.

00:33:58 We did a project in southern Africa for helium, which is produced in association with LNG

00:34:06 that will eventually account for 7 percent of the global supply of helium, a critical

00:34:11 material for defense, for aerospace, for medicine, for semiconductors.

00:34:17 We're open to doing projects in the Indo-Pacific.

00:34:22 We don't currently have any on the table.

00:34:25 We do have other energy projects.

00:34:27 We did in the last year in Indonesia a geothermal project.

00:34:30 It took years and years to get that project in place, but we're very pleased to be able

00:34:35 to get it across the finish line.

00:34:37 It's a huge resource for Indonesia to provide baseload power and take advantage of their

00:34:42 geographic position.

00:34:43 If we could specifically come back to LNG, though, because this is where I see the most

00:34:47 immediate opportunity and, frankly, the greatest geostrategic leverage for us.

00:34:52 We have the capacity right now to produce more.

00:34:56 There are mixed messages, I think, coming from the United States on this, but I want

00:34:59 to make certain that there's no limitation on what the DFC does when it comes down to

00:35:03 you.

00:35:04 Yeah, that's why I wanted to go into the projects in Europe.

00:35:05 For example, in Poland, we made a $500 million guarantee to PKN Orlin, the largest utility

00:35:12 there, precisely to help them buy U.S. LNG in response to their dependency on Russian

00:35:19 gas.

00:35:20 This was because they ran out of hedging capacity to hedge between Henry Hub and Antwerp, the

00:35:25 basis risk, and our guarantee provided more hedging capacity so that they could purchase

00:35:31 U.S. LNG.

00:35:32 In Bulgaria, we're making a $250 million loan to Bolger Transgas to provide more than a

00:35:39 doubling of their storage facility.

00:35:42 This enables them to buy gas, U.S. LNG cargoes, from Greece or from other places in the southern

00:35:49 European network to then provide wheeling of that gas to their neighbors in a way that

00:35:55 helps diversify.

00:35:57 And in Greece, we provided $125 million, and I had the pleasure of visiting this facility

00:36:02 for the rehabilitation of a shipyard.

00:36:05 This prevented a PRC entity from doing that shipyard, but the shipyard will be doing floating

00:36:11 storage and regasification units.

00:36:14 So again, it's part of the ecosystem of enabling these countries to diversify their energy

00:36:20 supplies by buying U.S. LNG or other LNG cargoes but not be dependent on getting it from the

00:36:27 East.

00:36:28 So I get what you're saying right now, but I'm coming back again to the immediate opportunity,

00:36:33 and my question is very specific now.

00:36:35 Is there anything that causes you to dissuade projects, to disfavor LNG projects?

00:36:43 There's nothing that I'm aware of.

00:36:44 We have to analyze them.

00:36:46 They have to go through all of our high-standard screening process.

00:36:51 There is a process for greenhouse gas emissions accounting and for guidance on that, but all

00:36:59 of the projects I just mentioned – Do you take into account the greenhouse gas

00:37:02 reductions of displacing coal when you do that sort of analysis?

00:37:05 Well, it goes into the discussion around it.

00:37:07 In terms of the exact accounting, the displacement effect does not go into the exact accounting.

00:37:13 We use the international accounting standards for that.

00:37:16 But what I was going to say is that none of that dissuaded us from doing the projects

00:37:19 I just mentioned, all of which are directly in the zone of the type of projects you mentioned.

00:37:24 I hear you.

00:37:25 Without the immediacy of the crisis in Ukraine with Russia, though, I'd still like us to

00:37:29 be looking longer-term strategically at projects where we could really provide a very real

00:37:34 counterweight to the Belt and Road Initiative.

00:37:36 So I would look forward to finding ways to continue to work together.

00:37:40 And if you sense anything that's forcing a deprioritization of these projects or something

00:37:43 that we could adjust that would allow us to be more aggressive, the geostrategic value

00:37:49 is quite obvious.

00:37:50 Chairwoman Lewis, I want to come to you as well.

00:37:53 Does Ex-Im Bank have any practices that discourage or in any way -- what's the right word -- discourage

00:38:01 LNG projects?

00:38:03 Senator, Ex-Im, we believe, have a very important role to support all of the industries and

00:38:09 workers in accordance with all of our statutory, regulatory, and policy requirements.

00:38:17 As an independent agency, you know we have a prohibition clause that does not allow us

00:38:22 to discriminate against any size or sector or region in the world.

00:38:27 And so we -- In practice, is that the case?

00:38:31 That is definitely the case, Senator.

00:38:32 We seek to definitely align with other -- with administration initiatives.

00:38:37 Have you financed any LNG projects in the past two or three years?

00:38:41 LNG projects, we have been involved in a number of projects with commodities.

00:38:47 And one of the things that we are -- I'm not asking about commodities broadly.

00:38:50 I'm asking specifically about what I think is the most important geostrategic opportunity

00:38:54 we have that's LNG.

00:38:57 We have -- we received all of our projects and transactions on a case-by-case basis.

00:39:03 And over the years, Ex-Im has invested in those.

00:39:07 I would be -- would love to be able to get back to give you a list of what goes in there.

00:39:11 If you could do that, if you could give me a roster of the LNG projects that have been

00:39:16 undertaken over the past several years, I'd love to see that.

00:39:19 In the past five or ten years, I'd just like to see how that trend is going.

00:39:22 Because again, this is a really important opportunity for us.

00:39:26 And the immediate benefit for this is rather obvious.

00:39:30 Thanks.

00:39:31 Thank you, Senator Hagerty.

00:39:33 Senator Coons had to go vote.

00:39:36 I will chair in his absence.

00:39:38 And Senator Schatz is recognized.

00:39:41 Thank you very much to all of the testifiers.

00:39:43 Thanks for all of your public service.

00:39:46 Ms. Albright, it will not surprise you to know that I am extremely enthusiastic to see

00:39:53 you in this role and at the testifiers' table.

00:39:59 I'm glad to see that MCC is working in the recently overlooked Pacific Islands.

00:40:07 And I'd like you to say a little more about the potential for additional projects in the

00:40:11 region and how, especially this, small investments can provide big returns economically and geopolitically.

00:40:20 Thank you so much, Senator Schatz, for the question.

00:40:24 So we very much agree that the Indo-Pacific, and in particular the Pacific Islands, are

00:40:29 a great opportunity for our government's development dollars, and in particular for MCC.

00:40:36 Right now, we are working in a program in Kiribati, $29.1 million, that will work on

00:40:42 helping young people in that country get better skills and opportunities for the jobs of the

00:40:49 future.

00:40:50 And that's a program that was very much designed with that country's government.

00:40:53 We're also working on a program in the Solomon Islands.

00:40:58 If we're able to expand our candidate pool, we could include other countries if they are

00:41:02 qualified, Fiji, Tonga, Tuvalu, for example.

00:41:07 It's a slightly different part of the region, but we're also working on a big program in

00:41:10 East Timor on water and sanitation and also education.

00:41:16 And those are all programs that are part of our – about a third of our work is in the

00:41:21 Indo-Pacific area.

00:41:23 And I just made myself a list.

00:41:24 We're doing programs right now in the Philippines, Nepal, Mongolia, Indonesia, East Timor, Kiribati,

00:41:29 and the Solomons.

00:41:31 And if we're able to expand our footprint, we could add to that.

00:41:35 And one thing that's – just the last point I'll make is that, you know, we're able to

00:41:39 do small programs in these huge compact programs.

00:41:42 One of the things that's a real standout for the smaller islands is that the $29.1

00:41:48 million for Kiribati is the largest piece of international aid that that country will

00:41:52 have gotten, and we're going to make a huge difference for the young people there.

00:41:56 So we can make a big difference with a reasonably modest amount of money.

00:42:02 That's exactly the point here.

00:42:03 And for us as appropriators, I think that's where we ought to think about how to deploy

00:42:09 the federal dollar most efficaciously.

00:42:12 And in these Pacific Island nations, you know, $29 million is a rounding error for the Department

00:42:17 of Defense, and arguably for the Department of State in other contexts, $29 million is

00:42:22 the most money that Kiribati has seen in maybe ever externally.

00:42:28 And this has a major impact.

00:42:31 And I want to praise the State Department more generally.

00:42:33 We've had these convenings over the last three or four years with Pacific Island leaders,

00:42:38 foreign ministers and prime ministers and defense ministers.

00:42:41 And you know, the first couple were a little rough.

00:42:44 They were, I wouldn't say gripe sessions, because that's unfair to them, but there were

00:42:48 a series of complaints that were, that could be summarized by, "You guys are never around

00:42:53 until you need something."

00:42:56 But they were very specific in their asks, and the State Department, along with the SFOPS

00:43:01 committee, sort of made good on a bunch of those promises.

00:43:05 And it is gratifying to see that these subsequent meetings have not only increased in attendance

00:43:10 from around three or four senators to, I think, last time, 15, 16 senators, including the

00:43:14 chairman of the Intelligence Committee, bipartisan participation from SFRC.

00:43:21 And it was, I wouldn't call it a love fest, but it was a huge improvement in the tone

00:43:25 and the tenor of our partnership.

00:43:27 So when Secretary Blinken says, you know, allies, friends, partners, you are on the

00:43:34 front lines of making that true.

00:43:36 And so I just wanted to recognize that.

00:43:38 I have a question for you about digital health tools.

00:43:40 You just made a big announcement, a $300 million partnership, and I'm wondering if you can

00:43:45 just talk through what that is going to mean and the kind of leveraged impact that's going

00:43:49 to have, both in terms of our good standing around the world, but also real-world impact

00:43:54 for people who need it.

00:43:56 So that program, I believe, is a Luzutu.

00:44:00 We signed the program a couple of years ago, and it will build on a previous investment

00:44:05 that we made in health clinics.

00:44:08 And we all know that one of the big vulnerabilities in global health is the inavailability of

00:44:13 data because it really eats at a system's ability to anticipate where the problems are.

00:44:17 So with our new Luzutu program, which will also focus on horticulture, we're going to

00:44:22 be investing in data systems in that country to help their health clinics really get up

00:44:26 to speed and figure out how they can anticipate where the issues are.

00:44:31 And in a country that's had, on a per capita basis, a significant history with AIDS, we

00:44:37 think that's a very important thing to help that country with, and we're very much looking

00:44:41 forward to working with them.

00:44:42 And we can follow up with your office, Senator Schatz, to let you know how it's going.

00:44:46 Thank you very much.

00:44:48 I would love for us to be on a first-name basis outside of this committee, Ms. Albright.

00:44:54 Thank you very much.

00:44:55 Mr. Nathan, I've repeatedly heard from leaders in the Indo-Pacific about the threats that

00:45:01 they face from sea level rise and disasters.

00:45:05 How are you implementing the President's Emergency Plan for Adaptation, or the PREPARE, in the

00:45:11 Indo-Pacific, and are there any additional tools that you need?

00:45:14 Well, thank you very much for the question.

00:45:19 We're a key implementing agency for the PREPARE Act.

00:45:22 We've done, since the inception of DFC, a little over $600 million of financing transactions

00:45:28 for adaptation within our climate finance bucket.

00:45:32 That's everything from regenerative agriculture, helping prevent waste of food by helping with

00:45:41 cold storage, water system management, and hardening infrastructure.

00:45:48 So we are helping.

00:45:51 In the Pacific Island nations that you were asking about before, we're looking for projects

00:45:56 that could specifically help in this area.

00:45:59 They're challenging places for us to work to find private sector projects.

00:46:03 Nonetheless, we have a $50 million microfinance facility specifically targeted at the Pacific

00:46:09 Island nations in cooperation with our colleagues at USAID, which I think might be able to find

00:46:16 some of these kind of adaptations.

00:46:18 Just because I only have 30 seconds left, does that microfinance facility, is that like

00:46:21 the first cousin of the Pacific Resilience Facility?

00:46:24 Like how are those two things going to interact?

00:46:26 Well, this is specifically a private sector facility to help get money into the hands

00:46:33 of individual businesses.

00:46:35 So they can definitely cooperate, but it's a separate facility.

00:46:39 Okay.

00:46:40 But I guess my question is, are you in conversations about how to sort of make sure that these

00:46:45 Absolutely.

00:46:46 I mean, the idea is to find deal flow and by cooperating with our colleagues managing

00:46:50 the resilience fund.

00:46:52 That's one way to do that.

00:46:54 Thank you very much.

00:46:56 Thank you, Senator Schatz.

00:46:58 And let me add my thanks to all of you for your service and your testimony here today.

00:47:05 All your agencies are great examples of different tools available to the U.S. government to

00:47:10 do everything from supporting American jobs to supporting our strategy around the world.

00:47:18 And I'm grateful for your service.

00:47:21 Ms. Lewis, it's great to see you again.

00:47:23 I know we've talked about this in the past, but I think we all share a concern about the

00:47:28 PRC's dominance in the critical mineral supply area and the supply chains related to that.

00:47:36 So from acquisition of raw materials to processing.

00:47:41 And my question is, are there ways that XM could be more effective in financing critical

00:47:48 mineral projects that diversify our supply chains?

00:47:53 And as part of that question, are the China and transformational exports programs sufficiently

00:47:59 flexible for critical mineral projects?

00:48:04 And if not, are there changes you would like to see that provide for that flexibility?

00:48:10 Thank you so much, Senator, for that.

00:48:11 Great to see you again.

00:48:13 As you mentioned, we have been before you in other committees calling regarding the

00:48:21 convening power that the Senate has to bring together the private sector players along

00:48:26 with government agencies like ourselves to discuss and make sure that they understand

00:48:30 the resources that XM has.

00:48:32 As I had mentioned in some previous conversations that you and I had, the exemption of having

00:48:40 CTAP, the transformational export program, from our 2% default rate would be really,

00:48:46 really critical for this agency.

00:48:48 It would allow us to be able to take a little bit more risk.

00:48:52 It will allow our underwriters to not be as cautious because primarily when you look at

00:48:58 these kind of critical minerals projects, which are not a part of the 10 transformational

00:49:03 export that Congress had passed in 2019, but it is really critical that we have been able

00:49:09 to tuck the critical minerals work and transactions underneath CTAP.

00:49:16 We know that you would like to see us take some bolder actions as a part of a strategy

00:49:20 to counter the PRC's unfair trade and export practices.

00:49:25 At XM, you know we require that reasonable assurance and repayment for every transaction

00:49:30 that we do.

00:49:33 To be able to ask you for that type of change, we think that that would allow us to have

00:49:38 a lot more flexibility and to be able to take a lot more risk and for us to continue to

00:49:43 do those types of deals.

00:49:45 As well as you should know from the convening that you participated in and allowed us to

00:49:50 be with, we have been able to put out a federal notice in our federal registry to ask the

00:49:56 industry and ask those in the market to give us some ways that they think that XM can do

00:50:03 more in this space.

00:50:06 We are very excited also that we have been able to use our MMIA deal authority that we

00:50:13 have providing direct loans that we recently did for 4.7 million of an expansion of a facility

00:50:21 for a company called Aquatech that happens to be in Wisconsin and Pennsylvania.

00:50:25 It is better for them to be able to support critical minerals like lithium and EB supply

00:50:30 chains.

00:50:31 Got it.

00:50:32 Well, thank you.

00:50:33 I look forward to continuing to work with you on this.

00:50:36 Senator Warner and Senator Rubio and I and others are working on legislation to expand

00:50:41 some of these authorities in a targeted way.

00:50:45 Mr. Nathan, it is great to see you again and thank you for all your good work.

00:50:51 I hear you loud and clear on fixing the scoring issue.

00:50:54 This is a self-inflicted wound.

00:50:56 I think it is just malpractice that we have not resolved this yet because it makes no

00:51:02 sense as you said to count every dollar that you invest as a grant dollar.

00:51:09 We look forward to trying to finally get this done.

00:51:13 As I think about how American businesses might be looking at the U.S. government and how

00:51:18 we are organized, they might see it as a little stovepipe.

00:51:22 Each of your agencies has very important authorities.

00:51:27 In some areas, especially between the Ex-Im Bank and DFC, there could be room for collaboration.

00:51:35 So I guess my question for you, Mr. Nathan, is to what extent are you sort of operating

00:51:43 in a more coordinated, maybe not seamless way, but a more coordinated way to make sure

00:51:50 that we use all our tools?

00:51:54 Some of the things that you provide can be complementary, obviously, to Ex-Im Bank.

00:51:57 So do you have some examples of where there is collaboration?

00:52:01 Well thanks for the question and I, as always, appreciate your input and support.

00:52:07 I would say we definitely collaborate with our colleagues, my colleagues at the table

00:52:13 and their agencies, as well as USTDA, of course our colleagues at the State Department, Commerce

00:52:18 Department, and USAID as well.

00:52:25 The way we collaborate mostly is by participating in various interagency processes to identify

00:52:33 foreign policy priorities that can be benefited from our activity.

00:52:39 With MCC, we have a formal agreement to try to find ways to collaborate and we come at

00:52:45 it from different ends, but it's complementary.

00:52:48 MCC did a compact in Sierra Leone that worked on the power sector.

00:52:54 We're funding a power plant there that will free them from the dependence on a barge with

00:52:59 four diesel gen sets that is unreliable and has led to severe political problems.

00:53:04 With Ex-Im, we frequently have discussions, but we're coming at these projects from almost

00:53:11 the exact opposite end, whereas Ex-Im is supporting US business and their exports, we're in-country

00:53:20 supporting the company or the project with local financing.

00:53:25 So there are places where it can be collaborative.

00:53:29 It'd be great if we had some good examples of projects.

00:53:34 We're obviously both focused on the critical minerals area.

00:53:37 We made $740 million of investments in critical minerals and key inputs last year.

00:53:44 I foresee this being an area where we will likely collaborate in the future, given the

00:53:49 high priority and the opportunity to both support mining and processing.

00:53:55 At the moment, our graphite investment last year in Mozambique, ultimately we're hoping

00:54:00 that will have as an off-taker a plant in Louisiana that will be supported by a Department

00:54:07 of Energy grant and loan.

00:54:09 So there is plenty of opportunity for collaboration.

00:54:13 And I agree with you, it's bewildering sometimes from the inside what each agency is doing.

00:54:18 From the point of view of our partners and allies, it's very hard to figure out.

00:54:25 Right.

00:54:26 I appreciate that, and that's why a number of us had that sort of convening of the different

00:54:32 agencies.

00:54:34 If I could just finish up, Mr. Chairman, with a question to Ms. Albright, and thank you

00:54:38 for your service.

00:54:40 And when we met, I told you I was very happy to be in Kathmandu last year, the day after

00:54:48 the MCC deal was finally being implemented.

00:54:54 And as you know, it took years because a lot of disinformation from the PRC, but I want

00:55:00 to applaud not only MCC, but the Government of Nepal for making the decision to move forward.

00:55:09 Many of us are big supporters of the legislation that you mentioned.

00:55:13 As you know, it passed the Foreign Relations Committee with a unanimous vote.

00:55:18 I believe it was unanimous, and we hope to advance it.

00:55:21 Could you just give one specific example of how passage of that legislation could make

00:55:29 a big difference in advancing the mandate of the MCC and the goals of the United States?

00:55:37 Thank you so much, Senator Benhall, for the question.

00:55:43 And I'm delighted that you were in Kathmandu the day after that was passed.

00:55:47 It was a very important project for us.

00:55:50 It's a $500 million program that will help completely upgrade the energy capability of

00:55:56 Nepal, and we're off to the races on it, so we're very excited about that.

00:56:01 So I keep this map on my desk, which shows all the different countries that we could

00:56:06 work in.

00:56:07 And the one I'm going to zero in right now is Moldova, because I would imagine that many

00:56:11 of us in this room are concerned about what's going to happen to Moldova as a result of

00:56:15 what Putin is doing in the region.

00:56:18 And we can't work in Moldova right now, but if we were able to get the legislation passed

00:56:24 – of course, it's a small country, but it's a very strategic country, and that's

00:56:28 one where we certainly could begin to work.

00:56:30 There's a number of others in the region.

00:56:33 There's also some interesting ones in Latin and Central America we're not able to work.

00:56:38 So what's interesting about the legislation is not just the specificity of the countries,

00:56:43 but it would enable us to work in regions – some in Central America, some in Europe,

00:56:50 Eastern Europe, some in the Pacific.

00:56:53 And there are certainly different geostrategic interests that the United States has in all

00:56:58 three of those regions, over and above what the individual sort of countries have to – what

00:57:03 need in terms of working with MCC.

00:57:05 So there's just many, many opportunities here, which is why we've been up here a

00:57:09 lot visiting with you all to try to get the legislation passed.

00:57:13 But we'd be very enthusiastic, and we think that a number of countries would qualify immediately

00:57:17 and we could do some good work.

00:57:19 Well, thank you.

00:57:20 I know the chairman supports that legislation strongly, as well as the legislation that

00:57:27 Mr. Nathan emphasized with respect to the scoring rules.

00:57:33 Thank you all for your testimony and for your service.

00:57:38 Thank you, Senator Van Hollen.

00:57:39 We understand Senator Merkley will arrive in a few moments.

00:57:43 If I might, I'm just going to go into another question or two, and appreciate your answers

00:57:49 to my colleagues.

00:57:51 Accountability and transparency is a key part of the work of all three of your agencies.

00:57:56 I think it's a central part of what makes the MCC model of development so powerful.

00:58:02 I think you've done important work at the DFC in order to strengthen your internal transparency

00:58:07 and accountability mechanism.

00:58:09 I think in EXIM it's important that we focus for a minute on workforce retention and competitiveness

00:58:15 in order to ensure that you're functioning at the level you need to.

00:58:19 If you could, each of you, if you'd speak about in what ways your agencies work to ensure

00:58:24 transparency and accountability, both internally and then competitively with other like-minded

00:58:31 other nations that are trying to do the same sorts of things you're doing, how do we promote

00:58:35 transparency and accountability?

00:58:37 Want me to start?

00:58:40 Yes please.

00:58:41 Okay, thanks.

00:58:42 Forgive me, Mr. Nate.

00:58:44 In regard to transparency, we too have been ranked high on transparency indices compared

00:58:49 to our DFI counterparts.

00:58:52 I think the last ranking we were the highest, but it still wasn't a high grade.

00:58:57 So if we're graded on a curve, we're doing well, but we have a long way to go.

00:59:01 We try to provide as much information as possible to the public, to the NGO community, and obviously

00:59:07 we provide all the information required by Congress.

00:59:11 We have many different oversight mechanisms.

00:59:14 We have a robust Office of the Inspector General.

00:59:18 We have an Office of Accountability, a public Office of Accountability that has recently

00:59:25 changed leadership, and I'm very optimistic about the robust leadership there and the

00:59:31 resources that that office is getting in order to have the ability to fulfill its mandate.

00:59:38 We want to cooperate with them as much as possible.

00:59:42 Internally, we try to share information.

00:59:46 You know, we're a rapidly growing agency.

00:59:48 In just the last two years, we've gone from 440 people to 670, and that has material impact

00:59:58 on our culture against the backdrop of the pandemic and changes to work patterns.

01:00:05 There have been some challenges in creating a new culture that's also, I think, natural

01:00:09 for an agency that launched only five years ago and built on a smaller team that really

01:00:15 was serving a different mission and a different mandate with different tools and a different

01:00:19 process.

01:00:20 So reorienting it has involved some changes internally to how we're organized that I think

01:00:27 going forward will really begin to bear fruit, but change is hard, and that has led to some

01:00:35 issues that we've tried to work through.

01:00:38 But from the point of view of leadership of the agency, openness and sharing of information

01:00:43 is a key element to that, and I think we're making progress.

01:00:46 How do you ensure that your Office of Accountability, which if I understand right is still one person,

01:00:51 may soon be two?

01:00:52 Yeah, and then potentially to triple to three.

01:00:55 Is actually accessible, open, responsive to concerns of communities that are impacted

01:01:01 by projects you're helping finance?

01:01:03 So one way is to make sure that there's great visibility on how to approach the Office of

01:01:11 Accountability, and we've worked with the new person who's in charge to make sure that

01:01:16 whether it's through website, through constant communication with the NGO community, which

01:01:22 is really critical in this regard, that that's something he's aware of.

01:01:29 We have a public hearing of our board two times a year in which members of the public

01:01:34 or NGOs can make statements, and that's another way for the Office of Accountability to be

01:01:40 aware of what is in the flow of that information.

01:01:43 And then obviously there's reports and letters sent directly.

01:01:49 And how do you contribute to greater transparency and accountability for the deal flow and the

01:01:54 loans that you're actually involved in, as opposed to our competitors from other countries

01:01:58 who are also active in development finance?

01:02:00 Well, we make a public information statement about every deal that we do.

01:02:04 We post that on our website.

01:02:05 We have information about our deals on our website.

01:02:09 That is certainly different than our strategic competitors, which actually bind most counterparties

01:02:14 with nondisclosure agreements to keep their loan agreements opaque, what kind of strings

01:02:21 are attached or security arrangements are made.

01:02:23 So that's not the way we manage things.

01:02:27 Thank you.

01:02:28 Ms. Lewis, tell us for a minute, if you would, about EXIM and how you both ensure accountability

01:02:32 internally and then compared to your strategic competitors.

01:02:37 From an internal perspective, Senator, one of the things that we've been very clear is

01:02:41 that we've seen that having an agency that was closed from 2015 to 2019 and then COVID

01:02:48 happened as well as the loss of a board quorum actually definitely changed the culture, I

01:02:54 believe, at EXIM Bank that we are striving every day to bring back.

01:02:58 Our scores have definitely been low, Senator, and we have most recently over the last year

01:03:05 hired a permanent Chief Human Capital Officer, Chief Management Officer, who has been really

01:03:11 helping to lead the charge in the support of increasing morale as well as engagement.

01:03:17 We've done a significant amount of work using an external consultant, one of the big four,

01:03:24 to assist us in the different types of programs we have done from training, from leadership

01:03:30 training.

01:03:31 We have extended our retreats from just the central 20 plus senior leaders to all of our

01:03:41 managers, which totaled about 40.

01:03:44 We have also been doing numerous more recognition award programs as well as having offsite retreats

01:03:54 that we have had.

01:03:55 I am very pleased to say that in the last one we had, mostly about a week ago, we had

01:03:58 over 80 percent participation of our team because I think people are just very interested

01:04:05 in the work that we are doing.

01:04:06 So we have also re-upped the internal communications that we do for all of us to know what's going

01:04:14 on at EXIM.

01:04:15 And what kind of initiatives do you take to ensure the transparency of the loans in the

01:04:19 long term?

01:04:20 Yes.

01:04:21 As Scott also mentioned, we have a very -- we've been working very closely and open with our

01:04:27 IG to ensure that we've seen a number -- I would say the open cases that we have, about

01:04:33 70 percent of them have only been done, issued in the last year.

01:04:37 And so we're working very closely to address them.

01:04:39 As it relates to transparency and accountability, we frequently, on a regular basis, with our

01:04:44 different transactions, are noticed in the Federal Register so that those can -- we're

01:04:50 seeking comments on those.

01:04:52 We definitely publish when we complete every transaction on our deals.

01:05:00 We also work very closely with other international bodies like the OECD because we all are part

01:05:10 of the arrangement and there are things that we all have to report when we are doing different

01:05:14 types of transactions.

01:05:15 And so we -- and then most recently, working with -- off of a recommendation, we have created

01:05:22 a new Office of Compliance that coincides alongside ethics and ethics officer.

01:05:27 We believe it's going to be those types of engagements and developments at EXIM that's

01:05:31 going to allow us to continue to be more transparent and more accountable to the American people,

01:05:36 as well as to the borrowers that come to EXIM.

01:05:40 Thank you.

01:05:41 Ms. Albright, I think accountability, transparency is sort of in the very DNA of the MCC.

01:05:46 I'd be interested in how you think, both internally and externally, you focus on transparency

01:05:53 and accountability at MCC.

01:05:54 Thank you, Chairman Coons, for the question.

01:05:56 Yes, there's many, many aspects we can point to.

01:05:59 Let me talk first about our internal decision-making processes, whether or not it's with our board,

01:06:06 with partner countries, with regards to how we do monitoring and evaluation of every single

01:06:12 program.

01:06:13 We are dedicated to transparency at every step along the way, whether or not it's our

01:06:18 scorecards, which you're familiar with, which are on the Internet, so every country can

01:06:22 see how they rank in terms of whether or not they're going to become eligible for MCC's

01:06:28 support.

01:06:29 We also have -- are very happy to have a very active dialogue with Congress on congressional

01:06:35 notifications at every step of the way.

01:06:38 We also evaluate every single program that we do.

01:06:42 We look at the lessons that we can learn, so we can learn how to do things -- continue

01:06:45 to learn how to do things better.

01:06:47 All of those reports are also published publicly.

01:06:51 So that's with regard to our decision-making internally.

01:06:55 A key part of how we think about accountability is whether or not countries remain eligible.

01:07:01 As you know, it's very difficult for countries to become eligible for MCC support, principally

01:07:06 on the question of whether or not they're on a democratic trajectory.

01:07:09 We then continue to watch that once a country is actually selected.

01:07:15 And if a country begins to divert from that, we start having serious conversations with

01:07:21 the country about whether or not we ought to continue.

01:07:23 And that's really at the heart of how we operate.

01:07:26 Very sadly, from time to time, we do have to actually completely discontinue our work

01:07:31 as we did recently with Burkina Faso.

01:07:34 We've also suspended our work in Niger.

01:07:37 So that's also -- I think runs right the way through MCC's DNA.

01:07:43 We too have an office of -- we work with the IG from USAID and have a very transparent

01:07:50 and productive relationship with them.

01:07:52 MR.

01:07:53 SESSIONS: Describe briefly, if you would, the MCC effect.

01:07:56 I've had the chance to see it on the ground, out in the world, and talking to heads of

01:08:00 state.

01:08:01 But I'd just be interested in how you understand it.

01:08:04 MS.

01:08:05 BENTON: So the MCC effect is the function of publishing the scorecard.

01:08:09 So we publish a scorecard on the Internet every year.

01:08:12 The next round will come out sometime this fall of how each country scores against 20

01:08:19 different indicators.

01:08:20 The indicators fall into basically three different policy buckets.

01:08:23 Is a country running its economy well?

01:08:25 Is it investing in its people?

01:08:27 And is it a democracy in trying to fight corruption?

01:08:30 And countries study their scorecards, whether or not they are close to becoming eligible

01:08:37 or not.

01:08:38 And so what -- in being able to see that public data, which is all third-party data, countries

01:08:45 often make a decision that they want to use that framework to make decisions about reforms.

01:08:51 So there's two good examples I can point to.

01:08:53 One is in the Cote d'Ivoire, where a number of years ago the country was only passing

01:08:57 five of the 20 scores.

01:08:59 And President Ouattara at the time set up a specific division to specifically make decisions

01:09:05 to become eligible, and now they're passing -- and I will double-check this for you -- at

01:09:10 least 14, and there are plenty eligible, and we're doing a lot of work with them.

01:09:14 The Democratic Republic of the Congo has a -- they're only passing five or six, maybe

01:09:19 seven scores.

01:09:21 But they've set up also an entity within their Ministry of Finance, without paying

01:09:26 a single dollar of MCC's program budget, to actually also make decisions to reform how

01:09:33 things are going in the DRC.

01:09:36 So it is a powerful tool for incentivizing reform.

01:09:40 And we see it in -- there's lots of other examples I can share with you, but it's one

01:09:43 of the -- now that we're 20 years into our history, I think it's one of the most efficient,

01:09:50 high ROI aspects of the agency, because a country starts making the reforms that they

01:09:55 need to become eligible without us spending a single dollar of U.S. taxpayer dollars on

01:10:02 the program side.

01:10:04 Our economists are in touch with them, but we're not spending program money until a country's

01:10:07 become eligible.

01:10:08 MR.

01:10:09 SESSIONS: I've seen that directly.

01:10:12 In fact, Cote d'Ivoire was the concrete example I had in mind, even though our strategic competitors

01:10:17 were offering multiples of U.S. investment.

01:10:20 President Ouattara and the Prime Minister were very engaged in achieving the compact.

01:10:24 And so that's not the only country, but probably the signal country.

01:10:30 I understand Senator Merkley is mere steps away.

01:10:32 So I'll simply just say each of you had a chance to touch on a legislative priority,

01:10:39 reauthorization, equity fix, expanding the number of eligible countries, default rate.

01:10:46 Is there something you didn't get to speak about that would be helpful to briefly address

01:10:50 in terms of legislative action you'd like to see from Congress that would help strengthen

01:10:55 your ability to execute on your core mission?

01:10:57 Please, if you might, Mr. Nathan.

01:10:58 MR.

01:10:59 NATHAN TILLMANN So within our reauthorization process, there

01:11:01 are a couple of other elements I'd love to just briefly touch on.

01:11:05 One is very similar to the issue facing MCC in terms of country eligibility.

01:11:11 We're currently dependent on the World Bank income classifications.

01:11:14 It's a crude tool that even the World Bank doesn't use for lending eligibility.

01:11:19 And it leads to annual volatility when the countries move categories every year.

01:11:26 That's very difficult to be working on a private sector deal and then July 1st have to put

01:11:31 your pencil down.

01:11:33 I think it would make sense to broaden out the group if we used World Bank categories.

01:11:37 It would add some Caribbean nations, some Pacific Island nations.

01:11:42 It would add countries in Central and South America that aren't currently eligible.

01:11:47 And I think it would do it in a systematic fashion as opposed to a targeted fashion.

01:11:51 So that's one element.

01:11:53 There are other things in reauthorization that could help us be more efficient and utilize

01:11:57 our resources better, raising our annual lending cap, making the fee authority I mentioned

01:12:04 permanent, increasing the threshold for congressional notification.

01:12:08 We're right now doing about 80 plus percent of our transactions require notification.

01:12:15 That was around 100 last year.

01:12:19 It would be great if we could find a way to still notify in a majority but have it be

01:12:24 fewer.

01:12:26 And then ways to help incentivize our workforce, really important in this very competitive

01:12:33 labor market for transaction lawyers and other in-demand transaction officers and otherwise,

01:12:41 to find ways to support them.

01:12:44 MR.

01:12:45 SESNO: I suspect that's true across all three of you.

01:12:46 MS.

01:12:47 BENTON: Yes.

01:12:48 MR.

01:12:49 SESNO.

01:12:50 You're looking for skill sets that are unusual and in high demand and in a very tight labor

01:12:52 market being able to incentivize and retain the very best.

01:12:56 I mean, there are complaints I hear occasionally about the time cycle, how long it takes to

01:13:01 work with all three of your agencies.

01:13:03 And I often say that's partly because of the demands on your workforce, that you're trying

01:13:08 to move a lot of transactions and very complex transactions and monitor them for a long period

01:13:13 of time.

01:13:14 So I'm very sympathetic to those concerns.

01:13:16 Ms. Lewis, if you might.

01:13:17 MS.

01:13:18 LEWIS.

01:13:19 Senator, you're absolutely right, Mr. Chairman.

01:13:20 It's not just monitoring.

01:13:21 It is about how we continue to recruit and how we continue to retain is critically important.

01:13:29 And to be able to additionally see some types of awards that we could also incentivize our

01:13:34 teams would be helpful.

01:13:36 I just want to just continue to emphasize the seeking of that default rate cap, the

01:13:40 exemption on nuclear as well as for CTAP, so that we can better counter, you know, PRC

01:13:47 financing on -- especially in the 10 export areas.

01:13:50 But more importantly, I think early reauthorization is really critical for Ex-Im Bank, especially

01:13:55 since we were out of the market for those years.

01:13:57 We've had an ability to reset and rebuild and renew so many relationships.

01:14:01 I think early reauthorization with a strong bipartisan support would continue to send

01:14:06 the right signal to the industry, to the market, and to our countries that America is there

01:14:12 and that we will be there with our Ex-Im Bank so that they can not only compete, but they

01:14:17 can actually win these awards around the world.

01:14:21 CHAIR BAILET.

01:14:22 Ms. Obrey.

01:14:23 MS.

01:14:24 OBREY.

01:14:25 Thank you, Chairman Coons.

01:14:26 Thank you for our budget, a robust budget, and also our candidate pool legislation.

01:14:31 Thank you.

01:14:32 CHAIR BAILET.

01:14:33 Can I ask, in this open setting, the President of Kenya will be here next week?

01:14:37 MS.

01:14:38 OBREY.

01:14:39 Yes.

01:14:40 We are going to be involved in those proceedings.

01:14:44 We're very excited about it.

01:14:45 We have signed a $60 million threshold program with Kenya, and it will be principally designed

01:14:54 to work on some of the transportation and safety issues in Nairobi, which anyone who's

01:15:00 been to Nairobi knows how difficult getting around Nairobi can be.

01:15:04 We're very enthusiastic about it, and if things go well with that threshold and if they continue

01:15:11 to make advancements on overall eligibility, we will also be in a position to consider

01:15:16 them from a compact, but we have to get through the threshold well first.

01:15:20 CHAIR BAILET.

01:15:21 Thank you.

01:15:22 I welcome any chance to further conversations.

01:15:23 I'll be meeting with the President next week.

01:15:25 Mr. Nathan, if you might, and then I'll hand it over to Senator Merkley, with my thanks

01:15:30 to all three of these great witnesses today.

01:15:32 Mr. Merkley.

01:15:33 MR.

01:15:34 NATHAN.

01:15:35 Well, thank you.

01:15:36 Just briefly on, really, the historic state visit that President Rudolph will be making

01:15:38 next week, we've had the opportunity to meet with President Rudolph multiple times and

01:15:43 find he and his team very constructive.

01:15:46 We have a package of several hundred million dollars, probably around $300 million of deals

01:15:53 to announce during the state visit, and I'm very proud of the work the DFC team did to

01:16:00 get us there.

01:16:01 That will mean we have more than a billion dollars of current projects in Kenya.

01:16:06 We also-and it relates to one of the things that we're looking for for additional budget

01:16:11 support, which is expanding our overseas presence.

01:16:14 Nairobi is a critical place both for projects in Kenya but also regionally for us to have

01:16:19 transaction officers or DFC staff on the ground.

01:16:24 MR.

01:16:25 SESNO.

01:16:26 Thank you.

01:16:27 I very much look forward to continuing to work with you, both during the state visit

01:16:30 and in the year and years ahead.

01:16:32 Thank you for your leadership and for your testimony here today.

01:16:35 I'll defer to Senator Merkley, who, in the absence of another member arriving, will close

01:16:39 out the hearing when he's done questioning.

01:16:41 Thank you all very much today.

01:16:42 MR.

01:16:43 MERKLEY.

01:16:44 Thank you very much, Chairman, and thank you all for coming and sharing your experience

01:16:48 and expertise.

01:16:51 Ms. Lewis, I wanted to try to understand better the charter for EXIM.

01:16:58 Isn't the charter actually passed by law?

01:17:02 MS.

01:17:03 LEWIS.

01:17:04 The charter is passed by law, yes.

01:17:05 Yes, Senator.

01:17:06 MR.

01:17:07 MERKLEY.

01:17:31 I'm just asking, is that in your charter or not?

01:17:56 MS.

01:17:57 LEWIS.

01:17:58 From a legal perspective, our charter is very clear that Congress has given us.

01:18:02 MR.

01:18:03 MERKLEY.

01:18:04 You don't know if those words are in your charter or not?

01:18:07 MS.

01:18:08 LEWIS.

01:18:09 Those words are in the charter, yes.

01:18:10 MR.

01:18:11 MERKLEY.

01:18:12 Okay, they are in the charter.

01:18:13 Thank you.

01:18:14 That's what I was asking.

01:18:15 Does it also say in your charter that your procedure is, quote, "shall permit the Board

01:18:17 of Directors, in its judgment, to withhold financing from a project for environmental

01:18:22 reasons"?

01:18:23 MS.

01:18:24 LEWIS.

01:18:25 It also tells us that we cannot discriminate against applications.

01:18:27 MR.

01:18:28 MERKLEY.

01:18:29 I know, that wasn't my question.

01:18:30 I'm just asking you about this particular clause.

01:18:32 MS.

01:18:33 LEWIS.

01:18:34 Congress has definitely made it very clear about the statute and charter of Ex-Im Bank.

01:18:38 MR.

01:18:39 MERKLEY.

01:18:40 So it shall permit the Board of Directors to withhold financing from a project for environmental

01:18:44 reasons.

01:18:45 That's in your charter, yes or no?

01:18:46 MS.

01:18:47 LEWIS.

01:18:48 The charter basically, Senator, allows us to.

01:18:49 MR.

01:18:50 MERKLEY.

01:18:51 Why can't you just answer the question?

01:18:52 Is it in your charter or not?

01:18:53 Thank you very much.

01:18:54 Now you have this nondiscrimination language in your charter as well.

01:19:00 And it says the nondiscrimination provision starts with, quote, "except as provided in

01:19:07 this Act."

01:19:08 Now those other two clauses I just read to you are provided in this Act.

01:19:12 Is that not right?

01:19:13 MS.

01:19:14 LEWIS.

01:19:15 Senator, you know, one of the things that has occurred is that I don't have the authority

01:19:18 to make changes of any magnitude unilaterally.

01:19:20 MR.

01:19:21 MERKLEY.

01:19:22 And I'm afraid, Senator, you indicated that you won't actually answer the question.

01:19:23 I'm just reading you from your own charter, and you're head of the operation.

01:19:30 I'm just trying to establish for the record that this is what the charter says.

01:19:33 MS.

01:19:34 LEWIS.

01:19:35 Our charter also gives us other explicit things that the Ex-Im Bank has to do about nondiscrimination

01:19:41 and no prohibition against size, sector, or industry.

01:19:44 MR.

01:19:45 MERKLEY.

01:19:46 So I just read to you "except as provided in this Act."

01:19:47 Is that not the qualification on the nondiscrimination clause?

01:19:50 Okay.

01:19:51 I know you don't want to cooperate in this line of questioning, and I'm really puzzled

01:19:57 as to why that is the case, because the charter is very clear.

01:20:01 It gives you the power to approve or disapprove projects.

01:20:06 According to the impact on the global commons, it says that the nondiscrimination clause

01:20:12 is subject except as provided in this Act, and the environmental provisions are provided

01:20:16 in this Act.

01:20:17 It says that explicitly shall permit the Board of Directors to withhold financing for a project

01:20:23 for environmental reasons.

01:20:25 I believe that you all are deliberately evading the responsibilities you have under this charter

01:20:32 as written, and I am extremely disturbed about that.

01:20:37 Are you aware of how much damage carbon pollution and methane pollution are doing to the global

01:20:45 commons?

01:20:46 MS.

01:20:47 HENDRICKS.

01:20:48 Senator, I truly understand the concerns that you have.

01:20:50 I will continue to love to work with you and your staff on these concerns to outline for

01:20:58 you how EXIM looks at all of our statute changes.

01:21:02 SEN.

01:21:03 RON PAUL.

01:21:04 So you're aware of my concerns, but my question was, are you familiar with the damage that

01:21:07 carbon pollution and methane are doing to the global commons?

01:21:10 MS.

01:21:11 HENDRICKS.

01:21:12 The work that I have done repeatedly at EXIM is how we have sought to work very closely,

01:21:20 understanding how climate change is a real threat.

01:21:23 We understand the work that we have to do, and we have been moving very aggressively

01:21:27 in that work.

01:21:28 SEN.

01:21:29 RON PAUL.

01:21:30 So you do understand the damage that carbon and methane are doing to the global commons?

01:21:32 That's a yes?

01:21:33 MS.

01:21:34 HENDRICKS.

01:21:35 I understand that how we have at EXIM Bank supported very large green energy projects,

01:21:38 some of the largest ones in the history of EXIM.

01:21:41 I totally share that.

01:21:42 I understand that we serve every candidate.

01:21:43 SEN.

01:21:44 RON PAUL.

01:21:45 Why is it so hard, if you actually know the science, why is it hard to say, yes, I understand

01:21:47 the damage that carbon and methane are doing to the global commons?

01:21:49 Why is that difficult?

01:21:50 MS.

01:21:51 HENDRICKS.

01:21:52 Senator, I can't comment on the science.

01:21:53 SEN.

01:21:54 RON PAUL.

01:21:55 You can't comment on the science?

01:21:56 Hmm.

01:21:57 Do you ignore the science?

01:21:58 MS.

01:21:59 HENDRICKS.

01:22:00 No.

01:22:01 EXIM looks at each transaction, Senator, on a case-by-case basis.

01:22:03 SEN.

01:22:04 RON PAUL.

01:22:05 Well, by case-by-case, some do a lot of environmental damage.

01:22:08 And one of the great mysteries is why EXIM is proceeding to explore financing for an

01:22:16 LNG development in northern Mozambique.

01:22:19 Now, LNG is interesting because we call it liquefied natural gas.

01:22:24 That's the industry term.

01:22:26 But anyone familiar with the chemistry of it, this is methane that's liquefied.

01:22:32 You're familiar with that.

01:22:33 MS.

01:22:34 HENDRICKS.

01:22:35 I'm familiar with that.

01:22:36 SEN.

01:22:37 RON PAUL.

01:22:38 And you're familiar with that.

01:22:39 But what I'm curious about is that methane gas has a much higher heat-absorbing, heat-trapping

01:22:42 power ounce for ounce than carbon dioxide.

01:22:45 MS.

01:22:46 HENDRICKS.

01:22:47 I cannot comment on the science.

01:22:48 SEN.

01:22:49 RON PAUL.

01:22:50 I really encourage you to learn the science, then, because you have a responsibility under

01:22:52 your provision to weigh environmental reasons on projects and to interpret or understand

01:23:01 the effects on the global commons.

01:23:03 And that you have to educate yourself about.

01:23:05 If you're not educating yourself about that—

01:23:07 MS.

01:23:08 HENDRICKS.

01:23:09 The team does educate us very well, Senator.

01:23:10 They do exceptionally due diligence, our engineers, on all of the projects that we do.

01:23:13 On the one that you're specifically speaking about, there has been no decision on that

01:23:17 particular transaction.

01:23:18 And also, that was a transaction that was done long before I came into office, but—and

01:23:24 no final decision has been made.

01:23:26 We definitely—I definitely commit, Senator, to reviewing any of these transactions with

01:23:32 you in a confidential manner.

01:23:34 SEN.

01:23:35 RON PAUL.

01:23:36 As we review it, I hope you'll take a chance to actually pay attention to the science that

01:23:41 you say you don't like to weigh.

01:23:43 MS.

01:23:44 HENDRICKS.

01:23:45 I—I'm—I'm—I'm sorry.

01:23:46 SEN.

01:23:47 RON PAUL.

01:23:48 Oh, go ahead.

01:23:49 MS.

01:23:50 HENDRICKS.

01:23:51 No, I was just going to say that our team does exceptionally due diligence in all manners

01:23:53 of these particular projects.

01:23:56 And as they pass review, they're done in accordance with our—

01:23:59 SEN.

01:24:00 RON PAUL.

01:24:01 So they do weigh the science and impact on the environment.

01:24:03 MS.

01:24:04 HENDRICKS.

01:24:05 And we have our engineers and environmental people available to you, Senator, to go with

01:24:09 exactly how on that particular project.

01:24:11 SEN.

01:24:12 RON PAUL.

01:24:13 Well, of course, you're in charge.

01:24:14 You're—you're the—you're the head of this operation.

01:24:17 The buck doesn't pass down to say, "I'm going to ignore the science and let my engineers

01:24:21 tell me that—do whatever," not when you have responsibilities on this charter that

01:24:24 you're ultimately the person accountable for.

01:24:27 MS.

01:24:28 HENDRICKS.

01:24:29 Yes, we do.

01:24:30 SEN.

01:24:31 RON PAUL.

01:24:32 So let me explain a little bit about methane, since—since it seems to be a mystery here.

01:24:34 When it's produced out from under the ground, it leaks all over the place.

01:24:42 And we have massive observations of those leakages.

01:24:44 We have on-site.

01:24:46 We have UAV observations.

01:24:50 We have satellite observations.

01:24:52 That leakage makes it extremely damaging for the amount of energy that it delivers.

01:24:58 It's estimated that if it replaces local coal, it's equal—it's equal in its climate

01:25:03 damage to coal.

01:25:05 However, when you spend extra energy, turn it into a liquid, you've now spent a huge

01:25:10 amount of extra energy.

01:25:12 You then spend a lot of extra energy transporting it overseas.

01:25:16 You then put it into a leaky gas system somewhere around the world, because all these systems

01:25:20 leak.

01:25:21 It's estimated by one study that if you have even .2 percent leakage, it's equal to local

01:25:29 coal.

01:25:30 Those systems leak far more than .2 percent.

01:25:34 All of this means that this LNG is far worse than local coal.

01:25:43 That's the basic understanding of scientists around the world.

01:25:47 So you're supporting, potentially, because you said it's under consideration, a proposal

01:25:54 to establish a huge American investment in something that's worse than local coal and

01:26:03 has massive impacts upon, to quote your charter, the global commons.

01:26:09 Are you going to take into account the enormous climate change impact of liquefied methane

01:26:16 gas when you consider financing this project?

01:26:20 There are numerous things, Senator, that our team, our technical and our legal team,

01:26:25 take into consideration, our environmental team, and we would be happy to come and brief

01:26:29 you on that, on those specifics.

01:26:31 So you're saying, yes, that is one factor, not the sole factor, but one of the factors

01:26:35 you will be taking into account.

01:26:37 It is numerous factors that we take, and at this juncture, I'm not going to say-

01:26:40 Are there numerous, excluding this, or numerous including the climate impact?

01:26:46 I cannot, since we look at each transaction on a case-by-case basis, I would be remiss

01:26:51 to be able to sit here and say yes to that.

01:26:54 I just know that our team-

01:26:56 That's such a mystery to me.

01:26:57 Your charter says to consider the impact on global commons.

01:27:00 It says you have the power to withhold financing for environmental reasons.

01:27:04 LNG has huge environmental impacts, worse than local coal.

01:27:09 And I can't even get you to say it's even one of the factors you will consider.

01:27:13 Not the exclusive factor, but one of the factors.

01:27:15 I can say, Senator, we do an exceptional due diligence on all of our deals and would love

01:27:20 to come and brief you about them.

01:27:23 When you brief me, are you going to tell me that this is one of the factors that you'll

01:27:26 take into account?

01:27:27 When our technical, legal, and environmental team and experts come, we would love to be

01:27:32 able to, in a confidential setting, brief you on any of the specifics.

01:27:37 Why did President Biden pause the approval of more LNG export facilities here in the

01:27:42 United States?

01:27:45 Why?

01:27:46 Yeah.

01:27:47 Senator, I basically stay focused on the transactions that EXIM has to do and follow

01:27:54 the rules that Congress has put before us in order to evaluate any type of transaction.

01:28:00 So the President's team said, "We're enacting this pause in order to give due consideration

01:28:05 to the environmental impacts of LNG."

01:28:09 You weren't aware of that?

01:28:10 I am aware of what the President put out, yes.

01:28:14 So if the President of the United States...

01:28:15 We seek to align with the President on all of our transactions.

01:28:20 The President's environmental team is saying that these impacts are so clear and solid,

01:28:25 we have to really weigh how they're evaluated.

01:28:27 I think that's context for also considering this project and others.

01:28:32 I'm going to spare you any more questioning along this line.

01:28:38 I'm fine.

01:28:39 I think you've heard that we put this into the charter for a reason.

01:28:45 Ignoring it is not an option.

01:28:48 Failing to consider environmental impacts is not an option.

01:28:52 Doing additional damage to the world on the most important issue facing humanity is really

01:28:57 a crime against this planet.

01:28:59 And for you to consider the possibility of continuing to fund massive global climate-damaging

01:29:05 projects is completely at odds with the protection of the global commons in your charter.

01:29:12 It's at odds with your power to withhold financing from a project for environmental reasons.

01:29:17 And I hope the Ex-Im Bank will become part of the solution instead of part of the problem.

01:29:26 The Chair has asked me to close with the following notes.

01:29:31 Thank you all for joining us.

01:29:34 We look forward to continuing our work together as we move forward in fiscal year '25 budget

01:29:41 process.

01:29:42 The hearing record will remain open for written questions until 5 p.m. on Wednesday, March

01:29:47 22, 2024.

01:29:50 And the hearing is adjourned.

01:29:54 [GAVEL]

01:29:55 [GAVEL]

01:29:55 (sighs)

01:29:57 [BLANK_AUDIO]

Chris Coons Chairs Senate Appropriations Committee Hearing On Strengthening American Competitiveness

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