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89–850 PDF 2014

H.R. 6, THE DOMESTIC PROSPERITY AND GLOBAL 

FREEDOM ACT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND POWER 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MARCH 25, 2014 

Serial No. 113–129 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Ohio 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

SUBCOMMITTEE ON ENERGY AND POWER

ED WHITFIELD, Kentucky 

Chairman 

STEVE SCALISE, Louisiana 

Vice Chairman 

RALPH M. HALL, Texas 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

LEE TERRY, Nebraska 

MICHAEL C. BURGESS, Texas 

ROBERT E. LATTA, Ohio 

BILL CASSIDY, Louisiana 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

BOBBY L. RUSH, Illinois 

Ranking Member 

JERRY MCNERNEY, California 

PAUL TONKO, New York 

JOHN A. YARMUTH, Kentucky 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN D. DINGELL, Michigan (ex officio) 

HENRY A. WAXMAN, California (ex officio) 

(II) 

(III) 

C O N T E N T S 

Page 

Hon. Ed Whitfield, a Representative in Congress from the Commonwealth 

of Kentucky, opening statement ......................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Cory Gardner, a Representative in Congress from the State of Colorado, 

opening statement ................................................................................................ 6 

Hon. Bobby L. Rush, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 7 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 8 

Prepared statement .......................................................................................... 9 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 9 

Hon. John Shimkus, a Representative in Congress from the State of Illinois, 

opening statement ................................................................................................ 10 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 10 

Hon. Jerry McNerney, a Representative in Congress from the State of California, opening statement .................................................................................... 11 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

prepared statement .............................................................................................. 144 

WITNESSES

Paula Gant, Deputy Assistant Secretary for Oil and Natural Gas, Office 

of Fossil Energy, Department of Energy ............................................................ 12 

Prepared statement .......................................................................................... 14 

Answers to submitted questions ...................................................................... 145 

Anita Orba ́n, Ambassador-at-Large for Energy Security, Ministry of Foreign 

Affairs, Hungary .................................................................................................. 33 

Prepared statement .......................................................................................... 35 

James Bacchus, Chair, Global Practice Group, Greenberg Trauig LLP ............. 46 

Prepared statement .......................................................................................... 49 

David G. Schryver, Executive Vice President, American Public Gas Association ........................................................................................................................ 58

Prepared statement .......................................................................................... 60 

Answers to submitted questions ...................................................................... 155 

Kenneth H. Ditzel, Principal, Charles River Associates ...................................... 80 

Prepared statement 1 ........................................................................................ 82 

Answers to submitted questions ...................................................................... 157 

W. David Montgomery, Senior Vice President, NERA Economic Consulting ..... 102 

Prepared statement 1 ........................................................................................ 105 

Answers to submitted questions ...................................................................... 162 

SUBMITTED MATERIAL

H.R. 6, the Domestic Prosperity and Global Freedom Act, submitted by Mr. 

Whitfield ............................................................................................................... 4 

Letter of March 24, 2014, from Paul N. Cicio, President, Industrial Energy 

Consumers of America, to Mr. Whitfield and Mr. Rush, submitted by Mr. 

Rush ...................................................................................................................... 139 

1 Additional supporting documents are available at http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=101953. 

(1) 

H.R. 6, THE DOMESTIC PROSPERITY AND 

GLOBAL FREEDOM ACT 

TUESDAY, MARCH 25, 2014 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY AND POWER, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 1:04 p.m., in room 

2123 of the Rayburn House Office Building, Hon. Ed Whitefield 

(chairman of the subcommittee) presiding. 

Members present: Representatives Whitfield, Hall, Shimkus, 

Terry, Burgess, Latta, Cassidy, McKinley, Gardner, Pompeo, 

Kinzinger, Griffith, Barton, Upton (ex officio), Rush, McNerney, 

Tonko, Green, Doyle, Barrow, Christensen, Castor, and Waxman 

(ex officio). 

Staff present: Nick Abraham, Legislative Clerk; Gary Andres, 

Staff Director; Charlotte Baker, Deputy Communications Director; 

Sean Bonyun, Communications Director; Allison Busbee, Policy Coordinator, Energy and Power; Tom Hassenboehler, Chief Counsel, 

Energy and Power; Jason Knox, Counsel, Energy and Power; Ben 

Lieberman, Counsel, Energy and Power; Brandon Mooney, Professional Staff Member; Chris Sarley, Policy Coordinator, Environment and the Economy; Jeff Baran, Democratic Senior Counsel; 

Alison Cassady, Democratic Senior Professional Staff Member; and 

Caitlin Haberman, Democratic Policy Analyst. 

Mr. WHITFIELD. I would like to call the hearing to order this 

afternoon. The topic of the hearing this afternoon is on H.R. 6, The 

Domestic Prosperity and Global Freedom Act. And at this time I 

would recognized myself for 5 minutes opening statement. 

OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF KENTUCKY 

And, as I said, we are excited about this hearing today. This is 

on the legislation introduced by our colleague Cory Gardner of Colorado. One of the subject matters that is really being discussed 

throughout the world today is the abundant energy supply in 

America, and, of course, one reason for that is the recent finds in 

natural gas in America. And we believe that, while we need further 

discussion on it, of course, that the export of liquid natural gas, not 

only would it be beneficial to our allies in Europe who find themselves dependent on expensive natural gas coming from Russia, but 

it would also be beneficial to our own economy because of the low 

cost of natural gas. And with the expansion of infrastructure to get 

2 

that natural gas to market, it is going to create a lot of jobs. Another benefit from the export of liquefied natural gas would, of 

course, be to improve our trade account deficit, which has been 

negative for many years. 

And so, despite all of these benefits, though, the current process 

for approved LNG exports is very slow and unpredictable. Just yesterday the DOE did approve an application to export LNG from the 

Jordan Cove terminal in Coos Bay, Oregon. This marks the seventh 

application to be approved by DOE, but there are still over 20 applications pending. While the world waits for natural gas from 

America, a backlog of applications to export languishes at the Department of Energy. Now, we also understand that getting the permit approved at DOE is just the beginning. You still have to go 

through FERTH, the environmental process, so it is going to take 

a while. But this is an important development for America. We believe that it is important for the entire world. 

And at this time I would like to yield the balance of my time to 

the author of this legislation, Cory Gardner of Colorado. 

[The prepared statement of Mr. Whitfield follows:] 

PREPARED STATEMENT OF HON. ED WHITFIELD

This subcommittee has spent a great deal of time analyzing the impact of the Nation’s oil and natural gas boom. One recurring theme throughout our work is that 

Federal policy has not yet adjusted to the new reality of American energy abundance, and in fact Obama administration red tape often stands in the way of the 

potential benefits of the energy boom. This is clearly the case with regard to the 

administration’s barriers to natural gas exports, which is why my friend and colleague Cory Gardner has introduced H.R. 6, the ‘‘Domestic Prosperity and Global 

Freedom Act,’’ which would facilitate the export of natural gas. 

According to the Energy Information Administration, America’s natural gas output has been rising since 2006. EIA projects the increases to continue through 2040, 

and expects domestic production of natural gas to remain well above domestic demand. And at the same time that we have this natural gas surplus, many of our 

allies round the world urgently need additional natural gas supplies. 

The case for mutually beneficial trade in liquefied natural gas (LNG) is a strong 

one. This was the conclusion I drew from our two hearings on energy exports, as 

well as our October 10, 2013 forum that invited representatives from 11 foreign governments to discuss their perspectives on U.S. LNG. 

At the forum, we had the opportunity to hear from three European allies—Hungary, Lithuania, and the Czech Republic. All three face the difficulties of being reliant on Russia for natural gas. In particular, they explained that they bear the brunt 

of Russian economic and political pressure backed up by the threat of raising prices 

or even cutting off gas supplies. 

Our European allies expressed a strong interest in being able to import LNG from 

the U.S. They stressed that even relatively modest volumes of U.S. LNG reaching 

the European market can greatly reduce Russia’s leverage. They also noted that the 

mere signal that America is serious about natural gas exports would immediately 

strengthen their negotiating position, long before the first LNG shipment goes out. 

This subcommittee is grateful to Anita Orban, Hungary’s Ambassador-at-Large for 

Energy Security, for participating in that forum and for appearing before us again 

today. 

And I might add that our efforts to better understand the geopolitical benefits of 

U.S. LNG exports were underway well before the current crisis in the Ukraine 

erupted. But the Ukraine situation further underscores those benefits. 

There is no question that American LNG exports would be great news for our allies in Europe as well as other nations around the world that want to buy our LNG. 

But it is also great news for our economy here at home. A study conducted for the 

Department of Energy concluded that LNG exports would provide net benefits for 

American consumers and the economy overall. A subsequent update of that study 

confirmed those benefits and also highlighted the net jobs created by LNG exports. 

I am happy to have the lead author of these studies, David Montgomery, appearing 

before us today. 

3 

Despite all of these benefits, the current process for approving LNG exports is 

very slow and unpredictable. Just yesterday, the DOE approved an application to 

export LNG from the Jordan Cove Terminal in Coos Bay, Oregon. This marks the 

7th application to be approved by DOE, but there are still over 20 applications 

pending. While the world waits for natural gas from America, a backlog of applications to export languishes at the Department of Energy. H.R. 6 cuts the red tape, 

approves the pending applications, and provides future applicants with a much more 

reasonable process. 

U.S. LNG exports would be an economic success story and a foreign policy success 

story, and would come at a time where the Nation could use a lot more of both. 

[H.R. 6 follows:] 

4 


89850.001
5 


89850.002
6 

Mr. WHITFIELD. And at this time I would like to yield the balance 

of my time to the author of this legislation, Cory Gardner of Colorado. 

OPENING STATEMENT OF HON. CORY GARDNER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Mr. GARDNER. I thank the gentleman. Thank you, Chairman, for 

this hearing today on H.R. 6, The Domestic Prosperity and Global 

Freedom Act. I would also like to thank Representative Tim Ryan 

and all of the Members who have chosen to co-sponsor this legislation. This bill that I have introduced is short and straightforward. 

It grants approval for completed LNG export applications that are 

currently languishing at the Department of Energy, and would 

modify the standard of review for future export applications by 

shifting the benchmark from free trade agreement countries to 

World Trade Organization member countries. Rarely in Congress 

do we get chances to pass legislation that creates economic opportunities here at home, strengthen and help our allies around the 

globe, weaken our enemies, and not spend the American taxpayers’ 

money all at the same time. Rarely do we even get to do one of 

those at the same time. But H.R. 6 gives us a chance to do all of 

these. 

I want to first give praise to what has brought us to the point 

of even being able to discuss selling some natural gas to other 

countries. American ingenuity has propelled the United States to 

the number one natural gas producing nation in the world. The 

shale gas revolution has provided enormous economic benefit to our 

Nation. With the ability to sell some of the natural gas we produce, 

we can see even more economic benefit. 

To paraphrase Pulitzer Prize-winning author Dr. Daniel Yergin, 

when he testified before this subcommittee last year, the United 

States is demand constrained, not supply constrained, when it 

comes to natural gas. In my home State of Colorado, on the western slope, the Peyonce Basin has been suffering due in part to the 

overabundance of natural gas supplies, which are saturating the 

market. Expanding the market for U.S. natural gas will encourage 

greater investment and new production. 

H.R. 6 also offers immense geopolitical benefits. The near monopolistic control Russia has on the LNG market in Europe has given 

them immense power, and reforming the LNG export process would 

send an immediate signal to the rest of the world that would help 

check Russia’s aggression. But for its natural gas and oil production and exports, Russia’s economy is no match for our industrial 

know-how and ingenuity. 

It is this American ingenuity that discovered there is enough 

natural gas to use domestically and to export to our allies around 

the globe. We have reached a turning point in this country that is 

moving towards energy independence. We no longer need to be at 

the mercy of nations that mean us harm. Being less dependent on 

foreign energy keeps our troops at home, keeps them safe, and 

keeps them from serving abroad. Energy produced here at home 

and sent overseas means we are sending energy, and not our 

troops. 

7 

It is a false dichotomy to say that we must choose between allowing for the sale of natural gas to other nations or keeping it here. 

We will have enough for both for generations to come. There are 

some that are opposing LNG exports who still cling to the failed 

notion of Nixon era price control efforts. Like the leisure suit and 

eight-track player, it is time to let it go. We have heard from 

former Senator Jay Bennett Johnston and others that history is littered with the failed policies to control prices. It is time for us to 

move forward. 

I want to thank those that will be testifying here today, and I 

look forward to this debate. Thank you, Mr. Chairman. I yield 

back. 

Mr. WHITFIELD. Gentleman yields back. At this time recognize 

the gentleman from Illinois, Mr. Rush, for a 5-minute opening 

statement. 

OPENING STATEMENT OF HON. BOBBY L. RUSH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. RUSH. I want to thank you, Mr. Chairman, for holding today’s hearing on the potential impacts of exporting liquefied natural gas to overseas markets, as laid out in H.R. 6. Mr. Chairman, 

I look forward to today’s hearing of experts, stakeholders, to clarify 

questions I have regarding the consequences of exporting LNG, and 

the impact it may have on several key issues that I am concerned 

about, including domestic natural gas prices, the potential for jobs, 

the effect on our manufacturing base, as well as the impact on the 

U.S. trade balance. 

As I understand the issue, Mr. Chairman, proponents of exporting natural gas say that doing so will lead to a net positive impact 

on American jobs, on the American economy, and the U.S. trade 

balance. Supporters also contend that exporting LNG to Japan, 

South Korea, Europe, and other U.S. allies will lower their natural 

gas prices, and provide them with leverage in negotiating with 

other natural gas suppliers, such as Russia. Opponents, primarily 

from within the U.S. manufacturing sector, disagree with those 

conclusions, and argue that exporting LNG will raise natural gas 

prices in the U.S., harm domestic manufacturing in energy intensive industries, and also hurt other natural gas consumers. 

The underlying bill, H.R. 6, will amend the Natural Gas Act to 

increase the number of destination countries for LNG exports for 

which DOE is required to deem applications consistent with the 

public interest. Under current law, DOE is required to grant applications for LNG exports to the 20, I want to emphasize that, to the 

20 countries that have free trade agreements with the U.S. However, H.R. 6 will instead require DOE to approve ‘‘without modification or delay’’ applications for LNG exports to all 159 members 

of the WTO, including all likely importers of LNG, such as China, 

India, Japan, and European countries. While increasing our exports 

of LNG may have positive impact on our economy, I believe that 

it is imperative that we do so in a manner that is both reasonable, 

that is safe, and that is truly in the public’s interest, Mr. Chairman. 

Mr. Chairman, today I am eager to engage our panel of witnesses 

to gain more insight into both the impacts of exporting LNG genVerDate Mar 15 2010 13:25 Nov 10, 2014 Jkt 037690 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 F:\113-129 H.R. 6 ND BLBK EDITS, SCANS\113-129 H.R. 6 WORKING WAYNE
8 

erally, as well as to learn more about the effects that H.R. 6 will 

have specifically. With an abundance of natural gas domestically, 

due to our technological advances, including hydraulic fracturing 

and horizontal drilling, it is important for the members of this subcommittee to fully understand the consequences of increasing exports, and the impact that will have on our consumers, our manufacturing base, and our economy as a whole. 

So I look forward to today’s witnesses on this important matter. 

And with that, Mr. Chairman, I yield back the balance of my time. 

Mr. WHITFIELD. Thank you, Mr. Rush. And at this time I would 

like to recognize the chairman of the full committee, Mr. Upton, for 

5 minutes. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Well, thank you, Mr. Chairman. And before I start, 

I just want to welcome back Ranking Member Rush. I know his 

family has experienced some real health concerns, and you have 

been out of the saddle, and we really do welcome you back, so good 

to see you. 

Three weeks ago the House overwhelmingly, rightly so, passed a 

billion-dollar loan guarantee aid package for Ukraine. And today 

the House Foreign Affairs Committee is marking up yet another 

package of support as Russia’s aggression continues. In this committee, we would debate on a bill that would help not only 

Ukraine, but literally every other Eastern and Central European 

Country, as well as other allies in Asia, and around the world, who 

are dependent on Russia’s natural gas. And although passage of 

H.R. 6, The Domestic Prosperity and Global Freedom Act, won’t 

certainly immediately turn on the spigot of American gas to 

Ukrainian or Hungarian homes overnight, it will indeed send a 

message, the right message, and a very powerful signal. 

The U.S. will be well positioned as a global energy superpower. 

We have the resources, the expertise, and the technology to deliver 

growing amounts of our domestic energy bounty to the market in 

the years and decades to come. Increasing exports would also result 

in the flow of billions of dollars into the United States economy. We 

can do that with this bill. 

This committee has an extensive record on the issue of LNG exports, including multiple hearings, an international forum, and a 

comprehensive report. And with continued technological innovation 

and access to production, a diverse electricity portfolio that indeed 

keeps all fuel sources in the mix, and a commitment to new infrastructure to get surging supplies to needed areas of demand, America has the ability to deliver a natural gas supply well in excess 

of our domestic needs. And by putting our extra natural gas capacity to use, by entering the global marketplace, the U.S. can supplant the influence of other exporters, like Russia, while strengthening ties with our allies and trading partners around the world. 

Overall, U.S. natural gas exports truly offer this win-win scenario. 

[The prepared statement of Mr. Upton follows:] 

9 

PREPARED STATEMENT OF HON. FRED UPTON

Three weeks ago, the House overwhelmingly passed a billion-dollar loan guarantee aid package for Ukraine, and today the House Foreign Affairs Committee is 

marking up another package of support as Russia’s aggression continues. In this 

committee, we begin debate on a bill that would help not only Ukraine, but every 

Eastern and Central European country, as well as other allies in Asia and around 

the world who are dependent upon on Russian natural gas. Although passage of 

H.R. 6, the Domestic Prosperity and Global Freedom Act, certainly won’t turn on 

the spigot of American gas to Ukranian or Hungarian homes overnight, it will send 

a clear and powerful signal. The U.S. will be well positioned as a global energy superpower. We have the resources, the expertise, and the technology to deliver growing amounts of our domestic energy bounty to the market in the years and decades 

to come. Increasing exports would also result in the flow of billions of dollars into 

the U.S. economy. We truly can do well and do good with this bill. 

The committee has an extensive record on the issue of LNG exports, including 

multiple hearings, an international forum, and a comprehensive report. With continued technological innovation and access to production, a diverse electricity portfolio 

that keeps all fuel sources in the mix, and a commitment to new infrastructure to 

get surging supplies to needed areas of demand, America has the ability to deliver 

a natural gas supply well in excess of domestic needs. By putting our extra natural 

gas capacity to use by entering the global market, the U.S. can supplant the influence of other exporters like Russia while strengthening ties with our allies and trading partners around the world. 

U.S. LNG would fight back against Russia in two ways. First, by providing more 

natural gas to the global market, it would reduce the price Russia can get away 

with charging. And second, by providing our allies in Europe with an independent 

source of natural gas, it would limit Russia’s political leverage over these nations. 

It is highly unlikely that the current crisis in Ukraine will be the last time Putin 

tries to bully a neighboring country. 

While the geopolitical benefits of LNG exports are substantial, the economic benefits alone should make H.R. 6 a no-brainer. Free trade strengthens the U.S. economy, and natural gas exports are no exception. 

H.R. 6 is a net jobs creator, including the jobs constructing and running the LNG 

export facilities as well as the additional energy industry jobs as natural gas producers expand their output to meet the increase in demand. These benefits are on 

top of the indirect jobs created as the billions in export revenues work their way 

through the economy. 

Overall, U.S. natural gas exports truly offer a win-win scenario. The U.S. has the 

chance to sell a product we have in abundance and other nations need, and at the 

same time provide a lifeline to our allies in that region for many years to come. I 

look forward to working with Cory Gardner and all of my colleagues to see H.R. 6 

become law. Thank you. 

Mr. UPTON.Yield now to Mr. Barton. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you, Chairman Upton, and thank you, 

Chairman Whitfield, and Ranking Member Rush for hosting this 

hearing today. I am proud to be an original co-sponsor of H.R. 6, 

along with Congressman Gardner from Colorado. We do need to 

streamline the regulatory process for liquefied LNG exports. In the 

Energy Policy Act of 2005 we gave the FERC the authority to conduct the environmental review and make the final decision, but we 

gave the Department of Energy the authority to determine whether 

it was in the national interest to even go forward with that. 

I want to compliment the Department of Energy on approving 

the latest project yesterday. I am told they did that in 35 days. 

These days, that is a world record lightning speed approval, and 

we are very appreciative of that. Unfortunately, there are still 

more than 20 export applications pending, and hopefully, after today’s hearing, and with the passage of this piece of legislation, we 

10 

can get that process hopefully even to be a little bit more timely. 

In any event, I look forward to today’s hearing, I appreciate the 

witnesses, and I yield to Mr. Shimkus the balance of the time. 

OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. SHIMKUS. Well, I thank my colleague. We should not underscore the importance of this legislation for freedom and democracy. 

The countries of Eastern Europe, and even Europe as a whole, 

have been, and will continue to be, to be extorted by the Russian 

Federation. It is a known fact. They extort on oil, they do trade, 

and the like. This bill is really an energy shot for freedom for these 

countries that are trying to get out of the Russian sphere of influence. I want to thank Cory for his effort. Cory, I know I can speak 

for all my friends in Eastern Europe to say thank you for this effort. It is really monumental and incredibly helpful to these countries who are looking to release themselves from the yoke of the 

Russian Federation, and of totalitarian regime. 

I don’t want to seem melodramatic. I have dealt in this area for 

18 years, and this is incredibly important at this time for these 

former Eastern European countries, also known as the former captive countries, because they once were captive to Soviet Union. And 

I yield back my time. 

Mr. WHITFIELD. Gentleman’s time has expired. At this time I will 

recognize the gentleman from California, Mr. Waxman, for 5 minutes. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. Today we 

are examining Congressman Gardner’s bill to change the approval 

process for liquefied natural gas exports. I said it when we first 

started discussing the possibility of LNG exports, I have an open 

mind, but I want to talk about some of my concerns. A number of 

studies predicted that LNG exports would have mildly positive economic effects, and since then DOE has moved aggressively to approve LNG exports. Today they have approved seven export proposals, and they are continuing to examine other applications as 

well. 

We need to carefully consider the impact of LNG exports on natural gas prices, and the impact of higher prices on American consumers and manufacturers. And we also need to look at the impact 

of LNG exports on global carbon emissions. Increasing U.S. exports 

would allow other countries to move from coal to natural gas, reducing their carbon emissions abroad, but LNG exports could increase U.S. carbon pollution by shifting electricity generation back 

to coal, and increasing fugitive methane emissions. I am not opposed to DOE’s considering applications for additional LNG exports, but I want those reviews to be thorough. 

I am concerned about the approach of this bill. The bill would 

short circuit the established review process for pending and future 

LNG export applications. It requires DOE to approve essentially 

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tries without any determination that such exports are in the public 

interest, or whether they would have significant adverse impacts 

on domestic natural gas prices, manufacturing, and jobs. DOE 

would have to immediately grant the 25 LNG export applications 

currently pending. In doing that, by the way, that would result in 

approved export amount of 36 billion cubic feet per day. That is almost half of all natural gas consumed daily in the United States. 

Unlimited LNG exports would have serious impacts on consumers 

and manufacturers. That is why major companies like Dow, Ocoa, 

and Newcourt have raised concerns about this bill. 

Proponents of unlimited LNG exports contend we need to help 

Ukraine and our European allies resist Russian aggression. This 

bill will not result in LNG exports to Europe for several years, if 

at all. No LNG export facilities currently exist in the continental 

United States. The first export terminal will not begin initial operations until late 2015. Export capacity will not ramp up into other 

facilities until 2017 or 2018. 

When the U.S. actually begins to export significant quantities of 

LNG 3 or 4 years from now, where will it go? Well, it won’t go directly to Ukraine, because Ukraine does not have any facilities to 

import or re-gasify LNG. In fact, it may not even go to Europe. We 

send be sending a clear message to Russia its aggression will have 

costly consequences, but I worry whether this really has the impact 

we want on a foreign policy basis. Russia is a member of the World 

Trade Organization. This bill adds Russia to the list of countries 

that can receive American natural gas without any DOE review. 

That is a very strange way to send a signal to support our American allies in Europe. 

This hearing should help us have an opportunity to think carefully about the bill, and I want to yield the balance of my time to 

Mr. McNerney. 

OPENING STATEMENT OF HON. JERRY MCNERNEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF 

CALFORNIA 

Mr. MCNERNEY. Thank you. I am in favor of LNG exports, but 

I have four concerns. First of all, gas production in this country 

needs to be done cleanly, and that means eliminating fugitive gas, 

it means don’t use fresh water, it means prevent well leakage to 

groundwater, and it means treating waste water. Until we are sure 

that we have national standards of some kind to make sure that 

that happens, I am very skeptical. Second, these large exports 

could impact U.S. manufacturing renaissance, and the price of natural gas generally in this country. 

Third, LNG export facilities are already being approved faster 

than they can be built, so this isn’t really needed. And as Mr. Waxman mentioned, Ukraine doesn’t even have LNG import facilities. 

And lastly, automatic approval seems pretty extreme to me. I 

mean, this could encourage the worst kind of applications to be 

submitted, knowing that they are going to be approved no matter 

what. So, until those concerns are addressed, I don’t think I can 

support this bill. Thank you. I yield back. 

Mr. WHITFIELD. Gentleman’s time has expired, and that concludes the opening statements. Today we have two panels of witVerDate Mar 15 2010 13:25 Nov 10, 2014 Jkt 037690 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 F:\113-129 H.R. 6 ND BLBK EDITS, SCANS\113-129 H.R. 6 WORKING WAYNE
12 

nesses, and on the first panel we have one person, and that person 

is Dr. Paula Gant, who is the Deputy Assistant Secretary for Oil 

and Natural Gas at the Department of Energy. And part of her 

portfolio certainly has responsibility for this area. So, Dr. Gant, we 

will recognize you for your 5-minute opening statement. Turn 

your—— 

STATEMENT OF PAULA GANT, DEPUTY ASSISTANT SECRETARY FOR OIL AND NATURAL GAS, OFFICE OF FOSSIL ENERGY, DEPARTMENT OF ENERGY 

STATEMENT OF PAULA GANT 

Ms. GANT. Thank you, Chairman Whitfield, and Ranking Members Rush and Waxman, and the members of the subcommittee. I 

very much appreciate the opportunity to appear before you today, 

and to have the opportunity to explain and answer your questions 

about the Department’s process for regulating the export of natural 

gas, including liquefied natural gas, or LNG exports. 

As Representative Gardner and Representative Rush have noted, 

we are enjoying an incredibly abundant natural gas supply, and observing the tremendous opportunities presented by that in recent 

years. It certainly makes my job quite a lot of fun, and these are 

extraordinary times for the country. There is tremendous opportunity, and we at the Department are very much focused on helping ensure that the country realizes that opportunity. 

Over the last several years, domestic gas production has increased significantly, outpacing demand growth, and resulting in 

declining net natural gas imports. This production growth is primarily due to the use of improved drilling technologies and practices, including largely the ability to extract natural gas from shale 

formations. Productions from shale formations amounted for a little 

less than two percent of domestic natural gas production in 2000. 

By 2012, that had risen to 40 percent of natural gas production, 

quite a dramatic change. 

Historically, the Department of Energy has played an important 

role in the development of technologies that have enabled the access to energy resources like this. Beginning in the late 1970s, public research dollars were invested in the development of hydraulic 

fracturing and horizontal drilling technologies that were later 

picked up and refined with private investment, and continued industry innovation. This has unlocked billions of dollars in economic 

activity associated with shale gas production. 

Thanks to American ingenuity and know-how applied to this tremendously abundant natural gas resource, the U.S. is now the 

world’s number one gas producer, and is poised to become a net exporter of gas in 2018. This is according to the Energy Information 

Administration. And this is an extraordinary shift in our fortunes. 

Our outlook is shifting from one framed by energy scarcity to one 

framed by energy abundance. This presents tremendous opportunity and tremendous responsibility that we get it right. 

Today domestic natural gas prices are lower than international 

prices of delivered LNG to overseas markets. As in the United 

States, demand for natural gas is increasing rapidly in these other 

markets. Due primarily to these developments, DOE has received 

13 

a growing number of applications to export domestically produced 

natural gas to overseas markets in the form of LNG, or liquefied 

natural gas. DOE’s authority to regulate natural gas arises under 

the Natural Gas Act, as mentioned previously. It provides two statutory standards for processing applications to export LNG from the 

United States. 

By law, applications to export LNG to countries with which the 

U.S. has a free trade agreement that provides for natural treatment of trade in natural gas are deemed to be consistent with the 

public interest, and the secretary must grant authorization without 

modification or delay. As of March 24, DOE has granted 35 such 

applications. For applications to export liquefied natural gas to 

non-free trade agreement countries, the secretary must grant that 

authorization unless, after an opportunity for hearing, the proposed 

export is found not to be consistent with the public interest. In executing that requirement, DOE has established a robust process to 

assess the public interest, a process that provides for robust public 

input and transparency, and also allows a balancing of the many 

aspects of the public interest that must be considered, and that 

may potentially be affected by the export of natural gas. 

While Section 3(a) of the Natural Gas Act establishes a broad 

public interest standard, and a presumption favoring export authorizations, the statute neither defines the public interest, nor 

identifies criteria that must be considered. In prior decisions, however, the Department has identified a range of factors that it evaluates when assessing the public interest, including economic impacts, international considerations, environmental impacts, security of natural gas supply, among others. To conduct this review, 

the Department looks at the record evidence, as presented by applicants and participants in the proceeding. Applicants and 

interveners are free to raise new issues or concern relevant to the 

public interest that may have not been address in prior cases. And, 

in fact, we have seen that to be the case. 

To date, DOE has granted seven conditional authorizations for 

long term export of domestically produced lower 48 natural gas to 

non-FTA agreement countries. This is equivalent to 9.3 billion 

cubic feet a day of capacity. This includes, as was noted, the Jordan 

Cove Energy Project, which the Department approved yesterday. 

As of today, there are 24 applications pending to export LNG to 

non-free trade agreement countries. The Department will continue 

to process these applications on a case by case basis in the order 

of precedence that had been established and made public on DOE’s 

Web site. During this time, as we have done previously, we will 

continue to monitor market developments and assess their impact 

in the assessment of the public interest, and consider information 

as it becomes available. 

In conclusion, Mr. Chairman, I would like to emphasize that 

DOE is committed to moving this process forward as expeditiously 

as possible. We understand the importance of this issue and its significance, and the importance of getting our process right. Thank 

you, Mr. Chairman. I would be happy to answer questions. 

[The prepared statement of Ms. Gant follows:] 

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89850.004
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89850.005
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89850.006
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89850.008
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Mr. WHITFIELD. Thank you very much, Dr. Gant. We appreciate 

your statement, and taking time to come over and talk about this 

important issue. At this time I recognize myself for 5 minutes of 

questions. 

Of course, one of the developments with Mr. Gardner’s legislation 

is it creates WTO countries the same as free trade agreement countries. And in your written testimony, you stated that you were concerned that H.R. 6, one of your concerns, that it would leave out 

public input. And I wanted to just explore that a little bit with you. 

When DOE made the NERA study available, that study was made 

available for public comment, and that was kind of the baseline for 

reviewing these applications. 

And in yesterday’s Order on the Jordan Cove project, DOE concluded that NERA’s explanation of its modeling design, methodology, and results provided a sufficient basis both for the public to 

provide meaningful comments, and for the Department to evaluate 

NERA’s conclusions. And also DOE concluded in this recent Order 

that, ‘‘We are not persuaded that using post-Annual Energy Outlook after post-2011 energy productions’’, you are not persuaded 

that anything post-2011 would have materially affected the findings of the LNG export study. 

So it would appear that the DOE non-FTA filing and authorization, since it is just one permitting process, because we have to get 

FERC involved also, it appears to me that your concerns about 

public input, maybe it is not that much of a concern, because the 

NERA study is sort of the baseline anyway, with the comments 

that you all made on these recent approvals. So would you agree 

with me that maybe you are being too concerned about the implications of what you perceive to be the lack of public input? 

Ms. GANT. Thank you, Mr. Chairman, and I agree the language 

in our Orders can be quite hard to read out loud sometimes. I 

struggle with it myself. I think there are a couple pieces to your 

question, and if I can take them in two? There are a number of aspects that inform our public interest determination, economic factors being some of them, as framed by the NERA analysis to a 

great extent, including environmental implications and geopolitical 

consideration. So the public interest is broader than the economic 

aspects of it. 

As I understand the legislation, and I am not intimately familiar 

with it, it would remove DOE’s requirement to conduct a public interest determination. And the public interest determination is the 

means by which we solicit public input, so it would remove the 

public’s opportunity to provide input on our process. 

The second piece of your question—— 

Mr. WHITFIELD. But if you had that public input in the NERA 

study, wouldn’t that compensate for the—— 

Ms. GANT. The NERA study was cut out for public comment, and 

then it is put on the record in each of our subsequent Orders, so 

it applies to each of those Orders. And each of the applications, and 

the dockets that are established for them, must be given their own 

individual consideration on a case by case basis, as established by 

the statute. Could I answer the second part of your question, with 

regard to the NERA? 

Mr. WHITFIELD. Yes, go ahead. 

21 

Ms. GANT. And I believe the reference you are referring to in our 

Order refers to the new information that has been provided. So the 

NERA analysis was based on the Annual Energy Outlook 2011, as 

released by EIA. In December, EIA released their Annual Energy 

Outlook 2014. They do this every year. The information provided 

therein, particularly with regard to the AEO 2014, demonstrates a 

projection for natural gas supply growth that is greatly outpacing 

expected natural gas demand growth. And so the finding, from our 

perspective, is that integrating the AEO 2014 into our analysis 

would not create a conclusion inconsistent with what we have already come to in 2011, which indicates that exports of natural gas 

generate net positive benefits for the U.S. economy. 

Mr. WHITFIELD. Now, has DOE taken an official position on the 

Gardner legislation? 

Ms. GANT. I am aware of the proposal. It has not made its way 

through interagency review, so I am not in a position to comment 

on the specifics. 

Mr. WHITFIELD. My time has expired. At this time I recognize 

Mr. Rush for 5 minutes of questioning. 

Mr. RUSH. Dr. Gant, thank you again for appearing before this 

subcommittee. And a lot of this—have under consideration is pretty 

timely now because of what is happening in Eastern Europe now. 

And I think that all the members of this subcommittee, in fact, all 

the Members of the Congress, we all stand together because we 

want to ensure that there are effective sanctions against Putin, and 

what he has done in Crimea, and we want to stop him. I don’t 

think that there is any doubt in anybody’s mind that we want to 

stand resolute and united, and trying to do all that we can to ensure that the democratic process is available to all those who are 

in Eastern Europe. 

But, with that said, the question came up earlier today, or the 

topic came up earlier today about H.R. 6, and its having such a tremendous impact on the future of Eastern Europe. And my question 

to you is, if H.R. 6 was, in fact, enacted today, when is the earliest 

possible time that exports of LNG will have their impact on decreasing Russia’s hold on the Ukraine, or on the other of our European allies, whom right now have been paying Russia for their natural gas supply? When do you see, or can you estimate, that Russia 

and Putin will feel the effect of the decrease of the Eastern European countries’ dependence on Russian natural gas? 

Ms. GANT. Thank you for that question, Ranking Member Rush. 

A couple of things that I think I can share that are responsive. And 

first I would say that we are tremendously concerned in moving to 

take immediate action to help our allies in Ukraine, and across Europe, and take the situation very seriously. To answer your question with regard to the legislation, again, I will just have to ask 

the committee to understand I haven’t had a chance to really assess the legislation and what impact it would have. But what I can 

say is that our understanding of the way that the timeline on 

which projects are moving is that the earliest point at which we 

could export substantial volumes of liquefied natural gas from the 

lower 48 would be the third quarter of 2015. So, regardless of what 

happens with a change in legislation, because the project that has 

final approval is moving along in its process at FERC. 

22 

However, there are other things that we can do to help the 

Ukraine and our European allies. The administration is keenly 

aware of these, and engaged in looking for ways to provide financial and technical existence. Also, there is the possibility of reversing pipeline flows in the Ukraine, should Russia actually turn off 

the tap, so to speak. That hasn’t happened yet, but there are efforts 

underway to prepare for that eventuality and reverse pipeline flows 

so that gas could flow from Europe into the Ukraine. 

And, importantly, as has been noted before, our increase in domestic production in recent years has allowed us to significantly reduce our reliance on imported liquefied natural gas. Those cargoes 

that would have been destined for U.S. markets have made their 

way to other places on world markets. And we do know that increased supplies of natural gas on global markets, and increase diversity of those supplies, increases our energy security, and those 

of our allies and trading partners. So things are happening that 

could have a positive impact. 

Mr. RUSH. But you have not been able to really look at and do 

your due diligence on this bill? That is understandable. But is 

there any way the effect of this bill, or any bill right now that 

would come out of the Congress on remediating the issue, or helping the Ukrainian people, it is not really certain right now any legislation that this Congress won’t have an immediate effect. Is that 

what you are saying, in essence? 

Mr. WHITFIELD. The gentleman’s time has expired, but I would 

like you to go on and answer his question. 

Ms. GANT. I would have to beg your patience that I am not in 

a position to opine on actions that this body might take, but I can 

say that we are proceeding with the guidance that you have given 

us, and working as expeditiously as possible. 

Mr. WHITFIELD. At this time recognize the gentleman from 

Texas, Mr. Barton, for 5 minutes. 

Mr. BARTON. Thank you, Mr. Chairman, and I thank our witness 

for being here. First I am going to make a comment, and then I 

am going ask you some questions. Mr. Waxman referred to, and 

you also, I think, referred in your opening statement to the number 

of projects that are pending, and the amount of LNG that would 

be exported, if they were all to be approved. There is one minor 

point, they also all have to be built, and they are not all going to 

be built. You could approve 30 projects. My guess is you will have 

one or two built on the East Coast, one or two on the West Coast, 

and perhaps two or three on the Gulf of Mexico. 

Now, I could be totally wrong about that, but the cost of these 

projects, and the long term financing commitment, and the uncertainty of the foreign markets, as soon as we start exporting LNG, 

these prices that look so lucrative overseas, they are not going to 

stay at $16 and NCL for 12 or $13. When people see that the U.S. 

is going to export to Hungary, or to Japan, or to Eastern Europe, 

or wherever, those prices are going to change, and there is going 

to be an equilibrium point. We don’t know where that is, but you 

are not going to build 20 LNG terminals to export natural gas. 

That is just not going to happen. 

Could you give an example, at least hypothetically, of what 

would not be in the national interest? I mean, so far every project 

23 

that has been reviewed has been approved, and the law is such 

that you have to find it is not in the national interest. If it is where 

we already have a trade agreement, it is an automatic, and if it is 

not, you do have to do this review, but so far the yeses have won 

every time. So what would be an example that would not be in the 

national interest, hypothetically? 

Ms. GANT. Thank you, Congressman. We would agree that it is 

unlikely that all of these projects will get built, that the success of 

these will depend on a number of factors. These are decade old 

commitments. They require very sophisticated engineering and construction capacities, and very large capital commitments, and very 

significant steel in the ground, if you will. The guidance that we 

have been given in the Natural Gas Act is to conduct a public interest review. As I noted, we didn’t get a lot of guidance on what 

that meant, so we have tried to create a process that is very transparent, and we are working our way through that process. 

Considering the public interest in the criteria that we have set 

out, what I can tell you is that the considerations that we take into 

account in making that determination are all part of the public 

record. And given the information that is placed on the record to 

date in those proceedings, weighing all of that, and balancing those 

interests, our determination has been that—— 

Mr. BARTON. You—— 

Ms. GANT [continuing]. Export is in the public interest. 

Mr. BARTON. You have talked for a minute and a half and 

haven’t said a thing. You know, that is not an adversarial question. 

Let me give you a hypothetical. If Barton LNG Exports presents an 

application to the Department of Energy to export LNG to North 

Korea to help build manufacturing capability to build missiles that 

would then be capable of attacking the United States, would that 

be in the national interest? 

Ms. GANT. I would imagine that quite a bit of information would 

be put into the public record for us to consider in that proceeding, 

and we would do so. 

Mr. BARTON. I would hope the answer to that question would be 

no. I mean, well, my time is evaporating, so let me move on. Is it 

safe to assume that the geopolitical considerations that Mr. Rush 

has talked about, and Mr. Shimkus talked about, are reasons to approve LNG exports, that there is a geopolitical strategic component 

to the review? 

Ms. GANT. Yes, sir. In all of our orders that we have approved 

to date, and authorizations have granted, geopolitical considerations, international considerations, are factored in. We take very 

seriously our Nation’s commitment to free trade, and very much 

understand that increasing the supply and diversity of natural gas 

on global markets benefits our energy use security, and that of our 

allies. 

Mr. BARTON. OK. This is my last question, and I want you to 

give me, in the spirit of John Dingle, who is not here, a yes-or-no 

answer. And I will give you a hint that these questions are designed to make your report look good, OK? Question one, isn’t it 

true that the Department of Energy rejected the claim that the 

NERA study overstated the likely macro benefits from LNG exports? Yes or no? 

24 

Ms. GANT. Yes, sir. 

Mr. BARTON. OK. Isn’t it true that DOE observed that more natural gas is likely to be produced domestically if LNG exports are 

authorized than if they are prohibited? 

Ms. GANT. Yes, sir. 

Mr. BARTON. OK. Isn’t it also true that the Department of Energy rejected the claim that there is a one for one tradeoff between 

gas used in manufacturing and gas diverted for export? 

Ms. GANT. Yes, sir. 

Mr. BARTON. OK. And isn’t it also true that DOE was not persuaded that LNG exports will substantially increase the volatility 

of domestic natural gas prices? 

Ms. GANT. Yes, sir. 

Mr. BARTON. And this is my last question. Isn’t it true that DOE 

believes that the public interest generally favors authorizing proposals to export natural gas that have been shown to lead to net 

benefits to the U.S. economy? 

Ms. GANT. Yes, sir. 

Mr. BARTON. Thank you very much. 

Mr. WHITFIELD. Gentleman’s time has expired. At this time recognize the gentleman from California, Mr. Waxman, for 5 minutes. 

Mr. WAXMAN. Thank you, Mr. Chairman. The Department of Energy has established a process for considering applications to export LNG, if the LNG would go to a country that has a free trade 

agreement with the U.S., the application is quickly granted. But if 

the LNG is going to a country without a free trade agreement, 

DOE does a public interest determination. That takes some time, 

but DOE has granted seven of those applications so far. Dr. Gant, 

I would like to ask you about how the Gardner bill would change 

this approval process. Everyone should understand what this bill 

would actually do. 24 applications to export LNG to non-free trade 

agreement countries are currently pending before DOE. Under the 

Gardner bill, what would happen to those applications? 

Ms. GANT. Thank you, Congressman. Again, I have had the 

chance to only briefly review the bill, but as I understand the basic 

concept, it would grant status to WTO nations like that is currently 

granted to FTA nations under the Natural Gas Act, and in doing 

so, would remove DOE’s requirement to conduct a public interest 

determination. 

Mr. WAXMAN. So they would be granted without modification or 

delay? 

Ms. GANT. If that is what the legislation instructs. 

Mr. WAXMAN. OK. It is my understanding it does. So for these 

applications, there would be no public interest determination, or 

analysis of whether the exports would have adverse impacts on domestic natural gas prices or consumers, is that right? 

Ms. GANT. As my understanding of the proposal is, yes, sir. 

Mr. WAXMAN. OK. Automatically granting those applications 

would result in the approval of a total of 36 billion cubic feet per 

day in LNG exports. That is equal to almost half of our total domestic consumption. Has DOE done any analysis of how this level 

of potential exports would impact domestic natural gas prices? 

Ms. GANT. Yes, sir. My understanding is that the capacity presented in the 24 applications that have not been granted non-FTA 

25 

approval status is 36 BCF a day. The economic analysis that we 

have conducted to date does not consider exports at that level. 

Mr. WAXMAN. OK. So these are just the pending applications? 

Under the Gardner bill, future applications to export LNG to any 

of the 159 World Trade Organization member countries, DOE 

would be required to just deem them in the public interest and 

grant them, isn’t that right? 

Ms. GANT. Again, not being familiar with the specifics of the legislation, if there is no public interest determination required, my 

understanding is, yes, the Secretary would be required to deem 

them—— 

Mr. WAXMAN. If there is no public interest—— 

Ms. GANT. Right. 

Mr. WAXMAN [continuing]. Requirement for analysis? 

Ms. GANT. Yes, sir. 

Mr. WAXMAN. OK. The WTO membership includes all likely importers, and the automatic approval doesn’t depend on the proposed LNG export levels. Every application to export any amount 

of LNG to virtually anywhere in the world would be automatically 

granted under this bill. Dr. Gant, that is really just unlimited LNG 

exports, isn’t it? 

Ms. GANT. My understanding is if the exports were authorized, 

then market forces would determine how many LNG cargoes would 

actually be exported from the United States. 

Mr. WAXMAN. Well, as far as the Government is concerned, an 

application from anywhere in the world would be automatically 

granted under this bill. Market forces, of course, would determine 

another—— 

Ms. GANT. Yes, sir. The—— 

Mr. WAXMAN [continuing]. Be another factor. OK. Is there any 

way under this bill for DOE to ensure that the total level of LNG 

exports will be in the public interest, or not have significant adverse impacts on domestic natural gas prices, consumers, and manufacturers? 

Ms. GANT. Our current process considers these applications on a 

case by case basis, and looks at the macroeconomic benefits and 

impacts of LNG exports. To the extent that we weren’t conducting 

that review, we wouldn’t be opining on that. 

Mr. WAXMAN. And is it your understanding the Gardner bill 

would not require that review? 

Ms. GANT. Again, I have very limited understanding. 

Mr. WAXMAN. OK. I have an open mind on LNG exports, but I 

have concerns about this bill. Rubber stamping what I think is unlimited LNG exports without any determination that they are in 

the public interest could have serious unintended consequences. 

That is why many of the largest manufacturers in the country oppose this bill. Yield back my time, Mr. Chairman. 

Mr. WHITFIELD. Gentleman yields back. At this time, recognize 

the gentleman from Illinois, Mr. Shimkus, for 5 minutes. 

Mr. SHIMKUS. Thank you, Mr. Chairman. Let me ask, permitting 

doesn’t mean building, is that correct? 

Ms. GANT. Correct. 

Mr. SHIMKUS. And I take it my colleagues didn’t understand 

that. The markets will determine whether these get built, and a lot 

26 

of jobs for steelworkers, a lot of jobs for laborers. These LNG facilities are major construction projects, and that would be good for the 

economy also. I have spent 18 years as a Member of Congress, 

dealing with Eastern European issues. I have spent 3 years on the 

West German border. I have a passion for freedom and democracy 

in the former captive nations. 

To my friend Mr. Rush, who I know shares the same thing, these 

countries are already seeing benefits of lower natural gas prices because of the ability to export. I want to read an article from Climate Change Science and Technology on 6 March. ‘‘Last week Lithuania took another important step towards the creation of its own 

liquefied natural gas terminal. The floating storage and re-gasification unit that is being built in South Korea by Hyundai Heavy 

Industries was put to water for initial testing, and christened by 

Lithuania’s president. The ship should arrive in Klaipeda, the location of Lithuania’s LNG terminal, by the end of the year and is 

planned for initial processing of LNG to start in December.’’ My 

opening was just a passion plea. These countries need to free themselves from the extortion of Russian energy markets. And it is not 

just Eastern European. It is the Western European countries too. 

50 percent of energy in Western Europe is from Russia. This is a 

big deal, folks. 

And now let me tie it to this whole FTA/WTO debate. The key 

component is we don’t have a free trade agreement with Europe, 

is that correct? 

Ms. GANT. That is my understanding. 

Mr. SHIMKUS. So if we want to help Europe, we have to move to 

the WTO format. There was another bill that I sponsored by Mike 

Turner, a member of the NATO Parliamentary Assembly, and that 

was to grant this same provision to NATO countries. And in the 

permutation of how legislation gets written, it was deemed an easier way to include the WTO members than to go to a defensive treaty alliance type issue. 

Again, I want to make sure that I highlight, in this day and age, 

at this time in the world’s history, with what is currently going, if 

you had any interest in a democratic, free Europe, whole and free, 

this is a big deal. The Russians extort by trade, they extort by energy. They get involved in political campaigns, legal and illegally. 

We are not making this up. Talk to any ambassador from an Eastern European country of Russian influence to try to destabilize 

their country. This is our opportunity, another way, without troops, 

bringing a measure of security to our European friends. 

And, of course, Shimkus is ethnically Lithuanian. I am glad that 

they have moved on an import terminal, at great expense to them. 

They have already seen the benefits of being able to negotiate 

lower natural gas prices because of the acknowledgement that now 

they are going to be able to go to the world market, outside of Russia, for their energy needs. 

So I want to thank you for the permits that you have already 

rendered. I hope that you will keep an open mind on this bill, and 

the WTO implications for our allies in Europe. It is a key component in this current struggle that we have. Thank you for, Mr. 

Chairman, a great hearing. I want to thank again Mr. Gardner. 

27 

There couldn’t be a more important time to move this legislation 

than now. So, with that, I will yield back my time. 

Mr. WHITFIELD. Gentleman yields back. At this time recognize 

the gentleman from California, Mr. McNerney, for 5 minutes. 

Mr. MCNERNEY. Thank you, Mr. Chairman. I agree with my colleague from Illinois that natural gas is a geopolitical tool, and it 

would be beneficial to have LNG import to Ukraine, but Ukraine 

doesn’t have LNG import facilities, and we are already approving 

LNG export facilities far faster than they can possibly be built, so 

I question the need for this bill. But I do have one question for Dr. 

Gant. 

You know, with the deeming and automatic approval of LNG export facilities, that makes me worry about the quality of applications that you are going to be receiving, if that was to be enacted 

into law, in terms of safety, in terms of fugitive gas emissions, and 

all kinds of environmental problems. Is that something that would 

be a problem, in your mind, in your estimation? 

Ms. GANT. Thank you for the question. I would just note that 

DOE has responsibility for considering the impact of actually exporting the natural gas molecule, while our partner agency, the 

Federal Energy Regulatory Commission, is responsible for the permitting and siting of the actual physical facility, and safety, and 

engineering quality, environmental impacts actually associated 

with the facility. 

Mr. MCNERNEY. So those aspects are OK, as far as you are concerned? 

Ms. GANT. Again, as I understand the legislation, it only addresses DOE’s responsibilities. 

Mr. MCNERNEY. OK. All right. That was my only question. I 

yield back. 

Mr. WHITFIELD. Gentleman yields back. At this time we will recognize the gentleman from Nebraska, Mr. Terry, for 5—— 

Mr. TERRY. To follow on that line of questioning, from the day 

that a permit is filed with DOE, what has been the average 

timeline for the seven that have been granted? 

Ms. GANT. Each individual application presents its own 

unique—— 

Mr. TERRY. That is why I said average—— 

Ms. GANT [continuing]. Individually. 

Mr. TERRY [continuing]. Between the seven. 

Ms. GANT. So once the comment period finished on the rulemaking, it was 3 months before we issued the first conditional authorization. 

Mr. TERRY. 3 months? 

Ms. GANT. And we are on an average of about a 2 month pace, 

give or take a week or 2—— 

Mr. TERRY. And that is—— 

Ms. GANT [continuing]. Depending on how fast we can—— 

Mr. TERRY. Very good. I understand that. Then what happens to 

the process one DOE signs off on a permit? 

Ms. GANT. So the statute gives us a little bit of flexibility. An applicant can proceed in parallel at the Department of Energy and 

the Federal Energy Regulatory Commission. We have established 

a process by which those applicants that have started their pre-filVerDate Mar 15 2010 13:25 Nov 10, 2014 Jkt 037690 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 F:\113-129 H.R. 6 ND BLBK EDITS, SCANS\113-129 H.R. 6 WORKING WAYNE
28 

ing process at FERC are entered into our order in the order at 

which they apply to us after initiating that process, and that they 

proceed through our process in parallel, if you will, to the FERC 

application process. 

However, we are a coordinating agency with the Federal Energy 

Regulatory Commission on the environmental impact assessment. 

So once we have given the conditional approval for export, then we 

wait until the Federal Energy Regulatory Commission has completed their environmental review, and then we consider that in 

our determination of a final authorization. 

Mr. TERRY. OK. Now, even though you may be sped up, the reality is FERC still has to deal with it, so if there is one agency that 

wants to delay, for whatever political purposes, like Keystone pipeline and that, FERC can do that? 

Ms. GANT. In the vast majority of the applications before us, the 

Federal Energy Regulatory Commission has the lead Federal agency responsibility—— 

Mr. TERRY. Right. 

Ms. GANT [continuing]. For conducting environmental reviews of 

these projects. 

Mr. TERRY. Couple of miscellaneous type questions here. A 

former member of this committee used to say that if we exported 

any, then that means the prices of natural gas in the United States 

would automatically go to the world prices on natural gas. That 

person always lost me on the logic. What is DOE’s opinion on 

whether or not, if we fill up one ship with liquid natural gas and 

send it over to the Ukraine, or Lithuania, that that means that we 

will be on a world price for natural gas? 

Ms. GANT. The analysis that we consider in assessing the public 

interest is based on the analysis conducted by EIA and NERA previously, particularly in NERA analysis across all scenarios envisioned where an export were provided for, were allowed, and taken 

up in global markets, we saw overall benefits to the U.S. economy. 

And, importantly, in the EIA’s AEO 2014 that was released in December, that projects a significant increase over the forecast period 

in LNG exports relative to the base case used in our NERA analysis. We see an actual decrease in projected Henry Hub prices for 

natural gas in the U.S., so that the—— 

Mr. TERRY. OK. 

Ms. GANT [continuing]. Baseline of 39—— 

Mr. TERRY. Very good. And have you been to the Balkan Fields, 

or the Eagleford Place? 

Ms. GANT. I have not, but I imagine I will have—— 

Mr. TERRY. You should. The chairman and I, and a couple others, 

Cory, did that. Fly over at night and see how much of the natural 

gas is being flared off, or wasted, in my view. 

Ms. GANT. Um-hum. 

Mr. TERRY. And that is an extremely disappointing picture to me. 

So when we talk about whether or not exporting LNG is going to 

create a demand issue for us when we are burning off, flaring, almost a third sounds almost silly to me. 

Ms. GANT. Um-hum. 

Mr. TERRY. Has DOD, in your last 30 seconds, looked into how 

to better capture that 1⁄3 that is just lit off? 

29 

Ms. GANT. Yes, sir. A couple of important things, we are very focused on reducing methane emissions from natural gas and oil systems, and other sources across the economy, as part of the President’s climate action plan. Specifically with regard to natural gas 

associated with oil production, increasingly producers are looking 

at gasifying their drilling sites, so moving off of diesel engines, onto 

natural liquefied natural gas engines, so you are looking at ways 

to increase the value of that fuel on site. In addition, the quadrennial energy review will provide an opportunity to look at obstacles 

to building gathering lines that would allow you to capture natural 

gas. 

Mr. TERRY. It would, if you would get one. 

Mr. WHITFIELD. The gentleman’s time has expired. We have a 

vote on the House floor. We are going to try to do two more questions because Dr. Gant is going to be leaving, and we are going to 

be gone 50 minutes, and we are going to be coming back for the 

second panel. But the next on the list is Mr. Doyle. He will be recognized for 5 minutes, and then Mr. Gardner. And if you all wanted to—— 

Mr. DOYLE. Thank you, Mr. Chairman. Well, let me just say this. 

This hearing is not about whether or not we should export natural 

gas. We are doing that. Having said that, I have some great concerns about this bill. 

Dr. Gant, you said that your average approval time is around 2 

months, every 2 months you are approving a permit. And I also 

heard you say that, when Mr. Barton asked you, when the first 

permit that you approved would actually come online, you said 

around the third quarter of 2015, is that correct? So that is about 

15 months from now. So, based on your granting permits on an average of about 2 months, you could conceivably grant another seven 

or eight permits before the first facility actually goes online, assuming it goes online by the third quarter of 2015. At that point 

we would have 15 permitted facilities to go to non-free trade agreement countries. 

Now, you said that the difference between granting a permit to 

a non-FTA country versus an FTA country is you go through a 

process to see if it is in the national interest to do so. But, under 

Mr. Gardner’s legislation, that would be waived. It would be treated just like an FTA permit, where you don’t go through that process, is that correct? 

Ms. GANT. As I understand. 

Mr. DOYLE. So, conceivably, if somebody wanted to export natural gas to Russia, which is a WTO country, there wouldn’t be a 

review process by DOE whether or not that was in the national interest? It would just be approved like an FTA country? Is that correct? 

Ms. GANT. Correct. 

Mr. DOYLE. I would say to Mr. Gardner, and people that are cosponsors of this bill, you may want to consider, based on what is 

going on in the world with the Russians, the Chinese, Pakistani, 

Turkey, how these countries are flaunting our trade laws and 

cleaning our manufacturers’ clocks. We just came from a steel caucus hearing this morning where these same very countries that we 

could be sending natural gas to, without any review to see if it is 

30 

in the natural public interest, are using our trade laws to put our 

companies out of business. 

The one edge our manufacturers have in this country is cheap 

energy, and we are about to take that from them too. Right now 

we have natural gas at $4 to $5 at MCF. They are paying $14 to 

$16 over there. Mr. Barton has it right. What is going to happen 

is our prices are going to come up a little, and their prices are 

going to come down a little, and we will eventually hit some sort 

of a leveling off period of pricing where it doesn’t make any more 

sense to export. And the market will determine how many of these 

facilities actually get built, because they cost billions of dollars to 

build. And even if you approve 30 permits, the likelihood is nowhere near 30 facilities are going to get built. Well, if the sweet spot ends up a $9 or $10, it then becomes the 

world price. Now we have lost our competitive edge, our manufacturers have, in this world market, because they no longer have the 

benefit of cheaper energy than their competitors overseas, whose 

companies still illegally subsidize their industries, and put the steel 

industry out of business. We lose 20, 30 companies before we get 

relief at the International Trade Commission. 

I would just say to Mr. Gardner, and anyone else that is for this 

bill, let us sit down and think about the countries we want to actually do this to. Let us not open up to every WTO country. Let us 

talk about who our allies are, and who our partners are, and what 

we are trying to accomplish over in Europe and Eastern Europe, 

and maybe limit it to those countries. And let us make certain that 

if somebody can put an application in to send natural gas over to 

Russia right now that the review process that would be waived 

under your bill isn’t waived. If you are not going to do that, I would 

suggest that you single out Russia and a few other countries not 

be eligible for this kind of favorable treatment. 

I am not against exporting natural gas. I am for it. I am for 

doing it. What I hate to see happen is just like with the Keystone 

pipeline. You know, not an ounce of American steel in that pipeline. The Indians and the Russians provided the steel that is going 

to build that Keystone pipeline. We need buy America provisions 

in this bill. If we are going to build these export facilities, they better damn well use American steel, U.S. steel, not Russian steel, not 

Indian steel, making sure that our companies have a level playing 

field when we do this. 

I am all for exporting the natural gas. I am not for giving away 

our competitive edge, and I am certainly not for giving cheap gas 

to our enemies. And this allows that to happen without any review 

from the Department of Energy. I don’t have any questions. I yield 

back. 

Mr. WHITFIELD. At this time recognize the gentleman from Colorado, Mr. Gardner, for 5 minutes. 

Mr. GARDNER. Well, thank you, Mr. Chairman, and if the gentleman supports the exporting, I would hate to see him exporting. 

So I thank you for your passion that you bring to this bill, but I 

hope you will stay and listen to other witnesses who are testifying 

today who will completely rebut and refute the statements that you 

just made. In fact, there is testimony within today’s hearing that 

talks about the price impact, that talks about many of those same 

31 

claims that you are making, which are refuted by the evidence and 

price impacts that are negligible, if at all, under this legislation. 

But what we do know, of course, as the DOE witness has talked 

about, and I thank you for the opportunity to have you here today, 

is the economic impact that this would have on the United States 

right now. The DOE permit application, in your assumptions, you 

talk about the number of jobs it would create. Have any of these 

facilities resulted in less employment in the United States? Have 

any of these permits resulted in a net loss of employment to the 

United States? 

Ms. GANT. I am not aware that those calculations have been 

made. 

Mr. GARDNER. I mean—— 

Ms. GANT. I am not privy to them, if they have. 

Mr. GARDNER. Does higher production of domestic energy result 

in more or less jobs? 

Ms. GANT. The economic analysis that we base in our Orders 

demonstrates that greater production of natural gas has generated 

overall economic impacts. 

Mr. GARDNER. And the gas that we are exporting is American 

gas, is that correct? 

Ms. GANT. That is correct, sir. 

Mr. GARDNER. So we are creating American jobs, yes? 

Ms. GANT. Yes, sir. 

Mr. GARDNER. With American energy? 

Ms. GANT. That is what the economic analysis suggests. 

Mr. GARDNER. And it is going overseas to displace energy that is 

coming from who, Russia? 

Ms. GANT. It is hard to say which natural gas is being displaced, 

but there is no doubt that—— 

Mr. GARDNER. Would it displace Russian gas? 

Ms. GANT. There is no doubt that we have greater supplies of 

natural gas—— 

Mr. GARDNER. Would that be a net benefit to U.S. allies? 

Ms. GANT. It is definitely a net benefit. 

Mr. GARDNER. And why would that be a net benefit? 

Ms. GANT. Because increased supplies of gas on global markets, 

and diversity of those supplies, increases energy security. 

Mr. GARDNER. So that means what for the United States, in 

terms of geopolitical situation? 

Ms. GANT. We are very keenly interested and invested in the energy security of our allies and training partners. 

Mr. GARDNER. So it would increase the security of our allies? 

Ms. GANT. It is a key strategic interest to the United States. 

Mr. GARDNER. OK. It would create American jobs? 

Ms. GANT. What is it? I am sorry, I have lost track of what it—— 

Mr. GARDNER. We would create American jobs developing—— 

Ms. GANT. Increased production of natural gas has led to, yes, increased economic benefits. 

Mr. GARDNER. And that would be a net benefit to the United 

States economy? 

Ms. GANT. In our analysis to date, yes. 

Mr. GARDNER. I thank the witness for her time. 

32 

Mr. WHITFIELD. I might make just one comment regarding the 

scenario of exporting gas to Russia, or North Korea, or wherever, 

and maybe Dr. Gant can answer this question, or maybe you can’t, 

but the reason we have these hearings is to find out. But Mr. Doyle 

presented a pretty dire—and many of us would agree with you. We 

wouldn’t want gas going to Russia, North Korea, some of these 

WTO countries. 

It is my understanding that the Energy Policy Act of 1975 gave 

the President of the United States the authority to prohibit export 

of natural gas to any country if they deemed it should not be done. 

And I know the Gardner bill does not amend that Act, but do you 

know personally if what I have just said is accurate? 

Ms. GANT. Mr. Chairman, if you wouldn’t mind, I would rather 

take that question for the record—— 

Mr. WHITFIELD. Yes. 

Ms. GANT [continuing]. Because I believe I know the answer—— 

Mr. WHITFIELD. OK. 

Ms. GANT [continuing]. But I would rather—— 

Mr. WHITFIELD. All right. 

Ms. GANT [continuing]. Not—— 

Mr. WHITFIELD. Well, if you wouldn’t mind getting back in touch 

with our committee staff? Because it is our understanding that that 

is the case, that the President could intervene and prevent some 

of the scenarios that Mr. Doyle talked about. But we want to make 

sure that that is accurate. OK. That concludes the first panel, and 

we thank you very much for taking time to come over and give 

your insights on this, and we look forward to working with you as 

we move forward. So you are dismissed. 

The second panel, we are going to cast these votes, and we are 

going to be back here in 50 minutes. And, as I have said before, 

we have world class restaurants in the Rayburn Building, so if you 

want to go down and get something to refresh yourself? 

Mr. RUSH. They have 15 minutes to get down there. 

Mr. WHITFIELD. Fifteen? 

Mr. RUSH. They have got 15 minutes to get down to Rayburn. 

They close at 2:30. 

Mr. WHITFIELD. Yes, they close at 2:30, so you better hurry. But 

we will be back in 50 minutes. 

[Whereupon, at 2:15 p.m., the subcommittee recessed, to reconvene at 3:05 p.m. the same day.] 

Mr. WHITFIELD. I would like to call the hearing back to order. 

And I want to apologize once again to those of you on the second 

panel. We appreciate your patience, and certainly do look forward 

to your testimony. And on the second panel today, we have Dr. 

Anita Orba ́n, who is Ambassador-at-Large for Energy Security for 

the government of Hungary. We have The Honorable Jim Bacchus, 

who is with Greenberg Trauig Law Firm. We have Mr. David 

Schryver, who is Executive Vice President of the American Public 

Gas Association, Mr. Kenneth Ditzel, who is Principal with the 

Charles River Associates. And we have Dr. David Montgomery, 

Senior Vice President for NERA Economic Consulting. 

So all of you have a perspective on this issue, and we really look 

forward to hearing from you. So, at this time, I will recognize Dr. 

33 

Orba ́n for her 5 minute opening statement. And just make sure 

your microphone is on. Thank you. 

STATEMENTS OF ANITA ORBA ́ N, AMBASSADOR–AT–LARGE FOR 

ENERGY SECURITY, MINISTRY OF FOREIGN AFFAIRS, HUNGARY; JAMES BACCHUS, CHAIR, GLOBAL PRACTICE GROUP, 

GREENBERG TRAUIG LLP; DAVID G. SCHRYVER, EXECUTIVE 

VICE PRESIDENT, AMERICAN PUBLIC GAS ASSOCIATION; 

KENNETH H. DITZEL, PRINCIPAL, CHARLES RIVER ASSOCIATES; AND W. DAVID MONTGOMERY, SENIOR VICE PRESIDENT, NERA ECONOMIC CONSULTING 

STATEMENT OF ANITA ORBA ́ N 

Ms. ORBA ́ N. Thank you, Mr. Chairman. Thank you, Chairman 

Whitfield, and the members of the subcommittee. I am honored to 

be here today to provide perspective on the importance of LNG export legalization for Central Eastern Europe. We applaud the leadership of this committee to look at the geostrategic aspect of the 

LNG export. On March 6 four ambassadors of the four Visegra ́d 

countries signed a letter to Speaker Boehner and Majority Leader 

Harry Reid to urge them to recognize the overall importance of 

U.S. engagement in Central Eastern Europe, and more specifically 

in the area of energy security. I would like to ask you, Mr. Chairman, to enter this letter into the record along with my written remarks. 

Mr. Chairman, we are in the middle of the largest security crisis 

that Europe has seen since the end of the Cold War, and energy 

dependence, especially that of Ukraine and Central Eastern Europe 

is on everybody’s mind. Energy import dependence is one of the key 

factors that limit the political options available to the Central Eastern European countries as U.S. allies. The popular interpretation 

of energy dependence, and natural gas dependence in particular, is 

widely associated with supply cutoffs. Supply cut may indeed happen, with unpredictable consequences for countries in the region. 

Yet, if used, it would seriously hurt the supplier as well, in the 

short term with loss of revenue, in the midterm with loss of its 

markets. 

There is another aspect of dependency, however, which is much 

less discussed, and that is its price implication. It is prices that 

provide the best economic and political tool for the monopoly supplier. Whoever has the monopoly calls the shots. Higher prices inflict a very tangible cost on the dependent country’s economy and 

population by stuffing the supplier’s coffers, and allowing it to reap 

the economic grants to finance further political, economic, and military actions. Most importantly, it can be applied in a discriminatory manner. The only way to limit the monopoly supplier’s ability 

to use the price weapon is to establish alternative supplies. Once 

they are in place, the monopoly supplier can no longer use the price 

discrimination tool freely. 

For Central Eastern European countries the most important task 

is today to create the credible alternative options. To do that, we 

need to do two things. First of all, we need to enhance and ensure 

the capacity of the pipeline system and of the infrastructure, and 

we need to secure the necessary volumes of additional natural gas 

34 

import. The first is our homework. Only we can do that, to create 

robust energy infrastructure, to create access to alternative supply, 

to create access to energy terminals. It is beyond the limit of my 

presentation to go into details to explain how much and what we 

have done, but I am very happy to elaborate on them during the 

Q and A session. 

However, Europe has been much less successful in building up 

the necessary volumes for alternative supply, and this has been 

largely out of the control of Europe. EU and U.S. sanctions against 

Iran, the slower than expected progress in Iraq, the upheaval in 

North Africa postponed, or put on hold indefinitely, potential alternative pipeline supplies. With no pipeline gas option available, the 

most credible alternative is to have access to the energy market. 

And it is pretty much only the American LNG which can create the 

credible volume to have a real impact in Central Eastern Europe. 

The urgency of establishing the region’s access to LNG means 

that the United States Congress has a potent tool at its disposal. 

By clearing the way for U.S. shale gas to reach America’s Central 

European NATO allies, it would provide significant protection 

against the deployment of the energy weapon. It is simply not true 

that lifting the natural gas export ban today would not have an immediate effect in the region. It would. It would immediately change 

the business calculus for infrastructure investments, and send an 

extremely important message of strategic reassurance to the entire 

region. 

Access to LNG would also assist Ukraine. During 2013, two capacities, reverse flow capacities, were opened toward Ukraine, one 

from the direction of Hungary, another from the direction of Poland, enabling the supply of natural gas to Ukraine on purely market terms. 

Expediting LNG export is an elegant, yet very effective tool, 

which is relatively cheap to use. It is a historic opportunity to send 

a strong message of freedom to the region by simply letting the 

markets work. This is not a partisan issue. It is an American issue 

that all statesmen in this country must show leadership on. 

Mr. Chairman, members of the committee, I believe that doing 

away with these export limitations would make economic sense, 

even in better times, but there is nothing like a crisis to focus the 

mind. As representatives of a country that Central Eastern Europe 

has traditionally looked to for leadership, you know well that you 

do not always have the luxury of choosing the time to make some 

of the most necessary decisions. But with the post-Cold War settlement crumbling before our eyes, if there was ever a time for your 

leadership, it is now. And if there was ever an issue that would do 

as much good at as little cost, it is the issue at hand. Thank you 

for your attention. 

[The prepared statement of Ms. Orba ́n follows:] 

35 


89850.009
36 


89850.010
37 


89850.011
38 


89850.012
39 


89850.013
40 


89850.014
41 


89850.015
42 


89850.016
43 


89850.017
44 


89850.018
45 


89850.019
46 

Mr. WHITFIELD. Thank you, Dr. Orba ́n. And at this time I will 

recognize the gentleman, Mr. Bacchus, for 5 minutes. 

STATEMENT OF JAMES BACCHUS 

Mr. BACCHUS. Thank you, Mr. Chairman, and it is always good 

to be back in this House. I had the privilege some time ago of representing the State of Florida in this House. Today I want to emphasize that I am here today representing no one but myself. I am 

speaking solely for myself. Furthermore, I am here today not to 

speak on issues of policy, but on issues of law, specifically on issues 

relating to international trade law under the WTO treaty. And I 

believe I have been invited here today because, when I became a 

former Member of the House, I went to Geneva and became one of 

the seven founding Judges on the appellate body of the World 

Trade Organization, and I served for nearly a decade there, including two terms as the Chief Judge there. I have written quite a few 

WTO legal opinions. 

So that is why I am here today. I am here because, largely overlooked in the emerging Congressional debate so far about restricting exports of natural gas, is the possibility that such restrictions 

are inconsistent with the obligations of the United States to other 

members of the WTO under the WTO treaty. This matters, because 

if our restrictive energy measures are inconsistent with our treaty 

obligations, the United States risks losing a case in the WTO, and 

such a loss could cause the WTO to authorize expensive economic 

sanctions against us through the loss of previously granted concessions in other sectors of our international trade. 

Mr. Chairman, WTO rules apply to trade in natural gas and 

other energy products in the same way they apply to other traded 

products. Some suggested that energy products are somehow separate and apart from other treated products in how WTO rules 

apply to them. There is no legal basis for this view. Among WTO 

rules that bind us in the WTO treaty are rules prohibiting bans, 

quotas, and other forms of quantitative restrictions on exports, unless those restrictions take the form of export taxes. Now, as all the 

members know, taxes on exports are prohibited by our Constitution 

in the United States, so energy export taxes are not an option for 

us. WTO rules also permit temporary restrictions on exports to prevent or relieve critical shortages of essential products, but that can 

hardly be said to apply to our current situation with respect to supplies of natural gas. 

A number of legal concerns occur when considering the consistency of the current U.S. process for licensing exports of natural gas 

with WTO rules. First of all, the current U.S. process gives special 

treatment in licensing exports of natural gas to countries with 

which we have a free trade agreement. Natural gas exports to 

these countries are deemed to be in the public interest, and permitted without delay. In contrast, the Department of Energy has 

elected to subject licensing requests for LNG exports to non-FTA 

countries to a thorough and lengthy assessment intended to determine whether exploits of natural gas to those countries serve our 

public interest. In this way, applicants that ship LNG to FDA countries are preferentially given expedited review in the licensing procVerDate Mar 15 2010 13:25 Nov 10, 2014 Jkt 037690 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 F:\113-129 H.R. 6 ND BLBK EDITS, SCANS\113-129 H.R. 6 WORKING WAYNE
47 

ess, as compared to those applicants that will ship LNG to nonFTA countries. 

When seen through the prism of WTO law, Mr. Chairman, these 

are measures affecting trade that result in discrimination between 

like traded products. The legal question under WTO law is whether 

this discrimination can be excused by an exception in WTO law 

that allows trade discrimination as part of a free trade agreement. 

But it is not at all clear that all of the FTAs of the United States 

fit within the definition in the WTO treaty of a free trade agreement. 

Fortunately, H.R. 6, introduced by Congressman Gardner of Colorado, and currently under consideration by this committee, would 

eliminate this potential legal concern by providing that natural gas 

exports to all members of the WTO would be deemed to be in the 

public interest. Depending on how the Department of Energy 

chooses to implement H.R. 6, however, it may not, in its present 

form, remedy several other legal concerns arising from the current 

U.S. licensing process under WTO rules. I, frankly, could not tell 

from the testimony earlier today by the representative from the Department of Energy how precisely they view this bill, how they 

would change what they do if this bill is enacted, or even how they 

engage in their process today, nor can, really anyone else. 

One remaining legal concern under WTO rules is the question of 

the lengthy delays in granting export licenses. H.R. 6, in its third 

paragraph, would provide for immediate approval of pending applications, but what about new ones? Under WTO rules, a license can 

clearly be a restriction on exports. And case law has defined the 

notion of a restriction broadly to include licensing procedures that 

post limitations on actions, or had a limited effect, such as by creating uncertainties, or by affecting investment plans. In one case, 

delays of up to 3 months in issuing export licenses were found to 

be inconsistent with the rules. 

Now, to be sure, liquefied natural gas is, practically speaking, 

not just another widget. Before it can be shipped by sea, natural 

gas much be transformed in a careful way that requires special facilities. Some period of deliberation, and citing, and evaluating 

LNG facilities seems reasonable. The FERC process of environmental consideration is probably perfectly defensible under WTO 

rules. But what would WTO Judges be likely to say about delays 

in issuing export licenses that last much longer? 

Mr. WHITFIELD. Mr. Bacchus, I have let you go a couple minutes 

over. If you would just summarize, and—— 

Mr. BACCHUS. Let me make one more point, Mr. Chairman, and 

then I will be happy to answer questions of the members on these 

other issues. And I congratulate the committee on asking first 

about our WTO obligations before enacting legislation, rather than 

finding out about them later in Geneva. 

An additional remaining legal concern is the lack of clarify, and 

how the Department of Energy defines the public interest. Conceivably even lengthy delays in the licensing process could be excused 

under WTO rules if it could be proven by the United States that 

such delays are necessary to protect life or health, or are related 

to the conservation of exhaustible natural resources, so long as the 

48 

process is not applied in a way that results in arbitrary or unjustifiable discrimination, or disguise restriction on international trade. 

Now here is my final point, Mr. Chairman, for now. If, however, 

in determining the public interest the DOE considers as a factor 

the effect the proposed exports will have on domestic producers 

that use natural gas in making their products and their competition with like foreign products, then these exceptions to WTO rules 

will not be available, and will not excuse a WTO violation caused 

by lengthy licensing delays. 

In fact, Mr. Chairman, the United States of America has been 

making precisely the point that I have just made just now in a case 

against China in the WTO, dealing with Chinese restrictions on exports of rare earth elements. Most likely the United States will win 

this case. A WTO panel ruling is expected tomorrow. If we have 

proven the facts, we will prevail on the arguments I have just 

made, that are some of the same arguments that we heard earlier 

today. 

[The prepared statement of Mr. Bacchus follows:] 

49 


89850.020
50 


89850.021
51 


89850.022
52 


89850.023
53 


89850.024
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89850.025
55 


89850.026
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89850.027
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89850.028
58 

Mr. WHITFIELD. Thank you so much, Mr. Bacchus. At this time 

I recognize Mr. Schryver for 5 minutes. 

STATEMENT OF DAVID G. SCHRYVER 

Mr. SCHRYVER. Chairman Whitfield, Ranking Member Rush, the 

members of the subcommittee, I appreciate this opportunity to testify before you today, and I thank the subcommittee for calling this 

important hearing on The Domestic Prosperity and Global Freedom 

Act introduced by Congressman Gardner. My name is Dave 

Schryver, and I am the Executive Vice President for the American 

Public Gas Association. APGA is a national association for publicly 

owned natural gas distribution systems. There are currently approximately 1,000 public gas systems located in 37 States in the 

U.S. Publicly owned gas systems are not-for-profit retail distribution entities owned by, and accountable to, the citizens they serve. 

As a result of advances in natural gas drilling techniques, U.S. 

consumers have enjoyed affordable energy prices, and a manufacturing renaissance is underway. The U.S. now has a unique opportunity to implement its long declared, but never seriously pursued, 

policy of energy independence, and thereby to fundamentally transform key variables affecting both our national security and domestic economy. 

However, APGA is concerned that the export of LNG threatens 

this opportunity. There have been about 30 applications filed at the 

Department of Energy, and the sum total of LNG that could be exported, should all these facilities go forward, would equate to nearly half of current U.S. natural gas production. This potential level 

of export could have serious adverse implications not only for U.S. 

national security, but also for domestic consumers of natural gas, 

and the economy as a whole. 

The pursuit of energy independence requires that the United 

States wean itself off of imported oil, which accounts for approximately 40 percent of our domestic use. The two major consumers 

of foreign oil in the United States are the transportation sector and 

the industrial sector. By converting commercial vehicles to natural 

gas, the United States can take giant steps towards energy independence and reducing greenhouse gas emissions. 

To accomplish this goal, natural gas in the United States must 

remain plentiful and reasonably priced. U.S. natural gas prices 

today are affordable, competitive, and relatively stable in contrast 

to the situation just a few years ago. This important change in gas 

pricing is the product of both the newly available supplies of natural gas and the fact that our natural gas market is largely limited 

to North America. At these prices, natural gas vehicles are price 

competitive with gasoline. 

By contrast, the large scale export of natural gas via LNG will 

not only play havoc with the current supply and demand situation, 

enhance the price of natural gas, but will also, because the price 

of LNG abroad is tied to the international oil market, inevitably 

link the domestic price of natural gas to international oil markets, 

which are substantially more volatile, and less transparent than 

our domestic market. 

APGA is not against free trade, but when important policies collide, nations must make choices. U.S. policymakers must carefully 

59 

consider and prioritize the use of domestic resources according to 

the national interest over both the long and short terms. Ultimately, U.S. LNG will be sold by private firms to the highest bidder without any consideration of U.S. geopolitical interest. Wherever these firms can obtain the highest price for natural gas is 

where the gas will be sold. 

Proof of this assertion can be found in the already approved applications for export of natural gas to non-FTA countries. The 

seven approved applications have finalized contracts, or are negotiating contracts, to sell U.S. gas to Japan, South Korea, and India. 

Since the goal of profit maximization applies to all pending nonFTA export applications, any future exports will also go where the 

price is highest, and not where U.S. geopolitical interests may wish 

them to be sent. In addition, Ukraine, unlike its likely Asian competitors, currently has no LNG import facilities, and therefore no 

capacity to receive U.S. gas in the near future. Rather than exporting LNG, a focus should be on exporting the drilling technology 

that has enabled producers in this country to tap into our huge 

shale reserves. There are vast shale reserves in Europe, including 

in Ukraine, that are there for the taking. 

APGA strongly believes that natural gas has a critical role to 

play in keeping energy prices affordable for U.S. consumers, reducing our dependence on foreign oil, reviving domestic manufacturing. No matter how well intentioned, the projected price increases of exporting LNG threatens those three objectives. In lieu 

of exporting our affordable premium fossil fuel, Congress should 

focus on adopting policies that encourage greater domestic demand 

for natural gas. This is a much better choice in both the short and 

long term to accelerate the transition from imported oil to domestic 

natural gas to fuel our transportation sector, revitalize our manufacturing industry, and improve our balance of trade. 

We urge the committee to carefully consider the adverse impact 

that exporting LNG will have on millions of natural gas consumers 

in the U.S., who will feel the impact of higher prices resulting from 

exposure to the global export market. APGA thanks you for this opportunity to testify, and we look forward to working with this committee on this important issue. 

[The prepared statement of Mr. Schryver follows:] 

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Mr. WHITFIELD. Thanks very much, and, Mr. Ditzel, you are recognized for 5 minutes. 

STATEMENT OF KENNETH H. DITZEL 

Mr. DITZEL. Mr. Chairman, and members of the subcommittee, 

thank you for your invitation to present testimony before the Subcommittee on Energy and Power. My name is Ken Ditzel. I am a 

principal at Charles River Associates, where I have authored three 

reports on LNG exports since February 2013. The client for these 

reports has been Dow Chemical. The views I express today, though, 

are mine, and do not necessarily reflect the views of CRA or others. 

Now, Dr. Montgomery and I have conflicting views on the value 

of LNG exports. I first want to state that Dr. Montgomery and I 

have known each other for almost 10 years, and we worked together for almost seven. He is a great person, and I agree with 

David on many other subjects where he is given Congressional testimony, but this time is different. The reason is that LNG exports 

could present serious opportunity costs. Why? It is because gas-intensive manufacturing creates twice as much GDP, almost five 

times the permanent jobs, and eight times the construction jobs as 

LNG exports on an equivalent consumption basis. Also, manufacturing distributes these benefits across more States, which means 

more people win in more States. Finally, manufacturing has a larger trade balance impact than LNG exports. Assuming equivalent 

consumption, manufacturing would create a $34 billion trade benefit differential. 

Given these higher benefits, we need to ask ourselves two key 

questions. One, is there a price point where the manufacturing renaissance will be at risk? Two, could U.S. LNG exports raise prices 

to this level? To answer the first question, price levels approaching 

almost $8 per million BTU would end the manufacturing renaissance. We saw these price levels in the mid-2000s, and the job destruction that ensued. The answer to the second question is yes. 

LNG exports, if left unconstrained, could raise domestic gas prices 

above $8 per million BTU. Why? It has to do with net back pricing. 

Today the U.S. net back price would be $10 per million BTU, if 

there were exports. 

Turning to the two NERA reports, I have a number of criticisms 

about their assumptions, process, and results. Given DOE’s reliance on the first NERA report, it is surprising that the DOE never 

had the report peer reviewed, as it would have uncovered a number 

of concerns, such as, one, the NERA report forecasted no exports 

in its reference cases, even though 30 BCF per day of applications 

were submitted at the time. Second, a lack of transparencies in results, full output data by scenario were missing on supply and demand by region in international LNG import prices. Third, resource owners win, while the rest of the economy loses. Fourth, assumptions that the LNG market is competitive. We know it is not 

because OPEC influences the oil prices by which LNG is indexed. 

In reviewing the second NERA report, I found more concerns. 

One is NERA’s now forecasting five BCF per day in the long term 

in its reference scenario, even though actual LNG export margins 

have slightly decreased between the timing of the two reports. The 

second is NERA’s results are inconsistent. NERA forecasts all have 

81 

prices to be $3.44 in 2018 in its reference scenario. Backing into 

this price using NERA’s output tables gives lower prices, which 

means LNG exports would be uneconomic, and would not occur in 

their model. 

Three, NERA forecasts almost one BCF per day of exports by 

2018, which is only 45 percent of the Sabine Pass capacity, yet 

Sabine has a take or pay contract that would put the facility near 

100 percent. Also, at 45 percent, one has to wonder if Sabine is a 

losing proposition, which shareholders wouldn’t want to hear. 

Fourth, NERA forecasts international gas prices to drop from $16 

today to $11 by 2018. That is because NERA models the energy 

market as competitive, and we know it is not. The BG group, however, forecasts LNG import prices to remain close to today’s levels 

from the next few years. 

In summary, I believe the value of LNG exports is still very 

much in question. The process employed thus far has been opaque, 

and I encourage the DOE to open up the process, and reconsider 

the reports it relies upon for determining what is in the public interest. 

[The prepared statement of Mr. Ditzel follows:] 

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Mr. WHITFIELD. Thank you very much. At this time, Dr. Montgomery, you are recognized for 5 minutes. 

STATEMENT OF W. DAVID MONTGOMERY 

Mr. MONTGOMERY. Thank you, Mr. Chairman, Ranking Member 

Rush, and Mr. Green, Mr. Griffith, and Mr. Gardner. I appreciate 

the opportunity to be here, and thought I might as well mention 

all of you. I led both NERA’s study of the macroeconomic impacts 

of LNG exports that we did for the Department of Energy, and also 

our recent update. I have provided a copy of this report with my 

testimony. I would like to request that that be entered for the 

record. I am also speaking today for myself, not for NERA, or any 

other consultant there, or any of their clients. These are my opinions. 

We did, as Dr. Gant mentioned, in our new study update our 

data to the most recent complete Energy Information Administration Annual Energy Outlook. What Mr. Ditzel refers to as our forecasts are simply what was in AEO 2011, when we did the DOE 

study, and 2013, in our current study. The reference case was calibrated precisely to the AEO forecast, as close as you can come. So 

we did the update. We also looked at higher levels of exports than 

we did in the previous study. We looked at the full amounts of exports that the market would take in each of the scenarios we developed. And what we found, again, was that LNG exports would provide net economic benefits to the U.S. in all the scenarios we examined, and the less the regulators restricted U.S. exports, the greater the benefits would be. 

Indeed, the largest net benefits were achieved when no limit was 

set on LNG exports by DOE. But that didn’t mean that exports are 

unlimited, because the market would limit them. And, put another 

way, there is a sweet spot, I agree, but the sweet spot is only going 

to be found by letting the market work to discover it. We are not 

going to be able to discover a sweet spot through arguments here, 

or through analysis. The sweet spot is the point at which the value 

in domestic use and the value in exports are balanced off by the 

market. 

We also find that the benefits of LNG exports will be distributed 

broadly, and we looked at this more carefully than we did in the 

previous version. Wage growth will be slightly slower, but it is not 

true that it is only rich land owners in Wyoming and North Dakota 

that will be getting the benefits. Workers benefit from increased 

values of their 401(k)’s and retirement savings. Everyone benefits 

from a source of Government revenue that doesn’t retard growth. 

And there is the basic point of international trade that when we 

increase exports, it directly reduces the cost of the other imported 

consumer goods that people buy. So there is an offsetting effect. 

You know, there is a demand for our exports. Other LNG exports 

go up, buyers need dollars. Buyers go out and acquire those dollars. 

That drives the value of the dollar up. That drives down the price 

of all the other goods that we import. For consumers, that is what 

turns out to be a wash, and it is a very important part of understanding the trade implications. 

Now, you have heard that the chemical industry will create more 

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dustry would create by exporting it. That is a false dichotomy, and 

bad economics in the bargain. The same thing could be said of 

every industry that uses a basic commodity, for example, grocery 

manufacturers, who use the same agricultural products that we export. Does this mean that we need to establish a law that creates 

a public interest requirement through determining whether agricultural exports are in our national interest? No. The market sorts 

that one out perfectly adequately. 

The whole notion that chemicals, or other manufacturing industries, need Government allocations of energy to survive is false. 

There is just no problem for the Government to solve. The competitive advantage of U.S. manufacturing won’t be taken away by exports. I would like to put up one slide here which shows what happened. This is the manufacturing renaissance. This is the effect of 

lower natural gas prices. The blue line shows 2005. The United 

States is the highest cost producer of chemicals at that point. It 

was really on the verge of being knocked out of business. Now we 

are tied with the Middle East as the lowest cost producer. We have 

a 60 cent a pound advantage in ethylene production over our nearest rival. 

So I did a calculation. I asked, what is the maximum impact that 

we see from natural gas exports across all our cases? It is not this 

fantasy that we are going to be linked to oil prices, and suddenly 

jump to 10 or $12 a barrel. It is a $1 increase above what prices 

would otherwise be. That $1 increase in natural gas prices converts 

to 5 cents a pound on the cost of producing ethylene. That is out 

of a 60 cent advantage that we have already. 

It is true, U.S. manufacturing gets a huge advantage over its rivals in countries that have to import natural gas, and we get it because our gas is so much cheaper, and that there is enough for 

manufacturing, and enough for the exports as well. In fact, when 

we looked at exports, we found that almost all of the increased gas 

for exports was coming from additional production. Almost none of 

it was coming from manufacturing. Manufacturing can afford to 

buy the gas because it has such an advantage. It is a false dichotomy to say it is either or. 

Let me show two other slides. This one shows that there are employment impacts, and they are positive impacts. There are direct 

jobs that are going to be created by building LNG facilities. We 

show them here that they will peak before 2018, 2,000 to 40,000 

jobs, depending on how fast we get on with the business of exporting LNG. That actually converts into reduced unemployment. Lot 

of talk about creating jobs, and putting people to work 40 years 

from now is nonsense. CBO, and most other forecasters, assume 

that once we get out of this recession, we will stay approximately 

at full employment. What matters is between now and 2018, because that is when CBO says we will be returning to full employment. Using a standard kind of macroeconomic theory, we looked 

at this and determined that we would get something up to 45,000 

additional workers joined out of the unemployed and put to work 

at the maximum level of LNG exports that we came across. 

Final chart, let me show, this would have an effect on Russia. I 

will leave it to others to talk about why it is our strategic advantage to do this, but what this shows is that if we do two things, 

104 

one is if we remove bureaucratic restrictions on exports, and the 

second is if we actually encourage the shale revolution, rather than 

restricting it through ham-handed regulations or unjustified fears, 

we can knock out five trillion cubic feet of Russian exports. It won’t 

be because we are exporting directly to Russia, to Europe, it is because we will be going where we have transportation cost advantages to go, and others, in particular the Middle East and Africa, 

will be shipping their gas to Europe, and knocking Russia out of 

that market. 

That will face Russia with two choices, and it is the choice every 

monopolist has to face when a competitor appears. They either 

have to cut back their production in order to maintain high prices, 

cede most of their market, or they have to take much lower prices. 

We project that, in the optimistic supply case that EIA has developed in 2013, we could reduce Russia’s natural gas export revenues 

between 40 and 60 percent if we free up LNG exports. I think that 

is a significant hit to the Russian economy, and one that should get 

their attention. Thank you for your indulgence. 

[The prepared statement of Mr. Montgomery follows:] 

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Mr. WHITFIELD. Thank you, and thank all of you for your testimony. We appreciate it very much. We know that, on this subject 

matter of exporting LNG, that there are a lot of different perspectives to review it from. One is the geopolitical arena, and from an 

economic standpoint, it sounds like, Dr. Montgomery, you believe 

that economically it would be a tremendous benefit for us to export 

natural gas. And, Mr. Ditzel, I guess it would be fair to say, from 

your perspective, it would be more of a negative than a positive 

overall. 

So, I want to get back to that in just a minute, but, Dr. Orba ́n, 

you have heard the argument that because of the time that it takes 

to put in infrastructure to export that really there is not going to 

be any immediate benefit to European countries that are relying on 

natural gas from Russia. Would you agree with that assessment, 

or do you disagree with that assessment? 

Ms. ORBA ́ N. Thank you, Chairman. I would disagree with this assessment, and let me highlight two points here. One is, if the decision is made to expedite U.S. energy to its allies, it can have two 

impacts. One, it is a strategic reassurance of the relationship between the European allies and your United States immediately. It 

sends a very important geopolitical signal at that very moment. 

Second, the economic impact. We have numerous cases, and in my 

written testimony, I also cited one case, when a future prospective 

alternative already had a price impact on the dominant supplier’s 

pricing. So we believe that it would have an immediate price impact on the dominant supplier’s pricing in Central Eastern Europe. 

And also let me add, when we are talking about the energy industry, we are talking about decades of investment. An investment 

will reach its maturity in several decades. We are talking here 

about a couple of years, which is, in the energy industry, it is like 

talking about tomorrow, or the day after tomorrow. And let me also 

take this opportunity to highlight that it is very important for us 

that this issue here, what we are discussing today, is a non-partisan issue in the United States. And I would like to highlight and 

recognize Congressman Gardner for introducing this bill, and I 

would like to recognize also Ranking Member Rush for acknowledging the geopolitical aspect of this important issue. 

Mr. WHITFIELD. Let me ask you, when you import natural gas 

from Russia by way of the Ukraine, or Belarus, or however, what 

is the length normally of those contracts? 

Ms. ORBA ́ N. The current length of those contracts is 20 to 25 

years. They are long term contracts. 

Mr. WHITFIELD. Your microphone. 

Ms. ORBA ́ N. Sorry. The length of those contracts is 20, 25 years. 

They are long term contracts, which were usually concluded in the 

’90s. So a lot of countries, we see their contracts are expiring in the 

next couple of years. If we are talking about renegotiating of the 

contract, or the future of the gas market in Central Eastern Europe, for all these countries, knowing that the credible option is 

there to buy 2018, 2019, onward, it gives an absolutely different 

negotiating position. 

Mr. WHITFIELD. So certainly, from your perspective, this is a crucial time, with these contracts to expire? 

Ms. ORBA ́ N. It is the time. 

126 

Mr. WHITFIELD. Yes. And where do you import gas from, other 

than Russia, in Hungary, for example? 

Ms. ORBA ́ N. We are importing from Russia, as well as we have 

access to a hub in Baumgarten, which is in Austria, where we are 

able to import not on a long term basis, but on a spot basis. But 

if we talk about the molecules, all the molecules in the pipeline 

system are Russian, of course, in that part of Europe. 

Mr. WHITFIELD. And most of this natural gas that you are importing, it is used for electricity, or for—— 

Ms. ORBA ́ N. It is used for heating, it is used for manufacturing, 

and it is used for electricity. The case of Hungary is pretty important to note that 3⁄4 of the households use natural gas for heating. 

As a result, it is an extremely important social, as well as political 

issue, the energy security, as well as the price of gas. 

Mr. WHITFIELD. And one time you had indicated that in Croatia 

they were in the process of building an import facility there that 

Hungary would benefit from. Is that the case? 

Ms. ORBA ́ N. There is a plan to build an energy facility in Croatia. 

If it is built, Hungary would benefit from that immediately, as well 

as many other countries in the region. We inaugurated a pipeline 

between Croatia and Hungary in 2010, with six billion cubic meters 

capacity, which is a pretty big capacity, compared to the size of the 

market there. It is three times of the market of Croatia. It is about 

60 percent of the market of Hungary. But for the LNG terminals 

to be built, you need the volume. You need the supply on the other 

end. And the LNG market currently is pretty tight. There is not 

really new LNG coming into the market. To get that investment 

feasible and up and going, you need the credible opportunity and 

alternative of energy entering the market. 

Mr. WHITFIELD. Well, my time has expired. I wanted to discuss 

this difference between Mr. Montgomery and Mr. Ditzel a little bit, 

and also the WTO, but I am going to have to recognize Mr. Rush 

for 5 minutes at this point. 

Mr. RUSH. It is very interesting, Mr. Chairman, I want you to 

know. We are seeing a resurgence in American manufacturing, and 

I want to make sure that we don’t do anything to undermine and 

hinder, or hamper, this resurgence in manufacturing. But I am also 

quite interested in the geopolitical aspects of this, and I don’t know 

whether or not Dr. Orba ́n could speak to this, but I certainly want 

to ask. 

I grew up on the streets in Chicago, and it has been my experience that a success of a bully is that there is a chance to be a bully 

until you stop them from being a bully. And you stand up to a 

bully. You call the bully out. And so, in my own way, I look at 

Putin as being a bully. And if we don’t do something in here, in 

terms of the LNG, or whatever, what can you see, or tell us, or give 

us an idea, where does he go next? Who is he going to bully next? 

Do you have any idea about that? And then I am going to get back 

to the matter at hand, but I just want to take the opportunity, because I think if you don’t stop a bully, he is going to keep on bullying. That is the nature of a bully, until you stand up to him. So 

is that one of your concerns? 

127 

Ms. ORBA ́ N. Thank you, Mr. Rush. If I understood you correctly 

at the beginning of your question, you allowed me now to answer, 

but you said that you will still—— 

Mr. RUSH. OK. 

Ms. ORBA ́ N. —ask it. I am not sure whether anybody is able to 

answer your question. 

Mr. RUSH. All right. Well, let us go back to something maybe 

somebody could answer. Mr. Schryver, the American Public Gas 

Association has been working with Alcor, Newcore, and other major 

U.S. manufacturers on the issue of LNG exports. And you call have 

significant concerns about exporting LNG. The Industrial Energy 

Consumers of America is also very concerned that you all will oppose the bill before the subcommittee. So, based on your conversations with these companies, why do you think that they are so concerned about LNG exports? 

Mr. SCHRYVER. From the perspective of our members, we are 

concerned about the price impacts first and foremost. Our members 

are focused on providing safe and affordable natural gas to their 

customers, so that is one. We are also concerned about the impact 

LNG export is going to have on efforts to increase our energy independence. That is number two. And lastly, you know, there has 

been a number of studies out there, you know, whether there is a 

net benefit or not. And when our members look at their natural gas 

customers, half the people they serve on average, you know, don’t 

own stock, and those that do may not necessarily own stock in a 

natural gas production company, or a company that is going to benefit from LNG production. So, from that standpoint, they really see 

no benefit from LNG export. 

Mr. RUSH. All right. Mr. Ditzel, I understand that Dow had commissioned some of your work on LNG export impacts? 

Mr. DITZEL. Yes. 

Mr. RUSH. Yes. Are Dow and other manufacturers right to be 

worried about the effect of LNG exports on the price of natural gas 

in the U.S.? 

Mr. DITZEL. They absolutely do. I have enumerated in all my 

studies the impact of LNG exports was going to be significant. If 

we leave it unconstrained, we will see prices rising above $8 per 

million BTU. I have raised this concern many times because I have 

some serious questions about the quality of the NERA report. As 

I pointed out in my oral testimony, and also in my written testimony, there are a number of flaws where the numbers just don’t 

add up or make sense. And, for example, I pointed out that NERA comes to $3.44 per 

MCF in 2018 in its reference scenario. The problem is that when 

you look at their output tables and you add it all up, it comes to 

a number that is lower, which means you wouldn’t export. So there 

are a number of concerns with the NERA—— 

Mr. RUSH. My time is running out. What about the jobs? They 

are—large volumes of LNG exports. How many jobs are at stake? 

Mr. DITZEL. Well, when we did our analysis, and looking at the 

job impact, we found that there is a five time impact by manufacturing relative to LNG exports. So that is roughly 180,000 jobs that 

are created from manufacturing at five BCF per day, and a fifth 

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cern if LNG prices rise, or force prices to rise above $8 per million 

BTU, which we think will happen. 

Mr. RUSH. And Dr. Montgomery don’t agree with you. He disagrees. And why do you think he is wrong about his—— 

Mr. DITZEL. Sure. 

Mr. RUSH. —analysis? 

Mr. DITZEL. He ties his reports and his analysis to the EIA reference case. And as I have shown in my slides, and in my testimony, the EIA reference case is consistently wrong, if you look 

back at history, and never hits any of the spot prices. So he ties 

it to a reference case that just, you know, that is likely to be wrong 

going forward. And in that case, we have analyzed the EIA analysis, and showed that the implied import price, in their analysis, 

was around $12 per million BTU in the long term, and that is consistent with what Dr. Montgomery uncovers in his analysis, and 

that is a big drop from today’s prices. So his analysis thinks that 

the LNG exports from the U.S. are going to make a big dent. 

Mr. GARDNER. Gentleman’s time has expired. I am going to try 

to do this better than last time. I think last time I hit the mute 

all button. I guess I am going to try not to do that this time. 

To Dr. Montgomery, I had a question for you. Recognize myself 

5 minutes, I apologize. We heard a lot about price impact, and investments in various industries. If there is an overabundance of 

supply of natural gas in the United States, will that erode capital 

investment in production within the United States of natural gas? 

Mr. MONTGOMERY. Yes. The investment and the, you know, exploration and production moves very directly with the price of natural gas. If we find ourselves, again, with a glut of natural gas, it 

could lead to collapses temporarily, as we actually probably saw a 

couple of years ago. You know, $2 per million BTU price of natural 

gas were, I think, largely driver by overextension of production on 

leases that had to be drilled. But it is all a matter of degree. As 

we see additional demand for natural gas exports coming into the 

market, that will bring forth production. I will let EIA defend its 

own record. I think that Mr. Ditzel seems to forget that every forecaster misses precise numbers. The point is that EIA has done a 

very good job on average of keeping up with what we are thinking 

with kind of current thinking about the future. 

But we followed EIA’s resource characterization and supply 

curves. And what they have concluded, and this is new in the AEO 

2013, and even more so in 2014, is that we can produce a lot more 

natural gas without the price going up very much. That is what 

keeps the price of natural gas down. That is why we can get, in 

most cases, an additional four or five, six, eight TCF of natural gas, 

with less than a $1 increase in the world oil price. It is because 

production responds very aggressively to the new demand, and it 

doesn’t take much of a price increase to get enough natural gas 

produced to satisfy all of that demand. 

Mr. GARDNER. And Dr. Montgomery, Dr. Orba ́n, I think this 

question could be addressed to both of you. In your testimony, 

when you talk about Russia, you say monopolists can be restrained 

as effectively by potential competition as by actual production by 

their rivals. Can you please talk about that in more detail? 

129 

Mr. MONTGOMERY. Yes. We have many examples in the United 

States, and overseas, of companies which may be the, you know, 

largest incumbents in a market, but as long as they can see that 

there are competitors ready and waiting to come into the market, 

with the capacity to, you know, meet their price, or to provide supplies at competitive prices, then that is going to discipline their 

pricing. We call it limit pricing phenomenon. Don’t price any higher 

than what it takes to bring somebody else into the market and take 

it away from you. I think that is exactly what we see with Russia. 

But what is critical to it is that there not be this overhanging 

risk that all of a sudden an administration will decide, no, that is 

enough exports, and cut them off before enough exports can flow 

to take the market away. 

Mr. GARDNER. Dr. Orba ́n, I want to add to that question. Have 

you or your government experienced any issues with Russian energy supplies, and if you could please explain that? 

Ms. ORBA ́ N. As you know, there was a case in 2009, which received us a lot of media attention, where for less than 2 weeks the 

supply was stopped entirely on the Ukrainian pipeline system, 

which caused serious shortages in Central Eastern Europe. It affected the different countries differently. Some countries had very 

severe problems, like Slovakia, or Bosnia-Herzegovina, or Bulgaria. 

Many countries needed to shut down industries, but there were 

also countries that residential heating was affected. After 2009 

State level, as well as the European level, they introduced numerous measures, and we built numerous new infrastructure to prepare for a potential new crisis situation to be able to assist each 

other based on the principle of solidarity, as well as to sustain if 

there is a serious crisis for a longer period. 

Mr. GARDNER. And the ability for the United States to export 

LNG, of course, would help mitigate that as well? 

Ms. ORBA ́ N. Absolutely. As I explained, what we need is build the 

internal capacity. The pipeline system and the internal infrastructure in Europe is lagging behind that of the United States. That 

is our homework. We are doing that. The other which we need is 

the extra volume to create the gas to gas competition in the market, and that is where the United States could be—— 

Mr. GARDNER. Mr. Ditzel, is it a fair assumption to say that the 

manufacturing renaissance in this country is because of the price 

of energy, and the abundance of energy supply in this Nation? 

Mr. DITZEL. Absolutely. 

Mr. GARDNER. Are you concerned that a lack of opportunities to 

export will impact investments within energy, and drive energy 

prices up because of a lack of investment in the energy sector, as 

wells are shut in, and production is decreased because of that 

issue? 

Mr. DITZEL. My concern is that, with unlimited LNG exports, it 

will raise domestic gas prices to a point that it will end the manufacturing renaissance. 

Mr. GARDNER. Dr. Montgomery, what do you say to those who 

say that if there is no limit, that the levels will be unlimited? 

Mr. MONTGOMERY. You have a find a buyer, and the U.S. is not 

going to find buyers for gas at the levels that Mr. Ditzel is assuming. You simply have to look at supply and demand in the global 

130 

market, and there are far too many countries out there who could 

beat us by several dollars a million BTU in delivering gas if our 

wellhead price was $10. We can’t find a scenario in which we sell 

gas at $10 a million BTU because nobody in the world wants it at 

that price. 

Mr. GARDNER. Thank you, and my time has expired. Mr. Green, 

the gentleman from Texas, is recognized for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman, and thank both the Chair 

and the ranking member for having the hearing today on an issue 

that is really important where I come from, an industrial area in 

East Harris County, chemical plants, refineries, that are all benefiting from our regionalized natural gas. Our committee, in 2005, 

actually federalized permitting of importing LNG because we 

thought our chemical industry in ’05, we couldn’t compete with 

North Sea gas, and we were losing chemical jobs, as you mentioned, Mr. Montgomery. But now we are seeing expansions. 

Of course, my concern is a balance between the producers needing to be certain they know their gas will have a market, because 

right now we are flaring a significant amount in South Texas, and 

I know the royalty owners would love to see that stop flaring and 

be able to ship it to someone. But our manufacturers need to know 

they have certainty of the prices not to skyrocket. And I would love 

to help our allies, particularly in Eastern Europe, but even if we 

pass the bill today, even—areas not going to export gas until next 

year. So even if we streamlined every permit that is in the line, it 

is not going to get there very quickly. And that is, again, depending 

on the investment that they can get. 

But the American people need to know that they will continue 

to benefit from our natural resources that we are seeing in the renaissance. By eliminating the regulatory oversight, I am concerned 

that we should mostly harness the agency expertise, and we heard 

that earlier, streamline the decision-making, which I think is being 

done right now, and also define the transparency. And so that is 

why I am glad we are having this hearing today. 

Mr. Schryver, in your testimony you state that the U.S. will give 

up a manufacturing renaissance promised on low prices, investing 

in natural gas. You cite an article in the New York Times that 

South African investment in a gas and liquids plant in Louisiana 

would cost $14 billion. Do you believe that the firm relied solely on 

the NERA study commissioned by the DOE to invest in that plant 

in Louisiana? 

Mr. SCHRYVER. Do I believe the firm that is moving to Louisiana 

is relying solely on NERA? No. Actually, there are a number of factors. I don’t want to speak for them, but I assume there are a number of factors, one of which is the low cost of natural gas we are 

enjoying right now. 

Mr. GREEN. Well, the CEO of that South African company stated 

that the plant becomes economical when U.S. natural gas prices exceed $8 per million BTU. Do you believe that the companies that 

will invest $14 billion to build a new facility without forecasting potential natural gas increases, that it would be much less than $8? 

Mr. SCHRYVER. From APGA’s perspective, we are not sure ultimately how much natural gas is going to be exported, and every 

131 

study we have seen has shown that the more natural gas that is 

exported, the greater the price impact will be. 

Mr. GREEN. Well, even in Texas we have five crackers that cost 

a billion dollars each, and these companies relied on NERA study, 

and they will invest that billion dollars without forecasting. Do you 

believe they would invest that billion dollars per cracker without 

forecasting potential price increases? 

Mr. SCHRYVER. I am sure they forecasted potential price increases. 

Mr. GREEN. Mr. Ditzel, how is natural gas priced in different 

parts of the world? Again, we are used to our U.S. pricing system, 

but it is priced in different ways. For example, Henry Hub, National Balancing Point, Japanese Clearing, S–Curve Oil Index, 

when signing contracts, how many years constitute a long term 

LNG contract? Could you tell us if there is a predominant natural 

gas pricing in the world, or is it really based on geography? 

Mr. DITZEL. It is absolutely based on geography in the U.S. We 

have a very liquid market, with several trading hubs, primarily the 

Henry Hub. Europe is becoming much more liquid, with the National Balancing Point and the TTF facility. But in Asia, we see 

that a lot of the pricing is around oil because—— 

Mr. GREEN. Yes. 

Mr. DITZEL [continuing]. In Japan and Korea, they do not have 

domestic production capabilities, so they have to look at the closest 

substitute to natural gas, and that is oil. And that is why you see 

the gas indexed to oil, because of the substitution effect. 

Mr. GREEN. OK. And these contracts that have been signed already for these plants that are exporting, whether it would be 

Cheniere and Sabine, or, you know, Chesapeake Bay, or the one 

just announced in Oregon, or other ones along the Texas/Louisiana 

coast, aren’t the average LNG contracts 16 to 20 years? 

Mr. DITZEL. Many of the contracts are 20 years, and many of 

them are take or pay contracts, which means that you are going 

to take until you think it is no longer economic, and want to pay 

the towing charge, instead of taking the gas. So they are going to 

continue to take as long as prices are economic to them. 

Mr. GREEN. Well, I am real familiar in Texas with take or pay, 

because we had some issues back in the ’70s and ’80s where utility 

companies had to make those commitments. And, by the way, most 

of these contracts, where is their jurisdiction if there is a legal decision? Do they have Federal courts in the United States, New York 

Federal Court, or is it an international court? 

Mr. DITZEL. I am sorry, I am not an expert in that area, so I 

can’t answer. 

Mr. GREEN. OK. Because I know oftentimes if it is an international contract, and it is not in a U.S. court, again, having practiced law, sometimes you can get home-towned in a country that 

might not be as beneficial for our exporting partners. Does your 

analysis include any shifting in contracting from Asia, for example? 

Mr. GARDNER. Gentleman from Texas, I have given you an extra 

45 seconds here. 

Mr. GREEN. OK. Thank you. 

Mr. GARDNER. Time is expiring. 

132 

Mr. GREEN. Just some movement of contracting once we get into 

the export market in the United States? 

Mr. DITZEL. In the analyses that I have looked at thus far, I have 

assumed, based on unconstrained exports from the U.S., that we 

would remain at about 80 percent of the Brent price, which is 

where prices have trended over the last few years, and there is a 

number of drivers to support that trend going forward, mainly because Japan is likely going to take a slow re-start to its nuclear facilities, Germany is abandoning its nuclear facilities, and as the BG 

Group forecasts, a major player in the LNG market, that the market in general will be tight through the end of the decade. 

Mr. GREEN. Thank you, Mr. Chairman, for your patience. 

Mr. GARDNER. Gentleman’s time has expired. The gentleman 

from Virginia, Mr. Griffith, recognized for 5 minutes. 

Mr. GRIFFITH. Thank you, Mr. Chairman. Let me start off by responding to some of the comments I heard earlier today about, you 

know, we can’t do any good immediately because it will take a 

while to build. And I am reminded that they believe that there is 

a lot of natural gas, maybe some oil, off the coast of Virginia, and 

that in 2004, when I was a member of the Virginia House of Delegates, we begged, let us start on the research, let us get going, and 

the criticism then was it would take 6 to 7 years, it is not going 

to do any good. We are still waiting. If we had started in 2004, like 

we had requested, and we sent the request to the Governor to ask 

for the ability for him to ask for the President to give us that authority, we would already be getting natural gas, and hopefully 

some oil off the Virginia coast. So when I heard that argument I 

am reminded, you know, well, it will never happen if you don’t 

start at some point. 

Also, in response to recent questioning, although I think you answered it earlier, Dr. Orba ́n, you said that the time is now because 

not only do you need to get started if you are going to do these 

kinds of things, but the contracts are coming up in a few years, and 

if they see that a competitor is on the way, that that will affect the 

negotiations, and the discussions, and whether or not natural gas 

is used by a weapon by the Russians. Am I correct in my assessment of your previous testimony? OK. And let me let you all know 

that I represent an area that produces coal and natural gas. 

So, Mr. Ditzel, let me ask you this. For a vibrant manufacturing 

sector, wouldn’t we also be well advised to not strangle our coal industry by regulations? Wouldn’t you agree with that as well? I assume you are pro-coal, as well as pro-natural gas usage? 

Mr. DITZEL. I am not pro-coal or pro-gas. I just want to say specifically, to address your point, that for the coal industry, it is going 

to be hamstrung by the EPA, by MATS. We are going to see a 

number of retirements, and the EPA has a number of proposals 

ready to affect the coal industry even further on carbon pollution. 

And coal is a backstop for natural gas, so if there are not a lot of 

options, the gas prices will rise as a result, because there is no 

backstop to relieve the gas. And specifically in the electricity market, it is nuclear and wind, and those are expensive options. 

Mr. GRIFFITH. Well, even in manufacturing of certain products, 

certain plastics and so forth, you could use oil, natural gas, or coal, 

and so we are negatively impacting the market that way. And 

133 

would you also advocate that we not export coal for that same reason, so we have a greater supply in the United States? 

Mr. DITZEL. Well, to address your point about coal, and the use 

of coal for chemical processes, we have seen that in China, and 

China has put our technology in the U.S. to good use. And their 

chemical industry is built primarily on U.S. technology using coal, 

but we can’t do that here in the U.S. because of a lot of the regulations associated with using coal in industry. 

Mr. GRIFFITH. And I appreciate that, and we certainly don’t want 

to hurt our manufacturing sector if we can help it, but clearly it 

is under assault from a number of different directions. 

Dr. Montgomery, if I could ask you, previously, in some of your 

testimony back in April of 2013, you indicated that it looked like 

prices, if we exported, might rise 25, 50 cents, somewhere in that 

range. I think you said today it looks like it might be a dollar. Is 

that accurate, somewhere in that range, if we export? 

Mr. MONTGOMERY. Yes. If we export, across most of the scenarios 

that we looked at, we either had no price increase, because it didn’t 

turn out to be economic to export. Certainly if we had $8 gas in 

the United States, nobody would want to buy it overseas. That actually is the EIA low oil and gas resource case. So doesn’t much 

matter what we do about exports in that case, nobody is going to 

want to buy it, and the manufacturing industry is going to be killed 

off, probably by our excessive regulation of natural gas. So, got to 

look at the scenario, but the only cases in which we found that we 

have high levels of exports of natural gas are ones where it is so 

cheap to produce that the price of gas stays lower than—— 

Mr. GRIFFITH. All right, and I am running out of time, so let me 

ask you this, because my gas folks tell me back home that we have 

so much natural gas in this country that we haven’t even tapped 

into yet, that if the price remains above $4, in the $5 range, that 

there will be more production, which then offsets any price increase. Is that what you are basically saying, is that the production 

capabilities in this country are so great that there won’t be an increase of any significant amount in the price because they will 

produce more, because they can still make a profit at four—— 

Mr. MONTGOMERY. Yes. 

Mr. GRIFFITH [continuing]. $5, $6? 

Mr. MONTGOMERY. That is exactly what I am saying, that we will 

see that most of the exports are satisfied by increased production. 

There won’t be much of a price increase, and whatever price increase there is is going to be far less than the cost advantage manufacturing already has over those poor rivals who have to import 

the gas, and pay as much to move it to their countries, as it costs 

us to buy it here. 

Mr. GRIFFITH. I appreciate that. And, Mr. Chairman, I yield 

back. I do have additional questions to submit into the record, and 

I assume that we will do that at the end of the hearing. 

Mr. GARDNER. Absolutely will, thank you. And the gentleman 

from New York is recognized for 5 minutes. 

Mr. TONKO. Thank you, Mr. Chair. Mr. Ditzel, in your summary 

you state that the concerns you have raised about finding the right 

level of natural gas exports were submitted to DOE, but the DOE 

public interest determination process, and I quote, ‘‘continues in a 

134 

manner that is opaque for both sides of the issue.’’ Please elaborate 

on that statement. What would make the public interest determination more transparent? 

Mr. DITZEL. Sure. I think you saw the answer by Dr. Gant earlier that it was opaque, that you couldn’t get a straight answer, 

and it is one of the complaints on both sides. There is a lot of uncertainty around the process, and businesses would like to make 

decisions. What would make it more transparent would be to look 

at the NERA study and first do a peer review. I have peer reviewed 

it, I have given my comments, and mentioned many of my concerns. I think a serious peer review needs to be given again. Also, 

in determining the public interest, it is not just simply the economic interest. It is also the environmental interest, and it is also 

national security interest, and there are no criteria that are set 

forth that you can gauge or measure, and publicly see and understand, in any of part of the DOE process. 

Mr. TONKO. Thank you. And your testimony states that you believe the NERA analysis used flawed assumptions, and the wrong 

modeling approach. It is my understanding that NERA relied on 

information and procedures used by the Energy Information Agency, or the EIA. The EIA’s projections, especially projections of 

prices of natural gas, have often been wrong. In March 2012 EIA 

released a retrospective study they did of their projections from ’94 

through 2011, a period of 17 years. An energy policy form article 

summarized some of those findings of that analysis. The findings 

do not give me confidence that DOE’s conclusion about the net economic benefits, let alone the broader public interest, is very robust. 

During that 17-year period, EIA overestimated crude oil production 62 percent of the time. They overestimated natural gas production 70.8 percent of the time, and natural gas consumption 69.6 

percent of the time. I would also point out that in 2003, just 11 

years ago, EIA’s analysis of the LNG market was anticipating we 

would be importing natural gas, and there were plans for a number 

of LNG import facilities. If DOE allows too much export, we may 

be creating a situation like the one we now face with propane, 

where, in spite of the abundant domestic production, our consumers and our domestic manufacturers are paying very high 

prices, and seeing no benefit from the increased domestic production. 

DOE is granting export allowances for 20 years. That is a long 

time in a business cycle. Do we need a more flexible approach that 

would allow us to pull back if we have granted too much export authority, or if conditions here in our country change? 

Mr. DITZEL. Well, first I want to address the EIA comments that 

you made in the reference case, and how consistently wrong it has 

been. Dr. Montgomery made a good point earlier that there are scenarios around the reference case. The problem is that you have to 

pick a reference case, and not just blindly choose it. You have to 

step back and say, is it the right reference case? The biggest issue 

with the EIA analysis is that they rely on a domestic supply and 

demand curve. So if you take the supply curve from EIA, and you 

layer on LNG exports, I agree you would get the prices that EIA 

projects. 

135 

But the problem is we leave the domestic demand and supply 

curve when we enter into the global market. We enter the global 

LNG supply and demand curve, and that is where you get netback 

pricing. EIA does not have a global gas trade model. They have admitted it. I have heard them say that, so their approach is invalid 

when you are looking at LNG exports. And on the second question, 

do you mind repeating it, Representative? 

Mr. TONKO. Well, the second thing is if we have granted too 

much export authority, or if conditions in the U.S. change, should 

we have a more flexible approach? 

Mr. DITZEL. Well, I think it would be challenging to pull back on 

multibillion dollar investments, and leave things stranded. But if, 

in a transparent process, if LNG exports are determined to be beneficial to the economy, and not opportunity costs to other parts of 

the economy, I think you have to put in a certain amount of consumer protections, and those would be using the gas as leverage to 

negotiate free trade agreements, also considering reducing taxes for 

those who would be affected most. Also investing in technologies, 

for example, advanced catalytic technologies, that would reduce our 

need for natural gas, and improve our efficiency. And, fourth, I 

think we need to reconsider some of the efforts by EPA, because 

we do not have the backstop in place for coal to come through and 

substitute for natural gas. 

Mr. TONKO. Thank you very much. Mr. Chair, I have exhausted 

my time, so—— 

Mr. GARDNER. Gentleman yields back. The gentleman from West 

Virginia, Mr. McKinley, is recognized for 5 minutes. 

Mr. MCKINLEY. Thank you, Mr. Chairman. I have been curious 

a little bit about the issue of if, when we export natural gas, we 

are going to see an increased price. And I am not an economist, I 

am an engineer, but I would probably like to see a little bit more 

statistics about that, why that would occur, because, as you know, 

we have been exporting 15 percent of the coal production, and we 

haven’t seen coal prices increase as a result of that. So I am interested in the disconnect, why coal prices aren’t going up, but gas 

prices will under the scenario. 

But more importantly, the other question I have is that, under 

Article I, Section 9, Paragraph 5 of the Constitution, there is the 

prohibition about putting duties and tariffs on exports. And that 

has been clarified, if I might, in 1996, in the IBM Decision, in 

which it went on to say something to the effect that that same protection extends to services and activities closely related to the export process, so my question has to do with the permitting process. 

If it takes 3 years to get a permit for natural gas, I know coal 

has been longer than 3 years trying to get the permit approved 

over in the State of Washington, in Bellingham, to put a coal terminal there, trying to prevent exporting by use of Government authority. What is the difference between imposing a tariff, but yet 

imposing a slow walk permitting process to prevent something from 

happening in an expeditious way? How can that be justified? How 

is that constitutional, I should say, what they are doing? 

Mr. MONTGOMERY. I would like to get Mr. Bacchus to answer 

this, but he is a lawyer, and I notice that he is being reticent. And 

136 

I am an amateur reader of law journals, but I think I am pretty—— 

Mr. BACCHUS. I am just waiting to be asked a question. 

Mr. MONTGOMERY. I am sorry. Then I will recede. 

Mr. BACCHUS. Congressman, you raise a very good point. As we 

have all learned in this country in the past few years, sometimes 

it is hard to tell a tax from a fee, or a tax from something else that 

may have the effect of a tax. And it may be that, under the U.S. 

Constitution, there might be some issues raised by the lengthy 

delays in this permitting process. 

As I advised the chairman at the outset, I am here today not to 

advise on policy, but on law, and specifically international law. And 

from a legal perspective, I am fascinated by this debate, because, 

as a matter of international law, we have long since made this decision that we are talking about today, when we signed the WTO 

treaty. We concluded then that it was presumably in our public interest, in agreeing to this treaty, that we would impose restrictions 

on exports only in some very limited exceptional circumstances permitted by that treaty. And I have heard no circumstances discussed 

today that fit those exceptions in that treaty. 

As a matter of international law, right now, with no action whatsoever by this Congress, we have a legal obligation to export natural gas unrestricted to her country, and other countries in Central 

and Eastern Europe that are members of the WTO, period. The 

only reason that we are not doing so at this point is because they 

are friends of ours, and they haven’t bothered to sue us in the 

WTO. But somebody could do so. At the same time, as I mentioned, 

our valiant trade negotiators and trade lawyers in the administration are, at this very moment, arguing in the WTO in not one, but 

two cases against China that they cannot do what these laws we 

are discussing, that we have in place today do. And they are winning those cases, as they rightly should. 

Meantime, more than 1⁄3 of WTO members, under the threats of 

the current financial situation, are imposing more and more export 

restrictions. This is a form of economic nationalism and protectionism that is illegal as a matter of international law, and the 

United States, on a bipartisan basis, has been leading the charge 

against this in the WTO, and should. 

Mr. MCKINLEY. Thank you. Maybe you can stop. I would like to 

carry on this conversation regarding the constitutionality of that. 

The third question I have is, do you think that this Supreme Court 

Decision yesterday about the Spruce Mine, allowing the EPA to 

retroactively withdraw a permit that they have given, could that 

have an impact on our LNG exports? If someone can build the facility, which could be a billion dollars or more, and the EPA withdraw 

that permit 2 or 3 years later, is that an appropriate gesture, or 

what has happened in the law that allowed that to happen? 

Mr. BACCHUS. I haven’t read the opinion, Congressman, so I 

couldn’t advise you on that at this time. I will be happy to—— 

Mr. MCKINLEY. But you are aware of the Spruce Mine, 4 years 

after it had been granted, 4 years afterwards, did the EPA pull the 

permit that they had been granted by the Corps of Engineers? That 

is a chilling effect for anyone in any business, not just coal, steel. 

Anyone that has a water permit, they have that permit pulled, I 

137 

am concerned about what it is going to have on LNG. Thank you. 

Yield back my time. 

Mr. GARDNER. Gentleman yields back, and we will go a couple 

more questions. Both Mr. Rush and I have just a few follow-up 

questions for you. Mr. McKinley, you are welcome to stay, if you 

would like, for that. But the question I have is, following up on this 

last question and conversation, how often has the U.S. pursued 

cases before the WTO regarding trade disputes with other countries? How often have we pursued trade disputes before the WTO 

with other countries? 

Mr. BACCHUS. Very often. It is the appropriate way for resolving 

inevitable trade disputes with our trading partners. 

Mr. GARDNER. Even if Russia is a WTO, nothing in this legislation requires trade with Russia? 

Mr. BACCHUS. We have the option, if you so desire, in your proposed legislation, to carve out an exception for Russia. Russia a 

member of the WTO, but one of the limited exceptions I mentioned 

to WTO rules is for national security. If national security interests, 

essential national security interests, are at stake in a time of emergency in international relations, we can impose a trade restriction. 

So you could—— 

Mr. GARDNER. Mr. Bacchus, if you could cut it short real quick? 

Mr. Rush has one final question for Dr. Orba ́n real quickly. Thank 

you. 

Mr. BACCHUS. Of course, sir. 

Mr. RUSH. Thank you. I panicked, because I saw you gathering 

your stuff, but I have one question. So far, DOE has ran seven export applications, and my understanding is that the export terminals—export this LNG have already signed long term contracts to 

supply LNG to China, Japan, Korea, and India, where natural gas 

prices are higher than in Europe. And the question is, is there any 

reason to believe that LNG exported from the U.S. will go to Europe, rather than to Asia? 

Ms. ORBA ́ N. Thank you, Ranking Member Rush. Yes, there is. Of 

course, the more gas on the market is the better for us. It has already indirect impact. But the Asian market’s absorption capacity 

is also limited, obviously, and as soon as it reaches its limit in 

terms of price difference, the European market comes next. And 

don’t forget that our countries are ready to pay a surplus for energy security, which is above, of course, market price. So we have 

every reason to believe that if either the expediting process is expedited, the process is expedited, or we have the law, then we would 

have a contract to supply the European market with U.S. energy. 

Mr. GARDNER. Thank you, Dr. Orba ́n. I know you have an important meeting, as reported in the newspapers this morning, to attend, so please. Mr. Bacchus, if you would like to finish where we 

left off? I apologize for interrupting, but I know Dr. Orba ́n had a 

meeting. Thank you. 

Mr. BACCHUS. Of course. Good job. 

Mr. GARDNER. I cut you off. I don’t know if you would like to continue that, and then we will be—— 

Mr. BACCHUS. That is all right, and I appreciate it, Mr. Chairman. As I said earlier, I think it is important that the committee 

consider WTO obligations before enacting legislation, rather than 

138 

learn about them afterwards. And I commend you for doing just 

that. Conceivably, the United States, and other members of the 

WTO, could impose trade restrictions, and indeed a trade embargo, 

on Russia, even though Russia is a member of the WTO. This need 

not be limited to natural gas or other energy products. It could include other products. 

This would be ordinarily in violation of WTO obligations. It could 

be challenged by Russia and WTO dispute settlement. But if the 

Russians did challenge it, we would then have a defense. The defense would be under Article 21 of the GAT, which deals with national security, and is a general exception to general obligations, 

such as the one on not imposing restrictions on exports. This general defense has never been the subject of much jurist prudence in 

the WTO. One of my great accomplishments as a Judge there was 

that I was able to get out of Geneva alive without having to say 

what it meant. 

But, presumably, we would have this defense. It clearly is in the 

GAT, and I can’t imagine that a Judge using the WTO would question any country’s assertion of its national security interest, nor 

can I imagine that they would not see a national security concern 

here, especially if we did not proceed alone, but proceeded along 

with a number of our trading partners. 

Mr. GARDNER. Thank you, Mr. Bacchus. And to the panelists, 

thank you very much for your time here today. That concludes today’s hearing. Members are reminded that they will have 10 business days to submit questions for the record and other material. 

Anything else? 

Mr. RUSH. Mr. Chairman? 

Mr. GARDNER. Yes? 

Mr. RUSH. Mr. Chairman, I ask unanimous consent to place in 

the record a letter from the Industrial Energy Consumers of America, strongly opposing H.R. 6. 

Mr. GARDNER. Without objection. 

Mr. RUSH. Thank you, Mr. Chairman. 

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Mr. GARDNER. That concludes today’s hearing. Thank you for 

your participation. 

[Whereupon, at 4:34 p.m., the subcommittee was adjourned.] 

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