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90–894 PDF 2014

S. HRG. 113–432 

LNG TRANSPORTATION 

HEARING 

BEFORE THE

COMMITTEE ON 

ENERGY AND NATURAL RESOURCES 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

TO

HARNESS A GAME-CHANGING RESOURCE FOR EXPORT,DOMESTIC 

CONSUMPTION, AND TRANSPORTATION FUEL 

JUNE 19, 2014 

( 

Printed for the use of the 

Committee on Energy and Natural Resources 
(II) 

COMMITTEE ON ENERGY AND NATURAL RESOURCES 

MARY L. LANDRIEU, Louisiana, Chair 

RON WYDEN, Oregon 

TIM JOHNSON, South Dakota 

MARIA CANTWELL, Washington 

BERNARD SANDERS, Vermont 

DEBBIE STABENOW, Michigan 

MARK UDALL, Colorado 

AL FRANKEN, Minnesota 

JOE MANCHIN, III, West Virginia 

BRIAN SCHATZ, Hawaii 

MARTIN HEINRICH, New Mexico 

TAMMY BALDWIN, Wisconsin 

LISA MURKOWSKI, Alaska 

JOHN BARRASSO, Wyoming 

JAMES E. RISCH, Idaho 

MIKE LEE, Utah 

DEAN HELLER, Nevada 

JEFF FLAKE, Arizona 

TIM SCOTT, South Carolina 

LAMAR ALEXANDER, Tennessee 

ROB PORTMAN, Ohio 

JOHN HOEVEN, North Dakota 

ELIZABETH LEOTY CRADDOCK, Staff Director 

SAM E. FOWLER, Chief Counsel 

KAREN K. BILLUPS, Republican Staff Director 

PATRICK J. MCCORMICK III, Republican Chief Counsel 
(III) 

C O N T E N T S 

STATEMENTS 

Page 

Durbin, Martin J., President and CEO, America’s Natural Gas Alliance .......... 27 

Landrieu, Hon. Mary L., U.S. Senator From Louisiana ....................................... 1 

McNally, Robert, President and Founder, The Rapidan Group, LLC ................. 12 

Murkowski, Hon. Lisa, U.S. Senator From Alaska ............................................... 3 

Rosenberg, Elizabeth, Senior Fellow and Director of the Energy, Environment 

and Security Program, Center for a New American Security .......................... 32 

Smith, Christopher, Principal Deputy Assistant Secretary, Office of Fossil 

Energy, Department of Energy ........................................................................... 6 

Udall, Hon. Mark, U.S. Senator From Colorado ................................................... 4 

Weiss, Daniel J., Senior Fellow and Director of Climate Strategy, Center 

for American Progress ......................................................................................... 16 

APPENDIXES 

APPENDIX I 

Responses to additional questions .......................................................................... 65 

APPENDIX II 

Additional material submitted for the record ........................................................ 69 

(1) 

LNG TRANSPORTATION 

THURSDAY, JUNE 19, 2014 

U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC. 

The committee met, pursuant to notice, at 2:33 p.m. in room SD– 

366, Dirksen Senate Office Building, Hon. Mary L. Landrieu, chair, 

presiding. 

OPENING STATEMENT OF HON. MARY L. LANDRIEU, U.S. 

SENATOR FROM LOUISIANA 

The CHAIR. Good afternoon, everyone. Thank the members for 

their attendance. 

We’re expecting the ranking member shortly. She’s on the Floor. 

So we’re going to go ahead and get started. 

Thank you all for joining us today for our hearing on natural gas, 

‘‘How to Harness a Game-changing Resource for Export, Domestic 

Consumption, and Transportation Fuel.’’ I might add for American 

energy security. 

We have an expert witness of—panel of witnesses today. I’ll introduce them in just a moment. 

I’m going to start with a brief opening statement and then recognize my ranking member, if she’s here, when she arrives. Then ask 

Senator Udall for a brief opening statement. Then we’ll go to our 

panel. 

Senator Manchin also has a time constraint. So he may want to 

be recognized. I thank you all very much. I thank Senator Udall 

for having a bill that’s pending before our committee. 

We will be discussing it and others today, gathering information. 

Then at some time when the debate is thorough we will look forward to having a mark up on that bill. I thank him for his leadership. 

Let me begin by saying what do I mean by game-changing resource? According to the Energy Information Agency new technology has secured an abundant supply of natural gas for almost 

the next 100 years. According to the Center for Climate and Energy Solutions, increased use of natural gas has lowered our CO2

emissions to their lowest level in 20 years. 

It’s interesting that 144 years ago on a windy night in Shreveport, Louisiana a night watchman was monitoring a water drilling 

operation when he struck a match expecting the wind to quickly 

blow it out. But instead, much to his surprise, it kept burning. It 

was fueled by an unexpected source, natural gas. 
2 

This match literally ignited an energy and economic pilot light 

that has been burning ever since in Northwest Louisiana and 

throughout other parts of Louisiana, the South and throughout the 

United States providing a cleaner, cheaper and more abundant 

source of energy for our country. Neither that night watchman or 

William Hart, who drilled the first natural gas well, 45 miles south 

of Buffalo in New York in 1821, could have envisioned how this resource would expand our Nation’s opportunities for job creation and 

energy security in the 21st century. 

Just a short 10 years ago it literally appeared that our Nation 

would continue a 30 year period of stagnant production of natural 

gas. Production was not increasing at the rate necessary to meet 

the rising demand for energy. As usual, though, private industry 

stepped in with huge investments to construct natural gas import 

terminals. 

But to the amazement of almost everyone in the industry and the 

government alike, extraordinarily swift advances in technology 

would develop to locate, capture andproduce natural gas. So that 

we now have the opportunity to turn what were proposed import 

terminals into export terminals, while also ensuring that hundreds, 

if not thousands, of domestic manufacturers continue to have an 

abundant source of energy that allows them to compete favorably 

abroad. 

I believe we can harness this resource to create tens of thousands 

of high paying jobs, position America as an energy superpower, 

support our allies abroad whether in Europe, the Mideast, Asia or 

in Africa. Prices have fallen to some of their lowest levels since the 

1980s when demand for natural gas first began to rise. Instead of 

peaking at$15 per thousand cubic feet as some predicted and as 

Japan is currently experiencing, natural gas prices at the U.S. are 

at $4.50/thousand cubic feet, some of the lowest prices in the entire 

world. 

Do we want to give up this advantage? Absolutely not. 

Do we have the capacity to power our exports while keeping 

prices relatively low? The evidence suggests we can. 

A 2012 report commissioned by the Department of Energy and 

conducted by National Economic Research Association, a private 

sector firm, found that we could responsibly export 12 BCF a day 

of natural gas to the world market and maintain adequate supplies 

to fuel our growth at home. This study was also updated this year 

and has found, as with this process is so dynamic, that that number is growing. 

Right now DOE is doing yet another update for us to use as a 

guide. Some estimates say that we could responsibly export up to 

20 BCF a day. That number may go up. It may go down. The hearing today is to find out what our capacity is. 

Today DOE has issued a final approval for one export facility. 

That is Cheniere which is located 15 miles south of Vinton, Louisiana to export 2.2 BCF a day of the 12 that has been authorized 

or suggested. 

Earlier today the Federal Energy Regulatory Commission issued 

a final citing for Sempra, the Cameron LNG facility in Hackberry, 

Louisiana on the banks of Black Lake. Once it receives its final 
3 

DOE approval which we expect will be very soon, Sempra will export 1.7 billion BCF a day. That is 4.0 BCF total. 

Just a few weeks ago DOE took the right step to simplify the approval process to separate the wheat from the chaff. In other words 

helping us to find out what projects are really likely to go, what 

are unlikely to go. What is the real queue and what is the conjecture queue? 

I look forward to hearing additional testimony from Mr. Smith 

to help us clarify that. It’s one of the questions that I’ll be pressing 

on today because there seems to be figures being thrown all over 

this capital. I think it’s important for our committee to know what 

the real facts are. 

Today’s hearing will also examine other ways we can support the 

most viable projects including several bills that Senator Udall has 

and that I am supporting. Senator Udall’s bill will shorten the 

DOE review process to 45 days. We’ll talk about the advantages of 

that. 

I would like now to turn to my colleague for her opening statement if she wants a minute. If you’re ready? 

OK, I’ll turn to Senator Murkowski for her opening statement. I 

thank you very much for planning this hearing with me. We look 

forward to hearing from our witnesses. 

Thank you for your leadership, Senator. 

STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 

FROM ALASKA 

Senator MURKOWSKI. Thank you, Madame Chair. 

Appreciate the attention to, I think what we would all agree, is 

a very important issue. As we perform our function here on the 

committee and that is one of oversight. We don’t do near enough 

of it in this Senate, I think, when we think about the oversight 

issues. So the opportunity to focus on it today is appreciated. 

This hearing is being held in the midst of geopolitical turbulence. 

Ukraine is in turmoil. Iraq is on the brink. Energy is never far 

from any of these discussions. 

Our rising production gives us the opportunity to satisfy our own 

needs here at home and to help our friends and allies around the 

world to play a constructive role in global energy markets as a 

leader and not merely an importer. 

But unplanned disruptions are real. 

According to the EIA last May saw 1.4 million barrels per day 

offline in Libya. 

Two-hundred and eighty-six thousand barrels per day offline in 

Nigeria. 

Some 370,000 in Iraq. 

One hundred and thirty thousand in Yemin. 

One hundred and twenty thousand in South Sudan. 

Two hundred and ninety thousand in Syria. 

This all adds up to a frightening number mitigated by one factor 

alone and that’s rising U.S. oil production brought to you by technology, sound state policies and true American grit. 

These same forces have also delivered a renaissance in natural 

gas where global markets may not be as developed, but are developing rapidly. Last December I wrote the President. I asked him 
4 

to consider the geopolitical impacts of U.S. oil and gas production 

as his Administration prepared the forthcoming national security 

strategy. I still believe that. I believe that events that have transpired since then have highlighted the importance of the national 

security aspects of production and exports in both oil and natural 

gas. 

Yet here we are once again approaching LNG exports like there’s 

some hypothetical enterprise as if we still need more time to weigh 

our options. I have weighed the options. I have looked at the evidence. I’ve attended multiple hearings about this issue. 

I think it’s time that we move beyond the speculation. Get to the 

business of nuts and bolts governance of implementation of actually 

getting things done rather than endlessly wringing our hands and 

falling prey to special interests and idiology. 

I have long advocated for expediting the process for Federal approvals of LNG exports. I did so in a white paper that we published 

last August. I reiterated that call this past January at the Brookings Institute. 

I have reached out to the Administration hoping to find ways, 

that we here in the Senate, can help grant but I think these no 

brainer approvals on a timely basis. So if I’ve got one goal at this 

hearing it is this. That is to establish that there are reasons for optimism about this new procedural change at the DOE. But that 

there are also reasons for skepticism. 

It does have my cautious support. But I think time will tell on 

this. As the proposal is implemented I want to be watching carefully. 

I believe it’s also time for us to consider legislation that would 

bring certainty to the pace of final approvals. While this proposal 

would clean up the conditional licensing queue. The mechanics of 

final licensing remain murky, especially in regards to timings. 

So Madame Chairman, know that I am committed to working 

very, very, very hard to see final approvals this year. Know that 

working with you we can encourage in the right direction. 

So I’m pleased to have the witnesses before us and look forward 

to their comments here this afternoon. 

The CHAIR. Thank you very much. 

Because it’s Senator Udall’s bill that’s going to be talked about 

generally, would it be appropriate to ask the Senator to make just 

brief remarks now and then we’ll hear from our panel and go to 

questions. 

Is that OK with the other members? 

Senator. 

STATEMENT OF HON. MARK UDALL, U.S. SENATOR 

FROM COLORADO 

Senator UDALL. Thank you, Madame Chair. 

I too want to acknowledge the witnesses. 

Thank you for having a hearing on such an important topic 

which is natural gas development across the U.S. As we’ve heard 

and as the chair and the ranking member and I think the committee in its entirety know, our Nation’s clean burning and job creating natural gas willplay an important role in strengthening energy security both at home and abroad. The ongoing crisis in 
5 

Ukraine and Russia’s recent announcement just this week to cutoff 

natural gas supplies shows why we need to responsibly develop our 

natural gas reserves and expand our capacity to develop and deliver this domestic resource to the market both American and the 

global market. 

Of course, this would also bring economic benefits at home. In 

fact just today we learned that Colorado’s Weld County, which is 

the Northeastern plains of my State, had the largest percentage increase in employment in the U.S. in 2013 due in part to oil and 

gas development. This shows how oil and gas has been and will 

continue to be a critical part of our economy, which is why I support safe and responsible development of these resources. 

So in that vein I was pleased with the Department of Energy’s 

recently announced proposal to streamline its natural gas export 

review process, effectively trimming 2 regulatory steps into one 

smooth process. I’ve been proud to lead the bipartisan effort to 

push this Administration to cut red tape and speed up the process. 

That said, I do think Congress has a role here as well. That’s 

why I’m going to continue to work on legislation to provide more 

certainty to the Department of Energy process. I’m pleased to be 

working with the chair on this effort. I also heard the ranking 

member call for more certainty as well. 

So in that vein we introduced legislation yesterday that will put 

a timeline on DOE to make its final decision on public interest for 

LNG export applications. Something that Mr. McNally suggested in 

his testimony. 

This bill also creates a path for judicial review if DOE doesn’t 

make a timely decision and requires public disclosure of where the 

natural gas is exported so that all Americans will know where our 

gas is going. I have to tell you I think this is a solution that works 

for all stakeholders by ensuring a timely decision for projects while 

still allowing for the technical analysis needed to make a good decision. 

I look forward to continuing to work with Energy Secretary 

Moniz as well as Deputy Principal Assistant Secretary Chris 

Smith, from whom we will hear today to take full advantage of responsibly utilizing our vast natural gas resources for both domestic 

consumption and export to global markets. 

Thank you again, Madame Chair, for holding this hearing. Of 

course, I’m really eager to hear what our witnesses have to say. 

Thank you. 

The CHAIR. Thank you very much. 

Let me quickly introduce our panelists, ask them to begin their 

remarks and then we’ll go through a round of questioning with 

those that are here. 

First, we welcome Chris Smith back to our committee. He is the 

Principal Deputy Assistant Secretary for Fossil Energy at the Department of Energy. His office oversees fossil energy research, development, encompassing coal, oil and natural gas. 

Next, Mr. Robert McNally is the founder and President of the 

Rapidan Group and a leading consultant regarding energy markets 

and policy in the Nation. 
6 

Next we have Mr. Dan Weiss, Senior Fellow at the Center for 

American Progress, who leads the Center’s Energy and Climate Advocacy Campaign. 

Next we have Mr. Marty Durbin, CEO of America’s Natural Gas 

Alliance. 

Finally we have Miss Elizabeth Rosenberg, Senior Fellow and Director of Energy, Environment and Security Program at the Center 

for a New American Security. 

We thank you all for being here. 

Mr. Smith, we’ll start with you. I know you have some prepared 

remarks and please leave them to 5 minutes or less. 

[Laughter.] 

STATEMENT OF CHRISTOPHER SMITH, PRINCIPAL DEPUTY 

ASSISTANT SECRETARY OFFICE OF FOSSIL ENERGY, DEPARTMENT OF ENERGY 

Mr. SMITH. Or less. 

Thank you very much, Chair Landrieu and Ranking Member 

Murkowski and members of the committee. 

I appreciate the opportunity to discuss the Department of Energy’s program regulating the export of natural gas including liquefied natural gas. I want to give my thanks to all the members of 

the committee for the leadership that you’ve shown in this important policy area. 

The development of U.S. natural gas resources is having a transformative impact on the U.S. energy landscape helping to improve 

our energy security while spurring economic development and job 

creation around the country. The Administration continues to take 

steps to ensure the safe and environmentally sustainable supply of 

natural gas. Since receiving the first long term application in 2010 

to export LNG to non-FTA countries from the lower 48 States, the 

Department of Energy has been and remains committed to conducting a public interest determination process as required by the 

Natural Gas Act that is expeditious, judicious and fair. 

Throughout this time the Department has consistently made 

clear that a close monitoring of market developments plays a critical role in the Department’s decisionmaking process. On May 29th 

of this year in order to reflect a changing market dynamics the Department of Energy proposed to suspend the practice of issuing 

conditional authorizations and review applications and make final, 

public interest determination only after completing the review required by environmental laws and regulations. 

The proposed changes to the manner in which LNG applications 

are ordered and processed ill ensure our process is efficient by 

prioritizing resources on the more commercially advanced projects 

while also providing the Department with more complete information when applications are considered and public interest determinations are made. 

When the Department began issuing conditional authorizations 

to export LNG to non-FTA countries in 2011 applicants were asking for some signal of regulatory certainty before spending significant resources to develop their projects. Since that time applicants 

have begun to spend significant time and resources to complete 

NEPA review prior to receiving conditional authorization from the 
7 

Department of Energy. Indeed, applicants are spending tens of millions of dollars on pre-fee and feed for NEPA review as well as negotiating contracts and financing. 

In response to these and other developments the Department intends to make final public interest determinations only after 

projects have completed the NEPA process instead of issuing conditional authorizations. While our moving them to intermediate step 

of conditional decisions and setting the order of DOE decisionmaking based on readiness for final action, the Department will 

prioritize resources on the more commercially advanced projects. 

The proposed procedural change will improve the quality of information on which DOE makes its public interest determinations. By 

considering for approval those projects that are more likely to actually be constructed, the Department will be able to base its decision 

on a more accurate evaluation of the project impact on public interests. The Department will also be better positioned to judge the cumulative market impact of its authorizations and its public interest 

review. 

While it is not assured that all projects for which NEPA review 

is completed will be financed and constructed. Projects that have 

completed NEPA review are, generally speaking, more likely to 

proceed than those that have not. 

In response to an evolving market this proposed change will 

streamline the regulatory process for applicants, ensure that applications, applications that have completed the NEPA review, will 

not be delayed by their position in the current order of precedence 

and give the Department a more complete understanding of project 

impacts. The Department issued the notice of proposed procedures 

for LNG export decisions for a 45 day public review and comment 

period. During this review period the Department will continue 

with evaluations of projects that have already received conditional 

authorizations and completed their NEPA review. 

Further, the Department will continue to act on requests for conditional authorizations currently under review during the period in 

which the proposed changes are under consideration. 

In addition to the proposed procedural change, the Department 

announced plans to undertake an economic study in order to gain 

a better understanding of how potential U.S. LNG exports between 

12 and 20 billion cubic feet per day could affect the public interest. 

The study will be made available for public comment. 

Finally, to better inform the Department and the public on the 

environmental impacts of increased LNG exports, the Department 

elected to prepare 2 additional reports for—on environmental 

issues. 

The first report reviewed unconventional natural gas exploration 

production activities. In keeping with the President’s Climate Action Plan and the Administration’s commitment to mitigate greenhouse gas emissions the Department completed a second report on 

life cycle greenhouse gas emissions. Both reports are being made 

available for public comment for 45 days after which the reports 

and comments received from the public will be considered by the 

Department in its public interest determination in connection with 

applications to export LNG to non-FTA countries. 
8 

In conclusion, Madame Chair, I would like to emphasize that the 

Department is committed to moving this process forward as expeditiously as possible. We understand the significance of this issue as 

well as the importance of getting it right. 

Thank you very much. 

[The prepared statement of Mr. Smith follows:] 

PREPARED STATEMENT OF CHRISTOPHER SMITH, PRINCIPAL DEPUTY ASSISTANT

SECRETARY OFFICE OF FOSSIL ENERGY, DEPARTMENT OF ENERGY

Thank you Chair Landrieu, Ranking Member Murkowski, and Members of the 

Committee. I appreciate the opportunity to be here today to discuss the Department 

of Energy’s (DOE) program regulating the export of liquefied natural gas (LNG). 

Recent Developments in LNG Exports 

The boom in domestic shale gas provides unprecedented opportunities for the 

United States. Over the last several years, domestic natural gas production has increased significantly, outpacing consumption growth, resulting in declining natural 

gas and LNG imports. Production growth is primarily due to the development of improved drilling technologies, including the ability to produce natural gas trapped in 

shale gas geologic formations. 

Historically, the DOE has played an important role in the development of technologies that have enabled the United States to expand development of our energy 

resources. Between 1978 and 1992, public research investments managed by the Department contributed to the development of hydraulic fracturing and extended horizontal lateral drilling technologies that spurred private sector investments and industry innovation, unlocking billions of dollars in economic activity associated with 

shale gas. 

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 growing rapidly in foreign markets. Due primarily to these developments, DOE has received a growing number of applications to export domestically produced natural gas 

to overseas markets in the form of LNG. 

DOE’s Statutory Authority 

DOE’s authority to regulate the export of natural gas arises under section 3 of 

the Natural Gas Act (NGA), 15 U.S.C. §717b. This authority is vested in the Secretary of Energy and has been delegated to the Assistant Secretary for Fossil Energy. 

Section 3(a) of the NGA sets forth the standard for review of most LNG export 

applications: 

[N]o person shall export any natural gas from the United States to a foreign country or import any natural gas from a foreign country without first 

having secured an order of the [Secretary of Energy] authorizing it to do 

so. The [Secretary] shall issue such order upon application, unless after opportunity for hearing, [he] finds that the proposed exportation or importation will not be consistent with the public interest. The [Secretary] may by 

[the Secretary’s] order grant such application, in whole or part, with such 

modification and upon such terms and conditions as the [Secretary] may 

find necessary or appropriate. 

Section 3(a) thus creates a rebuttable presumption that a proposed export of natural gas is in the public interest. Section 3(a) also authorizes DOE to attach terms 

or conditions to the order that the Secretary finds are necessary or appropriate to 

protect the public interest. Under this provision, DOE performs a thorough public 

interest analysis before acting. 

In the Energy Policy Act of 1992, Congress introduced a new section 3(c) to the 

NGA. Section 3(c) created a different standard of review for applications to export 

natural gas, including LNG, to those countries with which the United States has 

in effect a free trade agreement requiring the national treatment for trade in natural gas. Section 3(c) requires such applications to be deemed consistent with the 

public interest, and requires such applications to be granted without modification 

or delay. 

Free Trade Agreement (FTA) Countries 

There are currently 18 countries with which the United States has in place free 

trade agreements that require national treatment for trade in natural gas for pur-
9 

poses of the Natural Gas Act. These 18 countries include: Australia, Bahrain, Canada, Chile, Colombia, the Dominican Republic, El Salvador, Guatemala, Honduras, 

Jordan, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Republic of Korea, and 

Singapore. 

There also are two countries—Israel and Costa Rica- that have free trade agreements with the United States that do not require national treatment for trade in 

natural gas for purposes of the Natural Gas Act. 

Because complete applications under section 3(c) must be granted without modification or delay and are deemed to be in the public interest, DOE does not conduct 

a public interest analysis of those applications. 

DOE Process to Review Applications to Export LNG to non-FTA Countries 

DOE’s review of applications to export LNG to non-FTA countries is conducted 

through a public and transparent process. Upon receipt of an application, DOE 

issues a notice of the application in the Federal Register, posts the application and 

all subsequent pleadings and orders in the proceeding on its website, and invites 

interested persons to participate in the proceeding by intervening and/or filing comments or protests. Section 3(a) applicants are typically given an opportunity to respond to any such comments or protests and, after consideration of the evidence 

that has been introduced into the record, DOE issues an order either granting the 

application as requested, granting with additional terms or conditions, or denying 

the application. 

Under the Natural Gas Act, DOE’s orders are subject to a rehearing process that 

can be initiated by any party to a proceeding seeking to challenge DOE’s determinations. Court review is available as well after the rehearing process is exhausted. 

Public Interest Criteria for NGA Section 3(a) Applications 

For applications requesting authority to export LNG to countries that do not have 

free trade agreements requiring national treatment for trade in natural gas, DOE 

conducts a full public interest review. While section 3(a) of the NGA establishes a 

broad public interest standard and a presumption favoring export authorizations, 

the statute neither defines ‘‘public interest’’ nor identifies criteria that must be considered. In prior decisions, however, DOE/FE has identified a range of factors that 

it evaluates when reviewing an application for export authorization. These factors 

include economic impacts, international impacts, security of natural gas supply, and 

environmental impacts, among others. To conduct its review, DOE/FE looks to 

record evidence developed in the application proceeding. Applicants and interveners 

are free to raise new issues or concerns relevant to the public interest that may not 

have been addressed in prior cases. 

Jurisdiction over the LNG Commodity Export Versus the LNG Export Facility 

DOE exercises export jurisdiction over the commodity (natural gas), whereas other 

Federal, state, and local organizations have jurisdiction over the facilities used in 

the import or export of the commodity, depending on the facility location. 

The Federal Energy Regulatory Commission (FERC) is responsible for authorizing 

the siting, construction, expansion, and operation of LNG import and export terminals. FERC may approve those applications in whole or in part with such modifications and upon such terms and conditions as it finds necessary or appropriate. 

The U.S. Department of Transportation’s Maritime Administration (MARAD) is 

responsible under the Deepwater Port Act of 1974, as amended, (33 U.S.C. § 1501 

et seq.) for the licensing system for ownership, construction, operation and decommissioning of deepwater port structures located beyond the U.S. territorial sea, including deepwater LNG export facilities. 

Sabine Pass Authorization—First Long-Term LNG Export Authorization 

DOE granted the first long-term application to export domestically-produced 

lower-48 LNG to non-FTA countries to Sabine Pass Liquefaction, LLC, (Sabine Pass) 

in DOE/FE Order Nos. 2961 (May 20, 2011), 2961-A (August 7, 2012), and 2961- 

B (January 25, 2013). The LNG export volume authorized is equivalent to 2. 2 billion cubic feet per day (Bcf/d) of natural gas for a period of 20 years. In the first 

of the Sabine Pass orders, DOE stated that it would evaluate the cumulative impact 

of the Sabine Pass authorization and any future authorizations for export authority 

when considering subsequent applications. 

LNG Export Study 

Following issuance of the Sabine Pass order, DOE undertook a two-part study of 

the cumulative economic impact of LNG exports. The first part of the study was conducted by the Energy Information Administration (EIA) and looked at the potential 

impact of additional natural gas exports on domestic energy consumption, produc-
10 

tion, and prices under several prescribed export scenarios. The second part of the 

study, performed by NERA Economic Consulting under contract to DOE, evaluated 

the macroeconomic impact of LNG exports on the U.S. economy with an emphasis 

on the energy sector and natural gas in particular. The NERA study was made 

available on December 5, 2012. 

On December 11, 2012, DOE published in the Federal Register a Notice of Availability of the EIA and NERA studies, and inserted both parts of the study into 15 

then-pending LNG export application dockets for public comment. An initial round 

of comments on the study ended on January 24, 2013, and reply comments were 

due February 25, 2013. 

Comments to the LNG Study 

In response to the Notice of Availability, DOE received over 188,000 initial comments and approximnately 2,700 reply comments. Proponents of LNG exports generally endorsed the results of the two-part study, particularly the conclusion of the 

NERA study that increasing levels of exports will generate net economic benefits for 

the United States. On the other hand, comments filed by opponents of LNG exports 

raised a number of issues, including challenges to the assumptions and economic 

modeling underlying the two-part study and assertions that the two-part macroeconomic study should have further examined regional, sectoral, or environmental 

issues. 

Use of Annual Energy Outlook Projections 

On May 7, 2014, EIA issued its most recent projections for 2035 in the Annual 

Energy Outlook 2014 Reference Case (AEO 2014). Compared to AEO 2013 Reference 

Case, total natural gas consumption for 2035 is projected to increase by 4.7 Bcf/d, 

from 78.7 Bcf/d to 83.4 Bcf/d. However, total domestic dry gas production is projected to rise by 13 Bcf/d of natural gas, from 85.9 Bcf/d to 98.9 Bcf/d (although this 

increase includes Alaska natural gas production). Projections from the AEO 2014 reflect net LNG exports from the United States in a volume equivalent to 9.2 Bcf/d 

of natural gas. Of this projected volume, 7.4 Bcf/d are exports from the lower-48 

states, 0.4 Bcf/d are imports to the lower-48 states, and 2.2 Bcf/d are exports from 

Alaska. This estimate compares with projected net LNG imports of 0.4 Bcf/d in the 

lower-48 for 2035 in the AEO 2011 Reference Case. The 2035 Henry Hub price in 

the AEO 2014 Early Release Reference Case is $6.92/MMBtu, down from $7.31/ 

MMBtu in the AEO 2011 Reference Case (both in 2012 dollars). 

In sum, comparing the AEO 2014 Reference Case and AEO 2013 Reference Case 

projections shows market conditions that continue to accommodate increased exports of natural gas. We also note that EIA’s projection in the AEO 2014 Reference 

Case reflects domestic prices of natural gas that rise due to both increased domestic 

demand and exports, but that these price increases will be followed by ‘‘[a] sustained 

increase in production . leading to slower price growth over the rest of the projection 

period.’’ 

LNG Export Applications Status 

Consistent with the NGA, as of June 12, 2014, DOE has approved 36 long-term 

applications to export lower-48 LNG to free trade agreement countries in an amount 

equivalent to 38.23 billion standard cubic feet per day of natural gas. In addition, 

DOE has four long-term applications pending to export lower-48 LNG to free trade 

agreement countries. No worldscale liquefaction facilities in the lower-48 currently 

exist, one facility is currently under construction, and 26 additional worldscale facilities are proposed to be built. 

Most of the applicants seeking authorization to export LNG from proposed facilities to free trade agreement countries have also filed to export LNG to non-free 

trade agreement countries in the same volume from the same facility to provide 

optionality on the final destination country. The volumes of the applications to export to free trade agreement countries and non-free trade agreement countries are 

therefore not additive. 

As of June 12, 2014, DOE has granted one final and six conditional long-term authorizations to export lower-48 LNG to non-free trade agreement countries in a total 

amount equivalent to 9.27 billion standard cubic feet per day of natural gas from 

six proposed liquefaction facilities. As of June 12, 2014, DOE had 26 applications 

pending to export LNG equivalent to an additional 26.68 billion standard cubic feet 

per day of natural gas to non-free trade agreement countries. 

DOE Path Forward 

Since receiving the first long-term application in 2010 to export LNG to non-FTA 

countries from the lower-48 states, the DOE has been—and remains—committed to 

conducting a public interest determination process as required by the Natural Gas 
11 

Act that is expeditious, judicious, and fair. Throughout this time, the Department 

has consistently made clear that a close monitoring of market developments plays 

a critical role in the Department’s decision-making process. 

On May 29, 2014, in order to reflect changing market dynamics, the Department 

of Energy proposed to review and make final public interest determinations on nonFTA export applications only after completion of the review required by environmental laws and regulations that are included in the National Environmental Policy 

Act (NEPA) review, thereby suspending its practice of issuing conditional authorizations. The proposed changes to the manner in which LNG applications are ordered 

and processed will ensure our process is efficient by prioritizing resources on the 

more commercially advanced projects, while also providing the Department with 

more complete information when applications are considered and public interest determinations are made. 

In addition, the Department initiated an updated economic study and has released two environmental reports that address the environmental footprint of unconventional natural gas production and the lifecycle greenhouse gas impacts of U.S. 

LNG exports. 

In keeping with the Department’s commitment to an open and transparent process, the Department has made the proposed procedural change and environmental 

reports available for a 45 day public review and comment period. 

Proposed Procedural Change 

The Department’s current practice is to issue conditional authorizations to export 

LNG to non-FTA countries before project sponsors and the FERC spend significant 

resources for the review of export facilities required by environmental laws and regulations that are included in the NEPA review. However, market participants have 

increasingly shown a willingness to dedicate the resources needed for their NEPA 

review prior to receiving conditional authorizations from the DOE. In response to 

these and other developments, the Department intends to make final public interest 

determinations only after a project has completed the NEPA review process, instead 

of issuing conditional authorizations. By removing the intermediate step of conditional decisions and setting the order of DOE decision-making based on readiness 

for final action, DOE will prioritize resources on the more commercially advanced 

projects. 

The proposed procedural change will improve the quality of information on which 

DOE makes its public interest determinations. By considering for approval those 

projects that are more likely to actually be constructed, DOE will be able to base 

its decision on a more accurate evaluation of the project’s impact on the public interest. DOE will also be better positioned to judge the cumulative market impacts of 

its authorizations in its public interest review. While it is not assured that all 

projects for which NEPA review is completed will be financed and constructed, 

projects that have completed the NEPA review are, generally speaking, more likely 

to proceed than those that have not. 

In response to an evolving market, this proposed change will expedite the regulatory process for applicants, ensure that applications that have completed NEPA 

review will not be delayed by their position in the current order of precedence, and 

give the Department a more complete understanding of project impacts. 

On June 4, 2014, the the Federal Register Notice was issued for the Notice of Proposed Procedures for LNG Export Decisions for a 45 day public review and comment 

period. During the review period, the Department will continue with evaluations of 

projects that have already received conditional authorizations and completed their 

NEPA review. Further, the Department will continue to act on requests for conditional authorization currently under review during the period in which the proposed 

changes are under consideration. 

Economic Impact Study 

DOE plans to undertake an economic study in order to gain a better understanding of how potential U.S. LNG exports between 12 and 20 billion cubic feet 

per day (Bcf/d) could affect the public interest. Using more recent data from sources 

like the Annual Energy Outlook 2014, the Energy Information Administration (EIA) 

will update its 2012 LNG Export Study, which principally looked at export cases of 

6 and 12 Bcf/d. Following the EIA update, DOE will again contract for an external 

analysis of the economic impact of this increased range of LNG exports and other 

effects that LNG exports might have on the U.S. natural gas market. While these 

studies are underway, the Department will continue to act on applications as stated 

above. To date, the Department has issued final authorization for export to non-FTA 

countries at a rate of 2.2 Bcf/d. If at any future time the cumulative export authorizations approach the high end of export cases examined, the Department will con-
12 

duct additional studies as needed to understand the impact of higher export ranges. 

At all levels, the cumulative impacts will remain a key criterion in assessing the 

public interest. 

Both the updated EIA study and the planned external analysis of economic impacts will be made available for public comment. 

Release of Environmental Reports 

To better inform the Department and the public of the environmental impacts of 

increased LNG exports, the Department elected to prepare two additional reports 

of environmental issues beyond what is required for NEPA. The first report reviewed unconventional natural gas exploration and production activities and is titled Draft Addendum To Environmental Review Documents Concerning Exports Of 

Natural Gas From The United States. In keeping with the President’s Climate Action Plan and the Administration’s commitment to mitigate greenhouse gas emissions, the Department completed a second report called Life Cycle Greenhouse Gas 

Perspective on Exporting Liquefied Natural Gas from the United States. 

On June 4, 2014, both environmental reports were made available for public comment for 45 days, after which the reports and comments received from the public 

will be considered by the Department in its public interest determinations in connection with applications to export LNG to non-FTA countries. 

Conclusion 

In conclusion Madam Chair, I would like to emphasize that DOE is committed 

to moving this process forward as expeditiously as possible. DOE understands the 

significance of this issue—as well as the importance of getting these decisions right. 

The CHAIR. Thank you very much, Mr. Smith. 

Mr. McNally. 

STATEMENT OF ROBERT MCNALLY, PRESIDENT AND 

FOUNDER, THE RAPIDAN GROUP LLC 

Mr. MCNALLY. Madame Chair, Ranking Member Murkowski, 

members of the committee, my name is Robert McNally. I’m the 

President and founder of Rapidan Group, an independent energy 

market policy and geopolitical consulting firm in Bethesda, Maryland. It’s an honor to speak with you today about how to harness 

our energy bounty to serve our national economic and foreign policy 

interests. 

The tremendous boom in U.S. oil and gas supply has been as unexpected as it has been fortuitous for our economy and national security. Ten years ago the United States imported two-thirds of its 

oil and was embarking on becoming a major importer of LNG. But 

thanks, largely, to the ingenuity, prowess and risk taking of American workers and investors, we have unlocked enormous new supplies of energy and completely reversed these trends. 

Last year the United States emerged as the world’s leading producer of petroleum energy, exceeding Saudi Arabia and Russia. 

EIA reported the U.S. natural gas production is up 40 percent since 

2006. We hit an all time high in March of 72.7 billion cubic feet 

of production.Total gas reserves are up 46 percent since 2006. 

The shale boom is a tremendous windfall for our struggling economy. It has boosted jobs faster than in any other industrial sector 

and facilitated a period of lower energy price volatility. 

Our energy abundance also serves our foreign policy interests by 

turning our country into an arsenal of energy able to help friends 

and allies diversify from costly and dangerous dependence on countries like Russia and Iran. In the case of natural gas the striking 

swing of the U.S. from a future importer 10 years ago to a future 

exporter now has weakened Moscow’s ability to impose high, nonmarket based prices on gas for Europe. 
13 

In Asia, just the prospect of U.S. LNG exports is already boosting 

Japan’s bargaining position in its long term contracts with its LNG 

suppliers. 

As many energy experts and officials have already noted, the 

changed energy landscape should cause policy makers to reconsider, reform or remove outmoded and restrictive regulations and 

policies instituted over 30 years ago amiss concerns about shortages and declining production. The Congress, the Administration 

and within it among leading think tanks, there is a strong support 

for LNG exports, particularly in the wake of Japan’s nuclear crisis 

and more recently Russia’s aggression toward Ukraine. 

Bipartisan expert studies recommend the U.S. policy neither promote nor limit LNG exports. Second best LNG exports to all countries should be deemed in the public interest. Friends and allies 

should be able to compete on an equal footing with free trade partners. At the very least policymakers may wish to reduce the uncertainties and costs this current process creates. 

In this vein I will turn to the recent changes in DOE’s LNG export approval. 

The old framework was problematic for reasons. 

First, considering projects in the order they were filed disadvantaged projects that were down the queue but commercially more 

likely to be built. With 26 non-FTA applications currently in the 

queue and an average week interval between decisions many 

projects, many of the mature, faced a wait of up to 4 years. 

Second, a soft cap of 12 billion cubic feet per day in total, conditional permit approvals caused concern that projects down the 

queue would never move forward. 

DOE’s new approach, announced on May 29th, contains several 

positive elements while creating new sets of questions and concerns. 

The new process levels the playing field by changing the review 

sequence from order of filing to emergence in environmental permitting while also doing away with conditional permits and only 

issuing final ones. 

Second, it more than tripled the head room for new project approvals under the 12 billion cubic foot per day soft cap by counting 

final instead of conditional approvals. 

However, market participants still have concerns with the new 

process. 

First, there is no certainty it will remain in force. It could be 

changed again. 

Second, there appears to be no timeframe for DOE to decide 

when to grant a final permit once the environmental review has 

concluded, an issue that may be worked on here shortly as we 

heard. 

Third, there are new risks that litigation could increase project 

delays and uncertainty. When it announced the new procedure, as 

my colleague just said, DOE released 2 draft environmental reports 

for public comments. While these DOE reports found no cause for 

environmental concern industry analysts and investors worry their 

inclusion may be used to delay in the courts. 

In conclusion, while the impact of DOE’s new LNG export approval process contains several positive elements concerns linger 
14 

1http://www.eia.gov/forecasts/steo/report/natgas.cfm?src=Natural-b2 

2http://www.whitehouse.gov/the-press-office/2014/05/29/white-house-releases-report-administration-s-all-above-energy-strategy-p 

and its overall impact remains to be seen. One thing is sure, 

there’s more work to do. Given the large net benefits from—of our 

national energy boom for our economy, our labor market and our 

national security, policymakers should consider moving expeditiously to remove barriers to energy production infrastructure and 

trade. 

Thank you for the opportunity to testify. I look forward to your 

questions. 

[The prepared statement of Mr. McNally follows:] 

PREPARED STATEMENT OF ROBERT MCNALLY, PRESIDENT AND FOUNDER, THE

RAPIDAN GROUP LLC 

Madam Chair and Members of the Committee, my name is Robert McNally and 

I am the president and founder of The Rapidan Group, an independent energy market, policy, and geopolitical consulting firm based in Bethesda, MD. It is an honor 

to speak with you today about how to harness our energy bounty to serve our national economic and foreign policy interests. 

The tremendous boom in US oil and gas supply has been as unexpected as it has 

been fortuitous for our economy and national security. Ten years ago, the United 

States imported two-thirds of its oil and was on track to become a major importer 

of liquefied natural gas (LNG). But thanks largely to the ingenuity, prowess, and 

risk-taking of American workers and investors, we have unlocked an enormous new 

supply of domestic energy and completely reversed these trends. 

Last year, the United States emerged as the world’s leading producer of petroleum energy, exceeding Saudi Arabia and Russia. EIA reported US natural gas production is up 40 percent since 2006 and hit a record high of 72.7 bcf/d in March./ 

1/1 Total proven wet gas reserves are up 46 percent over that same timeframe. 

The US shale boom is a tremendous windfall for the struggling American economy. It has boosted jobs faster than any industrial sector and facilitated a period 

of lower energy price volatility. A recent White House report/2/2 noted ‘‘[r]ising domestic energy production has made a significant contribution to GDP growth and 

job creation. The increases in oil and natural gas production alone contributed more 

than 0.2 percentage points to real GDP growth in both 2012 and 2013, and employment in these sectors increased by 133,000 between 2010 and 2013.’’ These employment estimates do not include indirect jobs created, which the White House noted, 

‘‘could be quite large.’’ The White House cited one private estimate that unconventional oil and gas activity contributed a total of 1.7 million direct and indirect jobs 

in 2012. 

Arsenal of Energy 

US energy abundance serves our foreign policy interests by turning our country 

into an ‘‘Arsenal of Energy’’ able to help friends and allies diversify from costly and 

dangerous energy dependence on countries like Russia and Iran. In the case of natural gas, the striking swing of the US from future importer ten years ago to future 

exporter now has weakened Moscow’s ability to impose high, non-market based 

prices for natural gas in Europe. In Asia, the prospect of LNG exports is already 

boosting Japan’s bargaining position with LNG suppliers in its long-term contracts. 

Aboveground Risks 

While future trends in the energy industry depend in considerable part on unforeseeable economic, technological, and geopolitical factors, political and regulatory uncertainty and costs are also substantial and ought to be much more manageable. As 

many energy experts and officials have noted, the changed energy landscape should 

cause policymakers to reconsider, reform, or remove outmoded, restrictive regulations and policies that were instituted over 30 years ago amidst concerns about 

shortages and declining US energy production. Whatever policy benefit those policies had is debatable, and now they have surely outlived any reasonable purpose. 

One of the most important and ripe areas for updating is our policy on energy 

exports. The United States is the only country that requires companies to obtain a 

‘‘public interest’’ permit to export natural gas. It is far from clear what public inter-
15 

3http://www.brookings.edu/research/reports/2012/05/02-lng-exports-ebingerhttp://csis.org/event/ 

us-japan-alliance-anchoring-stability-asia 4http://www.brookings.edu/research/articles/2014/06/10-doe-approving-lng-export-goldwynhendrix ‘‘While DOE never announced a cap of any kind, the fact that the NERA study focused 

on exports of to 12 bcf/d, and that each DOE order cited this number led analysts to assume 

that a new study would be required for exports in excess of 12 Bcf/d. DOE’s announcement of 

updated studies to assess the impacts of exports between 12 and 20 Bcf/d appears to confirm 

this view.’’ Footnote 1. 5Op. cit., footnote 2 

est would be harmed by allowing the market to determine how many LNG facilities 

should be built. 

While some opponents claim allowing exports would significantly raise natural 

gas prices and hurt consumers and gas-intensive industries, most objective economic 

studies find that an increase in natural-gas prices caused by exports would be relatively small under any likely scenario. The net economic benefits of gas exports 

outweigh any harm, as the Department of Energy has reaffirmed in its recent LNG 

approval orders. While the aggregate amount of proposed LNG projects amounts to 

about one-half of US gas production, only a fraction of this amount will be financed 

and built. 

Fortunately, a bipartisan consensus exists that the current procedural framework 

for approving natural gas exports should be updated. In Congress, the Administration, and within and among leading think tanks, there is strong support for LNG 

exports, particularly in the wake of Japan’s nuclear crisis and, more recently, Russia’s aggression toward Ukraine. DOE has so far approved six conditional permits 

and one final approval to export LNG to non-FTA countries. 

Bipartisan expert studies recommend that Congress neither promote or limit LNG 

exports or ensure public interest determinations are granted automatically to our 

treaty allies./3/ A second-best option would be for policymakers to reduce the uncertainties and costs the current process creates. In that vein, I will turn to recent 

changes in DOE’s LNG export approval procedure. 

Old and New DOE Public Interest Process 

The prior DOE procedure for reviewing applications for LNG exports to non-free 

trade agreement countries involved first granting a conditional public interest permit and then a final one after a project had cleared environmental permitting under 

the National Environmental Policy Act (NEPA) process at FERC (in the case of onshore facilities) or the Transportation Department’s Maritime Administration 

(MARAD) for offshore jurisdictions. DOE considered applicants in an order of precedence based mainly on the date it applied to DOE and whether it had begun the 

NEPA process. DOE pledged to review applications expeditiously, and has been acting on permits with an average eight-week interval. 

Additionally, under the prior policy framework, DOE had signaled and the market 

had largely accepted there would be a ‘‘soft cap’’ of 12 bcf/d of conditional approvals, 

after which an indefinite pause may take place./4/ Conditional approvals now total 

9.27 bcf/d, implying only one to two more projects would be considered before the 

pause./5/ 

This old framework was problematic for two main reasons. First, the sequence 

DOE used to consider project applications disadvantages projects that are down the 

queue but commercially more likely to be built. With 26 non-FTA applications currently in the queue, that timeline left the review of many projects—in some cases 

commercially-mature ones already advanced in the NEPA process—more than four 

years in the future. Second, in short-changing projects that were more commercially 

and technically viable, investors were concerned these project would never move forward on permitting or experience lengthy delays with the soft cap of 12 bcf/d in 

place. 

DOE’s new approach, announced on May 29, contains several positive elements 

while creating new set of questions and concerns as well. The new process levels 

the playing field by changing the review sequence from order of filing to emergence 

from NEPA permitting, while also doing away with conditional permits and only 

issuing final ones. It recognizes FERC (and MARAD) is and ought to be the main 

‘‘gatekeeper’’ for project approvals. Second, it more than tripled headroom under the 

‘‘soft cap’’ by counting the final instead of conditional amounts of capacity approved, 

thus lowering the aggregate under the soft cap from 9.27 bcf/d to 2.2 bcf/d. Moreover, DOE announced it would study the economic impact of LNG exports of up to 

20 bcf/d. 

However, market participants still have concerns with the new process. First, 

there is no certainty this process will remain in force and it could be changed again. 

Second, there appears to be no timeframe for DOE to decide when to grant a final 
16 

6http://energy.gov/fe/draft-addendum-environmental-review-documents-concerning-exports-natural-gas-united-states and http://energy.gov/fe/life-cycle-greenhouse-gas-perspective-exportingliquefied-natural-gas-united-states 

permit once the environmental review has concluded. Third, there are new risks 

that in the new process obstructionist litigation could increase project delays and 

uncertainty. When it announced the new procedure, DOE also released two draft environmental reports/6/ for public comments. While these DOE reports found no 

cause for environmental concern, industry analysts and investors worry their inclusion may be used to delay projects in the courts. 

Conclusion 

While the impact of DOE’s new LNG export approval process contains several 

positive elements, concerns remain, and its overall impact remains to be seen. Going 

forward, policymakers should act expeditiously to remove outdated, inefficient, and 

costly barriers to energy production, transportation, and trade in order of our country to realize the full economic and national security benefits of the shale oil and 

gas boom, 

The CHAIR. Thank you very much. 

Mr. Weiss. 

STATEMENT OF DAN WEISS, SENIOR FELLOW AND THE DIRECTOR OF CLIMATE STRATEGY, CENTER FOR AMERICAN 

PROGRESS 

Mr. WEISS. Chair Landrieu, Ranking Member Murkowski and 

members of the Senate Energy Committee, thank you for having 

me. 

Growth in natural gas production has brought many domestic 

benefits including jobs, cheaper energy and cleaner energy. However, it’s important to consider a number of factors when assessing 

whether to further speed up the approval of proposed gas export 

applications. 

First, what is the impact on natural gas prices and electricity 

prices? 

Second, what is the impact on domestic manufacturing and on 

wages? 

Third, will this provide any assistance to Ukraine? 

Fourth, how will this affect the climate? 

So first, impact on prices. 

The Energy Information Administration forecasts that even with 

a modest level of exports the price of natural gas for electricity 

would grow by nearly one-third by 2020. The Department of Energy NERA study referenced by the Chair, also found that exports 

would raise electricity prices. 

Second, jobs and wages. 

The U.S. Conference of Mayors found that recent lower natural 

gas prices have fueled nearly 200,000 new manufacturing jobs. A 

study by Dow estimates that consuming natural gas in the U.S. instead of exporting it would create 8 times more jobs than exports 

for aparticular given level of natural gas. 

The DOE study that the chair referenced also determined that 

the expansion of LNG exports would provide net economic benefits 

but warned that, ‘‘Higher natural gas prices in 2015 can also be expected to have negative effects on output and employment.’’ This 

study projected that total labor compensation would decline. 

Third, fast tracking more LNG export approvals won’t help 

Ukraine any time soon. Most LNG export applications to non-free 
17 

trade Nations are already contracted to countries in Asia including 

Japan, Korea and elsewhere. That’s because the LNG price there 

is nearly 4 times higher than the U.S. price and about 60 percent 

higher than the price for LNG in Europe. 

Additionally LNG exports to Ukraine require infrastructure that 

takes years to build. The first export facility may not be ready until 

2016 and its gas is already contracted to go to India and South 

Korea. 

The other approved LNG export projects won’t be completed until 

2017 or later. Again, nearly all the gas is contracted to go to Asian 

Nations. 

A faster more effective assistance to Ukraine would be investments in energy efficiency, particularly since Ukraine is the second 

most energy wasteful Nation. The U.S. has already invested $15 

million in Ukraine for efficiency projects that saved enough natural 

gas to power the equivalent of 200,000 American homes and worth 

nearly $200 million. 

The Obama Administration plans that more efficiency assistance 

to Ukraine significantly expanding these efforts that reduce gas 

waste is an effective way to immediately help Ukraine reduce their 

reliance on Russian gas. It will provide assistance now, not 3 or 4 

years from now. 

No. 4, DOE must consider climate change when evaluating additional LNG exports. 

The hundreds of scientists of the National Climate Assessment 

just issued yet another 10 alarm warning. It alerts that, ‘‘Climate 

change has moved firmly into the present. Human induced climate 

change continues to strengthen and that impacts are increasing 

across the country.’’ 

We must continue to reduce climate pollution. Yet the production 

of natural gas releases methane which is a very potent climate pollutant. The oil and gas sector is the second largest source of this 

methane due to fugitive releases during the production and leaks 

during distribution. The Energy Information Administration predicts that further natural gas exports would spur additional gas 

production which would lead to more methane pollution. 

The Administration’s future methane production program must 

limit fugitive methane from fracking and from natural gas transportation. That policy which hasn’t been developed yet must take 

effect, in my view, before approving more exports. 

The bottom line. 

We’ve already approved 11 billion cubic feet per day of LNG exports. DOE reports that LNG exports would raise prices, lower 

wages and hurt manufacturing. 

Eliminating public interest reviews of LNG export applications 

won’t help Ukraine, but more energy efficiency investments now 

would. 

More natural gas exports and production would worsen climate 

change until there are significant limits on methane emissions. 

In our view it would be unwise to fast track anymore LNG export 

applications. 

Thank you very much. 

[The prepared statement of Mr. Weiss follows:] 
18 

1 Energy Information Administration, ‘‘In the News: Natural gas consumption sets winter 

record, with residential/commercial sectors surpassing 50 percent share,’’ Natural Gas Weekly 

Update, April 3, 2014, available at http://www.eia.gov/naturalgas/weekly/#jm-trends. 2 Energy Information Administration, ‘‘Technology drives natural gas production growth from 

shale gas formations,’’ Today in Energy, July 12, 2011, available at http://www.eia.gov/ 

todayinenergy/detail.cfm?id=2170. 3Platts, ‘‘Spot LNG Prices for June Delivery Fell 8.0 percent on Low Demand,’’ Press release, 

May 19, 2014, available at http://www.platts.com/pressreleases/2014/051914/no. 4 Energy Information Administration, ‘‘Henry Hub Natural Gas Sport Price,’’ available at 

http://www.eia.gov/dnav/ng/hist/rngwhhdW.htm (last accessed June 2014). 5 U.S. Department of Energy, ‘‘How to Obtain Authorization to Import and/or Export Natural 

Gas and LNG,’’ available at http://energy.gov/fe/services/natural-gas-regulation/how-obtain-authorization-import-andor-export-natural-gas-and-lng#LNG (last accessed April 2014). 6 Ibid. 

7 Energy Information Administration, Natural Gas Import/Export Regulation, (U.S. Department of Energy, 2011), available at http://www.usea.org/sites/default/files/event-file/511/AndersonllDOEllLNGllExports.pdf. 8Paula Gant, ‘‘The Department of Energy’s Program Regulating Liquefied Natural Gas Export 

Applications,’’ Testimony before the House Subcommittee on Energy and Power, March 25, 2014, 

available at http://docs.house.gov/meetings/IF/IF03/20140325/101953/HHRG-113-IF03-WstateGantP-20140325-U1.pdf. 

PREPARED STATEMENT OF DANIEL J. WEISS, SENIOR FELLOW AND DIRECTOR OF

CLIMATE STRATEGY, CENTER FOR AMERICAN PROGRESS

Chairman Landrieu, Ranking Member Murkowski, and members of the Committee on Energy and Natural Resources: thank you for the opportunity to testify 

on ‘‘How to harness a game-changing resource for export, domestic consumption, 

and transportation fuel.’’ The question has taken on greater urgency due to last winter’s increase in domestic natural gas consumption, the approval to export additional volumes of liquefied natural gas (or LNG), and Russia halting its natural gas 

exports to Ukraine.1

I plan to address several fundamental questions today. 

• What criteria should the Department of Energy (or DOE) use to evaluate 

whether a proposed LNG export project is in the public interest? 

• Are there cost-effective measures that the United States can undertake that 

would save natural gas, create jobs, and reduce pollution? 

• Is elimination of the public interest test for proposed LNG export applications 

an effective policy to assist Ukraine or other nations threatened by potential 

high natural gas prices or supply reductions? 

MEETING THE PUBLIC INTEREST STANDARD 

In the past six years, the United States experienced a dramatic increase in natural gas production, primarily from ‘‘shale gas’’ generated from improvements in 

‘‘hydraulic fracturing’’ (or ‘‘fracking’’) and horizontal drilling.2 Unlike crude oil, there 

is no world market price for natural gas. Prices vary by nation or region, depending 

on factors including domestic supplies and transportation costs for exports. For instance, the Japan/Korea Marker (or JKM) natural gas price in May 2014 was $15.56 

per million BTU of energy.3 Meanwhile, the Henry Hub spot price for natural gas 

in the United States averaged $4.60 per million BTU of energy.4 Exporting American shale gas to Japan or Korea would be quite profitable compared to selling it 

here. 

The higher natural gas price overseas led companies to submit applications to 

build and operate LNG export facilities. Under the Natural Gas Act, the Federal 

Energy Regulatory Commission (or FERC) must approve proposed LNG export or 

import terminals. For projects that will export gas to one of the 18 nations that have 

a Free Trade Agreement with the United States, the projects are automatically 

deemed to be in ‘‘the public interest.’’5 These 18 nations include Canada, Mexico, 

and the Republic of Korea.6

For potential gas importers that do not have a Free Trade Agreement with the 

United States—including Japan and Europe—DOE must determine whether the 

‘‘proposed exportation or importation will not be consistent with the public interest,’’ 

as required by Section 3(a) of the Natural Gas Act.7 Earlier this year, Deputy Assistant Secretary of Energy Paula Gant explained to the House Subcommittee on 

Energy and Power that DOE/FE [Office of Fossil Energy] has identified a range of 

factors that it evaluates when reviewing an application for export authorization. 

These factors include economic impacts, international considerations, United States 

energy security, and environmental considerations, among others.8
19 

9 Edward McAllister and Ayesha Roscoe, ‘‘U.S. regulators approve Cheniere LNG export 

plant,’’ Reuters, April 16, 2012, available at http://www.reuters.com/article/2012/04/16/uscheniere-sabine-idUSBRE83F1AI20120416. 10 Cheniere, ‘‘Sabine Liquefaction Project Schedule,’’ available at http://www.cheniere.com/ 

sabinellliquefaction/projectllschedule.shtml (last accessed April 2014). 11 ‘‘Proposed Procedures for Liquefied Natural Gas Export Decisions,’’ Federal Register, daily 

ed., June 4, 2014, p. 32261, available at http://energy.gov/sites/prod/files/2014/06/f16/ 

FE.ProposedProced.LNGll.pdf. 12 Ibid. 13 John Anderson, ‘‘Exporting LNG: Permitting & Economic Analysis,’’ (2011) available at 

http://www.usea.org/sites/default/files/event-file/511/AndersonllDOEllLNGllExports.pdf. 14 Ibid. 15 U.S. Department of Energy, ‘‘Applications Received by DOE/FE to Export Domestically Produced LNG from the Lower-48 States (as of June 11, 2014),’’ available at http://energy.gov/sites/ 

prod/files/2014/06/f16/Summary percent20of percent20LNG percent20Export 

percent20Applications.pdf. 16 Energy Information Administration, ‘‘Natural Gas Supply, Disposition, and Prices, Reference case,’’ available at http://www.eia.gov/oiaf/aeo/tablebrowser/ 

#release=AEO2013ER&subject=8-AEO2013ER&table=13-AEO2013ER®ion=0- 

0&cases=early2013-d102312a (last accessed April 2014). 17 Ibid. 18 Energy Information Administration, Effect of Increased Natural Gas Exports on Domestic 

Energy Markets, (U.S. Department of Energy, 2012) available at http://www.eia.gov/analysis/requests/fe/pdf/felllng.pdf. 19 Ibid. 20 Ibid 21 Ibid. 

Under these criteria, DOE has approved 7 LNG export applications. The Sabine 

Pass facility in Louisiana was the first to receive approval, and is under construction.9 Its completion could occur in the fourth quarter of 2015.10

PUBLIC INTEREST DETERMINATION 

On June 4, the DOE proposed to streamline the public interest determination 

process for applications to allow LNG export to non-free trade agreement nations 

by ‘‘acting only on applications for which NEPA [National Environmental Policy Act] 

review has been completed.’’11 In DOE’s view, this would enable the Department to 

better ‘‘judge the cumulative market impacts’’ in its public interest review.12 It 

would also enable DOE to avoid spending scarce resources to review applications for 

proposed export terminals that may not receive approval by FERC. 

Unfortunately, this proposed change in the public interest determination process 

does not ensure that the economic and climate effects become primary criterion for 

‘‘evaluating the public interest’’ of LNG export applications. Instead, they remain 

secondary criteria.13 An evaluation of the individual and cumulative impacts from 

approval of LNG export applications for non-free trade agreement nations should explicitly require an assessment of the increase of LNG exports on wages and electricity prices. It is essential that LNG exports do not significantly lower wages, raise 

rates, or harm manufacturing. In addition, DOE should evaluate the individual and 

cumulative impact of additional LNG exports on the emission of carbon, methane, 

and other climate pollutants. 

Large LNG exports possible by 2020, leading to a natural gas price hike 

The Energy Information Administration (or EIA) notes that LNG exports will increase by 14-fold between 2013 and 2020 under a ‘‘business as usual’’ scenario.14

Before Congress passes legislation to accelerate or eliminate the public interest review process, it is essential to note that DOE has already approved seven LNG applications that could export 11 billion cubic feet per day (bcf/d) of natural gas—about 

14 percent of total domestic production in 2020 under business as usual scenario.15

16

Under a business as usual scenario—without significant expansion of LNG exports—EIA projects that the cost of natural gas for domestic electricity generation 

would rise by 32 percent between 2013 and 2020 and 60 percent between 2013 and 

2030.17

A 2012 EIA study of various levels of LNG exports found that ‘‘increased natural 

gas exports lead to increased natural gas prices.’’18 Prices could increase by up to 

35 percent by 2018, depending on the supply of shale gas, and speed and amount 

of exports.19 EIA also found that ‘‘on average, from 2015 to 2035, natural gas bills 

paid by end-use consumers in the residential, commercial, and industrial sectors 

combined increase 3 to 9 percent.’’20 This would increase electricity bills for end-use 

customers by ‘‘1 to 3 percent.’’21
20 

22 Ibid. 23 Ibid. 24 Energy Information Administration, ‘‘U.S. Natural Gas Exports and Re-Exports by Country,’’ available at http://www.eia.gov/dnav/ng/ngllmovellexpclls1lla.htm (last accessed 

June 2014). 25 U.S. Department of Energy, ‘‘Applications Received by DOE/FE to Export Domestically Produced LNG from the Lower-48 States.’’ 26 NERA Economic Consulting, ‘‘Macroeconomic Impacts of LNG Exports from the United 

States,’’ prepared for the U.S. Department of Energy, (Washington: NERA, 2012) available at 

http://energy.gov/sites/prod/files/2013/04/f0/neralllngllreport.pdf. 27 Ibid. 28 Energy Information Administration, ‘‘Lower residential energy use reduces home energy expenditures as share of household income,’’ Today in Energy, April 18, 2013, available at http:// 

www.eia.gov/todayinenergy/detail.cfm?id=10891. 29 Ibid. 30 NERA Economic Consulting, ‘‘Macroeconomic Impacts of LNG Exports from the United 

States,’’ prepared for the U.S. Department of Energy, (Washington: NERA, 2012) available at 

http://energy.gov/sites/prod/files/2013/04/f0/neralllngllreport.pdf. 31 Ibid. 32 Collin Eaton, ‘‘Report: Cheap gas will fuel US manufacturing job surge through 2020,’’ Fuel 

Fix, March 20, 2014, available at http://fuelfix.com/blog/2014/03/20/cheap-gas-critical-to-u-s-manufacturing-surge-through-2020/. 

The EIA study determined that ‘‘with additional gas exports, consumers will consume less and pay more on both their natural gas and electricity bill.’’22 Total average annual electric bills could increase by up to $10 billion annually between 2015 

and 2025.23

These EIA estimates assume an increase in natural gas exports of no more than 

12 bcf/d. Since the analysis was completed in January 2012, U.S. natural gas exports via pipeline have grown by .5 bcf/d.24 DOE has already approved export applications for a total of 11 bcf/d. There are pending LNG export applications for at 

least another 24 bcf/d of natural gas.25 In other words, total natural gas exports 

could soon significantly exceed the 12 bcf/d that the EIA study assumed would be 

the upper limit in its analysis. Should natural gas exports expand beyond this 

amount, they could further increase gas and electricity prices beyond the EIA predictions. 

The DOE study by the NERA consulting firm, ‘‘Macroeconomic Impacts of LNG 

Exports from the United States,’’ reiterated EIA’s prediction that natural gas and 

electricity prices would rise with exports. The NERA study determined that ‘‘U.S. 

natural gas prices increase when the U.S. exports LNG.’’26 The analysis noted that 

‘‘the electricity sector, energy-intensive sector, and natural gas dependent goods and 

services producers will all be impacted by price rises.’’27 The analysis was also based 

on LNG exports of up to 12 billion cubic feet per day—a level that could be exceeded 

soon. 

A significant natural gas price increase could have a severe impact on family 

budgets for those not employed in the gas industry. EIA reports that the typical 

household spent an average of nearly $2,000—or 2.7 percent of their household income—on household energy fuels in 2012.28 Households in the fifth-lowest income 

bracket spent 6 percent—or twice that portion of their livelihood—on household 

fuels.29

While gas and electricity prices could rise, DOE projects that ‘‘total labor compensation’’ would decline.30 Its study concluded that ‘‘households with income solely 

from wages or government transfers... might not participate in [the] benefits’’ of 

LNG export expansion.31

Higher natural gas prices could hurt manufacturing 

Lower natural gas prices have fueled the recent increase in American manufacturing. Fuel Fix, a Hearst energy publication, reported in March that 

An ample supply of cheap natural gas has ignited a U.S. manufacturing 

surge projected to expand plant payrolls and drive demand for chemicals, 

machinery and steel through the end of the decade, according to a report 

released Thursday. 

Sinking natural gas prices.are linked to more than 196,000 new manufacturing jobs in major metropolitan areas and a $124 billion boost to sales 

for energy-intensive products like fabricated metals and plastics, according 

to a U.S. Conference of Mayors report on the nation’s industrial growth.32

For instance, Canada’s Methanex, the world’s largest methanol producer, is 

spending $1.1 billion to move two of its Chilean factories to Geismar, Louisiana. The 
21 

33 Jack Kaskey, ‘‘Chemical Companies Rush to the U.S. Thanks to Cheap Natural Gas,’’ 

Bloomberg Businessweek, July 25, 2013, available at http://www.businessweek.com/articles/ 

2013-07-25/chemical-companies-rush-to-the-u-dot-s-dot-thanks-to-cheap-natural-gas. 34 Ibid. 35 Energy Information Administration, ‘‘Natural Gas Supply, Disposition, and Prices, Reference case.’’ 36 Ibid. 37Ken Ditzel, Jeff Plewes, Bob Broxson, ‘‘US Manufacturing and LNG Exports: Economic Contributions to the US Economy and Impacts on US Natural Gas Prices,’’ prepared for The Dow 

Chemical Company, (Washington: Charles River Associates, 2013), available at http:// 

www.crai.com/uploadedFiles/Publications/CRAllLNGllStudyllFeb2013.pdf. 38 Ibid. 39 NERA Economic Consulting, ‘‘Macroeconomic Impacts of LNG Exports from the United 

States,’’ prepared for the U.S. Department of Energy, (Washington: NERA, 2012) available at 

http://energy.gov/sites/prod/files/2013/04/f0/nerallngllreport.pdf. 40 Ibid. 

plants are expected to open in 2015 and 2016.33 Dow will spend $4 billion to build 

two new plants in Texas and reopen one in Louisiana.34 These are simply several 

examples of the manufacturing revival linked to more shale gas production and 

lower gas prices. 

This growth is at risk if more LNG exports boost natural gas prices, as the aforementioned studies indicate would occur. According to EIA, the industrial sector, 

which includes manufacturers that use natural gas as a feedstock, would experience 

a 28 percent price increase in direct natural gas costs between 2013 and 2020.35 The 

price boost would be more than a 50 percent increase between 2013 and 2030.36

LNG exports could reduce net job creation compared to using this gas for domestic 

manufacturing. A study commissioned by the Dow Chemical Company—an opponent 

of unchecked LNG exports—found that a 

Comparison of the effects of the manufacturing sector using 5 Bcf/d of 

natural gas versus LNG terminals exporting 5 Bcf/d of natural gas.clearly 

shows higher... employment related to the manufacturing investments. 

This is primarily driven by the higher l.evel of investment required to 

manufacture products using the natural gas than to export it. Natural gas 

use of 5 Bcf/d in the manufacturing sector requires more than $90 billion 

in investments and significant annual spending, while LNG export terminals with 5 Bcf/d of capacity would involve only $20 billion in new investment.37

This study concluded that ‘‘the total direct and indirect employment for the manufacturing sector (180,000 annual jobs) is more than eight times the total direct and 

indirect employment from LNG exports (22,000 annual jobs).’’38

The NERA study commissioned by DOE determined that the expansion of LNG 

exports would provide net economic benefit to the economy. 

In all of these cases, benefits that come from export expansion would 

more than outweigh the costs of faster increases in natural gas production 

and slower growth in natural gas demand, so that LNG exports have net 

economic benefits in spite of higher domestic natural gas prices. This is exactly the outcome that economic theory describes when barriers to trade are 

removed.39

The study also concluded that higher natural gas prices from LNG exports would 

hurt manufacturing employment. It determined that 

Higher natural gas prices in 2015 can also be expected to have negative 

effects on output and employment, particularly in sectors that make intensive use of natural gas. The manufacturing sector [is] dependent on natural 

gas as a fuel and are therefore vulnerable to natural gas price increases. 

These particular sectors will be disproportionately impacted leading to 

lower output.40

An increase in LNG exports could increase climate pollution 

It is irresponsible to discuss energy policies without consideration of the potential 

contributions to climate change. Recent scientific reports continue to sound even 

louder alarms about the threat to public health and our environment from unchecked carbon, methane, and other climate pollution. On March 30, the Intergovernmental Panel on Climate Change (or IPCC), the world’s largest deliberative body 

of scientific study devoted to climate change, released its latest report ‘‘Impacts, Ad-
22 

41 Intergovernmental Panel on Climate Change, ‘‘Fifth Assessment Report (AR5)’’, available at 

http://www.ipcc.ch/index.htm#.U0QQ7GbD-70 (last accessed April 2014). 42 Intergovernmental Panel on Climate Change, ‘‘IPCC WGII AR5 Summary for Policymakers,’’ (IPCC Secretariat: Geneva, 2014) available at http://ipcc-wg2.gov/AR5/images/uploads/ 

IPCC—WG2AR5—SPM—Approved.pdf. 43 Justin Gillis, ‘‘Panel’s Warning on Climate Risk: Worst Is Yet to Come,’’ New York Times, 

March 31, 2014, available at http://www.nytimes.com/2014/04/01/science/earth/climate.html. 44 U.S. Global Change Research Program, ‘‘National Climate Assessment Overview,’’ available 

at http://nca2014.globalchange.gov/downloads. 45Daniel J. Weiss and Siri Manning, ‘‘2013: Extreme Weather, Extreme Damage’’ Center for 

American Progress, March 27, 2014, available at http://www.americanprogress.org/issues/green/ 

news/2014/03/27/86532/2013-extreme-weather-extreme-damage/. 46 Ibid. 47The White House, ‘‘Climate Action Plan: Strategy to Reduce Methane Emissions,’’ (2014), 

available at http://www.whitehouse.gov/sites/default/files/strategylltollreducellmethanellemissionsll2014-03-28llfinal.pdf. 48 Ibid. 49 Ibid. 50 Ibid. 51 Ibid. 

aptation, and Vulnerability.’’41 In its strongest language to date, the report warns 

that ‘‘Impacts from recent climate-related extremes, such as heat waves, droughts, 

floods, cyclones, and wildfires, reveal significant vulnerability and exposure of some 

ecosystems and many human systems to current climate variability.’’42

The New York Times noted the report warns that 

‘‘Throughout the 21st century, climate-change impacts are projected to 

slow down economic growth, make poverty reduction more difficult, further 

erode food security, and prolong existing and create new poverty traps, the 

latter particularly in urban areas and emerging hot spots of hunger,’’ the 

report declared.43

The United States’ National Climate Assessment, released on May 6, reiterated 

the IPCC findings. The assessment includes the dire warning that 

Climate change, once considered an issue for a distant future, has moved 

firmly into the present... This National Climate Assessment concludes 

that the evidence of human-induced climate change continues to strengthen 

and that impacts are increasing across the country. 

Americans are noticing changes all around them. Summers are longer 

and hotter, and extended periods of unusual heat last longer than any living American has ever experienced. Winters are generally shorter and 

warmer. Rain comes in heavier downpours. People are seeing changes in 

the length and severity of seasonal allergies...

Other changes are even more dramatic. Residents of some coastal cities 

see their streets flood more regularly during storms and high tides. Inland 

cities near large rivers also experience more flooding, especially in the Midwest and Northeast. Insurance rates are rising in some vulnerable locations, and insurance is no longer available in others. Hotter and drier 

weather and earlier snow melt mean that wildfires in the West start earlier 

in the spring, last later into the fall, and burn more acreage.44

In the United States, climate related events exact a huge human and economic 

toll. Examples of these costs include scorching California drought, record floods in 

Colorado, and a deadly wildfire season just ahead. Nationwide, in the past three 

years, there were 34 extreme weather events that each caused $1 billion or more 

in damages.45 Together, these events took 1,221 lives and caused $208 billion in 

damages.46

So we must assess the potential impact of LNG exports on U.S. climate pollution. 

It’s well documented that fracking to produce shale gas generates fugitive methane, 

which is the main component of natural gas.47 Methane is a potent climate pollutant, which has 86 times more warming potential than carbon dioxide pollution over 

a 20-year time period.48 This means that significant additional emissions in the 

near future could spur much more climate change, extreme weather, and other 

harmful impacts.49

Oil and gas production is the second largest source of domestic methane pollution, 

responsible for nearly 30 percent of it.50 The administration’s ‘‘Climate Action Plan 

Strategy to Reduce Methane Emissions’’ noted that ‘‘methane equivalent to 127 million tons of carbon dioxide pollution was emitted from production, processing, transmission, storage, and distribution of natural gas’’ in 2012.51
23 

52 Jim Day, ‘‘EPA raises greenhouse issue in FERC reviews of LNG export terminals,’’ IHS 

The Energy Daily, April 4, 2014, available at http://www.theenergydaily.com/publications/ed/ 

10905.html. 53 Ibid. 54 National Energy Technology Laboratory, Life Cycle Greenhouse Gas Perspective on Exporting Liquefied Natural Gas from the United States, (U.S. Department of Energy, 2014), available 

at http://www.netl.doe.gov/File percent20Library/Research/Energy percent20Analysis/Life 

percent20Cycle percent20Analysis/NETL-LNG-LCA-29May2014.pdf. 55 Ibid. 56Sen. Edward Markey, ‘‘America Pays for Gas Leaks,’’ Report prepared for Sen. Edward Markey, August 1, 2013, available at http://www.markey.senate.gov/documents/markeylllostllgasllreport.pdf. 

If LNG exports drive an increase in natural gas production—as many predict— 

this could also spark growth in methane pollution unless strict limits are set to reduce it during the production and transportation phases. This concern led the EPA 

to urge FERC ‘‘to consider greenhouse gas impacts from increased U.S. natural gas 

drilling in its environmental review of a natural gas export terminal in Louisiana.’’ 

52

The U.S. must significantly reduce its methane releases to meet its 2020 climate 

pollution reduction goal. Later this year, the EPA will release its methane reduction 

ideas for the oil and gas sector, which should include cost-effective limits on this 

pollutant.53This reduction regime must be promptly implemented in oil and gas 

fields to avoid further exacerbating climate change. 

Ignoring the potential increase in methane pollution from additional gas production driven by LNG exports won’t make climate change go away—it will only make 

its impacts more deadly, destructive, and expensive. 

DOE, too, must also assess the potential increase in methane pollution when reviewing pending LNG export applications. This evaluation should factor in the cumulative increase in natural gas production from all of the LNG export applications 

already approved, as well as the impact of the growth in gas production due to additional exports. 

Some proponents of additional LNG exports argue that they would benefit the climate by replacing dirty coal-fueled electricity produced in Asia and Europe. Natural 

gas combustion for electricity emits only half of the carbon pollution compared to 

coal combustion. However, the National Energy Technical Laboratory’s (or NETL) 

just released ‘‘Life Cycle GHG Perspective on Exporting LNG from the U.S.’’ found 

that there are 50 percent more emissions from the natural gas export supply chain 

compared to coal’s supply chain, offsetting the gains due to lower pollution from 

combustion.54 Thus, the NETL analysis concluded that there was little difference in 

the total amount of life cycle climate pollution between ‘‘U.S. LNG exports for power 

production in European and Asian markets. when compared to regional coal extraction and consumption for power production.’’55

Exporting LNG would convert a relatively clean fuel to one with similar emissions 

levels to coal. At a time when we must sharply reduce climate pollution, we can little afford such a result. LNG export proponents cannot claim that more exports will 

lower overseas climate pollution because NETL debunked this notion. 

Save natural gas, create jobs, cut pollution 

One way to lower consumer prices and cut climate pollution is to make our natural gas distribution system much more efficient. A report by Sen. Ed Markey, 

‘‘America Pays for Gas Leaks,’’ estimated that the aging network of natural gas 

pipelines leak significant amounts of this fuel. It determined that 

Gas distribution companies in 2011 reported releasing 69 billion cubic 

feet of natural gas to the atmosphere, almost enough to meet the state of 

Maine’s gas needs for a year and equal to the annual carbon dioxide emissions of about six million automobiles. 

Gas companies have little incentive to replace these leaky pipes, which 

span about 91,000 miles across 46 states because they are able to pass 

along the cost of lost gas to consumers. Nationally, consumers paid at least 

$20 billion from 2000-2011 for gas that was unaccounted for and never used 

according to analysis performed for this report.56

Sen. Markey introduced legislation that would begin to plug these leaks. ‘‘The 

Pipeline Modernization and Consumer Protection Act,’’ S. 1767, would ‘‘require gas 

pipeline facilities to accelerate the repair, rehabilitation, and replacement of high- 
24 

57Pipeline Modernization and Consumer Protection Act, S. 1767, 113th Cong., 1s sess. (November 21, 2013), available at http://beta.congress.gov/bill/113th-congress/senate-bill/1767?q={ 

percent22search percent22 percent3A[ percent22Markey percent22]}. 58 Ibid. 59Pipeline Revolving Fund and Job Creation Act, S. 1768, 113th Cong., 1s sess. (November 

21, 2013), available at http://beta.congress.gov/bill/113th-congress/senate-bill/1768?q={ 

percent22search percent22 percent3A[ percent22Markey percent22]}/. 60 ‘‘USAID Marks Four Years of Success in Improving Municipal Energy Efficiency in 

Ukraine,’’ (2014), available at http://ukraine.usembassy.gov/events/usaid-heating-project.html. 61 Ibid. 62 Alliance to Save Energy and the International Resource Group, ‘‘Ukraine Municipal Heat 

Reform Project, Energy Monitoring Report For Heating Season 2010-2011: Implementation Of 

Heat Metering And Weather-Based Control Systems (Draft),’’ prepared for USAID (2011). 63 Engility, ‘‘Municipal Energy Reform Project (MERP)—Ukraine,’’ available at http:// 

www.engilitycorp.com/files/8613/8669/8425/ENERGYll-llMERPllRev.pdf. 64 A. Delgado and M. Evans, ‘‘Inventory of U.S.-led International Activities on Building Energy 

Efficiency,’’ prepared for U.S. Department of Energy, (Richland, WA: Pacific Northwest National 

Laboratory, 2010) available at http://www.pnl.gov/main/publications/external/technicallreports/ 

pnnl-19467.pdf. 65 Engility, ‘‘Municipal Energy Reform Project (MERP)—Ukraine.’’ 

risk pipelines.’’57 Companies would develop a priority list of their pipelines that pose 

the most risk, and adopt a cost-recovery program to pay to repair them.58

Sen. Markey also introduced a bill to help stem natural gas leaks from pipelines 

while creating jobs. The ‘‘Pipeline Revolving Fund and Job Creation Act,’’ S. 1768, 

would provide ‘‘grants to states to establish [revolving] loan funds,’’ with each state 

providing 20 percent of the money in their fund.59 It would last for ten years. 

Together, these bills would begin to plug natural gas pipeline leaks, create jobs 

for workers to repair them, save consumers money due to less wasted gas, and cut 

climate pollution. Most importantly, they would identify and repair the most hazardous pipelines to reduce the likelihood of another tragic gas explosion, such as the 

one in Harlem in March. 

Companion bills were introduced in the House of Representatives by Rep. Charles 

Rangel (D-NY). These bills have broad support from organizations including the 

United Steelworkers, Consumers Union, New England Gas Workers Association, 

United Association of Plumbers and Pipefitters, and other interests. 

USAID PROGRAM ACHIEVED COST-EFFECTIVE EFFICIENCY IN UKRAINE

The United States Agency for International Development (USAID) has already invested a small amount of funds to reduce Ukraine’s woeful energy waste. It 

launched the ‘‘Municipal Heating Reform Project,’’ (or MHR) in 2009, which ‘‘selected 38 cities. . . for the implementation of project activities and energy efficiency 

demonstration projects.’’60 There were efforts in these cities to conduct 

Municipal energy assessments, development of municipal energy plans, 

development of legal and technical specifications for metering equipment, 

implementation of energy efficient technologies, and monitoring results.61

By 2013, the project achieved substantial results. For instance, through 2012 ‘‘on 

average, the implementation of heat metering and control systems resulted in 18.7 

percent savings,’’ according to an Alliance to Save Energy draft report.62

Engility, a USAID contractor on the MHR project, noted that it leveraged 

USAID’s investment to achieve the following significant energy, financial, and pollution savings, including: 

• 380 million cubic meters of natural gas saved; 

• $225 million leveraged for energy efficiency projects; 

• 676,000 tons CO2 emissions reduction; 

• 25 Municipal Energy Plans with appropriate local budget support; 

• 5 Regional Training Centers established; 

• 34 energy efficiency/improved heating demonstration projects; and, 

• 3,160 people (including 1,760 women) directly trained in energy efficiency subjects.63

The MHR project was relatively inexpensive. The first three years cost a total of 

$15 million.64 It received another $13.5 million in September 2013.65

EFFICIENCY CAN PROMPTLY HELP UKRAINE REDUCE DEPENDENCE ON 

RUSSIAN GAS 

Russia recently increased its threat to Ukraine by cutting off its natural gas supplies. Russia hopes to exploit Ukrainian dependence on its gas to dominate this 
25 

66 Energy Information Administration, ‘‘Ukraine,’’ available at http://www.eia.gov/countries/ 

country-data.cfm?fips=UP (last accessed April 2014). 67The White House, ‘‘FACT SHEET: U.S. Crisis Support Package for Ukraine,’’ Press release, 

April 21, 2014, available at http://www.whitehouse.gov/the-press-office/2014/04/21/fact-sheet-uscrisis-support-package-ukraine. 68Sen. Ed Markey, ‘‘Markey Introduces Legislation to Boost Ukrainian Energy Independence, 

Lessening Putin’s Power,’’ Press release, June 5, 2014, available at http:// 

www.markey.senate.gov/news/press-releases/markey-introduces-legislation-to-boost-ukrainianenergy-independence-lessening-putins-power. 69 Ibid. 70 Ibid. 71Steven Mufson, ‘‘Can U.S. natural gas rescue Ukraine from Russia?’’ Washington Post, 

March 25, 2014, available at http://www.washingtonpost.com/blogs/wonkblog/wp/2014/03/25/canu-s-natural-gas-rescue-ukraine-from-russia/. 72 Ayesha Rascoe, ‘‘U.S. lawmakers mull speedier gas exports to help Ukraine, Europe,’’ Reuters, March 25, 2014, available at http://www.reuters.com/article/2014/03/25/us-usa-lng-congressidUSBREA2O08Z20140325. 73 Cheniere, ‘‘Sabine Liquefaction Project Schedule.’’ 74 Clifford Krauss, ‘‘U.S. Gas Tantalizes Europe, but It’s Not a Quick Fix,’’ New York Times, 

April 7, 2014, available at http://www.nytimes.com/2014/04/08/business/energy-environment/usgas-tantalizes-europe-but-its-not-a-quick-fix.html?—r=0. 75Steven Mufson, ‘‘Can U.S. natural gas rescue Ukraine from Russia?’’ 

independent nation. In 2012, Ukraine produced only 37 percent of its own gas, and 

imported the remainder from Russia.66

The Obama administration recently delivered some cost effective aid to Ukraine 

that would reduce its reliance on Russian gas. During Vice President Joe Biden’s 

visit to Ukraine in April, he promised assistance to ‘‘maximize energy efficiency, 

which could deliver potentially huge cost savings to Ukraine and rationalize energy 

consumption.’’67

Sen. Markey introduced legislation to build on this aid, the ‘‘Ukrainian Independence from Russian Energy Act,’’ S. 2433.68 He noted that this bill responds to 

A coalition of 35 Ukrainian mayors... urgently requesting assistance 

in increasing the energy efficiency of their buildings, district heating systems, and transportation networks in order to reduce dependence on imports of natural gas from Russia. 

Ukraine is currently the second most wasteful country in the world with 

energy. If the country were only as energy efficient as the average country 

in Europe, that level of efficiency would almost completely eliminate 

Ukraine’s need to import Russian natural gas.69

S. 2433 would provide $30 million over three years to assist Ukraine with efficiency measures, including replacing inefficient boilers, upgrading district heating 

systems, plugging leaky pipes, and improving the efficiency of buildings.70

EFFICIENCY IS FASTER AND CHEAPER THAN LNG EXPORTS TO AID UKRAINE

Legislators are understandably concerned about Russia using natural gas as a 

weapon against Ukraine. The Washington Post reported that 

Many members of Congress are pressing the Obama administration to 

use energy as a diplomatic weapon and to speed permits for natural gas export terminals to ease Europe’s and Ukraine’s heavy reliance on Russian 

supplies.71

There is legislation to fast track approval of additional LNG export applications 

by eliminating or truncating DOE’s public interest review of proposed exports.72

Additional approval of LNG exports threatens to further hike natural gas prices 

and pollution, but would do little to help Ukraine. The Sabine Pass LNG facility 

is the export terminal nearest to completion, and its finish date is at least a year 

and a half away.73 The New York Times notes that ‘‘half of the gas that will leave 

[the] facility has already been contracted by India and South Korea. The other half 

will go to British and Spanish companies.’’74

None of the other approved LNG terminals have even begun construction. The 

Washington Post predicts that LNG exports to Ukraine could not occur until ‘‘years 

from now. The earliest gas exports won’t come until late 2015 or 2016, and most 

won’t get started until 2017 through 2019.’’75

Oil executives understand that the approval, construction and operation of LNG 

export terminals is a lengthy process. The New York Times reported that 

‘‘L.N.G. exports are not about snapping your fingers and making them 

happen,’’ said Marvin E. Odum, president of the Shell Oil Company, which 
26 

76 Clifford Krauss, ‘‘U.S. Gas Tantalizes Europe, but It’s Not a Quick Fix.’’ 77 Ibid. 78 Jennifer A. Dlouhy, ‘‘Sen. Markey: Regulatory oversight jeopardizes gas export approvals,’’ 

Fuel Fix, June 16, 2014, available at http://fuelfix.com/laredo/2014/06/16/sen-markey-regulatoryoversight-jeopardizes-gas-export-approvals/. 79Sen. Ed Markey, ‘‘Markey: Natural Gas Export Approvals May Be Unlawful,’’ Press release, 

June 16, 2014, available at http://www.markey.senate.gov/news/press-releases/markey-naturalgas-export-approvals-may-be-unlawful. 80 Jennifer A. Dlouhy, ‘‘Sen. Markey: Regulatory oversight jeopardizes gas export approvals.’’ 

has partnered with Kinder Morgan in a proposed export terminal in Georgia that is awaiting regulatory approval. ‘‘These are large business development projects that take several years of construction and several years of 

business development and engineering design.’’76

The Times concluded that ‘‘the United States can offer little hope for Europeans 

eager to diversify their gas sources as Russia occupies Crimea and may threaten 

other parts of eastern Ukraine.’’77

The bottom line: rushing to approve more LNG exports will not provide immediate 

or prompt relief for embattled Ukraine, but there are other significant ways we can 

help them. 

Rather than eliminate the public interest review of proposed LNG export facilities, the United States should expand the administration’s energy efficiency assistance to Ukraine by passage of S. 2433 to help slash its energy waste. Some of these 

efficiency measures could include replacement of inefficient furnaces and compressors with highly efficient American made models. This would reduce Ukrainian purchases of Russian gas, and create jobs both in Ukraine and the United States. 

On Monday, June 16, new uncertainty was injected into the fate of LNG exports 

when it was revealed that the federal government may have ignored the law by approving export applications. Based on an investigation by Sen. Markey, the Houston 

Chronicle reported that 

A decades-old decision by the Commerce Department to abandon congressionally mandated restrictions on natural gas exports could jeopardize current plans to sell the fossil fuel overseas. 

Although Congress passed a law in 1975 directing the government to bar 

exports of U.S. oil and natural gas, the Commerce Department never got 

further than crude. And when Commerce formally delegated gas export 

issues to the then one-year-old Energy Department in 1978, it did so citing 

a much older 1938 law and the regulations born under it—without any 

mention of the newer 1975 mandate.78

This four decade disregard of the Energy Policy and Conservation Act of 1975 

could halt approval of additional export applications, and provides a potent legal argument to those challenging the applications already approved by DOE.79 The Department of Commerce has yet to respond to Sen. Markey’s findings.80

CONCLUSION 

The huge increase in domestic shale gas production provides many benefits to the 

United States, including a home grown, cleaner, cheaper fuel for electricity generation, and more jobs in the oil and gas industry. It has also sparked a domestic manufacturing renaissance. We must ensure that there are strict enforceable limits on 

the emission of methane and other air and water pollution produced from the production, transmission and combustion of natural gas. 

Likewise, the approval of additional LNG export applications should occur only if 

they do not cause electricity price spikes that would harm middle- and low-income 

families and business budgets, lower wages, or impair the recent manufacturing resurgence. Additionally, such exports must help reduce—rather than increase—climate pollution. The cheapest, fastest, most economically beneficial step to meet energy needs in the United States or Ukraine is to launch mass energy efficiency programs to plug leaky pipes, reduce building energy use, and reduce other sources of 

energy waste. This would provide much quicker assistance to Ukraine than eliminating public interest reviews for future LNG export proposals. 

The CHAIR. Thank you. 

Mr. Durbin. 
27 

STATEMENT OF MARTY J. DURBIN, PRESIDENT AND CEO, 

AMERICA’S NATURAL GAS ALLIANCE 

Mr. DURBIN. Thank you. Good afternoon, madame chair, Ranking 

Member Murkowski, members of the committee. 

The question presented by today’s hearing appropriately acknowledges the tremendous opportunity we have as a Nation. The 

enormous technological innovations which continue to advance at a 

stunning pace are driving economic growth, environmental improvements and enhanced energy security. Recently the former 

Federal Reserve Chairman, Ben Bernanke, commented that growth 

in domestic energy production is one of the bright spots in our economic recovery. 

In addition, increased use of natural gas in both power generation and transportation is greatly reducing emissions not only of 

carbon dioxide, but also criteria pollutants such as sulfur dioxide, 

nitrogen oxides, mercury and particulate matter. Of course, to fully 

harness the benefits of natural gas the Federal Government must 

support the continued, safe and responsible development of this resource and maintain the fiscal policies that have drivenin the innovation and allow for cost recovery in what is a very capital intensive activity. But just as importantly we must work together to assure the necessary policies, infrastructure and market rules are in 

place that will allow for the efficient utilization of natural gas 

across the economy from power generation and manufacturing to 

transportation and exports. 

It’s important to highlight the scope of our abundant, affordable 

supply of natural gas in this country. Simply put the U.S. has 

enough natural gas at affordable prices to sustain substantial increases in domestic consumption and to support exports. 

To provide some context the volume of natural gas consumed in 

2013 in the U.S. was 26 trillion cubic feet. Compare that to recent 

projections that show a range of technically recoverable gas using 

today’s technology from 2,200 to 3,500 trillion cubic feet. There’s 

your one hundred plus year supply. As technology continues to advance in unconventional drilling these reserve estimates will continue to grow. 

Exporting natural gas gives you, as policymakers, a chance to 

create new jobs here at home, reduce the trade deficit and grow 

GDP. Production spurred by exports will also increase the production of natural gas liquids benefiting our petrochemical industry 

that is already seeing a resurgence of new and expanded facilities. 

LNG exports can help support all of this at home while helping 

U.S. allies around the world, but time is of the essence. 

Globally natural gas demand is not infinite and other countries 

are already seizing this opportunity. Those facilities that are able 

to come online sooner from whatever country will have a competitive advantage in serving the expected global LNG demand. 

There are also exciting opportunities for increased use of natural 

gas in the transportation sector. Natural gas use in heavy duty 

transportation including truck, rail and marine applications is driven by the performance and cost saving benefits that natural gas offers. Compliance with regulatory requirements to reduce pollutants 

are also driving investments in natural gas as a transportation 
28 

fuel. Of course, using this domestic fuel continues to enhance U.S. 

energy security. 

The transportation industry is seeing the benefits of LNG as a 

fuel. For example, Harvey Gulf International Marine has commissioned the construction of 6 LNG powered, offshore supply vessels 

and expects to save a dollar per gallon in fuel costs. 

In the on road space we’ve seen significant growth in the number 

of both CNG and LNG fueling stations. 

While this growth in the on road and off road markets is encouraging, it’s also important to highlight policy changes that could 

have a positive impact in the transportation sector. For example, 

the natural gas vehicle industry is supporting the formal adoption 

of a diesel gallon equivalent as the measurement to be used for 

both CNG and LNG. So consumers can make simple and accurate 

cost comparisons. 

Madame Chair, the shale energy revolution has allowed us to 

transition from a posture of energy scarcity to one of energy abundance in just a few short years. As this hearing demonstrates we 

have the ability to harness clean, abundant and affordable natural 

gas for both domestic consumption and for exports. This paradigm 

shift is driving economic growth, environmental improvements and 

enhanced energy security. 

ANGA will continue to engage policymakers in helping to find solutions to our Nation’s energy challenges. I’m grateful to the Chair, 

the ranking member and members of the committee. I look forward 

to our continued work together. 

Thank you. 

[The prepared statement of Mr. Durbin follows:] 

PREPARED STATEMENT OF MARTIN J. DURBIN, PRESIDENT AND CEO, AMERICA’S

NATURAL GAS ALLIANCE

Introduction 

Good afternoon, Madam Chair, Ranking Member Murkowski and Members of the 

Committee. Thank you for the opportunity to testify today. My name is Marty Durbin. I am President and Chief Executive Officer of America’s Natural Gas Alliance 

(‘‘ANGA’’). 

ANGA represents North America’s leading independent natural gas exploration 

and production companies. We work with industry, government and customer stakeholders to increase demand for, and ensure availability of, our nation’s natural gas 

resources for a cleaner and more secure energy future. The collective natural gas 

production of ANGA member companies is approximately eight trillion cubic feet annually, which represents one third of total U.S. production. 

Today’s hearing asks how we can harness this game-changing resource, which appropriately acknowledges the opportunity we have before us as a nation. The enormous technology innovations, which continue to advance at a stunning pace, are 

driving economic growth, environmental improvement and enhanced energy security. 

Recently, former Federal Reserve Chairman Ben Bernanke commented that 

growth in domestic energy production is one of the ‘‘bright spots’’ in our economic 

recovery, responsible for significant job creation and investment here at home. In 

addition, increased use of natural gas in both power generation and transportation 

is greatly reducing emissions not only of carbon, but also of criteria pollutants such 

as sulfur dioxide (SO2), nitrogen oxides (NOx), mercury and particulate matter 

(PM). And the opportunity to export natural gas provides economic and national security benefits. 

To fully harness the benefits of natural gas, ANGA believes the federal government must, of course, allow for the continued safe and responsible development of 

this resource, and maintain fiscal policies that have driven innovation and allow for 

cost recovery in what is a capital-intensive activity. Just as importantly, we must 

all work together to ensure the necessary infrastructure, policies and market rules 
29 

* All figures have been retained in committee file. 

1 ICF International, ‘‘U.S. LNG Exports: Impacts on Energy Markets and the Economy.’’ May, 

2013. pg. 44-45. 2 Ibid. 

3 EIA, ‘‘Annual Energy Outlook 2014.’’ May, 2014. 

4 NYMEX Futures, Henry Hub 2015 Annual Strip. Trade dates: Jan 1, 2014—Jun 13, 2014. 

5 Intercontinental Exchange, TGP-Z4 Marcellus Spot. Trade date: Jan 21, 2014. 

6 NERA Economic Consulting, ‘‘Macroeconomic Impacts of LNG Exports from the United 

States.’’ December 2012, pg 1. 

are in place that allow for the efficient use of natural gas across the economy manufacturing, transportation and exports. 

Today, however, I will focus my testimony on the exports of LNG and the tremendous opportunities we have for e use of natural gas in the transportation and manufacturing sectors. But, first I want to highlight the abundant driving these opportunities. 

Natural Gas Supply 

The Energy Information Administration (EIA), the Potential Gas Committee, and 

MIT all project ample domestic supplies of natural gas to power our nation for generations. The U.S has enough natural gas at reasonable prices to sustain substantial increases in domestic consumption and to support exports. To put these findings 

in context, the volume of natural gas consumed in 2013 in the U.S. was 26 trillion 

cubic feet. The most recent projections show a range of technically recoverable gas 

using today’s technology from 2,203 to 3,545 trillion cubic feet (Figure 1*). As technology continues to advance in unconventional drilling, reserve estimates will also 

continue to grow. 

Importantly, using today’s technology, ICF International estimates more than 1,500 TCF of dry gas is recoverable at $5 per MMBTU or less in the United States 

and Canada1 (Figure 2). 

Source: ICF2

Technology advancements have allowed us to access natural gas reserves that 

were previously too expensive to extract. Since the beginning of 2005, natural gas 

production in the United States has increased 30 percent. EIA’s most recent projections, the 2014 Annual Energy Outlook3 (AEO2014) show a 56 percent increase in 

total natural gas production from 2012 to 2040. Figure 3 shows that the most recent 

projection is 47 percent higher than the projection made in 2009 and 10 percent 

higher than just last year. The only uncertainty appears to be how high it will go. 

Price projections show an inverse relationship to production estimates (see Figure 4). In 2009, 2035, but their most recent outlook (AEO2014) projects prices near $6 

per MMBTU. EIA’s projections are comparable Mackenzie (WoodMac), and CERA. 

Price increases during last winter’s by infrastructure constraints and not a lack 

of supply. Cold weather drove a short-term increase in prices at Henry Hub by a 

couple of dollars per MMBTU but prices reverted quickly back to their long-term 

outlook range as weather improved. More importantly, the prompt year forward 

markets remained relatively un-phased by price movements seen in the spot market. The annual 2015 strip remained less than $4.50 per MMBTU4. And even on 

the one day when spot prices went to $120 per MMBTU in New York, the price in 

Western Pennsylvania was $4.30 per MMBTU.5 This further emphasizes the robust 

supply underlying all natural gas market fundamentals. 

This abundant, affordable supply can support significant demand growth across 

all sectors of the economy including power generation, manufacturing, transportation and exports. The relevant question is not how much prices will increase due 

to this growth in demand, but rather how much demand will grow to take advantage of this abundant, affordable resource. 

LNG Exports & the Manufacturing Renaissance 

Incremental demand from LNG exports is projected to result in small price impacts. The NERA Economic Consulting study commissioned by the Department of 

Energy finds that as the level of LNG exports increase from the U.S., so too does 

the level of economic benefits to the U.S.6

Additionally, robust natural gas production has also resulted in dramatic increases in U.S. natural gas liquids (NGL) production. This impressive increase in 

NGL supply, the primary feedstock for chemicals and plastics manufacturing, is 

driving an unprecedented resurgence in our nation’s petrochemical industry. Cal 

Dooley, President and CEO of the American Chemistry Council, stated in March 

that ‘‘U.S. chemical manufacturers surpassed the $100 billion mark in anticipated 

investments related to shale gas... nearly 150 investment projects—ranging from 

restarts, to expansions, to brand new facilities—will create an estimated $81 billion 
30 

7Dooley, Cal. ‘‘Prepared Remarks for Cal Dooley.’’ March 5, 2014 http:// 

www.americanchemistry.com/Policy/Chemical-Safety/TSCA/Cal-Dooley-Remarks-at-GlobalChem2014.pdf 8 ICF International, ‘‘U.S. LNG Exports: Impacts on Energy Markets and the Economy.’’ May, 

2013. pg. 7. 9 ICF International, ‘‘Tech Effect: How Innovation in Oil and Gas Explorati October 2012. pg. 

4. 10David L. Goldwyn, ‘‘Refreshing European Energy Security Policy: How the U.S. Can Help 

,’’ Brookings Institution (2014). Pg. 1.Institution (2014). Pg. 1. 11 Id at 1. The following countries have LNG import terminals under construction or proposed: 

Franc Poland, Spain, Croatia, Estonia, Italy, Romania, and Ukraine. 12 Charles K. Edinger and Govinda Avasarala, ‘‘The Case for U.S. Liquefied Natural Gas Exports,’’ Brookings Institution (2013), accessed June 17, 2014, http://www.brookings.edu/research/ 

articles/2013/02/us-lng-exportsebinger-avasarala. 13 EIA, ‘‘Annual Energy Outlook 2014.’’ May 2014. 

per year in new chemical industry output, and 637,000 permanent new jobs in communities across the United States.’’7

Dry natural gas and NGLs are co-products, and in most cases, one is not produced 

without the other. An increase in dry gas production will result in an increase in 

NGL production. A demand outlet for dry gas (like LNG exports) encourages continued investment in overall production, which in turn leads to a robust supply of 

NGLs and vice versa. ICF examined the impacts of LNG exports and found that 

natural gas liquid volumes would increase between 138,000 and 555,000 barrels per 

day (bpd) by 2035 due to LNG exports.8 An increase in NGL supply helps to preserve low NGL prices and this benefits domestic manufacturing industries. 

With respect to LNG exports, time is of the essence. Global demand for natural 

gas is expected to increase between 18 bcf/d and 38 bcf/d by 2025. Proposed new 

global LNG capacity outside the U.S. is approximately 50 bcf/d. Given the disparity 

between projected demand, and the number of facilities being proposed worldwide, 

the window of opportunity for the U.S. to get involved is narrow. The facilities that 

come online the fastest will have a competitive advantage in serving the expected 

global LNG demand. 

For every incremental billion cubic feet of gas produced each day to support LNG 

exports, 13,000 upstream jobs, 1,700 construction jobs and 200 operations jobs are 

created.9

Recent instability in Ukraine has focused much attention on the U.S. national security implications of global energy markets. In addition to helping reduce the trade 

deficit, LNG exports allies and bolster the U.S. ability to influenceglobal energy dynamics. 

The presumption of future U.S. supply will impact price expectations and the infrastructure investment decisions that are made today for both export and import 

facilities around the globe.10 The promise of U.S. LNG exports in the near term 

have reportedly proveded greater leverage to countries negotiating new contracts 

with existing supplies, incuding Russia.11

Just a few years ago, the U.S. was expected to be a major importer of natural 

gas. The shale revolution has eliminated our need for imports, thereby increasing 

global supplies and reducing prices across the board.12 Allowing U.S. Henry Hub indexed exports will help sustain lower pricing over the long-term and provide an alternative to oil-linked gas contracts. Lower world prices are a benefit to everyone, 

and while this could increase competition for the U.S. it will also allow for a more 

liquid and ‘‘free’’ market. 

Transportation 

In addition to exports, natural gas can be used domestically in a variety of ways 

including peaking storage for heating needs and power generation; as an alternative 

fuel in heavy-duty applications such as oil and gas production and in heavy-duty 

transportation such as in freight movement via truck, rail or marine. LNG is particularly appealing in heavy-duty applications due to both the economic and environmental benefits. 

The primary drivers for the adoption of natural gas as a transportation fuel are 

performance and cost savings. However, in some instances compliance with regulatory requirements to reduce pollutants such as sulfur dioxide (SO2), nitrogen oxides (NOX), and particulate matter (PM) can also drive investment in CNG or LNG 

as a transportation fuel. Additional benefits include enhanced energy security 

through the greater use of domestic fuel sources. 

Significant potential for natural gas as a transportation fuel exist in the heavyduty on-road, rail and marine transportation industries. According to EIA, rail consumption is projected to increase from just over 1 trillion Btu in 2017 to 148 trillion 

Btu in 2040, or 35 percent of total freight rail energy consumption (Figure 7).13
31 

14Several Governors as well as a group of bipartisan members of the House of Representatives 

are formally supporting the gallon equivalency standard. 

We are seeing large-scale, private sector investments in the tech needed to utilize 

natural gas in high horsepower applications. Companies like Harvey Gulf International Marine based in New Orleans, L commissioned the construction of six LNG 

powered Offshore Supply Vessels (OSVs). Harvey Gulf expects t in doing so, will 

have helped revitalize a number of businesses associated with the U.S. shipbuilding 

industry. By 2016, Harvey Gulf expects to have all six OSVs serving the oil and gas 

drilling industry o Each of the six vessels in the Harvey Gulf fleet will utilize 90,000 

gallons of LNG per month. Harvey Gulf expects to save $1 dollar per gallon in fuel 

costs and is currently building the first LNG maritime fueling facility in Port 

Fourchon—a facility which will be capable of storing 270,000 gallons of LNG to support their own growing fleet as well as other maritime companies who are considering natural gas powered vessels. 

There are also great examples of public-private partnerships encouraging increased natural gas use in the transportation sector. For example, in the Pacific 

Northwest, the Washington State Ferries, based in Olympia, Washington. WSF is 

evaluating LNG as a source of fuel for six ferries. WSF burns more than 17 million 

gallons of fuel each year. Their analysis has shown that switching from diesel to 

LNG could save 40-50 percent at today’s fuel price. Pending U.S. Coast Guard approval and funding, WSF could begin the first conversion of an Issaquah Class ferry 

as early as 2016. 

As a result of the shale gas revolution, we have seen significant growth in the 

last two years in the number of natural gas fueling stations. Nationally, there are 

now 1,378 CNG stations and 94 LNG stations. According to the Alternative Fuels 

Data Center there are 79 LNG stations planned and another 155 CNG stations 

planned to open in the coming year. In Texas alone, there are 78 CNG fueling stations and another 24 planned as well as 12 LNG fueling stations with 9 additional 

LNG fueling stations currently planned. The Texas Clean Transportation Triangle 

continues to serve as a model for public-private natural gas fueling to help address 

poor air-quality in the major metropolitan areas in Texas. Since the start of the program in 2011, the TCTT has created nearly 1,000 clean fuel technology jobs, $135 

million in direct investment into the Texas economy and allowed fleets like UPS, 

Procter and Gamble, Waste Management, and Frito Lay to deploy natural gas vehicles (NGV) and recognize the benefits of natural gas as a transportation fuel. 

While this growth in the on and off-road markets is encouraging, it is also important to highlight policy decisions that could have a positive impact on the industry 

and could speed up the pace of adoption. Currently, the NGV industry is supporting 

the formal adoption of diesel gallon equivalent (DGE) as the measurement to be 

used for CNG and LNG. This will allow consumers to make simple and accurate 

cost comparisons. As the use of natural gas in American vehicles is increasing, we 

believe that enabling consumer adoption should be a priority. This type of policy is 

exactly what is needed to ensure that our abundant supplies of natural gas continue 

to experience growth in new market sectors such as transportation. We encourage 

Congress to support adoption of the DGE standard for CNG and LNG in transportation applications.14

Conclusion 

The shale energy revolution has allowed us to transition from a posture of energy 

scarcity to one of energy abundance in just a few short years. As this hearing demonstrates, we have the ability to harness clean, abundant, and affordable natural 

gas for both domestic consumption and for exports. This paradigm shift is driving 

economic growth, environmental improvements and enhanced energy security. 

ANGA will continue to engage policymakers in helping to find solutions to our nation’s energy challenges. I am grateful to the Chair, the Ranking Member and the 

Members of the Committee for the opportunity to testify today on behalf of America’s Natural Gas Alliance and I look forward to our continued work together. 

The CHAIR. Thank you, Mr. Durbin.. 

Ms. Rosenberg. 
32 

STATEMENT OF ELIZABETH ROSENBERG, SENIOR FELLOW 

AND DIRECTOR OF THE ENERGY, ENVIRONMENT AND 

ECURITY PROGRAM, CENTER FOR A NEW AMERICAN SECURITY 

Ms. ROSENBERG. Madame Chair, Ranking Member Murkowski 

and distinguished members of the committee, thank you for the opportunity to testify on the national security and foreign policy implications of exporting liquefied natural gas. 

The United States finds itself today in a radically, more positive 

energy supply position than that of 5 years ago. Natural gas production has expanded well over 30 percent since 2005. there is new 

scope for a variety of new gas uses including LNG export. 

Washington now has a unique window of opportunity to use new 

found sources of energy to revitalize U.S. global leadership and the 

stability of free markets and strength of liberal, international 

norms. Decisions taken today to export LNG will deepen U.S. trading ties with strategic States tomorrow. They will also bolster the 

U.S. economy, improve the energy security of partners abroad and 

allow the U.S. to more effectively spur and support multilateral action to counter international security threats in the years ahead. 

The ability to export LNG opens new markets abroad for U.S. 

natural gas creating new revenue opportunities and economic 

growth. Exporting LNG will also create an incentive for additional 

natural gas production which will accrue economic benefits 

throughout the gas value chain in the United States from well 

head to export terminal. 

A strong economy is fundamental to U.S. national security. It 

provides the fiscal basis for U.S. leadership abroad including military development and humanitarian relief commitments. The massive and recent increase in unconventional gas has already helped 

to put the United States in a much stronger financial position. 

It has been a leading factor in decreasing the trade deficit which 

was at its lowest in 4 years last year and has slowed the rate of 

increase of U.S. indebtedness. Both of these factors will allow the 

United States new capacity and flexibility to advance foreign policy 

interests. The United States can further strengthen its hand globally if it exports energy, including LNG. 

Another security benefit of exporting LNG is the contributions it 

will make to a more stable, efficient and diversified natural gas 

market globally. In Asia, in particular, U.S. LNG exports will also 

help to lower prices which are currently 3 to 4 times those in the 

United States. The United States is stronger when our allies and 

trading partners have efficient, stable markets and have reliable, 

affordable energy supplies so fundamental to thehealth of any economy. 

Stable and diversified natural gas markets in Europe and Asia, 

primary receiving regions of LNG, will help insulate these economies from potential supply disruptions and importantly, diversified 

markets will help them to mitigate current or future politicized 

pricing arrangements from some more traditional suppliers. For example, more diversified markets will undermine the ability of gas 

suppliers, particularly Russia, to exert coercive market pressure on 

consumers. U.S. export of LNG is an important policy choice that 

will help expand U.S. economic opportunity, strengthen national 
33 

1 U.S. Energy Information Administration, U.S. Natural Gas Imports, (May 30, 2014). http:// 

www.eia.gov/dnav/ng/hist/n9100us2a.htm 2 Ibid. 

security and help cement U.S. leadership in the international community. 

We should not exaggerate its efforts, however. It is far from a 

cure all for gas market inefficiency, politicization or instability. It 

cannot, of itself, bring economic or energy security to our economy 

or the economies of our allies and partners. As a blunt instrument 

offoreign policy, it also cannot achieve short term, targeted political 

aims. Nevertheless, it can promote more stable, competitive and diversified energy markets internationally and a stronger U.S. economy which all redound to the benefit of U.S security. 

Refraining from selling LNG abroad in order to support domestic 

manufacturing interests or to try and stem carbon emissions 

growth would undermine U.S. foreign relations and the scope of 

our leadership abroad. It would also cause the United States to lose 

out economically to other countries that do, by contrast, move 

ahead now to build export capacity. 

As the United States thinks about the energy and foreign policy 

agenda that can best promote prosperity and our national interest, 

it must prioritize responsible production of energy and its export. 

Thank you for the opportunity to testify. I look forward to your 

questions. 

[The prepared statement of Ms. Rosenberg follows:] 

PREPARED STATEMENT OF ELIZABETH ROSENBERG, SENIOR FELLOW AND DIRECTOR OF

THE ENERGY, ENVIRONMENT AND SECURITY PROGRAM CENTER FOR A NEW AMER- ICAN SECURITY

Madam Chair, Ranking Member Murkowski and distinguished members of the 

Committee, thank you for the opportunity to testify on some of the key considerations associated with production and export of abundant U.S. natural gas supplies. 

I will focus my remarks on the national security and foreign policy implications of 

exporting liquefied natural gas (LNG). 

The United States finds itself today in a radically more positive energy supply position than that of five years ago. Natural gas production expanded over 30 percent 

since 2005 to 66.5 billion cubic feet per day in 2013./1/ Imports fell sharply, roughly 

66 percent in this time./2/ This abundance, along with 100 years’ worth of reserves 

in the ground at current consumption levels, has led to the redesign of terminals 

intended to receive LNG only five years ago. They are now intended to export this 

commodity and will compete with other proposed new facilities to move gas overseas. The United States is expected to send LNG abroad at the end of next year 

or in early 2016, and is forecast to be a net gas exporter by 2018. 

In a period of tremendous geopolitical uncertainty, and when many questions 

exist about the future role of the United States in the world, Washington has a 

unique window of opportunity to use newfound sources of energy to revitalize U.S. 

global leadership and the strength of free markets and liberal international norms. 

Exporting LNG will deepen U.S. trading ties with strategic states, including those 

in Europe and Northeast Asia. It will bolster the U.S. economy, improve the energy 

security of partners abroad and allow the U.S. to more effectively spur and support 

multilateral action to counter international security threats. To enhance energy and 

national security, and reduce the ability of potential adversaries to use energy as 

a weapon of coercion, a new national energy policy should actively embrace a more 

nimble and supportive regime for LNG exports. 

Exporting LNG Enhances U.S. Economic Growth 

The ability to export LNG opens new markets abroad for U.S. natural gas. In 

turn, this creates new revenue opportunities and strengthens the U.S. economy. Exporting LNG will also create an incentive for additional natural gas production, 

which will accrue economic benefits throughout the gas value chain in the United 

States, from wellhead to export terminal. In two recent studies by NERA Economic 
34 

3 NERA Economic Consulting, Macroeconomic Impacts of LNG Exports from the United 

States, December, 2012, http://energy.gov/sites/prod/files/2013/04/f0/nerallnglreport.pdf. Also, 

NERA Economic Consulting, Updated Macroeconomic Impacts of LNG Exports from the United 

States, March, 2014, http://www.nera.com/nerafiles/PUBlLNGlUpdatel0214lFINAL.pdf. 4 Analysts vary on the volume of LNG that will be exported by the United States over the 

near to medium term, though most offer a range of roughly five to nine billion cubic feet per 

day. For example, IHS estimates that U.S. LNG export capacity will reach 5.7 billion cubic feet 

per day by 2020: IHS CERA, Fueling the Future with Natural Gas: Bringing It Home, January 

2014, XI-5,http://www.fuelingthefuture.org/assets/content/AGF-Fueling-the-Future-Study.pdf. BG 

Group estimates that the United States will export the equivalent of 7.95 to 9.27 billion cubic 

feet per day by 2025: Chris Finlayson, ‘‘Global LNG Update’’, (report presented at the Howard 

Weil Energy Conference, New Orleans, Louisiana, March 23-27, 2014) http://files.the-group.net/ 

library/bggroup/files/docl526lt.pdf. 

Consulting, analysts concluded that exporting LNG will have positive benefits for 

economic growth and the trade balance. Furthermore, they found that ‘‘the greater 

the level of exports, the greater the benefits.’’/3/ 

A strong economy is fundamental to U.S. national security. It provides the fiscal 

basis for U.S. leadership abroad, including military, development and humanitarian 

relief commitments. Also, it is what enables the United States to be the world’s only 

superpower. The massive and recent increase in unconventional gas has already 

helped to put the United States in a much stronger financial position. It has been 

a leading factor in decreasing the trade deficit, which was at its lowest in four years 

last year, and has slowed the rate of increase of U.S. indebtedness. Both of these 

factors will allow the United States new capacity and flexibility to advance foreign 

policy interests. The United States can further strengthen its hand globally if it exports energy, including LNG. 

LNG exports are expected to offer a modest but meaningful contribution to economic growth and security. The volume of exports may range from five to nine billion cubic feet per day between 2020 and 2025./4/ A variety of factors determines 

the price for natural gas and planned LNG exports. These include various demands 

for gas from the U.S. sectors of residential heating, power generation, industrial 

manufacturing and transport, as well as export demand. Gas supply is relatively 

elastic in the United States, but these competing demands will likely increase natural gas prices somewhat. Price increases will be felt particularly by low-income 

consumers and will contribute to more muted growth in certain particularly gas-intensive manufacturing sectors. However, even with many demand sources and increased gas prices, sustained and expanding macroeconomic growth is expected. 

Using current projections for LNG export volumes, revenue from LNG exports will 

make a contribution, though relatively minor, to the U.S. gross domestic product 

(currently valued at well over $16 trillion) over the next decade. 

In broad terms, any opportunity to expand economic growth, including ones that 

will keep natural resource rents at home, will help build U.S. economic vitality, security and standing abroad. When such opportunities involve expansion of exports 

and greater integration of the U.S. economy with foreign trade partners, they will 

expand U.S. clout and capacity for leadership. For this reason, LNG exports will 

make a contribution to economic growth and security. By contrast, restraining the 

export of LNG in order to support domestic gas-intensive manufacturing industries 

will cause the United States to forego an opportunity for economic growth and expansion of trade. This will undermine foreign relations and the scope of U.S. leadership abroad. 

LNG Exports Improve Global Gas Market Competition and Security 

An additional and more significant contribution to national security that the export of LNG will offer is to help make global natural gas markets more stable, efficient and diversified. The United States is stronger when our allies and trading 

partners have efficient, stable markets and have reliable energy supplies so fundamental to the health of any economy. Stable and diversified natural gas markets 

in Europe and Asia, for example, will help insulate these economies to potential supply disruptions. Stable and diversified markets will also help them to mitigate current or future politicized pricing arrangements from some more traditional suppliers. They will also undermine the ability of gas suppliers, including our adversaries and enemies, to exert coercive market pressure on consumers. 

LNG Export Will Contribute to European Energy Security 

The recent U.S. boom in natural gas production has contributed directly to greater 

gas supply diversity and competitive prices in European markets. LNG imports to 

the United States slowed to a trickle over the last several years, and cargoes of LNG 

destined for the United States were redirected to Europe and elsewhere. These new 

LNG supplies gave European consumers greater leverage with Russia’s Gazprom in 
35 

supply negotiations. As a direct consequence, European companies have been able 

to exact more favorable pricing arrangements in some gas contracts. This is a boon 

for European consumers, who depend on Russia for 30 percent of their gas supplies. 

The expectation of U.S. LNG exports entering the global gas market, whether cargoes will land in Europe or travel to other destinations, gives additional leverage 

to Europeans in future price negotiations with Gazprom. Russia will have to concede 

more favorable terms with European consumers to keep market share. However, 

even while U.S. LNG will help to diversify supply sources in Europe, and thereby 

help reduce the cost of some Russian gas, it will not drive down the price of gas 

substantially. The cost of U.S. gas plus liquefaction and transatlantic transport fees 

will mean it only slightly undercuts European gas prices, and therefore will only 

slightly drive down European equilibrium prices. 

Another benefit to European energy security derived from U.S. LNG export is the 

signal it will send to investors to build new LNG receiving and gas pipeline infrastructure. This will help make the European market more efficient and more resilient in the face of a potential supply disruption from one source or supplier. There 

are, of course, various other measures necessary to improving efficiency and resiliency of the European gas market, and to reducing European vulnerability to politicized Russian gas pricing. Significantly, Europe should develop new indigenous gas 

resources, reform market and gas pricing mechanisms and build new pipeline interconnector and transmission infrastructure. Additionally, Central and Eastern European countries in particular should adopt greater energy efficiency practices and the 

use of alternative energy resources 

The crisis in Ukraine, spurred and sustained by ongoing disagreements between 

Moscow and Kyiv about gas pricing, highlights the vulnerability of heavy dependence on Russian gas among Eastern and Central European countries. U.S. LNG cannot offer immediate relief to Ukraine, both because Ukraine lacks the infrastructure 

required to receive LNG cargoes and because of the unavailability of U.S. supplies 

at present. Indeed, helping Ukraine manage this week’s supply-cut off of Russian 

gas or erasing Russia’s dominant position as a European gas supplier is beyond the 

scope of what any LNG supplies to Europe can provide. However, the potential for 

U.S. LNG exports to diversify European gas supplies and increase competitiveness 

is evident. Permitting and promoting the export of U.S. LNG will expand and diversify the supply of LNG from reliable sources in the global market. This will boost 

European energy security and help to erode Russia’s coercive pricing and political 

leverage. 

LNG Export Will Positively Shape a Developing Asian Market 

In contrast to Europe, where U.S. energy policy is aimed at addressing insecurities that ensue from well-established and relatively inflexible market dynamics, 

many important contours of the future Asian energy market are being determined 

now. Today’s policy and investment choices will shape the region’s economic and security future for decades. Unlike most national security decisions, which are typically reactive and short-term, in this case the U.S. government has the unique opportunity of having the tools and the foresight to help shape a crucial element of 

Asia’s geopolitical future. It would be irresponsible to fail to employ those tools and 

find ourselves decades from now wondering why the United States did not act when 

it had the chance. 

Exporting LNG to Asia will help to diversify gas supplies and reduce prices. It 

will also fetch lucrative returns for U.S. suppliers. Natural gas prices in Northeast 

Asia are roughly three times more than they are in the United States, and one and 

a half times European prices. This differential will likely pull the majority of U.S. 

LNG exports to Asia, and meaningfully alter LNG trade patterns in the Asia-Pacific 

region. 

Given the large LNG import dependence of Japan and South Korea, the largest 

and second largest global LNG importers, substituting lower cost U.S. LNG for current higher cost LNG imports will have several important economic benefits. Notably, it will reduce the massive Japanese trade deficit, and in both countries it will 

boost gross domestic product by reducing its energy costs. In turn, this will allow 

Japan and South Korea to become even more significant trading partners and investors in the United States. Japanese LNG imports, which have soared in the wake 

of the 2011 Fukushima Daiichi nuclear disaster, pushed the Japanese trade deficit 

to its highest-ever level last year. According to an analysis from Japan’s Institute 

of Energy Economics, the amount of U.S. LNG currently committed to Japanese 

buyers from those U.S. export projects with DOE permits is equal to about 20 percent of Japanese LNG imports last year. Lowering the costs of this quantity of Japan’s LNG imports would represent a substantial economic gain. 
36 

5 International Energy Agency, World Energy Outlook 2013, 578 & 596. 

The export of U.S. LNG will also give Asian consumers more supply options. This 

will help to ensure that they are not pushed into significant, politicized contracts 

with Russia for lack of sufficient alternative supplies. Asian gas demand is expected 

to grow 70 percent by 2025, and more than double by the year 2035, according to 

the International Energy Agency,/5/ and Russia aims to be a substantial supplier 

to this region. With last month’s Gazprom-CNPC gas pipeline deal to supply 38 billion cubic meters of Russian gas annually to China, Russia locked in an important 

Asian market share. It also has substantial LNG supply aspirations to meet gas demand in the rest of Asia, the largest LNG importing region. However, the entrance 

of U.S. LNG, or LNG from other suppliers such as Australia, Canada and East Africa, will help Asian consumers to bargain hard with Russia for future supplies and 

attract more affordable, stable terms. 

Northeast Asia harbors myriad sources of insecurity. The Korean Peninsula, Taiwan, maritime disputes and the broader U.S.-China competition could all produce 

crises and conflicts in which Russia, alone or in collaboration with China or North 

Korea, is tempted to use natural gas as an instrument of coercion. It has done so 

in Eastern Europe and there is no reason to believe it would not do so in Asia as 

well. The United States has the ability to limit Russia’s future capacity to use energy to twist the arms of America’s friends and allies, if it adopts pro-export energy 

policies now. 

U.S. LNG Exports Will Travel on More Secure Maritime Routes 

Supplies of LNG moving from the U.S. market to Europe and East Asia will avoid 

traveling through conflict-prone regions and maritime hot spots. Unlike LNG supplies from the Persian Gulf, for example, U.S. LNG cargoes will sail shorter distances through open waters of the Pacific to reach East Asian consumers. Exports 

from the United States will avoid the South and East China Seas and the Straits 

of Hormuz and Malacca, where territorial dispute, piracy and terrorism pose a 

greater risk to marine vessels. The United States is a very stable jurisdiction and 

the threat of Middle Eastern conflict, like the destabilizing and violent upheaval we 

see now in Iraq, poses no supply disruption concerns for potential future purchasers 

of U.S. LNG. 

Exporting LNG Will Strengthen Strategic Allies 

The United States will be in a better position to achieve more of its foreign policy 

and economic objectives when it collaborates closely with economically vital and energy secure trading partners. The United States suffers when its trading partners 

experience energy supply disruptions or when their economies falter due to 

unaffordable energy costs. In a highly globalized economic system, and in anticipation of more interconnection between regional natural gas markets in the future, the 

United States has a fundamental strategic interest in promoting stable, diversified 

gas market arrangements and more liberalized trade. 

Europe will be a stronger security partner to the United States with more competitive natural gas prices and supply diversity, and the energy security to which 

these factors will contribute. Investing in the transatlantic partnership, from expanding trading ties to enhancing NATO military and diplomatic capacity, will 

allow European partners to more ably pursue shared security objectives with the 

United States. This includes diplomatic and economic efforts to limit Russia’s destabilization of eastern Ukraine and other countries on its periphery, such as Georgia 

and Moldova. It also includes joint action on economic sanctions, including those targeting Iran and Syria, and collective peacekeeping or military efforts. 

Northeast Asian treaty allies of the United States will also be stronger security 

partners as a result of U.S. LNG supplies, and the resulting improved gas market 

and economic conditions. Expanded economic growth and stability will enhance the 

ability of key U.S. allies to boost military spending and invest greater attention and 

resources into joint security efforts. U.S.-Northeast Asian alliances play a critical 

role in maintaining U.S. power and presence in Asia, and it would be strategically 

wise and economically prudent to take all appropriate policy steps to strengthen 

these states. Japan and South Korea will look favorably on a U.S. LNG export policy 

that will effectively benefit their energy market conditions. Indeed they have actively advocated for such exports to U.S. policy and business leaders in recent years. 

Japanese and South Korean leaders will also perceive LNG exports as a meaningful 

economic component in the U.S. administration’s policy to ‘‘rebalance’’ strategic 

focus to Asia. 

For China, the expansion of trade ties with the United States to include LNG 

could contribute to a more constructive bilateral relationship. A more significant 
37 

U.S. position in Asia’s energy markets should serve as a source of caution and restraint in Beijing, even with sometimes cool diplomatic ties between the U.S. and 

China, particularly as Beijing behaves in an aggressive and provocative manner in 

territorial disputes with neighbors. Also, support for more liberalized LNG trade 

will give the United States a stronger leg to stand on in trade organizations and 

international negotiations to demand that China not withhold high value natural 

resources, such as rare earth minerals, from the international market. Building 

shared liberal economic norms will support U.S. interests and increase the potential 

for greater economic integration and mutually beneficial growth. 

The economic and strategic benefits of liberalized trade are something that U.S. 

policymakers have acknowledged and touted, at least in theory, for decades. Its national security and foreign policy value is also evident, though difficult to quantify. 

Liberalized trade regimes for energy are even more important than ever in the 

United States today, when abundant energy production and export capacity align 

so poorly with restrictive and outdated export rules. In the present market conditions, one of the most practical ways for the United States to promote secure and 

diversified gas markets globally, and to reap the geopolitical advantages of its energy abundance, is to take an active role in global LNG trade. 

The Market Needs a Stronger Signal of Administration Policy on LNG Exports 

The recently-announced Department of Energy (DOE) proposal to alter the LNG 

export authorization process is a positive step, but additional measures need to be 

taken to secure a role for the U.S. as a leading LNG exporter in the near- and medium-term. The DOE proposal would do away with conditional authorizations of 

LNG export projects that will supply countries with which the United States does 

not have a free trade agreement, and thus makes the LNG project approval process 

more rational. This move will, as intended, elevate more commercially viable 

projects in the regulatory approval process. It will also ensure that applicants that 

have completed the environmental review will not be delayed by their position in 

the current order of precedence. However, it will not meaningfully accelerate the 

plodding pace of LNG export project development. The time-intensive environmental 

review process, which will not change, is likely still to constitute the lengthiest part 

of the new proposed process. The proposed new rules also do not clarify whether 

the administration plans to cap LNG exports. 

The United States is an extremely attractive potential supplier of LNG in the 

post-2018 period, the period after which the bulk of currently planned LNG projects 

will be up and running. However, without a clearer policy signal from the administration that the United States is committed to as robust an LNG export capacity 

as the market will bear, potential investors in many proposed projects are hanging 

back. Assurances from the DOE that the United States supports LNG exports have 

clarified that there will be at least some LNG export capacity permitted in the 

United States. However, the administration has offered no firm guidance on the potential extent of LNG export capacity nor signaled a clear policy of non-interference 

with the market. Without this, foreign companies remain worried that the United 

States will cap LNG exports if there is a domestic gas market crisis, price spike or 

political opposition. 

Competitor developers of LNG export facilities abroad are delaying plans and 

carefully watching the slow progress of U.S. LNG projects. They will move forward 

to supply LNG demand if the United States does not. But in the current ‘‘wait and 

see’’ period, regional and global energy security risks grow. United States policymakers should expressly support an export policy to lock in a share of the expanding LNG market and enhance market stability and supply. 

Conclusion 

U.S. export of LNG is an important policy choice that will expand U.S. economic 

opportunity, strengthen national security and help cement U.S. leadership in the 

international community. It is far from a cure-all for gas market inefficiency, 

politicization and instability. It cannot, of itself, bring economic or energy security 

to our own economy or the economies of our allies and partners. As a blunt instrument of foreign policy, it also cannot achieve short-term, targeted geopolitical aims. 

It can nevertheless promote more stable, competitive, and diversified energy markets internationally, which redound to the benefit of U.S. security. By strengthening 

the economy, by helping to make allies in Europe and East Asia less dependent on 

unstable and politicized supply, and by promoting energy stability internationally, 

more liberalized gas trade and the export of LNG is in the American national interest. 
38 

The CHAIR. Thank you very much. An excellent panel, very diverse views and we look forward to the questions. 

Let me submit to the record the FERC decision today which is 

the second decision to approve an export facility which would be 

the Sempra permit. I’d like to submit that to the record because it 

leads into my first question that I want to ask all the panelists 

starting with you, Mr. Smith and each one. 

The CHAIR. There are numbers flying around about how much 

has been approved for export. I want to spend my time clarifying 

that and trying to get all 5 of you to agree on one number because 

there is one number. It can only be one. 

So, Mr. Smith, if I asked you the number of the volume of gas 

that has approved to date including this was released earlier today. 

What would that number in volume be? What is your understanding of the FERC final approval number? 

Mr. SMITH. Thank you for the question, Chair Landrieu. 

So, to date FERC has—well, the Department of Energy. 

The CHAIR. FERC. 

Mr. SMITH. FERC, OK. 

The CHAIR. Approval number for FERC. There are only 2. 

Mr. SMITH. So for FERC they’ve approved the 2 applications, 2.2 

for Sabine Pass and then the 1.7 for—— 

The CHAIR. So that’s 3.9? 

Mr. SMITH. In total. 

The CHAIR. OK, Mr. McNally, do you agree with that or disagree? 

Mr. MCNALLY. I will agree with my colleague on 3.9. 

The CHAIR. Mr. Weiss, do you agree or disagree? 

Mr. WEISS. Based on the DOE tracking of the approved things, 

I would say about 11 million cubic feet. 

The CHAIR. No, that’s not the question. 

Mr. WEISS. I understand. 

The CHAIR. So I want you to answer my question. 

Mr. WEISS. I would then—— 

The CHAIR. I did not ask you about the tracking. 

Mr. WEISS. Right. 

The CHAIR. I’m going to be very respectful of you. I want you to 

give me the answer that I—the answer the question that I asked. 

How much has been approved by FERC to date? 

Mr. WEISS. I’m not in a position to answer that because I’ve only 

been—because I believe that the—— 

The CHAIR. It’s not what you believe. 

Mr. WEISS. Right. 

The CHAIR. It’s just what it is. 

Mr. WEISS. OK. Then I’m not in a position to answer that. 

The CHAIR. OK. I’m going to ask you to submit that in writing 

because you—— 

Mr. WEISS. Be happy to. 

The CHAIR. You could do some research on that and just get it 

to us before the close of the hearing date. 

Mr. Durbin, what do you believe the figure is? Would you—— 

Mr. DURBIN. I agree with Mr. Smith. What has been approved 

by FERC is 3.9. 

The CHAIR. 3.9. 
39 

Ms. Rosenberg. 

Ms. ROSENBERG. I also agree, 3.9. 

The CHAIR. OK. Now I’d like to ask all of you what do you acknowledge is in the general queue? That would be the answer to 

Mr. Weiss? 

What is in the general queue? Now that’s an interesting queue 

because it’s been changed recently. So I want to try to be clear 

about what I’m asking. 

What do you believe, Mr. Smith, because this is under your general jurisdiction, is in the queue for approval by FERC that is either in the process of getting its environmental review? What number would you put on that? 

Not in the total queue, in the queue that is likely to receive approval? 

Through the FERC process? 

Mr. SMITH. Alright. Thank you for the question. 

That question is a little more subjective when you’re saying, you 

know, what projects are likely to move forward and which ones 

aren’t. 

The CHAIR. OK. How would you ask it then? Maybe what 

projects have spent upwards of $100 million on their application? 

As of August 6, 2014, the FERC has issued three orders granting 

authorization to site, construct, and operate facilities for the liquefaction and export of domestically produced natural gas to: 1) 

Sabine Pass LNG, L.P. and Sabine Pass Liquefaction, LLC, subsidiaries of Cheniere LNG, Inc., which is a subsidiary of Cheniere 

Energy, Inc. up to a volume of approximately 2.2 billion standard 

cubic feet per day (Bcf/d); 2) Cameron LNG, LLC, a wholly-owned, 

lindirect subsidiary of Sempra Energy, up to a volume of approximately 1.7 Bcf/d; and, 3) Freeport LNG Developmen, L.P. up to a 

volume of approximately 1.8 Bcf/d. In total, the FERC volumes authorized are approximately 5.7 Bcf/d. 

Before a project sponsor can file with the FERC for an order and 

certificate to site, construct, and operate facilities for the liquefaction and export of demestically produced natural gas, the project 

sponsor must be accepted for FERC’s pre-filing process. Once accepted to begin the pre-filing process, the project sponsor completes 

FERC’s resource reports. Resource Report 13 includes significant 

engineering design and mass and material balance estimates of the 

proposed project, at a significant cost to the project sponsor. 

As of August 6, 2014, by DOE’s estimate, there are nine applications pending at the FERC seeking authorization to site, construct, 

and operate facilities for the liquefaction and export of domestically 

produced natural gas, in a total volume of 12.7 Bcf/d. Combined 

with the already FERC authorized volume of 5.7 Bcf/d, there would 

be a total of 22.3 Bcf/d of FERC-authorized domestically produced 

liquefied natural gas export facilities that may be approved at some 

time in 2015. 

Additionally, at least three other project sponsors are in the prefiling stage with the FERC, and DOE has heard from several DOE 

applicants that they intend to begin the pre-filing process with the 

FERC in the near future. 

Mr. SMITH. Perhaps so, Chair Landrieu. 
40 

You know, the response that—I don’t have that number, you 

know, at my fingertips because we’d have to look at all those applications. 

The CHAIR. OK. 

Mr. McNally, do you? Because if not, I’m going to ask—I’m going 

shape this question very clearly and then ask you all to submit it. 

Do you have any idea how many would be in the queue of FERC? 

DOE has no way of knowing which, if any, of these other proposed projects will result in a FERC order and certificate. For example, in the mid-2000’s over 40 projects were proposed to be built 

to import liquefied natural gas, and only eight were built. 

Mr. MCNALLY. I do not. I’ve come, in my time in Washington, to 

believe you only have what you have in your hand. My number is 

3.9 and no more. 

The CHAIR. OK. 

Mr. Durbin, any ideas or Mr. Weiss? 

Mr. WEISS. Thank you. 

I believe 11 billion cubic feet per day has been approved with another 26 billion cubic feet in the queue. 

The CHAIR. Oh, that is—yes, OK. 

Thank you. 

Mr. Durbin. 

Mr. DURBIN. I think you’re asking the right question. I don’t 

have the specific answer, but we will certainly submit. 

The CHAIR. OK. 

Ms. Rosenberg, do you have any idea? 

Ms. ROSENBERG. I will also defer to the colleagues here. I don’t 

have the exact number, but can look into it. 

The CHAIR. OK. 

The reason I’m pressing this number is because it’s really important for us to understand what has been approved, what is pending 

because part of, I think, what this committee is going to try to ascertain is what is the right balance of exports to domestic. I think 

having those numbers is really important. 

But the record should reflect that 4 of the 5 panelists agree that 

3.9 is all that has been approved to date. As of August 6, 2014, by 

DOE’s estimate, there are nine applications pending at the FERC 

seeking authorization to site, construct, and operate facilities for 

the liquefaction and export of domestically produced natural gas, in 

a total volume of 12.7 Bcf/d. Combined with the already FERC authorized volume of 5.7 Bcf/d, there would be a total of 2.3 Bcf/d of 

FERC-authorized domestically produced liquefied natural gas export facilities that may be approved at some time in 2015. Additionally, at least three other project sponsors are in the pre-filing 

stage with the FERC, and DOE has heard from several DOE applicants that they intend to begin the pre-filing process with the 

FERC in the near future. Then we’re going to use the questioning 

to try to ferret out what is actually, potentially, there from a potential approval and what is just going to fall by thewayside. 

The other question that I want to get is the volume of recoverable resources. 

Mr. Smith, what did you testify today, the volume of recoverable 

resources of gas in the United States based on your estimates 

today? I know it’s a moving target. 
41 

Mr. SMITH. Thank you for the question. 

I did not have that number within my testimony and numbers—— 

The CHAIR. OK. 

Would you submit that for the record? 

Technically recoverable resources (TRR) are resources in accumulations producible using current recovery technology but without 

reference to economic profitability. They include both proved reserves and unproved resources. 

DOE/FE notes that the Energy Information Administration’s 

(EIA) U.S. natural gas TRR estimates are 2,266 trillion standard 

cubic feet (Tcf) in the EIA’s Annual Energy Outlook 2014 (AEO 

2014). These TRR estimates include proved nad unproved TRR 

shale gas resources. In AEO 2014 unproved shale gas TRR was estimated at 489 Tcf. 

The CHAIR. Mr. McNally, do you know what your folks are projecting? 

Mr. MCNALLY. Yes, mine would be 330 trillion cubic feet. 

The CHAIR. OK. 

Mr. Weiss. 

Mr. WEISS. I don’t have that, but I would go with what Mr. Durbin says because he’s been looking at it very carefully. 

The CHAIR. What did you say, Mr. Durbin? 

Mr. DURBIN. Total recoverable? 

The CHAIR. Recoverable? 

Mr. DURBIN. Total recoverable, again, you’ve got 3,600 TCF. 

The CHAIR. OK. 

Ms. Rosenberg, do you have something? 

Ms. ROSENBERG. I was going to have said technically recoverable 

gas is set at 2,431 TCF. 

The CHAIR. OK. 

Finally, I want to submit to the record. There have been 5 studies, the NERA study, the ERA Update 2012–2014, Brookings 2012, 

Dan Yergin’s firm which is very well respected, 2012, and then 

Charles Rivers then has a very liberal number. I’d like the staff to 

compile thesestudies and put it into the record. If there are other 

members that have documents that would lead us to come to a very 

final conclusion about what the estimates are today. They could go 

up in the future, but what they are today, of the recoverable resources in the United States. 

The CHAIR. Then finally I want to submit, this is the Natural 

Gas Act of the United States. It was first passed in 1938. That 

would be right after, some years after the Great Depression and before World War II. 

It has only been amended twice on the section of exports since 

1938. It’s 2014. So I think this needs a little work. 

That’s what this committee is going to be about doing. 

Thank you. 

The CHAIR. Ranking member. 

Senator MURKOWSKI. Thank you, Madame Chair. Appreciate the 

inquiry into the numbers because I do think it is important that 

we understand and come to an agreement about what we’re really 

talking about here. 

Just with regards to the process. Mr. Smith, this goes to you. 
42 

It would appear to me that we’ve fixed the front end of the process, the middle end—excuse me. The middle area there with FERC 

seems to be moving forward. But what we haven’t addressed here 

is what happens on the back end the challenges with the final DOE 

order. The fact thatit appears to just be open ended. There’s no 

time table for these final licenses here. 

What would be your reaction, the Department’s reaction, to Congress legislating that DOE has some time frame here following the 

final approval from FERC to make its own final assessment? In 

other words, to put a back end in it? 

You’re in a situation where NEPA has already been completed 

then which, of course, is that lengthy unknown. Would a month period be sufficient, 6 months, the merits of allowing for some level 

of certainty or finality to the process here through DOE? 

Mr. SMITH. Thank you very much for the question, Senator. 

First of all, we appreciate and understand the interest, your interest in the markets, interest in certainty around this process. 

That’s been a principle that we’ve endeavored to preserve throughout our entire process of evaluating these applications. 

When we announced our proposed process change we did not put 

in place a time limit. Instead we continued with our—the commitment we’ve always made to make sure that we’re moving forward 

as appropriately and expeditiously as possible to make good public 

interest determinations. 

Senator Udall mentioned the possibility that’s included in the bill 

that’s currently being proposed to include a time limit. Again, 

that’s not something we’ve included in our process change or 

that—— 

Senator MURKOWSKI. Is it something that you think would make 

sense to provide that level of certainty and expediency to a process? 

Mr. SMITH. Indeed we always are going to uphold the letter in 

the spirit of the law that would hold our feet to the fire, certainly. 

Ensure that there’s a start and close to the process. Within that 

time limit we would make sure that we made a good and 

appropriatepublic interest determination. 

Senator MURKOWSKI. Let me ask the question and I think I’ll direct this, well, Mr. McNally, it was initially directed to you. But I 

can have others jump in here as well because we talk about the opportunities for us as a Nation with these amazing reserves and resources that we have not only for the benefit of this country, but 

for the benefit of our friends and allies. 

But yet, it’s not just us that has this. It has been mentioned that 

there are other Nations, clearly, that have the ability to jump into 

this market. They are our competitors in that sense. So when we 

talk about an opportunity for us from a global, 

competitivenessperspective, if we have a process that doesn’t allow 

for a timeliness and for a level of certainty, how competitive are we 

really out there in that global marketplace? 

Mr. McNally, Mr. Durbin and anyone else who would care to 

comment? 

Mr. MCNALLY. Thank you for that. If I could I will be correcting 

myself. I gave you, Madame Chair, the proved economic reserves. 

I’ll be adding a zero and giving you another number for total technologically recoverable reserves. 
43 

Mr. MCNALLY. Senator Murkowski, you’re absolutely correct. 

There’s a window we have to jump through. We have our old competitors, Qatar and Australia, having built or in the process of 

building world class facilities. We have new kids on the block. Tanzania and Mozambique and perfectly placed to compete in Asia, 

who will be bringing on huge projects. 

We have to jump into that window. It takes many years to finance and build and construct a project, even with a quick approval process. So we do have this window. There are enormously 

long lead times in this industry. It’s crucial that we move quickly 

to get our companies inthe game. 

Senator MURKOWSKI. Mr. Durbin. 

Mr. DURBIN. I included in my written testimony, in fact in figure 

6. There’s a chart in there. 

But the answer to your question is that, you know, right now we 

believe that in the next 10 years or so there’s about 18 to 38 BCF 

of incremental demand globally. If you look outside of the U.S. 

there’s already about 50 BCF of projects that are planned or potentially beingbuilt. Not all of those are going to be built. 

In the U.S. we took all of our, the applicants, it would be north 

of 30 BCF a day. Again, not all of those are going to be built. 

The more important point is we’ve only got that little, that incremental demand, that’s available. If we don’t move quickly to be 

able to make sure that we get part of that market. Again, it’s going 

to be the early movers that are going to have a competitive advantage inthat global market. 

Senator MURKOWSKI. Madame Chairman, my time is expired. 

But I will note for my colleagues here that we here in Alaska know 

what it means when we’re talking about a window of opportunity 

because it was just a few short years ago that Alaska was looking 

to move its natural gas resource. The whole prospect was moving 

it across Canada and then bringing it into the lower 48 States. 

We lost that window of opportunity as a State. It is no longer on 

the table. It is no longer part of the consideration. We’re trying to 

figure out, OK, where is the market for Alaska gas. But windows 

of opportunity do not stay open indefinitely. 

The CHAIR. Thank you. 

This is the queue that I have, Senator Heinrich, then Senator 

Barrasso, then Senator Udall, Manchin, Franken, Baldwin and 

Stabenow. 

Senator MURKOWSKI. Do you have Hoeven in there? 

The CHAIR. Hoeven. 

Go ahead, Senator Heinrich. 

Senator HEINRICH. I want to start with Deputy Assistant Secretary Smith and then I’ll, kind of, throw this open to any of you 

who want to offer your thoughts. 

When consumers think about this they generally think about 

price. They understand that these decisions are going to have some 

impacts on prices. Taking the bookends aside, I think there’s a fair 

amount of consensus that the sweet spot would be somewhere 

where there’s a highenough price to incentivize production. 

Certainly New Mexico is a production State. We produce a lot of 

natural gas. We like this, the price, to be somewhere where they’re 

not shutting in those wells. 
44 

But also low enough to maintain this competitive advantage that 

we’ve seen in recent years that’s been good for consumers. It’s been 

great for manufacturing jobs. 

Do you have an opinion of, kind of, where is that——where’s the 

range in terms of price point? Should our policy and the tools that 

you have such as export approvals and controls be aimed at trying 

to move us into and maintain us in that kind of a sweet spot? 

Mr. SMITH. Thank you, Senator, for that question. 

So this kind of goes to the heart of the public interest decision 

that we are dealing with when we’re looking at LNG exports. So 

as I mentioned in my testimony the Natural Gas Act, Section 3 of 

the Natural Gas Act, gives us fairly broad latitude in defining what 

publicinterest means. It’s not defined in the law so we have to 

make that clear in the orders that we write. 

So when we look at public interest we look at a number of issues. 

We look at prices, as you mentioned. 

We look at the impact on American consumers. 

We look at the impact on American manufacturers. 

We look at balanced trade. 

We look at economic issues. 

We look at job creation. 

We look at environmental issues. 

We look at international issues. 

So there’s a very broad range of issues that we are compelled to 

consider when we’re looking at each of these applications and determining whether or not that particular export application is in 

the public interest. 

Price, certainly is one of those issues. It’s one that certainly gets 

a lot of attention when we think about public interest determination. 

So how have we handled this? 

When we evaluated the first final authorization that we’ve 

issued, we contracted the study that was referenced earlier that 

was conducted by NERA. It looked at all of these issues including 

price and the important relationship between supply, demand and 

price and price elasticity for natural gas. 

That helps us understand the potential impact on jobs. 

It helps us understand the potential impact on manufacturers 

and on consumers. 

So rather than targeting a particular range which is something 

we have not done, we have to look at these questions holistically. 

So the NERA study is one of the studies that we have evaluated, 

entered into the public record, put out for public comment and have 

referenced inprevious conditional authorizations. 

We also have to consider in the public review process comments 

that we get in from a broad range of stakeholders. Here on this 

panel and amongst the members of this committee we do here, 

even here, are very broad range of views on the pros and cons of 

export. So we have toconsider all those in a holistic way. So that’s 

the way that we’ve attempted to make sure that we’re making 

good, judicious, public interest determinations that consider all of 

these factors. 

Senator HEINRICH. Go ahead. 
45 

Mr. WEISS. Senator Heinrich, right now the Asian market is 

about, the price is about 4 times our price here. The European 

market is about 60 percent higher than our price here. Our low 

price has many domestic advantages. 

It has helped breed manufacturing jobs. 

Natural gas has become a substitute for dirtier coal that helps 

protect children from asthma attacks and other lung issues. 

It helps with the climate. 

Raising that price significantly would have an effect that would 

be negative here even though, you know, it may help the companies that are exporting the natural gas to other Nations. So I think 

before we get to approving applications where we’re going to look 

at moreexports we ought to look at what’s going to be the domestic 

impact of more exports on our price, wages, jobs and health. 

Senator HEINRICH. OK. 

Go ahead. 

Mr. MCNALLY. Senator Heinrich, the study that Mr. Smith just 

mentioned noted that our consumers and our gas intensive industries will always enjoy the lowest prices and the most competitive 

advantage compared to other folks. The reason is because the cost 

of transporting, of liquefying and transporting gas is so high that 

our friends in Asia and Europe will always be paying double or triple what we’re paying. So whatever our price is $4,$6, whatever it 

is, we will always have the lowest cost gas because of those advantages. 

Mr. DURBIN. Senator, if I could? 

I would frankly argue that the basic—the size of the resource we 

have, our ability to continue producing it at affordable prices, I 

think, it has essentially made the concept of a sweet spot irrelevant. We are going to be able to continue to produce. Meet the demand we have here. Be able to get into this, what is a very finite, 

global market for LNG. 

Senator HEINRICH. Go ahead. 

Ms. ROSENBERG. Just a tag. 

Senator HEINRICH. I’m over my time so—— 

The CHAIR. He’s over his time so quickly, please. 

Ms. ROSENBERG. On the issue of increased prices I would just 

add that one of the primary things to keep in mind in a scenario 

where they do, in fact, increase, is tothink about how we can insulate consumers and our economy from that. One of the key ways 

to do that is, of course, increasing our energy efficiency and thinking about those most vulnerable low income populations that are 

most significantly affected. 

Senator HEINRICH. Thank you, Madame Chair. 

The CHAIR. Thank you so much. Excellent questions. 

Senator Barrasso. 

Senator BARRASSO. Thank you, Madame Chairman. 

Mr. Smith, on March 24th the Department of Energy approved 

the export application for the Jordan Cove LNG export terminal. 

This terminal would be located in Coos Bay, Oregon. It would enable natural gas producers in Wyoming, Colorado, Utah, to export 

LNG to internationalmarkets including markets in Asia. 

The DOE’s conditional license order for the Jordan Cove terminal 

reads as follows. ‘‘To the extent U.S. exports can diversify global 
46 

LNG supplies and increase the volumes of LNG available globally, 

it will improve energy security for many U.S. allies and trading 

partners.’’ 

Immediately afterwards the order States, ‘‘As such authorizing 

U.S. exports may advance the public interest for reasons that are 

distinct from and additional to the economic benefits to the United 

States.’’ 

So I’m encouraged to see the DOE recognizes that LNG exports 

from the United States will improve the energy security of our allies and as a consequence, promote the public interest. 

So would you please expand a bit on how you see LNG exports 

from the U.S., including LNG exports to Asia, improving energy security of our allies? 

Mr. SMITH. Thank you very much for that question, Senator. 

So as you note in that latest conditional authorization that we 

issued, the language around international issues was slightly different than the language that we’d concluded in previous orders 

which does reflect the fact that we’re constantly looking at the market and global events when we think about this part of public interest determination. 

As we stated in the order, we’re thinking about broad range of 

things on a public interest determination including the importance 

of making sure that we’re cognizant of the challenges and opportunities that are faced by our allies and our trading partners around 

the world, as been seen in recent world events. So that’s something 

that’s important for us to consider. 

So if we look at how U.S. gas markets potentially impact global 

markets one thing to observe is that we’ve spoken here about the 

tremendous benefit, the tremendous change in industry that we’ve 

gotten out of technological advances in unconventional oil and natural gas to increase production here. We’re yet to export any LNG 

from the lower 48. The first terminal is still being constructed. 

But the advances here in the United States are already having 

a tremendous impact on global markets. Those cargoes that initially were destined for the United States, that were going to be 

coming to the U.S. to supply demand here domestically are now 

available for consumers in Asia, for consumers in Europe. So we’re 

already having impacts simply through the successes that we’re 

having involving natural gas domestically. 

Now that said, the ability to target particular countries is limited. When the Department of Energy issues an application that allows an applicant to export LNG, we don’t tell that applicant where 

to send the molecule. That’s determined by the private sector, by 

the privatemarket. They send the market. They send that molecule 

where it has the highest demand. 

So when we think about assisting our allies and trading partners 

certainly we’re cognizant of the fact that more gas in the market 

can be positive in that way. But we have to be, you know, have 

some humility about our ability to focus and direct and send molecules to a particular destination in a way that’s effective for a certain, immediate issue. 

But it’s a general statement of our recognition. These are important issues. We’ll continue to consider them in future final orders. 
47 

Senator BARRASSO. While I’m grateful for your answer. I’m very 

encouraged that the DOE recognizes that U.S. LNG exports will 

improve energy security of our allies, our trading partners. I do remain concerned that the Department of Energy is still not acting 

with enoughurgency. As Senator Murkowski said, windows of opportunity can close. 

With enough urgency on pending LNG export applications, I 

think it’s been in about three and a half years the Department has 

approved fully one application, approved 5 other proposals but 

under the condition that the FERC complete its environmental review process. I think currently they’re about 26 pending applications, about 15 of which have been pending for over a year. 

Earlier this month the DOE proposed making changes to the approval process. I’m just wondering how things are coming along 

with the application process and anything you have in terms to 

offer regarding the timelines? 

Mr. SMITH. Thank you for the question. 

One thing we’ve really endeavored to do as we’ve gone through 

this process is to establish a track record for getting the applications evaluated and passed through the previous conditional authorization process. So I think that we’ve, you know, that we’ve 

spoken about the quantity of natural gas that we’ve already authorized on a conditional basis. We’re changing to focusing on the 

finals. 

But our job is to make sure that we get to that queue in a way 

that’s responsible. That makes good and important public interest 

determinations, but gives the market some certainty that we’re 

able to actually make those decisions in a way that is fairly predictable. 

I think for the seven conditional authorizations that we’ve issued 

we’ve established a record of being able to evaluate those and put 

out the reasoning in orders that are in clear, plain English that 

state very clearly the rationale that we’ve used in order to get to 

the final decisions such as the part of the order that you just 

quoted a moment ago, Senator. 

Senator BARRASSO. Thank you. 

Thank you, Madame Chairman. 

The CHAIR. Thank you. 

Senator Udall. 

Senator UDALL. Thank you, Madame Chair. 

Mr. Smith, let me follow up with you on the question of how 

quickly the DOE has acted or could act. 

As I think you know, I introduced a piece of legislation yesterday 

that I mentioned earlier along with the Chairwoman. It would require the DOE to make a decision within 45 days. 

How long would DOE need to make that decision? 

Mr. SMITH. Thank you for the question, Senator. 

So DOE, obviously, will comply with the letter and spirit of the 

law as written. 

Senator UDALL. So if we tell you to use 45 days you would be 

able to comply with a 45 day requirement? 

Mr. SMITH. Again, Senator, I’m confident that whatever the law 

requires that the Department will be able to accomplish. 

Senator UDALL. Thank you. 
48 

I serve on the Armed Services and the Intelligence Committees 

and I have a deep appreciation for the national security implications of natural gas exports. On Monday, Russia announced that it 

will suspend its natural gas deliveries to Ukraine. We’ve seen that 

movie before. It wasn’t the first time Russia has held its natural 

gas supply over Ukraine’s head. 

A criticism of exports has been that approving U.S. exports today 

won’t have an effect for years to come. 

Mr. McNally, in your testimony you mentioned how the prospect 

of LNG exports are already boosting Japan’s bargaining position. 

Could you explain the connection a little bit more and what about 

places obviously beyond Japan? 

Mr. MCNALLY. Yes, Senator Udall. 

I was in Japan on a business trip back in March speaking with 

officials there. While the—their negotiations with their LNG suppliers are secret they said the smiles have never been wider. Their 

backs have never been straighter in negotiating these long term 

LNG contracts because of the gas they contracted to get from the 

U.S., but will not receive for several years. So it has vastly improved Japan’s bargaining position. 

Last month Russia cut a deal with Eni, the Italian Energy company, and had to severely weaken. We don’t know all the details, 

but from the press reports it’s clear that the Italians got a great 

deal. They got a lower price and they weakened that Russian control over the gas price. 

Mr. Putin recently ran to China and signed a deal that’s pretty 

favorable for the Chinese. 

So I think it’s fair to say, sir, that pardon me, we’ve already, sort 

of, gotten in the head of the Russians. What we’re getting ready 

to do has materially impacted how Russia is contracting right as 

we speak and will affect their revenues, if not the actual volume 

of their exports. 

Ms. ROSENBERG. Senator, excuse me. Can I add to that? 

Senator UDALL. Sure, sure. Ms. Rosenberg, go ahead. 

Ms. ROSENBERG. So I would just add to the argument that when 

people offer that LNG exports from the United States can do nothing to help Ukraine today. That doesn’t mean that we should do 

nothing to help them, Europe and others in the future. 

So we have understood and as the national gas production in the 

United States has increased it has sent cargoes that might have 

been destined for this market elsewhere, including to Europe, 

which has given certain consumers the ability to negotiate harder 

with Gazprom and to achieve lower prices. Lithuania, for example, 

indicated that in contract negotiations in May they were able to get 

a lower price for their gas from Russia. 

So as Mr. McNally has said, this is already having an effect now 

even without the United States sending LNG abroad and being 

able to lower certain prices for certain of our allies abroad in Europe and in Northeast Asia and more U.S. LNG on the market will 

only increase their ability to do that. 

Senator UDALL. We certainly have a stake in the Baltic countries. 

I want to make sure Mr. Weiss and Mr. Durbin also can comment. 
49 

Mr. WEISS. Thank you, Senator. 

I’d like to submit for the record information that actually Europe 

is paying a higher price from Gazprom now than they did several 

years ago. 

Mr. WEISS. In fact one of the highest prices ever which is $485 

per thousand cubic meters of gas and so, all of this new supply has 

not really seemed to have affected that. 

Second, the challenge for helping Ukraine is even if we have all 

the export terminals that everybody wants there’s no guarantee 

that gas will be sold to either Ukraine or Europe. Of the ones that 

have been approved by DOE so far only one, the Sabine project, is 

going to beselling gas to Europe, to Spain and France and the UK, 

all the rest of the gas and part of Sabine’s is going to Asia. So unless we’re going to have a law that forces exports to go to Europe 

than as long as the market price for natural LNG is much higher 

in Asia than it is in Europe, that’s where the gas is going to go. 

Senator UDALL. Mr. Durbin. 

Mr. DURBIN. Fortunately Senator, the market works. No matter 

where the gas is going to go from here it is going to help moderate 

prices globally. So it will help Ukraine even if the gas is going to 

Asia. 

Even today just the fact that we are not importing natural gas, 

as Ms. Rosenberg was saying, has already had an impact, you 

know, across the globe on LNG prices. for us to then—to now get 

into the game and to send these clear signals both to customers 

and to othercountries that we are committed to doing this. It is 

going to have that positive impact for our allies and customers 

around the world. 

Senator UDALL. These are all important points of view. I will 

study them further. 

I did want to add in on this note. We’ve imposed sanctions on 

countries in the past. The most notably on Iran and markets almost immediately act. To me, natural gas exports would be a form 

of a positive sanction that has real benefits to our economy. 

But again, thanks to the panel. This is a very, very important 

discussion. 

Thank you, Madame Chair. 

The CHAIR. Thank you very much. 

Senator Hoeven. 

Then we’ll go to Senator Baldwin. 

Senator HOEVEN. Thank you, Madame Chairman. 

Starting with you, Mr. Smith, I’d ask each of the panelists. What 

is the most productive way we can help the European Union and 

Ukraine with LNG? 

I understand, you know, you can’t do it, you know, tomorrow. It’s 

going to take some time and I also understand some of your points 

about it’s a global market. But if you were charged with trying to 

help Ukraine today, in terms of natural gas, what steps do you feel 

we couldtake that would be helpful? 

Mr. SMITH. Well, thank you for the question, Senator. 

So I’d perhaps endeavor to refrain that slightly to say what can 

we do to help our allies and trading partners in Europe with energy security? 

Senator HOEVEN. Right. 
50 

Mr. SMITH. What they think is the important goal? 

So there’s, you know, LNG is one component. I’ll note that, you 

know, as someone, who in the private sector worked building LNG 

import terminals in the U.S. which are now being turned into LNG 

export terminals. The observation is that as soon as the United 

States had options other than importing LNG it immediately 

stopped thinking about importing LNG. 

So importing LNG is not a particularly good tool for long term 

energy security. 

In Europe—and we’re not in a position to run and tell Europeans 

how to develop their own domestic resources. But certainly we’ve 

learned a lot here from Texas to North Dakota to Alaska about how 

we develop natural resources including unconventionals. I think 

there are lessons that we can share here about creating a market 

and regulatory environment and sharing technological understanding that helps those markets to be developed, gas to be developed and produced domestically, infrastructure to be put in place 

and the way that we think about some of these issues here in the 

U.S. 

So there’s lots of learnings that we’ve accumulated here that we 

could share with our allies and other trading partners. 

Senator HOEVEN. But let me add this helmet. Right now we flare about $1.5 million a day in natural gas in North Dakota, in North 

Dakota. We drill oil wells and we get natural gas, LNG rich gas, 

as a byproduct. 

So we’re trying to catch up with that. But the price is so low for 

natural gas in North Dakota that it, you know, obviously it’s a 

problem in terms of getting people to capture this and getting it 

to market. So I’m trying to put the two together. How do we, being 

mindful of the impact on other industry? 

So I’m looking for, really, brilliant recommendations from all of 

you on how we put all this together so we’re capturing this gas, 

doing it in a good, economically viableway. Being cognizant of our 

other industries which I know Senator Stabenow is going to talk 

to all of you about and helping the E with more energy security. 

How do we do this in the most intelligent, most expeditious way? 

Best ideas? Right down the line. 

Yes, Mr. Weiss, if you have a good idea, start it off. 

Mr. WEISS. Yes. Thank you, Mr. Hoeven. 

First, just for the record I am the grandchild of Ukrainian immigrants to the U.S. on my mother’s side. So I have a great deal of 

concern about that. 

I think the fastest, cheapest thing that we can do is to help them 

become much more efficient. It’s the second, least energy efficient 

economy in the world. We’ve alreadyinvested $15 million there 

through USAID. It helped them save $180 million worth of natural 

gas and it helped them save as much natural gas to heat about 200 

thousand U.S. homes. 

When Vice President Biden went there back in April he promised 

more of that assistance. We could do even more still that would 

help create jobs there. It would help create jobs here if they use 

American technology like transformers and stuff from Honeywell 

and other Americancompanies. Ship over there. Make their economy much more energy efficient. 
51 

It would really be the first—we could do it right now. It would 

have impact this year. 

Mr. MCNALLY. Senator Hoeven, I would want to aim right at 

Russia’s pocketbook. I think you—the best thing to do would be, as 

I said in my testimony, to deem all LNG exports to be in the public 

interest, to send a signal to Russia that we are going to compete. 

Let me just quote from a testimony from March from Dr. Montgomery and what that would mean. He said, ‘‘We estimate.’’ This 

is from the NERA, the author of the NERA study, the consulting 

group. ‘‘We estimate that in the next 5 years U.S. competition could 

drive Russia’srevenues from natural gas exports down by as much 

as 30 percent and in the long term cut those revenues by as much 

as 60 percent.’’ 

Russia has the largest gas reserves in the world. They will always be sending volume up. But we can hit them in the pocketbook. That’s how we can help, sir. 

Senator HOEVEN. Compelling point. 

Sir? 

Mr. DURBIN. Senator, I would say, first it’s not an either or, the 

question here. I think helping them with energy efficiency is a 

great idea. 

Senator HOEVEN. I agree both of those are good ideas. 

Mr. DURBIN. Yes, but I think that, you know, also being very 

clear that, you know, we are going to be entering this game on 

global LNG exports does get to the pocketbook issues of Russia, but 

also just helps allies around the world. 

To your point I think also, you know, North Dakota is, the State, 

is leading along with the industry on being able to capture those 

resources. It just means we’re goingto continue to have more resource available for manufacturers and for, you know, for customers and demand here in the U.S. and abroad. 

Ms. ROSENBERG. So for all we can do, we won’t change the fact 

that Russia will be a very significant supplier of natural gas to Europe. But the things that we can do thatwill be effective include, 

of course, first and foremost efficiency. I certainly agree with my 

panelists on that, fellow panelists. 

Additionally, indigenous production and one of the best ways to 

do that there is to help create, through technical assistance and 

other means, the right regulatory, taxation and investment terms 

in order to help bring in that indigenous production and give investors confidence that they can, in fact, run a successful project there 

and make a return. 

Of course, encouraging the changes and reform in market and 

pricing for gas and power in Europe is also an important contribution we can help with there. 

Exporting LNG which as Mr. McNally said, will help to diversify 

the European market and give those consumers the opportunity to 

negotiate for lower prices from Gazprom. 

Senator HOEVEN. Thank you. Appreciate it. 

The CHAIR. Senator Baldwin. 

Senator BALDWIN. Thank you, Chair Landrieu and Ranking 

Member Murkowski. I’m really glad that we’re having this discussion today. I have a few comments as well as a few questions for 

our panel. I’ll try to get them in my time here. 
52 

I’m particularly pleased we’re having this discussion today because of the way in which natural gas is a key input that drives 

manufacturing. I hail from a State that has a very vital and vibrant manufacturing sector. Our policies on natural gas exports, 

transport and use have a tremendous impact on consumers. Some 

of the witnesses here today have touched briefly on the issues affecting consumers in your testimony. 

But I remain convinced that discussions around how we will use 

our natural gas resources must fundamentally protect American 

consumers and provide them with a seat at the table. Therefore, 

Madame Chair, I would like to ask unanimous consent that testimony that has been prepared by the Industrial Energy Consumers 

of America which addresses, particularly, the impact on consumers 

be placed in the hearing record. I have a copy available for you. 

The CHAIR. Without objection. 

Senator BALDWIN. Great, thank you. 

Senator BALDWIN. Between 2010 and 2013 about 60 thousand 

jobs were created in the oil and gas industry in the United States. 

In that same period as natural gas prices dropped from $8 to $9 

per thousand cubic feet down to a low of about four in 2012, the 

manufacturing sector added about 570 thousand jobs. 

Manufacturers tell me regularly and I think they’ll tell you that 

in large part it’s low energy prices that are driving another great 

American renaissance. We’ve seen plants return to our shores. 

We’ve seen shifts added. We’ve seen growth in this core sector of 

our economy. 

The Chair earlier referenced the Charles River and Associates 

study of last year comparing the economic contributions of exporting a unit of LNG verses using that same unit in domestic manufacturing. It found that using that unit here in the U.S. contributed 

$5 to the economy compared to $2.40 when it was exported. When 

it compared the jobs sustained domestic use of natural gas contributed about 180 thousand jobs compared to 22 thousand when the 

gas was exported. 

So I’m very concerned about the impacts of exports on domestic 

prices because of the critical role that these low prices are playing 

right now in our manufacturing economy. So I’d like to open up a 

couple of questions to the panel. I was listening, Mr. McNally, 

when you were talking about the other major exporters of LNG. 

Talking about how liquefacation costs will always mean we have a 

low domestic price. 

But what comments would you have about the experience in Australia? Now my understanding is—and they’ve been exporting for 

a while. But the domestic prices have tripled there. They’re projecting even greater, you know, greater increases in prices. 

What does that tell us about what the sweet spot that we’re all 

discussing here in the U.S. might be? 

Mr. MCNALLY. Thank you, Senator Baldwin. 

I am not an expert in the Australian natural gas or manufacturing sector. But my understanding, generally, is —and I’d be 

happy to do a little work and get back to you. I’d be happy to do 

that. 

Mr. MCNALLY. My understanding though is the Australian resources are much higher cost than ours are. They’re remote. 
53 

They’re offshore. Australia doesn’t have the infrastructure that we 

have to get it to where it needs to be consumed. 

So just the cost of producing gas in Australia is an order of magnitude or more than ours and I think that—— 

Senator BALDWIN. Yet, but how then, if they’re increasing their 

exports that would obviously be tightening the already expensive, 

domestic supply. We’re trying to figure out where this sweet spot 

is, I guess, as everyone is calling it, a range of BTUs for export 

verses domestic use and the price range. 

Mr. MCNALLY. The—my understanding, again, and I want to 

check the data is that Australia’s exports are about 40 percent of 

their consumption. Whereas most studies I’ve seen with regard to 

the U.S., I think it’s most likely that we’ll end up permitting 6 or 

7 or alittle bit more BCF a day, so 10 percent or less. So the volume, the amount of exports in the economy may be a factor. But 

again, I’m not an expert on the Australian experience. 

Senator BALDWIN. OK. 

You know, we’ve certainly—Mr. Weiss? 

Mr. WEISS. Thank you. 

The NERA study that the Chair has referenced and Mr. McNally 

just referenced, said basically and I quote. Higher natural gas 

prices in 2015 can also be expected to have negative effects on output and employment, particularly in sectors that make intensive 

use of naturalgas. The manufacturing sector is dependent on natural gas a fuel and are therefore vulnerable to natural gas price 

increases.’’ 

So our concern is that we may be doing this to make our—some 

of our allies more energy secure, but we’ll be weakening our own 

economy at home. We need to know how big that impact is going 

to be before we go ahead and approve even more export applications that we alreadyhave approved. 

Senator BALDWIN. Madame Chair, I have run out of time, but I 

did have a couple of questions for Mr. Smith relating to the updates in process and updated analysis. Might I submit them for the 

record or I could? 

The CHAIR. Absolutely. We’re going to go through a second round 

if you can wait. 

Senator BALDWIN. Oh, then that would be perfect. Then I can 

wait. 

The CHAIR. OK. 

Mr. DURBIN. Senator, I do have a paper on Australia. I’ll be 

happy to provide. 

Senator BALDWIN. Thank you, appreciate it, Mr. Durbin. 

The CHAIR. Senator Stabenow. 

Senator STABENOW. Thank you. Thank you very much, Madame 

Chair and Ranking Member. Thank you to all of you. This is a 

very, very important discussion. 

I want to start, Mr. Smith, by saying thank you to you and the 

Secretary for, I believe, putting forward a proposal that really is 

the sweet spot at this point. To prioritize for review the projects 

that are serious enough to have spent millions of dollars in order 

to conduct a national environmental policy act review. 

Then second, to update your study which I think is critically important to do in terms of the impact on American jobs and Amer-
54 

ican manufacturing, American consumers. So I want to thank you 

for that. 

Also, just for the record, lots of different numbers going around 

and certainly FERC has approved 2 projects. As I understand it 

there’s, first of all, FTA applications, Free Trade Agreement applications are automatically approved. Most of those are not ones, I 

guess, that folks are willing to pursue but have been approved 

39.31 BCF. 

But the big area we’re focused on is seven projects. Isn’t it true, 

Mr. Smith, that 2 of those have now gone on to be approved finally 

by FERC? But in total the DOE has given preliminary approval to 

move forward on 10.9 BCF. Is that correct? 

Mr. SMITH. Thank you for the question, Senator. So the total of 

conditional authorizations that we’ve issued has been 9.27 billion 

cubic feet per day. Then we’ve issued a final authorization for one 

terminal which is the Sabine Pass terminal in Louisiana for 2.2 billion cubic feet per day. 

Senator STABENOW. I see. 

So that would be 11? What you’re saying 9? What was it again? 

Mr. SMITH. 9.27 on a conditional basis and then of that 9.27, 2.2 

has gone on to be authorized on a final basis. 

Senator STABENOW. OK. Great, great. Thank you very much. 

So let’s look for a second though on what we’re talking about just 

in terms of the study the DOE already did. You said that a high 

export scenario was 12 billion. So you’ve done over 9. Twelve billion 

cubic feet per day and that at 12 billion we could see up to a 54 

percent increase in energy costs, translating into $60 billion a year 

in higher energy costs for American consumers and businesses as 

well as concerns that Mr. Weiss was talking about in terms of what 

happens to wages and labor costs and so on. 

As we go forward and we’re talking about all of this I guess I 

appreciate the window of opportunity internally. I appreciate hearing all about the economies around the world. I’m going to talk 

about ours. 

We’ve got ten million people out of work in our country. When 

we look at the incredible advantage we have right now of this great 

new boon in natural gas. 

The fact that China is paying $14 per million BTUs right now. 

Brazil is paying $15. 

Europe is about $8. 

In America we’re paying about $4. 

Now if that was a tax rate differential we would never give that 

up in a million years. Never. So here we are debating and I appreciate very much the impacts. I care about around the world. 

But I also care deeply about right here, in America. So from our 

standpoint this is a huge competitive advantage. Businesses are 

coming back to America. 

We’ve seen BASF moving production from Europe back to facilities here in America and in Louisiana. They’ve invested $6 billion 

in America in recent years. 

More than 100 productionsites around the country. 

There are many more opportunities to talk about, more than 

$100 billion investments in other manufacturers. 

One hundred and Fourty-eight different manufacturing projects. 
55 

In fact the Charles River Associates have said that if we focus 

on exports verses manufacturing there’s 8 times more jobs in manufacturing because there’s so many products that we use natural 

gas in. So, I guess I’m not going to ask a question because I just, 

at thispoint, Madame Chair, I love the fact that we’ve added 646 

thousand jobs since February 2010 in manufacturing. 

It’s the fastest pace of job growth since the 1990s. I want to keep 

it up. I’m willing to work on finding, based on the DOD study, how 

we can make sure what you’ve already approved gets online. 

But for the life of me, I cannot imagine why any American listening to this debate, unless you own an oil and gas company, would 

think it’s a great idea to give up a huge advantage right now that 

we have in cost that is creating good paying, middle class jobs. 

Thank you. 

The CHAIR. Thank you. 

Let me follow up with a line of questioning. Maybe Mr. McNally 

and Mr. Durbin, you could best respond to the comments made by 

Senator Stabenow and her passion for creating jobs in America is, 

you know, is terrific. I’d also say that that’s my purpose too, is to 

create more jobs here. 

That’s the whole purpose of this hearing and having a balance 

of using domestic gas internally for our own use and export is the 

best way to create the most jobs inAmerica. That’s—we agree on 

that. This is about creating jobs in America. 

So talk about the economic advantage that seems to be of such 

concern to this Senator and to others. Explain again, how we will 

always maintain or for the foreseeable future should maintain a 

significant economic advantage. I think you testified to that, if you 

wanted just to repeat or add something to that. 

Mr. MCNALLY. Thank you, Madame Chair. 

Certainly agree that were we to confront a choice between a 

manufacturing renaissance and exports we all know what we 

would choose. That would be our manufacturing. 

The good news and this news comes from study after study from 

NERA and Brookings, that you, Madame Chair, mentioned and 

others, is that we can have our gas and export it too. There is so 

much gas in this country now. The gas curve is so flat meaning 

that were the pricejust to go up a little bit a lot more supply comes 

out of the ground. 

There’s so much gas here that as the NERA study found, our net 

welfare as a Nation goes up even if we had unlimited exports of 

LNG in terms of public policy limits.So we just allowed the market 

to decide how many export facilities will get built. So, again, I 

would just want to remind about all the studies that we’ve talked 

about today that show we have enough gas to have both those 

things. There’s really no reason to have to make thatchoice, that 

awful choice that you mentioned. 

The CHAIR. I think that’s an excellent point. 

Mr. Durbin, since you represent both producers of gas, E and P, 

exploration and production, and users of gas, both for electricity as 

well as for fuels. Your organizationrepresents all of that, correct? 

Mr. DURBIN. Actually we are just the producers. 

The CHAIR. OK, just the producers. 

OK. 
56 

Mr. DURBIN. But I—— 

The CHAIR. Among your general producers of that are producing 

for various, different means, how do they reconcile this tension between using gas for electricity, using gas for fuels, using gas for 

other things and some of the concern that we might run out of a 

supply that Mr. McNally says, really looks almost limitless right 

now. 

Mr. DURBIN. Thank you for the question, Senator. 

Let me first say that, you know, I and our member companies 

share the Senator’s passion with regard to, you know, helping to 

shore up our own economy here first. We think that, you know, 

U.S. energy production is doing that, has done that and will continue to do so. 

The mission that my members gave me was to promote the increased demand for and use of natural gas. That’s in power generation, in manufacturing, in transportation and in exports. The point 

being and may again, again, you know, the resource is just so enormous at this point. Our ability to get it at affordable prices continues to improve on a daily basis. 

Again, in my testimony you’ll find another, to Mr. McNally’s 

point, that, you know, ICF has done a study that shows that, you 

know, as far as, you know, flattening out the supply curve, you 

know, for natural gas. There’s now, by their estimates we have 

1,500, trillion cubic feet of natural gas available at sub $5 levels. 

That means we can have our gas and export it too and continue 

to drive growth in our economy and the manufacturing. 

The CHAIR. Thank you. 

Let me ask you, Mr. Smith. In 1992 which is the law that we’re 

reviewing, the Congress said that LNG exports shall be deemed 

automatically to be in the public interest if they involve transactions between the U.S. and free trade agreement countries. So 

the following countries which we all know, Australia, Bahrain, 

Canada, Chile, Columbia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. There’s 

nothing for you to decide because the Congress has already decided 

this is in our interest, correct? 

Mr. SMITH. That’s correct. Those—— 

The CHAIR. That is correct because the law directs you in that 

direction. 

Mr. SMITH. That is correct. 

The CHAIR. OK. 

This committee is going to consider what the update to that law 

should be and what is in the U.S. interest to export. That, I think, 

will be based on an economic analysis of having our gas and exporting it too and what those numbers are. 

The only other decision you would make is whether the receiver 

was meritorious of receiving. It’s, you know, the question is how 

much can we afford to export? It’s a veryimportant question that 

I want this committee to try to grapple with. 

The other question could be and this is what I want to ask you 

is the merit, the friendliness of the country in receipt. So has that 

ever been a discussion that you’reaware of in another committee 

which is out of our jurisdiction that would be in foreign relations, 
57 

you know, who we should or shouldn’t export. I mean, clearly 

inWorld War II we wouldn’t export to Germany, our enemy. 

So along those lines have you been engaged in any discussion 

about that in another committee? 

Mr. SMITH. I have not personally been engaged with that. 

The CHAIR. Do you know if the Secretary of Energy has been 

asked to testify along those lines? 

Mr. SMITH. Along that particular question I can’t answer about 

that. 

The CHAIR. So it really has been just, to your knowledge, about 

the volume, the question of the volume. 

Mr. SMITH. The volume along with all the other issues that we 

considered today. 

The CHAIR. What are all the other issues? 

Mr. SMITH. In terms of public interest? 

The CHAIR. Yes. 

Mr. SMITH. In public interest we look a wide variety of issues. 

The CHAIR. Like what exactly? 

Mr. SMITH. We look at impact on prices. 

We look at impact on manufacturers. 

We look at impact on consumers. 

We look at job creation. 

The CHAIR. But you don’t look at that for these because the Congress has already deemed automatically that it’s in the public interest, for these countries. 

Mr. SMITH. Yes, Senator. That’s correct. For those countries we 

have—— 

The CHAIR. Yes. 

So what some of us are thinking about doing is just adding to 

this list because it’s clearly, according to the law, in our interest 

to export to these countries. 

The only real question to me is, how much should we be allowing 

to leave our country that provides us with the balance that we 

need to create jobs here at home more and more and more. Capture 

gas that is being flared into the atmosphere which is not good and 

put it into the market so everybody can make money on it. 

I just think we should be pretty clear about that. If there are 

members that disagree, I’m happy to hear that. 

I’m going to—I’ve gone over my questions. So I’m going to stop. 

But the law says it is in the public interest to export to these 

counties. The question is how many other countries should be 

added, in my view? Should it be NATO countries that we fight battles with over this issue of resources? Should it be the 170, you 

know, tradeorganization members that we trade all sorts of products with? That’s one question. 

Then the other question is what volume should we allow and 

what triggers should regulate that, is the way I’m thinking. But let 

me turn it over to Senator Murkowski. 

Senator MURKOWSKI. Thank you, Madame Chairman. This has 

been a good hearing, good information put out on the table. 

I just want to get a couple of things clarified with you, Mr. 

Smith, just so I make sure that I have heard and interpreted correctly. 
58 

When we’re talking about this procedural change here one of the 

concerns that I have is the uncertainty surrounding what happens 

to projects that are awaiting these conditional licenses within this 

interim period before the change is finalized. We’ve heard from 

some thatthese conditional approvals send good, positive signals to 

the market. I happen to believe that that is the case. The Administration has, in fact, argued that as well. 

So what I would like to know, specifically from you, is whether 

or not these conditional approvals will continue as you’re collecting 

comments and figuring out what you’re doing going forward. You’re 

not, in other words, you’re not going to be stopping or slowing down 

on theseconditional approvals? 

Mr. SMITH. Thank you, Senator, for that question. 

So two points I’ll make in response to that question. 

First, we have—we plan on continuing to finalize the conditional 

approval that we’ve already started working on the one that’s next 

in the queue. So we expect to continue with that authorization. 

We don’t expect to—— 

Senator MURKOWSKI. Wait. Will you continue with just the next 

one in the queue and the one subsequent to that or just the one? 

Mr. SMITH. On a conditional basis we expect to continue with the 

one conditional authorization that we’ve already started on. We 

also expect to continue to move forward with final authorizations 

for those applicants who have received conditional authorizations 

and who complete the FERC process. So those would be applicants 

who would be eligible for final authorization. 

They would not be—we would consider—we would continue with 

those authorizations. 

Senator MURKOWSKI. OK. So those will continue as well as the 

one that is immediate in the queue now? 

Mr. SMITH. Immediate in the queue for conditional authorization. 

Senator MURKOWSKI. OK. 

Then another clarification here. 

It’s been stated this procedural change effectively resets the clock 

on these cumulative volumes so that only the finally approved 

projects count toward the 12 billion cubic feet per day. So, right 

now we’ve got the 2.2 billion cubic feet per day for Cheniere and 

then thisSempra one that has just been approved. 

So this means that no matter how long it may take to do this 

additional study, assessing the cap up to 20 billion cubic feet, you 

will continue to process those applications that take you up to the 

$12 billion, excuse me, the $12 billion, BCF? 

Mr. SMITH. BCF. 

That is correct. So with—we’ve approved the 2.2 BCF per day. 

As final authorizations there is an additional authorization or application that’s gotten through the FERC process for an additional 

1.7 BCF. So that takes us up to a total of 3.9 BCF per day. 

Senator MURKOWSKI. Right. 

Mr. SMITH. We’ve done a study that goes up to 12 BCF. We’ve 

announced that in the future we’ll be looking from 12 to 20. But 

right now we’re at—you’re at 2.2. 

Senator MURKOWSKI. Right. 

Mr. SMITH. Another thing I’d observe is—— 

Senator MURKOWSKI. But—can I just ask then on that? 
59 

We’re at the 2.2 but will you continue moving toward final approval even while this study is underway that does this assessment 

between 12 and 20? 

Mr. SMITH. So the study for 12 to 20 would only impact those applications that are beyond 12 BCF. So yes, we do not have to complete that additional economic study for us to move forward on 

final applications. 

Senator MURKOWSKI. OK. 

I just want to make sure that we’re still moving here. Then one 

final point of clarification here. 

I am expecting, I’m certainly hoping that by the end of this year 

we will see more projects than that will receive final approval from 

DOE after completing the review at FERC. That’s my hope. 

That’s—and I’m hearing you, kind of, lay out this process. I’d like 

a little bit of optimism or assurance that you would agree that we 

will see final approval. 

Would you be surprised if we did not? 

Mr. SMITH. I think that’s a reasonable expectation, Senator. The 

comment period for the two studies that we’ve put out, that closes 

on July 21st. That will give the public 45 days to comment on the 

upstream study and on the greenhouse gas emissions study which 

will be considered in reference in our next final application. 

So we need time to see what those comments are that we get. 

We have to evaluate them. We haven’t gotten the comments yet. 

So I don’t know what they are. 

But it’s our general expectation that we should be able to finish 

with that process and finish with the comment period for the 

change in process in a timeline that’s roughly consistent with the 

next applicant coming out of the FERC process and finishing with 

the notice for rehearing and all things that has to do with FERC. 

So we don’t expect this process to be, you know, a delay in our 

ability to continue to process final applications. 

Senator MURKOWSKI. Good. That’s good to hear because there’s 

a lot, seemingly, a lot of moving parts. Quite honestly when additional studies are announced around hereit’s usually code for, OK, 

we’re going to slow things down. Now we have a reason to back off 

of it. 

Mr. SMITH. Right. 

Senator MURKOWSKI. But you seem somewhat assured that we 

will continue that process while these studies are in play. I would 

certainly hope that that would be the direction as we move forward. 

Mr. SMITH. I—— 

Senator MURKOWSKI. There’s a lot of skepticism out there. 

Mr. SMITH. Thanks, Senator, but I would observe that the 2 studies that we’ve talked about the greenhouse emissions study and the 

upstream impact study. Those studies are—have been published. 

They’re available. They’re on our website. You can download them. 

You can read them. They’re out for public comment right now. 

The public comment period will close on the 21st of July. So 

there’s a set date for that public comment period closing. 

I don’t know what comments we’re going to get so I can’t give 

a commitment on exactly how many days that we’re going to need 

in order to evaluate the comments. But what we can commit to is 
60 

that the—our expectation is that we should be able to open and 

close the comment period,evaluate the comments and be ready to 

move forward on subsequent applications at a timeline that’s 

roughly consistent with the next applicant being completely finished with the FERC process. 

Senator MURKOWSKI. So it would be good to get updates as you 

go along so we can just kind of make sure we’re all going in the 

same direction? 

DOE has no basis to estimate how long it will take to evaluate 

comments on these two environmental reports. The time it takes 

to evaluate these comments will depend on a number of factors, including the number of comments and the scope of the comments received. 

Mr. SMITH. I’d be happy to do that. 

Senator MURKOWSKI. Thank you. 

The CHAIR. Thank you. Our hearing is coming to a close with the 

next set of questions by Senator Baldwin. Then we’ll have a wrapping up remarks. I think that will call it a day. 

Senator BALDWIN. Thank you. I appreciate second round and a 

chance to continue with a few questions. 

Mr. Smith, on the topic that we were talking about the changes 

in the process for permitting, recognizing, obviously, a huge change 

in the landscape for natural gas in our country. I was particularly 

pleased to see that the Department is seeking updates in their 

analysis of the impacts of natural gas exports on the public interest. 

What, I guess, I’m curious about is, sort of, the granularity of 

that analysis that we might expect because we know that exports 

will have different impacts in different regions of the country and 

different States and different sectors. I was talking in the last 

round alittle bit about my State of Wisconsin and its manufacturing economy. 

So, I guess my first question is will you really be looking at, sort 

of, broad, national averages or will you get into a greater level of 

geographic and sector granularity in your update? 

Mr. SMITH. Thank you for the question. 

We do expect to have, you know, a certain level of granularity 

certainly in the last study that we commissioned that was done by 

NERA. We took a close look at sectors. We looked at different sectors of the economy and impacts on various areas. 

So we would expect to do something similar in this study so that 

we get a look at what this means for consumers throughout the 

United States, but also for manufacturing consumers. 

Senator BALDWIN. So economic sectors also, regions and States? 

Mr. SMITH. I—we have not scoped this study thoroughly yet. But 

I would expect. 

Senator BALDWIN. Then I would encourage you to get that level 

of specificity. I know that, certainly, you know, there’s quite a variation between how increased exports, at least that’s my instinct on 

all of this. 

Mr. Weiss. 

Mr. WEISS. According to DOE guidelines the impact on the economy and wages and those sorts of things are a secondary consideration. The primary consideration is the impact exports will have on 
61 

domestic supply and U.S. energy security. So the things that you’ve 

been raising are important, but as far as the rules go, they’re not 

as important as those other considerations. 

Senator BALDWIN. But let me go a little bit further with Mr. 

Smith on this. 

I would—as you’re scoping this study I would also encourage you 

to look at likely significant changes in domestic demand by virtue 

of things like boiler MACT and other, you know, EPA greenhouse 

gas rules. In a State like my own where 62 percent of the electrical 

generation right now is coal and States, of course, are going to 

have a significant mandate to figure out plans to reduce that 

greenhouse gas emission level as boiler MACT is, you know,in its 

stages. 

We’re going to see some demand, domestic demand, changes. So 

I hope we anticipate those as we look at updating the analysis on 

export impact? 

Mr. SMITH. Indeed, Senator. That’s really the driver toward 

doing additional studies. We’re aware that things change. Markets 

change. The rules in some cases change. 

So as we look at going from zero exports to larger numbers, it’s 

appropriate periodically to make sure we’re making decisions based 

on recent and appropriate data. So capturing some of these things 

is the very reason. 

Senator BALDWIN. Yes. 

Mr. SMITH. That we do this. 

Senator BALDWIN. I would just certainly strongly recommend 

that you look at both of those sets of issues, not only regional and 

sector issues, but I suspect in a State like my own we are going 

to see some significant fuel switches. I certainly want to make sure 

that that’s affordable. As Senator Stabenow was saying, that we actually even retain a cutting—a real advantage in doing these 

things. 

Thank you. 

The CHAIR. Thank you, Senator, for those excellent questions. 

Just a couple of wrapping up remarks. 

I’ve asked the staff to submit a record to the committee about the 

States that produce natural gas and also are huge consumers of 

natural gas because getting to Senator Baldwin’s question, I think 

it’s important as we move forward to make decisions about this. We 

have to be clear about what regions of the country are producers 

and consumers. 

The CHAIR. Interestingly as I’ve stated to the members of this 

committee, Louisiana is a little bit in both. We produce a tremendous amount of gas, but we also consume a tremendous amount of 

gas. So we’re, kind of, a good balance here. It’s not in our interest 

for just, you know, unlimited exports, neither is it our interest to 

not export because we both produce it and consume it. 

So in order for our economy to work we’ve got to have that right 

balance. I, kind of, think that is going to be where we end up in 

the country. So, but let’s get that information about what States 

are consuming? What States are producing? I’ll ask the staff. 

Then finally for Mr. Weiss, I think one question about this life 

cycle greenhouse gas needs to be answered. You stated in your testimony that there’s little differencein the life cycle emissions be-
62 

tween using U.S. LNG exports or coal for power production in Europe and Asia. That’s what your testimony says. 

Yet our own labs, our own energy technology laboratory, the latest analysis of LNG life cycle emissions estimates that our exporting from the U.S. on average would reduce greenhouse gas emissions by almost 40 percent in Asia and 42 percent in Europe over 

100 years if thesubstitute, if it’s a substitute for coal which is in 

large measure, all that—not all that Europe has but they rely a lot 

on it. They’re closing their nuclear facilities downin some of those 

countries. They don’t have the technology that we have. 

So they do rely heavily on coal. So while acknowledging an uncertainty range around these estimates it concludes it would reduce 

greenhouse gases from a minimum of 18 percent and as high as 61 

percent. 

Are you saying in your testimony that that difference is not accurate? 

Mr. WEISS. Madame Chair, that same study. 

The CHAIR. Are you disputing that? 

Go ahead. 

Mr. WEISS. No. I’m not disputing it. 

But that same study says, ‘‘The use of U.S. LNG exports for 

power production in European and Asian markets will not increase 

GHG emissions on a life cycle perspective when compared to regional coal extraction consumption for power production.’’ 

That’s the same study. Basically what they found is although 

natural gas is 50 percent cleaner when it comes to carbon pollution 

than coal, that all of the carbon pollution and energy that’s used 

to liquefy the gas, to ship the gas, liquefy it, move it across the 

ocean, then un-liquefy it, takes up—is 50 percent more energy intensive than the coal supply chain. 

So basically I’m reading it—the way—and again I’m quoting the 

exact same study you are that the way I read this is that there’s 

basically no difference. That’s what this study concludes. There’s no 

difference because of the supply chain emissions from LNG exports,between LNG exports and foreign coal. 

The CHAIR. Has the Department of Energy made a conclusion on 

this? If so what is it? If not, when will you have it? 

Mr. SMITH. So the statement that Mr. Weiss read is one of the 

conclusions of the study which essentially that it’s argumentation 

that LNG exports don’t increase greenhouse gas emissions. 

The CHAIR. They do not. 

Mr. SMITH. They do not. 

The CHAIR. But the question is do they reduce it? 

Mr. SMITH. If you look at the study there’s lots of scenarios. In 

the vast majority of the scenarios, excuse me, emissions actually do 

go down. 

The CHAIR. That they do reduce greenhouse gases even given 

what Mr. Weiss said about the, you know, fabrication transport, 

etcetera. Even taking all that into consideration it actually reduces 

greenhouse gases? That’s what you’re testifying to? 

Mr. SMITH. That’s the conclusion of the study which is also out 

for public comment. So a very important part of this process is to 

put the data out. Do it in a way that’s flat and open and clear. 

Then allow the public to comment on the study and the analysis. 
63 

So that’s a key and critical part of us making good public interest 

determinations is to make the data available. 

The CHAIR. I agree with you. I think people are going to be very 

interested in what the findings are whether it reduces, you know, 

greenhouse gases or increases. Very interesting. We should have 

that analysis done shortly. 

I’d like to give you all each a chance to wrap up in 30 seconds 

starting with you, Ms. Rosenberg. Anything that you think should 

be on the record that you did not put on the record, any closing 

remarks. 

Ms. ROSENBERG. I think I have nothing further to add than what 

I did earlier and in being mindful of your time I think I’ll pass it 

on. 

The CHAIR. Thank you. 

Mr. Durbin. 

Mr. DURBIN. I do think it’s been a very comprehensive hearing. 

Thank you for holding it. Angain, just believe that, you know, we 

do have the resource here and be able to produce it at affordable 

prices for quite a long time. 

The CHAIR. Thank you. 

Mr. Weiss. 

Mr. WEISS. Thank you for having me, Madame Chair. I would 

just like to add the NERA study that Mr. McNally and others have 

quoted makes it very clear that natural gas exports are a net economic benefit to the country. But essentially there’s a transfer of 

income between those who work in manufacturing and work in 

labor intensive jobs to those who are in the oil producing sector. 

Oil producers are much better off. Wages are lower and less 

manufacturing. 

Thank you for having me. 

The CHAIR. Mr. McNally. 

Mr. MCNALLY. Thank you for having me, Madame Chair. I have 

nothing to add. 

The CHAIR. Mr. Smith. 

Mr. SMITH. Thank you very much, Chair Landrieu. 

I guess just in closing I’d say that, emphasize that the process 

change that we propose is all about making better decisions about 

improving the process, about making sure that we make good informed decisions and that we include all of the broad public stakeholders that we’veheard from, you know, here in this hearing as 

part of that process. 

So we’re committed to an open and transparent public process 

that’s as efficient as possible, but helps us make sure that we balance these issues and these decadal challenges that we’re facing 

before us. 

The CHAIR. Thank you very much. 

The record will stay open for 14 days. 

The CHAIR. Thank you all. 

The meeting is adjourned. 

[Whereupon, at 4:27 p.m. the hearing was adjourned.] 

(65) 

APPENDIXES 

APPENDIX I 

Responses to Additional Questions 

RESPONSES OF ELIZABETH ROSENBERG TO QUESTIONS FROM SENTOR FRANKEN

Question 1. One challenge standing in the way of more natural gas vehicles on 

the road has to do with refueling infrastructure. Service stations across the country 

are predominantly designed to dispense gasoline. Infrastructure for natural gas or 

other fuels is far less common. What are some of the advances that could make 

home refueling units more cost effective? 

Answer. Natural gas vehicles currently represent a small but promising portion 

of the U.S. transportation fleet. The adoption of natural gas-fuelled vehicles is greatest among heavy-duty vehicles, where the cost advantages are greatest and the size 

of natural gas fuel equipment is manageable. The light-duty natural gas vehicle sector is in its infancy. Utilities and manufacturers are working to develop new technology and home refueling systems that will match the cost advantages already in 

evidence in the heavy-duty natural gas vehicle domain. New codes and standards 

will help to facilitate the growing commercial adoption of light-duty natural gas vehicles and home refueling units. Specific incentives for individual technology production are rarely helpful or effective, but proper market design and clear policy objectives can speed development of effective technology solutions. 

Question 2. Natural gas in homes is stored under low pressure, and it takes hours 

to compress the gas to the Compressed Natural Gas (CNG) form necessary to fill 

up the tank. What are the prospects of overcoming this hurdle for home-filling 

units? 

Answer. There are a variety of distribution and technology deployment challenges 

associated with adoption of light-duty natural gas vehicles in the United States. 

Technology for home refueling is one such challenge and a source of serious research 

and development focus for commercial and university experts. While this technology 

is in its infancy, there are great commercial advantages of using relatively inexpensive natural gas and accessing the convenience of in-home natural gas sources. Prospects for overcoming the hurdles associated with in-home natural gas compression 

are promising while natural gas prices remain relatively low. 

Question 3. One of the challenges associated with CNG vehicles is that the large 

fuel tanks take up a lot of trunk space. This is one area that may be ripe for technological innovation. For example, 3M in Minnesota is working to develop natural gas 

fuel tanks using composite material that could be much lighter and hold more capacity than currently available tanks. What opportunities exist for breakthrough 

technologies in this area? What are some of your recommendations for incentivizing 

the development and deployment of new technologies? 

Answer. The commercial incentives for use of natural gas in heavy-duty vehicles 

are clear and have caused a meaningful adoption of this technology over the recent 

past. Technology challenges associated with shrinking the size of the fuel tank in 

a light-duty natural gas vehicle are substantial but not insurmountable. With relatively low natural gas prices, auto manufacturers and natural gas sector entrepreneurs will continue to work to realize a breakthrough for this technology in the 

light duty vehicle market. Incentives and technology support for the natural gas vehicle market through policy should be crafted with clear objectives, but retain sufficient flexibility to allow markets to shift and respond to changing circumstances. 
66 

RESPOPNSES OF CHRISTOPHER SMITH TO QUESTIONS FROM SENATOR FRANKEN

Question 1.The Department of Energy (DOE) has conducted several studies on the 

effect of increased Liquefied Natural Gas (LNG) exports on domestic prices. Under 

the various scenarios considered in these studies, are there any export scenarios 

DOE considered where consumers do not pay higher prices for natural gas? 

Answer. DOE undertook a two-part study of the cumulative economic impact of 

LNG exports. The first part of the study was conducted by DOE’s Energy Information Administration (EIA) and looked at the potential impact of additional natural 

gas exports on domestic energy consumption, production, and prices under several 

export scenarios prescribed by DOE. The EIA study did not evaluate macroeconomic 

impacts of LNG exports on the U.S. economy. The second part of the study, performed by NERA Economic Consulting, assessed the potential macroeconomic impact of LNG exports using its energy-economy model. NERA built on the EIA study 

requested by DOE by calibrating the NERA U.S. natural gas supply model to the 

results of the EIA study. The EIA study was limited to the relationship between 

export levels and domestic prices without considering whether those quantities of 

exports could be sold at high enough world prices to support the calculated domestic 

prices. NERA used its Global Natural Gas Model to estimate expected levels of U.S. 

LNG exports under several scenarios for global natural gas supply and demand. 

In all natural gas export cases evaluated by EIA, domestic natural gas prices were 

higher than the reference case without natural gas exports. 

In many of the NERA cases in which U.S. liquefied natural gas (LNG) exports 

were allowed to compete internationally, no LNG exports occurred in NERA’s model 

because the delivered price of U.S. produced LNG to international markets was not 

competitive with LNG delivered from other sources. In those cases, domestic natural 

gas prices did not rise. In other NERA cases in which international natural gas demand was higher than in NERA’s reference case, or if international, non-U.S. supplies of LNG were restrained in different scenarios, U.S. LNG exports were projected to occur and in those cases, prices of domestic natural gas rose. 

It is important to note that in all studies, including the EIA’s most recent update, 

the Annual Energy Outlook 2014 (AEO 2014), issued on May 7, natural gas production rose at a higher level than potential exports. Projections from the AEO 2014 

reflect that the 2035 Henry Hub price in the AEO 2014 Reference Case is $6.92 per 

million Btu (MMBtu), down from $7.31 MMBtu in the AEO 2011 Reference Case 

(both in 2012 dollars), which was the basis for the two-part LNG study. 

Question 2 In order to approve LNG exports, DOE is required to consider the public interest. As your testimony indicates, this includes economic impacts, international impacts, security of natural gas supply, and environmental impacts, among 

other factors. However, economic impacts vary by region. Higher prices for natural 

gas may benefit states rich in natural gas, but may not benefit states with manufacturers who need to buy natural gas. Does DOE’s public interest determination account for varying impacts on different regions of the United States? 

Answer. DOE’s evaluations contain analysis of regional impacts of LNG exports 

when those impacts are included in dockets submitted by the applicants, proponents 

or opponents in DOE proceedings. For example, DOE included a section on Regional 

Impacts in Jordan Cove Energy Project, L.P., DOE/FE Order No. 3413 (Order Conditionally Granting Long-Term Multi-Contract Authorization to Export Liquefied 

Natural Gas by Vessel from the Jordan Cove LNG Terminal in Coos Bay, Oregon, 

to Non-Free Trade Agreement Nations) dated March 24, 2014. The applicant in this 

case included a study that addressed regional economic benefits that would accrue 

from a grant of the application. DOE found that the record contains substantial evidence of regional economic benefits from a grant of the application. 

Question 3. Fracking demands large amounts of water. We are projected to frack 

a million new wells by 2035. Each fracking well is estimated to use two to ten million gallons of fresh water per year. In addition, up to 90 percent of water used for 

fracking can remain unrecovered underground. How is DOE working with industry 

to make sure more water is recovered, recycled, and also treated for other uses? 

Answer. DOE, in collaboration with DOl and EPA, sponsors research and development (R&D) work directed toward mitigating the environmental effects of oil and 

gas production activities, including hydraulic fracturing. These include finding alternatives to water for hydraulic. fracturing, minimizing the amount of water used in 

hydraulic fracturing, and reutilizing waters that are recovered from oil and gas 

wells. Essentially all oil and gas wells, even those in which hydraulic fracturing is 

not employed, yield large quantities of ‘‘produced water’’ in association with the oil 

and gas that are their principal products. While only a comparatively small portion 

of the water used to hydraulic fracture a well may be recovered during the initial 

‘‘flow-back’’ phase (which occurs after hydraulic fracturing but before a well is 
67 

1Steven Mufson, ‘‘Can U.S. natural gas rescue Ukraine from Russia?’’ Washington Post, 

March 25, 2014, available at http://www.washingtonpost.com/blogs/wonkblog/wp/2014/03/25/canu-s-natural-gas-rescue-ukraine-from-russia/. 2 Ayesha Rascoe, ‘‘U.S. lawmakers mull speedier gas exports to help Ukraine, Europe,’’ Reuters, March 25, 2014, available at http://www.reuters.com/article/2014/03/25/us-usa-lng-congressidUSBREA2O08Z20140325. 3 Cheniere, ‘‘Sabine Liquefaction Project Schedule,’’ available at http://www.cheniere.com/ 

sabinelliquefaction/project—schedule.shtml (last accessed September 2014). 

placed in production), it is not uncommon for the total quantity of produced water 

that is recovered over the life of a well to exceed the amount that was used in hydraulic fracturing. Recovering, treating, and either properly disposing of or recycling 

all waters recovered from oil and gas wells is a significant environmental challenge 

which also represents a substantial cost of doing business to producers. 

While numerous water treatment technologies are currently available, DOE, other 

federal agencies, and the industry are pursuing more cost-effective and less energyintensive 3 treatment approaches, such as membranes. DOE’s primary focus is on 

promoting the reutilization of produced and flow-back waters in oil and gas production operations. However, to the extent that technological advances facilitate more 

efficient and effective removal of contaminants, a greater range of recycling possibilities may emerge. 

Alternatives to water as a hydraulic fracturing agent include using carbon dioxide 

or nitrogen. These agents are not effective in all geologic formations, but sometimes 

can offer an attractive ‘‘water-less’’ alternative. DOE and industry are also actively 

exploring using water recycled from other industries, such as acid drain water from 

mining, for use in hydraulic fracturing. Due to the considerable cost of purchasing 

and transporting millions of gallons of fresh water to production sites, industry has 

a clear economic incentive to minimize its fresh water requirements. 

DOE’s interest in water use, treatment and recycling extends beyond the oil and 

gas industry. The water-energy nexus is integral to two DOE policy priorities: climate change and energy security. DOE’s program offices have addressed the waterenergy nexus for many years; however, this work has historically been organized on 

a program-by-program basis, where water has been considered among a number of 

other factors. In the fall of 2012, DOE initiated a department-wide Water-Energy 

Tech Team (WETT) to increase cohesion among DOE programs and strengthen outreach to other agencies and key external stakeholders in the water and energy sectors. The WETT developed the Water-Energy Nexus: Challenges and Opportunities 

report, which was released in June 2014, to provide 4 an analytical basis from 

which to address these objectives and to provide direction for next steps. 

RESPONSES OF DAN WEISS TO QUESTIONS FROM SENATOR FRANKEN

Question 1. One important issue is the extent to which our LNG exports can have 

an impact on Russia’s behavior in Ukraine. Unlike Russia, which sends its natural 

gas to Europe through pipelines, U.S. exporters would need to first liquefy the natural gas at export terminals in the U.S., then re-gasify the natural gas at import 

terminals in Europe, and then finally put the gas into pipelines to get it to its destination. In addition, the first U.S. export terminal won’t be completed until late 

2015 or 2016. Finally, Europe has only a limited number of import terminals that 

can take in our product. What role, if any, would increasing U.S. LNG exports play 

in the immediate security situation in Ukraine? 

Answer. Increasing U.S. LNG exports will not provide immediate or prompt relief 

for Ukraine and will play no role in in ameliorating the immediate security situation. 

Concern about Russia using natural gas as a weapon against Ukraine is understandable. The Washington Post reported that 

Many members of Congress are pressing the Obama administration to 

use energy as a diplomatic weapon and to speed permits for natural gas export terminals to ease Europe’s and Ukraine’s heavy reliance on Russian 

supplies.1

There is legislation to fast track approval of additional LNG export applications 

by eliminating or truncating DOE’s public interest review of proposed exports.2

Additional approval of LNG exports threatens to further hike natural gas prices 

and pollution, but would do little to help Ukraine. The Sabine Pass LNG facility 

is the export terminal nearest to completion, and its finish date is at least a year 

away.3 The New York Times notes that ‘‘half of the gas that will leave [the] facility 
68 

4 Clifford Krauss, ‘‘U.S. Gas Tantalizes Europe, but It’s Not a Quick Fix,’’ New York Times, 

April 7, 2014, available at http://www.nytimes.com/2014/04/08/business/energy-environment/usgas-tantalizes-europe-but-its-not-a-quick-fix.html?llr=0. 5 Jennifer Dloughy, ‘‘Two more LNG projects cross finish line for exports,’’ Houston Chronicle, 

September 10, 2014, available at http://www.houstonchronicle.com/business/energy/article/Energy-Department-gives-out-two-more-LNG-export-5747191.php. 6Steven Mufson, ‘‘Can U.S. natural gas rescue Ukraine from Russia?’’ Washington Post, 

March 25, 2014, available at http://www.washingtonpost.com/blogs/wonkblog/wp/2014/03/25/canu-s-natural-gas-rescue-ukraine-from-russia/. 7 Clifford Krauss, ‘‘U.S. Gas Tantalizes Europe, but It’s Not a Quick Fix.’’ 

8 Ibid. 

9Sen. Ed Markey, ‘‘Markey Introduces Legislation to Boost Ukrainian Energy Independence, 

Lessening Putin’s Power,’’ Press release, June 5, 2014, available at http:// 

www.markey.senate.gov/news/press-releases/markey-introduces-legislation-to-boost-ukrainianenergy-independence-lessening-putins-power. 10 ‘‘USAID Marks Four Years of Success in Improving Municipal Energy Efficiency in 

Ukraine,’’ (2014), available at http://ukraine.usembassy.gov/events/usaid-heating-project.html. 11 Arthur Nelson, ‘‘Europe’s dependency on Russian gas may be cut amid energy efficiency 

focus,’’ The Guardian, September 8, 2014, available at http://www.theguardian.com/world/2014/ 

sep/09/europe-dependency-russian-gas-energy-efficiency-eu. 

has already been contracted by India and South Korea. The other half will go to 

British and Spanish companies.’’4

While two other exports terminals in Florida and Louisiana have recently provided final approval by the Department of Energy they will not be finished until 

2018 at the earliest.5 None of the other approved LNG terminals have even begun 

construction. The Post predicts that LNG exports to Ukraine could not occur until 

‘‘years from now. The earliest gas exports won’t come until late 2015 or 2016, and 

most won’t get started until 2017 through 2019.’’6

Oil executives understand that the approval, construction and operation of LNG 

export terminals is a lengthy process. The Times reported that 

‘‘L.N.G. exports are not about snapping your fingers and making them 

happen,’’ said Marvin E. Odum, president of the Shell Oil Company, which 

has partnered with Kinder Morgan in a proposed export terminal in Georgia that is awaiting regulatory approval. ‘‘These are large business development projects that take several years of construction and several years of 

business development and engineering design.’’7

The Times concluded that ‘‘the United States can offer little hope for Europeans 

eager to diversify their gas sources as Russia occupies Crimea and may threaten 

other parts of eastern Ukraine.’’8

The bottom line is that rushing to approve more LNG exports will not provide immediate or prompt relief for embattled Ukraine, but there are other significant ways 

the U.S. can help them. 

Rather than eliminate the public interest review of proposed LNG export facilities, the United States should expand the administration’s energy efficiency assistance to Ukraine by passage of S. 2433 to help slash its energy waste.9 Some of these 

efficiency measures could include replacement of inefficient furnaces and compressors with highly efficient American-made models. A similar program has already 

been applied by the United States Agency for International Development for a small 

amount of foreign assistance and proved to effectively reduce Ukrainians’ energy 

consumption.10 Increasing these efficiency assistance programs would reduce 

Ukrainian purchase of Russian gas, and create jobs both in Ukraine and the United 

States. 

This same conclusion has also reached European Union leaders seeking to insulate themselves against an energy disruption this winter. The Guardian reports that 

European leaders-of nations wealthier and less vulnerable than Ukraine-are considering mandating energy efficiency improvements as the quickest way to protect 

themselves as the Ukrainian-Russian conflict remains unresolved. The EU also recognizes the dual benefit that these programs would have in mitigating climate 

change.11

As exported American LNG can provide no possible leverage for Ukrainians for 

several years, notwithstanding company contracts that are already in place to export elsewhere, efficiency is the only way to provide immediate and effective assistance Ukraine and our other European allies. 
(69) 

APPENDIX II 

Additional Material Submitted for the Record 

DEPARTMENT OF ENERGY, 

June 18, 2014. 

Hon. MARY LANDRIEU, 

Chair, Committee on Energy and Natural Resources, U.S. Senate, Washington, DC. 

DEAR SENATOR LANDRIEU: 

The U.S. Energy Information Administration (EIA) proposes to expand an existing 

smvey to collect more timely monthly data on oil and natural gas production. This 

EIA smvey will be a carefully developed statistical sample which will enable EIA 

to publish more current monthly information on oil and gas production trends. This 

survey is important to EIA’s short term energy outlook on whjch policymakers, the 

markets and the public rely. 

Currrently, the EIA-914 smvey, Monthly Natural Gas Production Report, collects 

natural gas production data from a sample of about 240 well operators in five states 

(Louisiana, New Mexico, Oklahoma, Texas, and Wyoming) and the federal offshore 

Gulf of Mexico. 

The proposed changes to EIA-9 14 are driven by the recent and substantial increases in U.S. oil and natmal gas production, largely from tight formations. Natural gas production outside the cuiTent EIA-914 states has increased substantially 

and some- for example, Pennsylvania and Colorado- now out-produce some of the 

original ElA-914 states. These changes have led EIA to propose expanding the number of states on the survey to 19 and adding the category of crude oil production 

by API gravity. 

Additional information about the proposed changes is available in the 60-day Federal Register Notice (http://www.eia.gov/survey/frn/naturalgas/FRN-60-Day-EIA 

-914-May-6-20 14.pdf), which was published May 6. A draft version of the survey 

is available at http:/ /www.eia.gov/survey/forrn/eiall914/proposed/form.pdf. 

STATEMENT OF DAVID L. GOLDWYN, DOE’S NEW PROCEDURE FOR APPROVING LNG 

EXPORT PERMITS: A MORE SENSIBLE APPROACH

On May 29, the Department of Energy (DOE) proposed revised procedures for reviewing applications to export liquefied natural gas (LNG) to countries which the 

U.S does not have free trade agreements. This long overdue revision would ensure 

that projects that are commercially mature and have obtained environmental clearance under the National Environmental Policy Act (NEPA) receive a prompt public 

interest determination from the Department of Energy. Scholars at Brookings, including Charles Ebinger and myself, have argued for this kind of rational treatment 

of applications since the summer of 2013 and I applaud DOE’s proposed improvements. 

Problems with the Prior Procedure: Delay and Hot Air 

The prior DOE procedure for reviewing applications for LNG exports to non-free 

trade agreement (non-FTA) countries impeded the consideration of commercially 

mature projects by requiring applicants to queue up for conditional approvals, in the 

order in which they applied to DOE. DOE pledged to review applications expeditiously, noting that it was approving projects at an average interval of every eight 

weeks. However, with 24 applications in the queue as of March 2014, that timeline 

left the review of many projects more than four years in the future. That timeline 

applied to all projects, even projects that were able to clear their NEPA review 

much sooner because they were less environmentally complex or controversial, because they were more simple expansions of previously approved projects, or because 
70 

1While DOE never announced a cap of any kind, the fact that the NERA study focused on 

exports of to 12 bcf/d, and that each DOE order cited this number led analysts to assume that 

a new study would be required for exports in excess of 12 Bcf/d. DOE’s announcement of updated studies to assess the impacts of exports between 12 and 20 Bcf/d appears to confirm this 

view. 2 As of June 3, 2014, the U.S. Department of Energy had approved 9.27 Bcf/d of LNG exports, 

7.07 Bcf/d of which was in the form of conditional permits. The cumulative volume would have 

exceeded 12 Bcf/d with the approval of the Cheniere Marketing project, currently number two 

in the queue, assuming that both it and the project preceding it, Oregon LNG, were approved 

for the full volumes requested (2.1 and 1.25 Bcf/d respectively). Approval of the Cheniere project 

would have pushed the cumulative tally to 12.62 Bcf/d. 

sponsors elected to initiate the NEPA review process before filing an application 

with DOE. 

The prior procedure was politically provocative in that it exaggerated the cumulative impact of project approvals by scoring the cumulative export volumes of conditional approvals—many of which might never receive environmental clearance or 

final investment approval. The result was that projects which might make it 

through the environmental review, led by the Federal Energy Regulatory Commission (FERC) or the U.S. Maritime Administration (MARAD) depending on jurisdiction, might not be considered until they came up in the queue, possibly years later, 

or might be rejected altogether because they exceeded the soft cap of 12 billion cubic 

feet per day (Bcf/d).1

Almost exactly one year prior to the DOE announcement, a Brookings paper suggested that if DOE wanted to preserve its current process, it ought to let FERCapproved, commercially mature projects ‘‘jump the queue’’ and receive prompt consideration for a national interest determination. In proposing this change, DOE has 

vastly improved on ‘‘jump the queue’’ with its new process, which is, effectively, 

‘‘dump the queue.’’ Bravo. 

The Proposed Procedure—Commercially Savvy, Politically Savvy 

DOE proposes to dispense with conditional approvals and only issue public interest determinations for projects that have completed their environmental assessment 

as required by NEPA, generally led by FERC or MARAD. This has multiple benefits 

for all serious applicants. First, it sets a level playing field for all applicants by entitling any applicant to prompt consideration once they complete their environmental 

review. Second, it eliminates the risk of delay to all applicants whose turn would 

have come after conditional approvals reached a cumulative tally of 12 Bcf/d2, removing the chance that they would face indefinite delays or outright rejection while 

DOE solicited new analysis of exports exceeding 12 Bcf/d. Under DOE’s proposed 

procedure the cumulative tally is now effectively 2.2 Bcf/d (the volume of exports 

that have already received final approval), and the next 9.8 Bcf/d in projects that 

emerge from FERC should be approved unless market conditions radically change. 

In addition, DOE also announced that it would seek updated analysis from the Energy Information Administration and an external group to consider the effect of exports between 12 and 20 Bcf/d, further reducing the chance of a soft cap hindering 

future project approvals. Third, the analysis of the impact of LNG exports on the 

economy would be calculated in the year the project is ready for approval, not years 

in advance. This would provide a more accurate projection by using current data. 

Winners and Losers 

The winners here are the applicants that are doing their homework by proceeding 

with the required environmental review and securing customers. The companies 

that have already received conditional non-FTA export licenses from DOE and have 

also started the NEPA process at FERC are no worse off—they always had to clear 

FERC to get a final approval. Other winners are those applicants beyond number 

two in the queue (those that would have been considered after conditional approvals 

reached 12 Bcf/d)—their risk of rejection has dropped considerably. The biggest winners are those projects at the bottom of the queue, which now have as good a chance 

to be approved by FERC. Those projects can now compete on a level playing field 

without worry that customers might perceive their position in the DOE queue as 

a commercial liability. Among the losers are those applicants who sought a marketing license from DOE but did not have, or could not attract, the funds to mount 

a serious project. Those projects were always gum in the works. 

Improving the National Interest Determination 

Finally, DOE has taken the prudent step of considering the upstream effects of 

producing natural gas for export and the lifecycle effects of LNG exports. While this 

step was entirely discretionary and not required under NEPA (as noted by DOE in 
71 

3The Energy Policy Act of 2005 (2005 EPAct) establishes FERC as the lead agency responsible 

for coordinating review by other federal and state agencies of LNG export projects, encouraging 

structure and timeliness in the LNG review process, providing that the FERC ‘‘shall establish 

a schedule for all Federal authorizations ‘‘to (1) ‘ensure expeditious completion of all such proceedings,’ and (2) ‘comply with applicable schedules set by Federal law.’’’ (15 U.S.C. 717n(c)) Notably, EPAct 2005 also sets a deadline of 90 days for agencies to provide final decisions in a 

timely manner, stating that ‘‘a final decision on a request for a Federal authorization is due 

no later than 90 days after the Commission issues its final environmental document, unless a 

schedule is otherwise authorized by Federal law.’’ (18 C.F.R. 157.22) Indeed, the typical FERC 

‘‘Notice of Schedule for Environmental Review’’ directs Federal agencies issung federal authorizations ‘‘to complete all necessary reviews and to reach a final decsion on the request for a federal authorizaton within 90 days of the issuance of the Commsion staff’s final Environmenal 

Imact Statement (EIS) for the Project.’’ (U.S. Federal Energy Regulatory Commission, ‘‘Notice 

of Schedule for Environmental Review of the Corpus Christi LNG Project,’’ (12 February 2014) 

http://elibrary.ferc.gov/idmws/search/advResults.asp) 

the Federal Register notice and public announcement regarding the papers), it 

should preempt the inevitable criticism that DOE’s national interest determination 

would attract if it had not considered these environmental issues. 

Numerous studies, including a Brookings report on liquid markets and the EIA’s 

Annual Energy Outlook 2014, show that U.S. LNG exports are unlikely to exceed 

even 6 Bcf/d in the next 10 years. Fears that LNG exports will drive up domestic 

natural gas prices significantly remain unsupported by credible evidence. One uncertainty does remain, however, even for export projects that complete their NEPA 

review. The U.S. is alone in its peer group in its issuance of national interest determinations for LNG exports, a Congressionally mandated determination that raises 

questions about the right to export even for projects that receive a final export permit, because the government retains the right to rescind export permits in the event 

that market conditions or other factors render them to no longer be in the national 

interest. This is a significant uncertainty that is not faced by LNG export projects 

in competing countries like Russia, Australia, Canada or Qatar. While this uncertainty will continue to remain as a specter over the U.S. LNG export industry, it 

is outside of the jurisdiction of DOE to abolish this process—only the direct action 

of the Congress could achieve such an outcome. In spite of lingering concerns and 

uncertainties, at last, the decision as to which projects will succeed will be made 

on merit, by considering those who have met the legal requirements in the order 

that they complete their environmental assessments mandated by NEPA. 

The only major lacuna in DOE’s procedure is a commitment by the agency to complete its consideration of the public interest determination promptly. We believe 

that the Energy Policy Act of 2005 requires all agencies that cooperate with FERC 

to complete their work within 90 days of FERC’s environmental review.3 In addition 

to all of the reasons that DOE has already given for this process change, if DOE 

were also to recognize and commit to meeting this 90-day requirement, the agency 

will meet its obligations under EPACT 2005 and will also have put in place a process that is transparent, fair and prompt. This will enable potential LNG customers 

to pick their partners based on their ability to complete the work required for approval. This is a vast improvement over the current process, and DOE is to be complimented for correcting its course. 

Æ