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[Senate Hearing 113-432]
[From the U.S. Government Publishing Office]

                                                        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

                               ----------

                         U.S. GOVERNMENT PRINTING OFFICE

90-894 PDF                       WASHINGTON : 2014
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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                   MARY L. LANDRIEU, Louisiana, Chair

RON WYDEN, Oregon                    LISA MURKOWSKI, Alaska
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont             MIKE LEE, Utah
DEBBIE STABENOW, Michigan            DEAN HELLER, Nevada
MARK UDALL, Colorado                 JEFF FLAKE, Arizona
AL FRANKEN, Minnesota                TIM SCOTT, South Carolina
JOE MANCHIN, III, West Virginia      LAMAR ALEXANDER, Tennessee
BRIAN SCHATZ, Hawaii                 ROB PORTMAN, Ohio
MARTIN HEINRICH, New Mexico          JOHN HOEVEN, North Dakota
TAMMY BALDWIN, Wisconsin

                Elizabeth Leoty Craddock, Staff Director
                      Sam E. Fowler, Chief Counsel
              Karen K. Billups, Republican Staff Director
           Patrick J. McCormick III, Republican Chief Counsel

                            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

 
                           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.
    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 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 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 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.
    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 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.
    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. Sec. 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 purposes 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. Sec.  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, production, 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 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 non-FTA 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 conduct 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, non-market based prices on gas
for Europe.
    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 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.
---------------------------------------------------------------------------
    \1\ http://www.eia.gov/forecasts/steo/report/
natgas.cfm?src=Natural-b2
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \2\ http://www.whitehouse.gov/the-press-office/2014/05/29/white-
house-releases-report-administration-s-all-above-energy-strategy-p
---------------------------------------------------------------------------
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 interest 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.
---------------------------------------------------------------------------
    \3\ http://www.brookings.edu/research/reports/2012/05/02-lng-
exports-ebingerhttp://csis.org/event/us-japan-alliance-anchoring-
stability-asia
---------------------------------------------------------------------------
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/
---------------------------------------------------------------------------
    \4\ http://www.brookings.edu/research/articles/2014/06/10-doe-
approving-lng-export-goldwyn-hendrix ``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.
    \5\ Op. cit., footnote 2
---------------------------------------------------------------------------
    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 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.
---------------------------------------------------------------------------
    \6\ http://energy.gov/fe/draft-addendum-environmental-review-
documents-concerning-exports-natural-gas-united-states and http://
energy.gov/fe/life-cycle-greenhouse-gas-perspective-exporting-
liquefied-natural-gas-united-states
---------------------------------------------------------------------------
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
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:]
 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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
    \3\ Platts, ``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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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/
Anderson__DOE__LNG__Exports.pdf.
    \8\ Paula 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-Wstate-
GantP-20140325-U1.pdf.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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/us-cheniere-sabine-
idUSBRE83F1AI20120416.
    \10\ Cheniere, ``Sabine Liquefaction Project Schedule,'' available
at http://www.cheniere.com/sabine__liquefaction/project__schedule.shtml
(last accessed April 2014).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.LNG__.pdf.
    \12\ Ibid.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \13\ John Anderson, ``Exporting LNG: Permitting & Economic
Analysis,'' (2011) available at http://www.usea.org/sites/default/
files/event-file/511/Anderson__DOE__LNG__Exports.pdf.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \17\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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/
fe__lng.pdf.
    \19\ Ibid.
    \20\ Ibid
    \21\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \22\ Ibid.
    \23\ Ibid.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \24\ Energy Information Administration, ``U.S. Natural Gas Exports
and Re-Exports by Country,'' available at http://www.eia.gov/dnav/ng/
ng__move__expc__s1__a.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.''
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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/nera__lng__report.pdf.
    \27\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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/nera__lng__report.pdf.
    \31\ Ibid.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
    \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/.

    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 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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \35\ Energy Information Administration, ``Natural Gas Supply,
Disposition, and Prices, Reference case.''
    \36\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \37\ Ken 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/CRA__LNG__Study__Feb2013.pdf.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \38\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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/nera_lng__report.pdf.

    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\
---------------------------------------------------------------------------
    \40\ Ibid.
---------------------------------------------------------------------------
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, Adaptation, 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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.

    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\
---------------------------------------------------------------------------
    \44\ U.S. Global Change Research Program, ``National Climate
Assessment Overview,'' available at http://nca2014.globalchange.gov/
downloads.

    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\
---------------------------------------------------------------------------
    \45\ Daniel 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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \47\ The White House, ``Climate Action Plan: Strategy to Reduce
Methane Emissions,'' (2014), available at http://www.whitehouse.gov/
sites/default/files/strategy__to__reduce__methane__emissions__2014-03-
28__final.pdf.
    \48\ Ibid.
    \49\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \50\ Ibid.
    \51\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.\53\This
reduction regime must be promptly implemented in oil and gas fields to
avoid further exacerbating climate change.
---------------------------------------------------------------------------
    \53\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \56\ Sen. Edward Markey, ``America Pays for Gas Leaks,'' Report
prepared for Sen. Edward Markey, August 1, 2013, available at http://
www.markey.senate.gov/documents/markey__lost__gas__report.pdf.

    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-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\
---------------------------------------------------------------------------
    \57\ Pipeline 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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \59\ Pipeline 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])/.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \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.

          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\
---------------------------------------------------------------------------
    \61\ Ibid.

    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \63\ Engility, ``Municipal Energy Reform Project (MERP)--Ukraine,''
available at http://www.engilitycorp.com/files/8613/8669/8425/ENERGY__-
__MERP__Rev.pdf.

    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\
---------------------------------------------------------------------------
    \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/technical_reports/pnnl-19467.pdf.
    \65\ Engility, ``Municipal Energy Reform Project (MERP)--Ukraine.''
---------------------------------------------------------------------------
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 independent nation. In 2012, Ukraine produced
only 37 percent of its own gas, and imported the remainder from
Russia.\66\
---------------------------------------------------------------------------
    \66\ Energy Information Administration, ``Ukraine,'' available at
http://www.eia.gov/countries/country-data.cfm?fips=UP (last accessed
April 2014).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \67\ The 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-us-crisis-
support-package-ukraine.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
    \68\ Sen. 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-ukrainian-energy-
independence-lessening-putins-power.

          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\
---------------------------------------------------------------------------
    \69\ Ibid.

    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\
---------------------------------------------------------------------------
    \70\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \71\ Steven 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/can-u-s-natural-
gas-rescue-ukraine-from-russia/.

    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\
---------------------------------------------------------------------------
    \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-congress-
idUSBREA2O08Z20140325.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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/us-gas-
tantalizes-europe-but-its-not-a-quick-fix.html?--r=0.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \75\ Steven Mufson, ``Can U.S. natural gas rescue Ukraine from
Russia?''
---------------------------------------------------------------------------
    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 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\
---------------------------------------------------------------------------
    \76\ Clifford Krauss, ``U.S. Gas Tantalizes Europe, but It's Not a
Quick Fix.''

    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\
---------------------------------------------------------------------------
    \77\ Ibid.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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-regulatory-
oversight-jeopardizes-gas-export-approvals/.

    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\
---------------------------------------------------------------------------
    \79\ Sen. 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-natural-gas-export-
approvals-may-be-unlawful.
    \80\ Jennifer A. Dlouhy, ``Sen. Markey: Regulatory oversight
jeopardizes gas export approvals.''
---------------------------------------------------------------------------
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.

  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 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 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.
---------------------------------------------------------------------------
    * All figures have been retained in committee file.
---------------------------------------------------------------------------
    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 Canada\1\ (Figure 2).
---------------------------------------------------------------------------
    \1\ ICF International, ``U.S. LNG Exports: Impacts on Energy
Markets and the Economy.'' May, 2013. pg. 44-45.
---------------------------------------------------------------------------
    Source: ICF\2\
---------------------------------------------------------------------------
    \2\ Ibid.
---------------------------------------------------------------------------
    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 Outlook\3\ (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.
---------------------------------------------------------------------------
    \3\ EIA, ``Annual Energy Outlook 2014.'' May, 2014.
---------------------------------------------------------------------------
    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 MMBTU\4\. 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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \6\ NERA Economic Consulting, ``Macroeconomic Impacts of LNG
Exports from the United States.'' December 2012, pg 1.
---------------------------------------------------------------------------
    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 per year in new chemical industry
output, and 637,000 permanent new jobs in communities across the United
States.''\7\
---------------------------------------------------------------------------
    \7\ Dooley, Cal. ``Prepared Remarks for Cal Dooley.'' March 5, 2014
http://www.americanchemistry.com/Policy/Chemical-Safety/TSCA/Cal-
Dooley-Remarks-at-GlobalChem-2014.pdf
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \8\ ICF International, ``U.S. LNG Exports: Impacts on Energy
Markets and the Economy.'' May, 2013. pg. 7.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \9\ ICF International, ``Tech Effect: How Innovation in Oil and Gas
Explorati October 2012. pg. 4.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \10\ David 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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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 heavy-duty 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\
---------------------------------------------------------------------------
    \13\ EIA, ``Annual Energy Outlook 2014.'' May 2014.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \14\ Several Governors as well as a group of bipartisan members of
the House of Representatives are formally supporting the gallon
equivalency standard.
---------------------------------------------------------------------------
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.

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 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
                           American 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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 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/
---------------------------------------------------------------------------
    \3\ NERA Economic Consulting, Macroeconomic Impacts of LNG Exports
from the United States, December, 2012, http://energy.gov/sites/prod/
files/2013/04/f0/nera_lng_report.pdf. Also, NERA Economic Consulting,
Updated Macroeconomic Impacts of LNG Exports from the United States,
March, 2014, http://www.nera.com/nerafiles/
PUB_LNG_Update_0214_FINAL.pdf.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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/doc_526_t.pdf.
---------------------------------------------------------------------------
    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
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.
    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.
---------------------------------------------------------------------------
    \5\ International Energy Agency, World Energy Outlook 2013, 578 &
596.
---------------------------------------------------------------------------
    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 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.

    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.
    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 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.
    Mr. Smith. Perhaps so, Chair Landrieu.
    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.
    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.
    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.
    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.
    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.
    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 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.
    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.
    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.
    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.
    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.
    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.
    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.
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 American 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.
    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.
    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, 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.
    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?
    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 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 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 between 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.
    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.]
                               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.
                                 ______

   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 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 energy-intensive 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 water-energy 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\
---------------------------------------------------------------------------
    \1\ Steven 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/can-u-s-natural-
gas-rescue-ukraine-from-russia/.

    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\
---------------------------------------------------------------------------
    \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-congress-
idUSBREA2O08Z20140325.
---------------------------------------------------------------------------
    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
has already been contracted by India and South Korea. The other half
will go to British and Spanish companies.''\4\
---------------------------------------------------------------------------
    \3\ Cheniere, ``Sabine Liquefaction Project Schedule,'' available
at http://www.cheniere.com/sabine_liquefaction/project--schedule.shtml
(last accessed September 2014).
    \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/us-gas-
tantalizes-europe-but-its-not-a-quick-fix.html?__r=0.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
    \6\ Steven 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/can-u-s-natural-
gas-rescue-ukraine-from-russia/.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \7\ Clifford Krauss, ``U.S. Gas Tantalizes Europe, but It's Not a
Quick Fix.''

    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\
---------------------------------------------------------------------------
    \8\ Ibid.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \9\ Sen. 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-ukrainian-energy-
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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
                              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/eia__914/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
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\
---------------------------------------------------------------------------
    \1\ 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.
---------------------------------------------------------------------------
    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 FERC-approved, 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/d\2\, 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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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 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.
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    \3\ The 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)
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