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88–088 PDF 2014

EXAMINING THE EFFECTS OF LIQUEFIED NATURAL 

GAS EXPORTS ON U.S. FOREIGN POLICY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY POLICY, 

HEALTH CARE AND ENTITLEMENTS 

OF THE

COMMITTEE ON OVERSIGHT 

AND GOVERNMENT REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

APRIL 30, 2014 

Serial No. 113–109 

Printed for the use of the Committee on Oversight and Government Reform 

( 

Available via the World Wide Web: http://www.fdsys.gov 

http://www.house.gov/reform 

(II) 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM 

DARRELL E. ISSA, California, Chairman 

JOHN L. MICA, Florida 

MICHAEL R. TURNER, Ohio 

JOHN J. DUNCAN, JR., Tennessee 

PATRICK T. MCHENRY, North Carolina 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

JAMES LANKFORD, Oklahoma 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

TREY GOWDY, South Carolina 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

CYNTHIA M. LUMMIS, Wyoming 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

DOUG COLLINS, Georgia 

MARK MEADOWS, North Carolina 

KERRY L. BENTIVOLIO, Michigan 

RON DESANTIS, Florida 

ELIJAH E. CUMMINGS, Maryland, Ranking 

Minority Member 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

JOHN F. TIERNEY, Massachusetts 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

JACKIE SPEIER, California 

MATTHEW A. CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

ROBIN L. KELLY, Illinois 

DANNY K. DAVIS, Illinois 

PETER WELCH, Vermont 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

Vacancy 

LAWRENCE J. BRADY, Staff Director 

JOHN D. CUADERES, Deputy Staff Director 

STEPHEN CASTOR, General Counsel 

LINDA A. GOOD, Chief Clerk 

DAVID RAPALLO, Minority Staff Director 

SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE AND ENTITLEMENTS

JAMES LANKFORD, Oklahoma, Chairman 

PATRICK T. MCHENRY, North Carolina 

PAUL GOSAR, Arizona 

JIM JORDAN, Ohio 

JASON CHAFFETZ, Utah 

TIM WALBERG, Michigan 

PATRICK MEEHAN, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

BLAKE FARENTHOLD, Texas 

DOC HASTINGS, Washington 

ROB WOODALL, Georgia 

THOMAS MASSIE, Kentucky 

JACKIE SPEIER, California, Ranking 

Minority Member 

ELEANOR HOLMES NORTON, District of 

Columbia 

JIM COOPER, Tennessee 

MATTHEW CARTWRIGHT, Pennsylvania 

TAMMY DUCKWORTH, Illinois 

DANNY K. DAVIS, Illinois 

TONY CARDENAS, California 

STEVEN A. HORSFORD, Nevada 

MICHELLE LUJAN GRISHAM, New Mexico 

(III) 

C O N T E N T S 

Page 

Hearing held on April 30, 2014 .............................................................................. 1 

WITNESSES 

Mr. Christopher A. Smith, Principal Deputy Assistant Secretary for Fossil 

Energy, U.S. Department of Energy 

Oral Statement ................................................................................................. 5 

Written Statement ............................................................................................ 8 

Mr. Amos J. Hochstein, Deputy Assistant Secretary for Energy Diplomacy, 

Bureau of Energy Resources, U.S. Department of State 

Oral Statement ................................................................................................. 14 

Written Statement ............................................................................................ 16 

APPENDIX 

Statement by Ambassador-at-Large for Energy Security, Dr. Anita Orban 

from the Ministry of Foreign Affairs in Hungary submitted by Rep.James 

Lankford ................................................................................................................ 54 

Opening Statement by Rep. Michael R. Turner .................................................... 57 

Opening Statement by Rep. Matt Cartwright ....................................................... 62 

Supplemental Information: Admin. Officials Recognize the Benefits of U.S. 

Natural Gas Exports submitted by Rep. James Lankford ................................ 64 

(1) 

EXAMINING THE EFFECTS OF LIQUEFIED 

NATURAL GAS EXPORTS ON U.S. FOREIGN 

POLICY 

Wednesday, April 30, 2014 

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON ENERGY POLICY, HEALTH CARE & 

ENTITLEMENTS, 

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to call, at 9:35 a.m., in Room 

2154, Rayburn House Office Building, Hon. James Lankford [chairman of the subcommittee] presiding. 

Present: Representatives Lankford, Jordan, Walberg, DesJarlais, 

Farenthold, Woodall, Massie, Speier, Norton, Duckworth, 

Cardenas, and Lujan Grisham. 

Staff Present: Melissa Beaumont, Majority Assistant Clerk; 

Molly Boyl, Majority Deputy General Counsel and Parliamentarian; David Brewer, Majority Senior Counsel; Caitlin Carroll, 

Majority Press Secretary; Drew Colliatie, Majority Professional 

Staff Member; John Cuaderes, Majority Deputy Staff Director; 

Adam P. Fromm, Majority Director of Member Services and Committee Operations; Linda Good, Majority Chief Clerk; Tyler Grimm, 

Majority Senior Professional Staff Member; Ryan M. Hambleton, 

Majority Senior Professional Staff Member; Christopher Hixon, Majority Chief Counsel for Oversight; Matt Mulder, Majority Counsel; 

Laura L. Rush, Majority Deputy Chief Clerk; Jessica Seale, Majority Digital Director; Jaron Bourke, Minority Director of Administration; Courtney Cochran, Minority Press Secretary; Jennifer Hoffman, Minority Communications Director; Adam Koshkin, Minority 

Research Assistant; Elisa LaNier, Minority Director of Operations; 

Juan McCullum, Minority Clerk; Dave Rapallo, Minority Staff Director; and Katie Teleky, Minority Staff Assistant. 

Mr. LANKFORD. The committee will come to order. 

I would like to begin this hearing by stating the Oversight Committee mission statement. 

We exist to secure two fundamental principles: first, Americans 

have the right to know the money Washington takes from them is 

well spent and, second, Americans deserve an efficient, effective 

Government that works for them. Our duty on the Oversight and 

Government Reform Committee is to protect these rights. Our solemn responsibility is to hold Government accountable to taxpayers, 

because taxpayers have a right to know what they get from their 

Government. We will work tirelessly in partnership with citizen 

2 

watchdogs to deliver the facts to the American people and bring 

genuine reform to the Federal bureaucracy. This is the mission of 

the Oversight and Government Reform Committee. 

Today we are here to discuss the role of liquefied natural gas, the 

exports and how we are handling that, and national security policy 

and foreign policy. This hearing builds on another hearing held by 

this subcommittee last year that focused on the Department of Energy’s strategy and process in reviewing applications to export 

LNG, specifically to non-Free Trade Agreement countries. At that 

hearing we were joined by Mr. Christopher Smith of DOE, who is 

here again with us today. Thank you. We would also like to welcome Deputy Assistant Secretary Hochstein from the U.S. State 

Department’s Bureau of Energy Resources. Thank you both for 

coming. 

By now it is obvious the United States is in the middle of an energy production revolution. This is due almost entirely to advanced 

drilling techniques, such as hydraulic fracturing, horizontal well 

drilling that gives us access to resources that were not previously 

recoverable. Prior to 2005, it was estimated there was less than 

200 trillion cubic feet of dry natural gas proved reserves in the 

United States. As of 2010, that number had risen to over 300 trillion cubic feet, an increase of over 50 percent in just five years. 

Economic studies such as the NERA study commissioned by the 

DOE to inform its decision-making on LNG exports indicate the 

United States will see a net economic benefit from LNG exports. 

Energy exports could also be a powerful and much-needed foreign 

policy tool should we choose to wield it. Many of our friends and 

allies are forced to buy their oil and gas from the resource autocracy of Russian President Vladimir Putin. In order to meet its domestic power needs, Ukraine imports over 60 percent of its natural 

gas. All these imports are from Russia. This gives Russia an immense amount of power over Ukraine. This is also the case for several other Eastern European countries, such as Hungary and Lithuania. Russia has a habit of squeezing its neighbors’ energy supplies when it wants to influence their actions. 

The United States has the resources to counter this and to come 

to the aid of our Eastern European allies; what it needs is the political will. As mentioned in our previous hearing, this subcommittee is familiar with the DOE process for improving LNG export licenses. For countries with which we have a Free Trade 

Agreement covering natural gas, the natural Gas Act of 1938 requires DOE to grant applications to export LNG. Such export is 

deemed to be consistent with the public interest, and the authorization must be granted without modification or delay. For countries 

with which we do not have a Free Trade Agreement covering natural gas, the Natural Gas Act still presumes that DOE will grant 

the application to export LNG unless the Department finds the proposed exportation will not be consistent with the public interest. 

The United States has exported natural gas via pipeline to Canada and Mexico since the 1930s. Furthermore, the U.S. has exported LNG from the Kenai Peninsula in Alaska since 1969. For 

the lower 48 States, in May of 2011, the Department of Energy 

granted the first permit to export LNG to non-FTA countries. That 

3 

facility is currently under construction in southwest Louisiana and 

will begin exporting LNG very soon. 

When we had our last hearing on this topic, this was the only 

facility approved for non-FTA export. I am pleased to see that number is now seven. However, there are still 24 applicants waiting for 

DOE approval. I encourage DOE to process these applications expeditiously. The process to determine that exporting excess American 

product is in our national interest has stretched on for months. 

In December 2012, President Obama said to TIME Magazine, 

‘‘The United States is going to be a net exporter of energy because 

of new technologies and what we’re doing with natural gas and oil.’’ 

The President also recognized that these ‘‘energy [developments] 

could have a huge geopolitical consequence.’’ 

It would seem that the President’s remarks are embodied in the 

State Department’s Bureau of Energy Resources. This Bureau, set 

up only a few years ago, states as one of its goals ‘‘To manage the 

geopolitics of today’s energy economy through a reinvigorated energy diplomacy with major producers and consumers.’’ 

One objective that I hope to accomplish with this hearing is to 

get a sense of how the Administration is taking advantage of this 

national security and diplomatic opportunity afforded by the export 

of LNG. It seems clear to me this Administration has identified 

LNG exports as a valuable, if not crucial, part of U.S. diplomacy 

and strategic relations. I would like to make sure that the different 

parts of our Government are communicating effectively and efficiently. Is DOE aware of the foreign policy objectives pushed by the 

State Department? Are these agencies working harmoniously to advance the Administration’s goals? Are there any intra-governmental barriers that we can help fix to move this along? 

Allowing more exports of this domestic commodity will have a 

clear effect on the fulfillment of our foreign policy agenda. We need 

to ensure that we have a strategy in place that safeguards our allies from political volatility outside their borders, and we must 

have the cross-agency coordination to carry it out. 

I thank the witnesses for appearing and I look forward to your 

testimony. 

With that, I recognize the distinguished ranking member, the 

gentlelady from California, Ms. Speier, for her opening statement. 

Ms. SPEIER. Thank you, Chairman Lankford, for today’s hearing. 

I look forward to what I hope will be an informative discussion. 

First, I certainly agree that Russian control of the natural gas 

supplies into and through Ukraine is a critical issue. The OPN 

Union gets 24 percent of its gas from Russia. But some countries, 

such as Lithuania, Finland, and Latvia, are dependent on Russia 

for the entirety of their supply. Considering President Putin’s obvious imperial ambitions, the United States must help our European 

allies lessen their dependence on Russian gas as much as possible. 

Unfortunately, at least in the short-term, proposals to help 

Ukraine by fast-tracking approvals of new LNG export terminals 

will not meet the goal intended of quickly getting U.S. LNG to Europe, and Ukraine in particular. Currently, the U.S. has only one 

LNG export terminal, in Alaska, with another terminal in Louisiana scheduled to start operation in 2015. Building more termiVerDate Aug 31 2005 10:28 Jun 06, 2014 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCS\88088.TXT APRIL
4 

nals and finding the private investment to fund them will take several years. 

I am all in favor of giving the Department of Energy and the 

Federal Energy Regulatory Commission the resources they need to 

speed the permitting process. FERC, in particular, has a complex 

and slow process which could benefit from additional resources. 

However, we shouldn’t pretend that faster permitting alone is a 

panacea. 

In addition, the main barrier to the U.S. export to Europe is not 

the permitting process; it is the fact that U.S. gas shipped to Europe would be substantially more expensive than cheap Russian 

gas. Most experts agree that LNG exports from the U.S. would be 

far more likely to go to Asia, where prices are higher than in Europe. This is not to say that the U.S. should not aim to market gas 

to Europe. But taking note that conducting foreign policy via energy export is complex. 

So how can we help Ukraine, given these practical constraints? 

A number of efforts are already underway. The U.S. is working 

with the EU and the International Monetary Fund on a number of 

efforts to move Europe towards a greater diversity of energy 

sources, such as reversing flows of natural gas from existing pipelines into Ukraine and further developing Ukraine’s own natural 

gas resources. 

Encouraging energy efficiency rarely makes headlines, but in 

Ukraine it could be a game-changer. Ukraine produces nearly as 

much gas as it uses, but Ukrainians are notoriously profligate energy users thanks to government energy subsidies. By implementing the same efficiency measures that other European countries already use, Ukraine could be nearly self-sufficient. 

Mr. Chairman, I think these efforts to use America’s resources 

to bolster our foreign policy are admirable and will become increasingly important over the next decade. However, we must not lose 

sight of the economic and environmental side effects of our current 

energy boom. A Brookings Energy Security Initiative study found 

that U.S. LNG exports would have a modest upward impact on domestic prices. Even this modest increase, estimated to be around 

$50 per family, would be damaging to low-income consumers, who 

must often choose between heating their homes and buying food. 

That means that an increase in LNG exports should go hand-inhand with full funding of the Low Income Home Energy Assistance 

Program. 

We must also not forget the businesses and manufacturers that 

have built business plans around plentiful low-priced natural gas. 

Creating jobs through LNG export could be offset by the loss of jobs 

elsewhere in the economy. 

Increasing LNG exports would also increase the environmental 

risks associated with drilling and gas liquefication. A strong foreign 

policy cannot come at the cost of polluting Americans’ drinking 

water with unknown chemicals from fracking fluid or drowning the 

coasts, including my district, with uncontrolled sea level rise. U.S. 

LNG exports can provide substantial benefits, but we must be realistic about what is feasible and control for the costs. 

Thank you again, Mr. Chairman, for holding this hearing, and to 

our witnesses for being here today. 

5 

Mr. LANKFORD. Members will have seven days to submit opening 

statements for the record. 

We will now recognize our first and only panel. 

Mr. Christopher Smith is the Principal Deputy Assistant Secretary for Fossil Energy at the U.S. Department of Energy. 

Mr. Amos Huchstein is the Deputy Assistant Secretary for Energy Diplomacy in the Bureau of Energy Resources, the U.S. Department of State. 

Pursuant to committee rules, all witnesses are sworn in before 

they testify. If you would please stand and raise your right hand. 

Do you solemnly swear or affirm that the testimony you are 

about to give will the truth, the whole truth, and nothing but the 

truth, so help you, God? 

[Witnesses respond in the affirmative.] 

Mr. LANKFORD. Thank you. You may be seated. 

Let the record reflect the witnesses have answered in the affirmative. 

In order to allow time for discussion, I would ask you to limit 

your oral testimony to five minutes. We will have plenty of time 

for oral discussion and questions after your testimony is finished. 

Obviously, your written statement will be made a part of the permanent record as well. 

Mr. Smith, you are recognized first. 

WITNESS STATEMENTS 

STATEMENT OF CHRISTOPHER A. SMITH 

Mr. SMITH. Well, thank you very much, Chairman Lankford and 

Ranking Member Speier, and members of the subcommittee. I appreciate the opportunity to discuss the Department of Energy’s program regulating the export of natural gas, including liquefied natural gas. 

The incredible abundance we are experiencing in our domestic 

natural gas supply provides unprecedented opportunities for the 

United States. Over the last several years, domestic and natural 

gas production has increased significantly, outpacing consumption 

growth, resulting in declining natural gas imports. Production 

growth is primarily due to the development of improved drilling 

technologies, including the ability to produce natural gas trapped 

in shale formations. 

Production from these sources made up less than 2 percent of the 

U.S. supply in 2000 and rose to 40 percent of that total in 2012, 

a dramatic change. 

Historically, the Department of Energy has played an important 

role in development of technologies that have enabled the United 

States to expand development of these energy resources. Beginning 

in the late 1970s, research investments by the Department contributed to the development of hydraulic fracturing and extended horizontal lateral drilling technologies that were later refined and commercialized through private sector investments and continued industry innovation, unlocking billions of dollars in economic activities associated with shale gas production. 

Thanks to American ingenuity and know-how applied to our 

abundant domestic natural gas resources, the United States is now 

6 

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

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, the Department of Energy has received a growing number of applications to export domestically produced natural gas to overseas markets in the form of 

liquefied natural gas. 

The Department’s authority to regulate the export of natural gas 

arises from the Natural Gas Act, which provides two statutory 

standards for processing applications to export LNG from the 

United States. By law, applications to export natural gas to nations 

with which the United States has a Free Trade Agreement that 

provides for natural treatment of trade in natural gas are deemed 

to be consistent with public interest and the Secretary of Energy 

must grant authorization without modification or delay. As of 

March 24th, the Department of Energy has approved 35 such applications. 

For applications to export natural gas to non-FTA nations, the 

Secretary must grant the authorization unless, after opportunity 

for hearing, the proposed export is found to not be consistent with 

the public interest. In executing that requirement, the Department 

of Energy established a robust process to assess the public interest, 

a process that affords the opportunity for the public comment and 

transparency, and also allows balance of the many aspects of public 

interest that are potentially affected by the export of natural gas. 

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

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

criteria that must be considered. In prior decisions, however, the 

Department has identified a range of factors that it evaluates when 

reviewing an application for export authorization. These factors include economic impacts, international considerations, security of 

natural gas supply, environmental considerations, and others. 

To conduct its review, the Department 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. To date, the 

Department of Energy has granted seven conditional authorizations for long-term applications to export domestically produced 

lower 48 LNG to non-FTA countries, equivalent to 9.3 billion standard cubic feet per day. As of today, 24 applications are pending to 

export LNG to non-free trade agreement countries. 

The Department will continue processing the pending non-FTA 

LNG export applications on a case-by-case basis following the order 

of precedence previously established and set forth on the Department’s Web site. During this time, the Department will continue to 

monitor any market developments and assess their impact and 

subsequent public interest determinations as further information 

becomes available. 

Given the topic of this hearing, I would also like to note that, as 

I mentioned earlier, the Department considers international factors 

7 

as part of the public interest determination, among many other domestic factors. Of course, we are monitoring the situation in Europe very closely, and we certainly take energy security of our allies very seriously. We have taken recent global events into account 

in making decisions in recent applications. 

The United States’ commitment to free trade is another factor in 

our reviews. An efficient, transparent international market for 

international gas with diverse sources of supply provides both economic and strategic benefit to the United States and our allies. Indeed, increased production of domestic natural gas has already significantly reduced the need for the United States to import LNG, 

and global trade LNG shipments that would have been destined for 

United States markets have been redirected to Europe and Asia, 

improving energy security for many of our key trading partners. 

To the extent United States 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. 

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

Department of Energy is committed to moving forward on LNG applications as expeditiously as possible. We understand the significance of this issue, as well as the importance of getting it right. 

And I would be happy to answer any questions that you may have. 

[Prepared statement of Mr. Smith follows:] 

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Mr. LANKFORD. Mr. Hochstein. 

STATEMENT OF AMOS J. HOCHSTEIN 

Mr. HOCHSTEIN. Mr. Chairman, thank you for having me appear 

before this committee. Ranking Member Speier, thank you and the 

members of the subcommittee. It is always good to be back here. 

As someone who served on the House Foreign Affairs Committee 

staff, it is good to be able to be back in the House, so I appreciate 

the opportunity, especially on this critical topic. 

The hearing comes at a critical time. Today, the relationship between security and access to energy is drawn in sharp relief. With 

the illegal annexation of Crimea by Russia and its role in the unrest in Eastern Ukraine, we are witnessing the unacceptable and, 

frankly, shocking violation of the sovereignty and territorial integrity of one country by another. 

The Department of State is not the agency responsible for the 

process of approving natural gas export licenses, and my colleague 

Chris Smith, from the Department of Energy, has just addressed 

that issue. But the crisis led many to argue that accelerated approval of LNG exports is the magic bullet to provide energy security to our European allies and partners. 

While critically important, U.S. energy resources, including LNG 

exports, are just one tool among many that we can and are utilizing to address the energy security challenges in Europe and elsewhere. We have been working in many ways around the world to 

contribute to that energy security, and we will continue to do so in 

the weeks, months, and years to come. 

There are renewed fears that Russia will use energy as a political tool, as it did in January 2009, when Russia cut off gas supplies to Ukraine. All Russian gas flows through Ukraine were halted, cutting off supplies to Southeastern Europe completely for 13 

days. A shocked European Union began the process of moving towards diversifying its resources of energy and the routes by which 

the energy is delivered. The EU began to implement regulations 

and build infrastructure toward a common integrated and transparent energy market. 

The U.S. has been working closely with the EU to prevent a repeat of the 2009 crisis. We established that year the US–EU Energy Council, an annual meeting co-chaired by the Secretaries of 

State and Energy to address strategic energy issues and forms of 

collaboration. The first meeting was held that year, in November 

of 2009; the fifth meeting was held just a few weeks ago. 

What we have to take into consideration as we look at these 

issues is the global context in which we are living, and the supplydemand changes that have occurred around the world. First, the 

supply mechanism has changed from a small number of countries 

supplying the world to a much larger number of countries around 

the world supplying energy, both oil and gas. And in demand, while 

OECD countries were driving the demand until now, for the decades to come that demand will be driven by non-OECD countries, 

principally China, India, and Asia. 

As we have worked with Ukraine and with Europe to address the 

energy security of Ukraine and of Europe as the downstream countries, we are looking, as Ranking Member Speier said in her openVerDate Aug 31 2005 10:28 Jun 06, 2014 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 C:\DOCS\88088.TXT APRIL
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ing testimony, at not just the issue of LNG exports, but the issues 

that would require Europe to be able to address their own needs, 

and that means addressing the infrastructure shortages and shortfalls that Europe suffers from. With pipelines that go from Russia 

down south into Europe, to make sure that those are able to reverse flow so that they can supply Ukraine. The fact that Poland 

and Hungary have already been able to reverse their flows, and I 

am pleased to announce that two days ago a major deal was 

reached between Slovakia and Ukraine to reverse the flow, these 

are steps that could not have happened had we not learned the lessons from 2009 and have spent the last four to five years working 

with our EU partners to make those changes available and capable. 

For example, the UE passed theirs, as a result of 2009, the Third 

Energy Package, which changed the regulatory framework. Without that, today the reverse flows into Ukraine would not have been 

possible. 

But it is not enough to look at this from Russia to Ukraine and 

into Europe; we have to look at pipelines that go not just northsouth, south to north, but east-west and west to east so that gas 

can flow. We have to make sure that there are LNG receiving terminals so that there is capacity to receive the LNG and that it is 

done in a way that is bankable and financeable. 

But as we look at this, this is not just about the United States 

and its exports that will come in the years to come. This is, as I 

talked about before, the supply change. And I am going to get to 

what Ranking Member Speier said in her opening testimony. We 

are looking at Australia coming online with enormous amounts of 

natural gas over the next several years. Mozambique and Tanzania 

have made impressive discoveries, and they too will come online in 

the coming decade. Offshore, Israel is already delivering new gas 

to its domestic market, and is poised to become an exporter in 2017 

or 2018. Same for Cyprus. Potentially, Lebanon, Egypt, and the 

rest of the Eastern Mediterranean. North Africa, South America, 

and other areas are all looking to become new producers. 

So as we look at this, this is a global context that we have to 

understand how to address, and we are doing so today, together 

with the Department of Energy, Department of State, and the rest 

of the Administration, to ensure that we can be there to allow and 

to make sure that not only Europe is supplied, but that energy is 

used as an energy resource for cooperation, and not resource for 

conflict. 

In conclusion, Mr. Chairman, LNG exports may become an important factor in assisting our allies and friends, but it is only that 

one factor, that one tool. And we have to work on all these other 

areas that I just mentioned in order to make sure that our commitment to energy security, as we did with the Baku-Tbilisi Ceyhan 

pipeline in the 1990s and as we are doing now with the southern 

corridor from Azerbaijan and other projects, to make sure that that 

energy security is achieved. 

We are strongly committed to Europe’s energy security and we 

will continue our joint efforts with the EU to make that a reality. 

Thank you very much for allowing me to testify before you today. 

[Prepared statement of Mr. Hochstein follows:] 

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Mr. LANKFORD. Thank you. 

I will begin with five minutes of questioning. We will go around 

the dais and then we will do a second round in just a moment. 

I would like to first enter, without objection, Ambassador-atLarge for Energy Security, Dr. Anita Orban from the Ministry of 

Foreign Affairs in Hungary, a statement that she has written about 

this same hearing and some of the issues. Without objection, so ordered. 

It shows a statement in this that I want to just be able to read 

to you quickly. She testified on the Hill March the 25th. She said, 

I used $400 as an example of how unrealistically high Russia may 

raise the price of 1,000 cubic meters of gas delivered to Ukraine if 

it chooses to use gas as an economic weapon. This was before they 

invaded Crimea. In fact, Moscow went above that number with a 

wild number and now quotes $485. Now, the current price is 

around $268. Four times the amount that is the Henry Hub Price. 

Given that Ukraine had difficulty setting its invoices even when 

the price was 268, the new price seems well beyond what Kiev will 

be able to cover. Ukraine may face a winter without gas supplies 

from the east and will have to either buy gas from the west or cave 

in politically. This is the reality that is on the ground. 

One other statement that she makes I think is pertinent. On 

April 11th, Russian President Vladimir Putin sent a letter to 18 

European countries, warning them about potential supply disruptions in the winter. This is hardball and this is one of the situations that we have to be able to respond to, and respond to with 

clarity in the process. 

I say one final statement. Let me read one final statement, as 

well, as she makes this. She said U.S. LNG export liberalization is 

no panacea in the short-term. The gas could not be delivered in 

large volumes to Ukraine immediately. It will not save Ukraine 

and possibly other parts of Central Eastern Europe from a very 

cold winter in 2014. Yet, it makes the medium-term solution very 

clear and this prospect would have immediate impact on pricing 

and maybe even availability. 

Her request is interesting. Her request is if we will begin to act, 

it at least sets a marker out there that shows Russia that we are 

serious and they know that we are moving. 

Two years ago, when we started the process of these conversations, I had two different individuals internationally that came to 

visit my office immediately, the Japanese and members of Parliament from Ukraine. Two years ago. And their question was the 

same, how quickly could we get American natural gas. Since that 

time period multiple other countries have come to be able to visit 

with me with the same question, how quickly could we get American natural gas. 

This is one of those conversations that we need to be able to determine. I understand full well we have the first responsibility to 

take care of America and Americans. That is in our national interest. That is our first responsibility. But when there is economic 

benefit and there is also diplomatic strength that comes from the 

export of energy, this is one of those issues I continue to ask why 

is it taking so long in the process. 

So I know that was a long statement for me to make as well. 

23 

Mr. Smith, let me start this conversation. It has taken, depending on the different permit, sometimes it has taken 11 weeks, 

sometimes it has taken 8 weeks, sometimes it has taken different 

times to be able to actually get a permit one after another here. 

So the initial one, obviously, the Sabine Pass approval, took approximately 8 months after the application. Well, we have had 

some now that are 29, 27, 23 months after the application. Is this 

process getting faster? I know you are working through the process. 

Is it getting faster? Is the Department of Energy getting more efficient in the approval process? 

Mr. SMITH. Thank you for the question, Mr. Chairman. First of 

all, as you note, we are working through the queue on a case-bycase basis. The first application we did obviously took some more 

time because we had to do the full study to look at a cumulative 

impact. Since then a lot of scrutiny has been made on the time between each application. One might be 9 weeks, one might be 11 

weeks, one might be 7 weeks. 

What I can say to that is that we have a great team of people 

working to write these orders. Our focus is on making sure that we 

get the public interest appropriate and we get it right and that we 

get an order that is going to withstand the scrutiny that is it sure 

to receive. So our task is to make sure that we keep moving forward as expeditiously as possible. There is not a time line that we 

are on; there is not a clock that we follow. Essentially the team 

looks at each issue. Each of the orders is different, so they are 

going to take different amounts of time because they will require 

different analyses. But once each order is done, it is released by the 

team and we move on to the next order. So that is the process that 

we have been on, and we are moving through the queue. 

Mr. LANKFORD. Let me interrupt real quick because I want to be 

able to transition and let other folks speak. So at this point you 

don’t have a requirement on your team whether they take two 

years or two weeks to work through the next permit? It is just 

whenever they get done at whatever speed? 

Mr. SMITH. The requirement is to move forward as expeditiously 

and professionally as possible, but to make sure that they get the 

analysis right. 

Mr. LANKFORD. But it may take two weeks or it may take two 

years. 

Mr. SMITH. It takes the time that is required, Mr. Chairman. It 

is not a time-bound requirement; it is a requirement bound on the 

necessity to make sure we make a good public interest determination. 

Mr. LANKFORD. I am very aware there is not a time bound on it, 

but the issue is the clock is ticking internationally. That is part of 

the issue; it is not only domestically, but internationally. 

Let me move on. I want to be able to honor everyone’s time today 

with that. 

Ms. Speier. 

Ms. SPEIER. Thank you, Mr. Chairman. 

Let’s just address the likelihood that liquefied natural gas will go 

to Europe if it is manufactured here in the United States. Most of 

these companies are domestic companies with shareholders, correct? And do they not have a responsibility to acquire the highest 

24 

price for their gas in order to maintain a profit that is appropriate? 

Let’s ask Mr. Smith and Mr. Hochstein. 

Mr. SMITH. Thank you for the question. Certainly, I think you 

raise the point that once approved by the Department of Energy, 

the Department of Energy does not determine where the gas will 

go; it is going to be determined by the companies that receive the 

authorizations. And, indeed, those companies will certainly move to 

send the gas to the place that has the best return for orders. 

Ms. SPEIER. What is the price differential between Europe and 

Asia? 

Mr. HOCHSTEIN. The price of natural gas, as you state, is not like 

crude oil, where there is more or less of a balanced price around 

the world; there is a difference. So whole people talk about Henry 

Hub as the American price, Europe is about, let’s see, 460 or so 

traded these days, and Europe is anywhere between $10 and $13, 

and Asia is anywhere between $16 and $18. Then you have different regions within that that probably are a little bit different. 

But I think it is important to note that you can’t simply take one 

price in one area and make the transport of that equal. So if you 

take the price from the United States LNG exports that are approved here, you would have to add the cost of the liquefaction, the 

transport insurance, the re-gasification. Probably the kind of increase in price that you would have to add on puts it right in the 

range of what prices are today in Europe. So it wouldn’t be much 

above it, but it wouldn’t be much below it, either. 

Ms. SPEIER. So the likelihood of it going to Europe is not nearly 

as great as it is to go Asia, in any case? 

Mr. HOCHSTEIN. I think as Mr. Smith said, we, as a Government, 

don’t tell our companies who to sell it to. 

Ms. SPEIER. Exactly. 

Mr. HOCHSTEIN. But I think you are right that the companies are 

going to make a decision where to sell it to. But, if I may, I think 

the issue here is not where we send our gas. I think this is about 

a global market. And wherever our gas will go, and it is likely to 

go to wherever the traders feel that they need to put this gas based 

on a variety of factors, including price, it will make a difference in 

all other regions. So it will make a difference, as I think Mr. Smith 

said in his opening testimony. We have already made an enormous 

impact on the market by removing, if you look at the expectations 

of what we would be importing in 2014 just a few years ago, that 

delta is enormous. 

Ms. SPEIER. Okay, Mr. Hochstein, I want to try to get a couple 

more questions in. 

One of the points that I think hasn’t been made well enough yet 

is that the infrastructure in Europe to receive the LNG is not yet 

robust, and that these import terminals need to be built. Do we 

know how many need to be built? Do we know how much that 

would cost? Is that something that the United States would or 

could invest in? 

Mr. HOCHSTEIN. We are working with the EU on that issue for 

the last several years. There is quite a bit of capability at the moment that is full. There is more that is being built. The EU has 

had some regulatory challenges in getting some of these through. 

There is one in Lithuania that is going to be built; there are some 

25 

in Italy. But there has also been a sharp decrease in demand for 

LNG in Europe over the last couple years partly because the price 

of coal has come down quite a bit in the United States and made 

coal cheaper in Europe, so there has been a transition from gas to 

coal. There have also been very warm winters for the last couple 

years that have affected demand. So you are right. I don’t know 

that we would be as investors, that is for the private sector to do, 

but we are working with the EU to figure out how to make these 

financeable and bankable so that they are more likely to be built. 

Ms. SPEIER. All right, according to the Center for Strategic and 

International Studies, saving Ukraine from its gas-related diplomatic disadvantage with Russia is both a matter of money and political reform. They say the only way to extract Ukraine from the 

immediate payment crisis is to provide money for Ukraine to pay 

down its debts. However, that does not address the fundamental 

problem that resulted in Ukraine’s indebtedness in the first place: 

massive corruption, opaque markets, and poor pricings. 

Mr. Hochstein, do you agree with that view, and what do you 

think we should be doing about that? 

Mr. HOCHSTEIN. I do largely agree with that view. We have to 

look at this in a number of ways. The IMF package is hopefully 

going to be approved fairly soon. That will, with it, release American money that Congress has authorized, as well as European EU 

money. The need to pay down the arrears immediately is urgent so 

that additional supplies can come and we don’t have a cutoff. But 

we have to address the reform of the industry. This is an opportunity, this crisis is an opportunity for Ukraine to open a new page 

and to address the reform that the sector desperately needs so that 

we don’t end up in the same place that we are today a few years 

down the road, after paying the debt. 

Mr. LANKFORD. Mr. Walberg. 

Mr. WALBERG. Thank you, Mr. Chairman. 

Mr. Smith, as I understand it, companies that are seeking to export LNG today are required to go to the Department of Energy 

seeking a determination on public interest. Could you tell us the 

criteria that the Department of Energy uses to determine that 

term, public interest? 

Mr. SMITH. Thank you, Congressman, for that question. So the 

Natural Gas Act essentially creates a rebuttable presumption that 

exports are in the public interest unless the Department determines that approving such application would be deleterious to the 

overall public interest. The law, however, does not give a specific 

definition of the public interest; that has been left to the Department to interpret. 

So we have a wide range of criteria that we use when we are 

looking at public interest. We look at impact on the economy; we 

look at job creation; we look at energy security; we look at prices; 

impacts on consumers; foreign issues; issues of international affairs. So there is a very broad range of factors that we use. 

Mr. WALBERG. Are any of the factors weighed differently? 

Mr. SMITH. Well, one thing that we don’t have is a formula or 

matrix that we plug numbers into and get an answer out. Essentially what we allow for is a period of public comment in which the 

public can opine on these, and we think that is a very important 

26 

part of the process. We then have to make a qualitative decision 

on all the arguments that are made for and against LNG exports. 

In fact, when you see one of the orders that we have written , they 

are extensive documents. We are required to make very clear and 

transparent the reasoning that we make for each one of these applications, so we have to talk about the arguments that are made 

and either accept or rebut each of those individual arguments. 

Mr. WALBERG. Are international considerations weighed in any 

different way? Are they more significant, less significant? Do you 

work with the Department of Energy on making international determinations? 

Mr. SMITH. With the Department of State, certainly. Yes, Congressman, we work very closely with the Department of State on 

all issues. But in terms of international considerations, you will see 

in the most recent order that we put out there is a very specific 

reference to the importance of energy security for the United States 

allies and trading partners, and that is something that we do take 

into consideration, it is something that is very important to us. 

Mr. WALBERG. But not heavier than any other factors? 

Mr. SMITH. Well, Congressman, I think that all these factors are 

important. I mean, we care about impacts on American consumers; 

we care about prices; we care about international impacts. So all 

these are important. 

Mr. WALBERG. Is the process working as well as you would like 

it to, in your determination? 

Mr. SMITH. I think that the team is doing an excellent job of 

making very important long-term decadal energy decisions in terms 

of looking at public interest, so I think the team is going a good 

job. 

Mr. WALBERG. How many are awaiting approval right now, the 

projects? 

Mr. SMITH. Thus far we have approved 7 projects. I think we 

have more than 20 that are waiting in the queue. So to date we 

have approved 9.27 billion cubic feet per day of exports, and we are 

working through that queue on a case-by-case basis. 

Mr. WALBERG. Thank you. 

Mr. Hochstein, if you could tell us about the Unconventional Gas 

Technical Engagement Program and the Energy Governance and 

Capacity Initiative. Give us a little background on that. 

Mr. HOCHSTEIN. For the last several years the Department of 

State and our offices have worked together with the Department of 

Energy and other agencies with friends and allies around the world 

who have sought to look into the possibility of addressing their unconventional and shale resources. What we have done is we don’t 

encourage any country to do or not to pursue unconventional, but 

if they are going to do so, to offer them the support of understanding the regulatory mechanisms to make sure it is done in a 

safe and environmentally sustainable way. And for that we have a 

program that supports a number of countries. We worked very 

closely with Poland. We actually started working with Ukraine before the crisis, about a year ago, and we are looking at expanding 

that program now to be able to bring about more resources there. 

The EGCI program that you mentioned, Congressman, looks at 

the governance of oil and gas sector overall to make sure, again, 

27 

that as we see new countries coming online as new producers, that 

they are not suffering from the same trap that some others have 

done before them, and to make sure that those resources are made 

available to all the people of that region and that country, and that 

it is done with a governance structure. 

Mr. WALBERG. Are you achieving that goal, in your estimation, 

right now, like Ukraine and the situation? 

Mr. HOCHSTEIN. Yes. I think on the unconventional, yes, I do. It 

is a very difficult task, but I think that it is important that countries make the decision on unconventional based on science and not 

on emotions, and, if they are going to do so, that we support them 

in being able to develop and increase their production from conventional and unconventional resources. 

Mr. WALBERG. Thank you. 

Mr. LANKFORD. Mr. Cardenas. 

Mr. CARDENAS. Thank you very much, Mr. Chairman. 

In order to expedite LNG exports, environmental concerns and 

what is in the public interest, it is my understanding, are involved 

in the process. Section 3 of the Natural Gas Act requires companies 

seeking to export natural gas to obtain approvals from the Department of Energy, Office of Fossil Energy, and the Federal Energy 

Regulatory Commission. Under this section, no export of natural 

gas will be permitted unless it is consistent with the public interest. 

So, Mr. Smith, can you describe the various approvals that are 

required and what the roles of each agency are? 

Mr. SMITH. Well, thank you very much for the question, Congressman. There are two primary agencies that are involved in this 

process, there is the Department of Energy, which essentially 

grants the authorizations to export the molecule, and then there is 

the Federal Energy Regulatory Commission that grants permission 

to actually build the plant. So those are two different processes. 

They are separate, but they are both critical and important to get 

a project up and running and exporting natural gas. 

Mr. CARDENAS. Okay, thank you. Mr. Smith, what are the specific criteria for making the public interest determinations? 

Mr. SMITH. Thank you for the question, Congressman. There is 

a wide range of criteria that we use when we are looking at each 

one of these applications on a kind of case-by-case basis. We have 

to look at a wide range of factors that are important for American 

consumers and American industry and our national security, so we 

look at energy security, we look at supply availability, we look at 

environmental impacts, we look at international effects, we look at 

prices, impacts on consumers, on industrial customers. So those are 

all things that we have to consider for each and every one of these 

applications. 

Mr. CARDENAS. Okay, thank you. 

Mr. Hochstein, are you aware of any provision under the public 

interest determination for benefitting U.S. foreign policy? 

Mr. HOCHSTEIN. We at the State Department are not involved directly in the approval process, but, as Mr. Smith said, the Department of Energy and the Department of State work very closely together and I think we share information, and when they make 

their determination they have our views in mind. 

28 

Mr. CARDENAS. Okay. 

Mr. Smith, what, if any, environmental determinations does the 

Office of Fossil Energy make in determining the public interest? 

Mr. SMITH. So that is going to be on a case-by-case basis depending on the application that we are looking at, but we are compelled 

to look at a wide range of issues; where the gas is coming from, 

how it might impact local communities. So those are things that 

are considered. 

Mr. CARDENAS. And what about other agencies? 

Mr. SMITH. Well, the Federal Energy Regulatory Commission, 

the FERC, also has to do an environmental analysis and, in fact, 

we are a core operating agency in their environmental process that 

looks at the impact of the terminal itself, the footprint of the terminal, and the impacts of actually constructing the facility itself. 

So we are a coordinating agency with FERC in that process, so we 

work together in that way. 

Mr. CARDENAS. Okay. Mr. Smith, would you describe the involvement of these processes as very simplistic or complicated? 

Mr. SMITH. I would certainly say it is an important and complicated decision, and we have processes that match the gravity of 

the decision we have to make. 

Mr. CARDENAS. For example, if somebody were to put in an application in January of 2010 and then, all of a sudden, somebody puts 

in what looks to be, on the face of it, a similar application in January of 2014, would you say that there are some variables that may 

have changed between those two? 

Mr. SMITH. There certainly would be variables that would 

change. Just temporally factors changes, and each of the individual 

applications will have factors that might be different. So we have 

to consider the comments that are made by the public in this public 

and transparent process, and we have to consider each of those on 

a case-by-case basis. 

Mr. CARDENAS. For example, in a hearing like this, do you imagine that in 2010 somebody would have mentioned Ukraine, 

Ukraine, Ukraine; whereas, now they may be mentioning it quite 

often? Is that a variable that perhaps complicates it a little bit 

more? 

Mr. SMITH. That certainly is something that has changed dramatically over the course of the past few months. 

Mr. CARDENAS. Yes. One of the things that I find fascinating is 

that, a lot of times, when we have public hearings like this, people 

like to try to force the issue to be simplified more than it possibly 

can be. I mean, I got my degree in engineering, and the one class 

that I remember the most and that apply in almost everything that 

I have done since I have left college is something called feedback 

systems. Simply put, it is a class of every engineer of every kind 

takes as a freshman and it basically explains that what goes in and 

what comes out is very different based on what happens in between, and no feedback system is identical to another. And it 

seems like that is the kind of thing that departments have to deal 

with on a daily basis. 

I want to thank you very much for doing a very good job of simplifying it as much as possible so that we in the public can underVerDate Aug 31 2005 10:28 Jun 06, 2014 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 C:\DOCS\88088.TXT APRIL
29 

stand how complicated it is and how important it is. Thank you so 

much. 

I yield back my time. 

Mr. LANKFORD. Mr. Jordan. 

Mr. JORDAN. Thank you, Mr. Chairman. 

Mr. Hochstein, when can we expect a decision on the Keystone 

pipeline? 

Mr. HOCHSTEIN. Sir, unfortunately, I can’t answer that question. 

Mr. JORDAN. Do you know when the application for the Keystone 

pipeline was filed? 

Mr. HOCHSTEIN. I don’t have the date in front of me, sir. 

Mr. JORDAN. Six years ago, September 2008. When do you think 

we can expect a decision? 

Mr. HOCHSTEIN. The process in the Department of State, as you 

know, is ongoing. 

Mr. JORDAN. Are you involved in that decision? 

Mr. HOCHSTEIN. I am personally not involved in the process; my 

office is. 

Mr. JORDAN. You are the Deputy Assistant Secretary for Energy 

Diplomacy. Big title. Diplomacy in the title and you are not directly 

involved? 

Mr. HOCHSTEIN. I think that we have different people working on 

a variety of different issues. Obviously, I am part of the leadership 

of the Bureau, so involved in that sense—— 

Mr. JORDAN. Mr. Hochstein, are you aware the EPA’s final report 

was released clear back in 2011, three years ago, stated there were 

no significant impacts on the environmental side? Are you aware 

of that? 

Mr. HOCHSTEIN. Yes, I am, sir. 

Mr. JORDAN. And the folks who are going to make the decision, 

are they aware of that at the State Department? 

Mr. HOCHSTEIN. I believe they are, sir. 

Mr. JORDAN. Are they aware that, two and a half years ago, Congress sent the President a bill saying, hey, make a decision? The 

President delayed that and said we want to wait for the Sand Hill 

issue to be resolved. And you are aware that that has been resolved, Mr. Hochstein? 

Mr. HOCHSTEIN. I am, sir. 

Mr. JORDAN. And the people who are making that decision are 

aware that it has been resolved? 

Mr. HOCHSTEIN. I believe people are aware of a variety—— 

Mr. JORDAN. Are they aware that the governor of the State was 

initially against it, now he is for it? 

Mr. HOCHSTEIN. If I may, Congressman, I think that as the process continues and we look at a variety of these different issues that 

are affecting this decision—— 

Mr. JORDAN. Do you think we can get a decision before this year 

is over? 

Mr. HOCHSTEIN. I can’t answer that directly. 

Mr. JORDAN. Then you would meet the six year time frame. If 

you get it done before September, you have done it in six years. 

Mr. HOCHSTEIN. Congressman, if I may, one sentence. I think I 

can give you what I think is happening at the moment, and that 

is that as we have new data coming in, such as the decision of the 

30 

court in Nebraska, we are not stopping the process, we are not suspending the process, the process is ongoing. 

Mr. JORDAN. Do you know The Washington Post said that waiting any longer—and this is not Jim Jordan, this is not The Washington Times, this is The Washington Post, said to not make a decision is absurd and laughable. Again, not Chairman Lankford, not 

members on the Republican side; The Washington Post. And it 

kind of is six years. And you are telling me you don’t know if you 

can get it done before September of this year to meet the six-year 

time frame? 

Mr. HOCHSTEIN. What I am saying, Congressman, is as we are 

trying to make the process move as expeditiously as possible—— 

Mr. JORDAN. No, that cannot be true. That cannot be true. You 

are trying to make it move as expeditiously as possible. The Washington Post says it is absurd not to make a decision now. It has 

been almost six years. You can use any other adjective you want 

to use, but expeditious is probably the wrong one to use. 

Mr. HOCHSTEIN. We have a significant and overwhelming volume 

of public comments that we are going through. We have a court decision in Nebraska that just was announced just a few weeks ago 

that has to be addressed, as well, just on the root—— 

Mr. JORDAN. But my point is when. My point is when. Or maybe 

a better question is will you ever make a decision. 

Mr. HOCHSTEIN. Yes, we will make—— 

Mr. JORDAN. You will make a decision at some point? Okay, well, 

that is a step in the right direction, because there are some people 

who are starting to think there is never going to be a decision. 

Now, do you think it will happen—let’s take this date. Do you 

think it will happen before the November elections this fall? 

Mr. HOCHSTEIN. Sir, I can’t—— 

Mr. JORDAN. Is it likely to happen before the November elections 

this fall? 

Mr. HOCHSTEIN. As I was trying to say, sir, I can’t—— 

Mr. JORDAN. Do you want it to happen before the November elections this fall? 

Mr. HOCHSTEIN. Did you want me to answer, sir? 

Mr. JORDAN. I want you to answer that last one first, if you 

could. 

Mr. HOCHSTEIN. Okay. 

Mr. JORDAN. Do you want it to happen before the November elections? 

Mr. HOCHSTEIN. I would like to be able to go through the process 

in the way that we are required to do, addressing all the issues 

that have come before us, including the recent data. Had you asked 

me this question a few weeks ago, before the court decision in Nebraska, we would have been in a different situation. I think what 

we are trying to do is—— 

Mr. JORDAN. The Washington Post used the terms absurd and 

laughable, knowing about the court issue, Mr. Hochstein. You are 

aware of that, correct? 

Mr. HOCHSTEIN. I am aware of what The Washington Post said. 

They don’t speak for me and I don’t always agree with what The 

Washington Post says. 

31 

Mr. JORDAN. Let me just ask you this. Will there be a decision 

before the November elections of this year? 

Mr. HOCHSTEIN. As I said, Congressman, I can’t stick to a specific time line of when this decision will be made. 

Mr. JORDAN. Yes or no, do you, as Deputy Assistant Secretary for 

Energy Diplomacy, want there to be a decision before the November elections this fall? 

Mr. HOCHSTEIN. I would like to be in the position where we have 

done all the work that we are required to do to be in a position 

in the time line that we can do. If that is before the election, then 

I hope that that is done. But what I cannot say is whether or not 

we are going to be able to make that time line. We are trying. We 

have a lot of people working on this. There are a number of factors 

that we are looking at, including the enormous volume of—— 

Mr. JORDAN. We want you to try harder. It has been six years. 

We want you to try harder. Frankly, we want a decision yesterday, 

but we know that is not going to happen. So, at a minimum, it 

makes sense the American people could know about this before an 

important mid-term election. 

With that, I yield back, Mr. Chairman. 

Mr. LANKFORD. It is becoming increasingly apparent that to stop 

any permit, you just flood the office with public statements and everything stops. At some point leaders have to make decisions. 

With that, I recognize Ms. Duckworth. 

Ms. DUCKWORTH. Thank you, Mr. Chairman. 

Let’s return back to the topic of today’s hearing, which is liquefied natural gas. The crisis in the Ukraine is yet another reminder 

of how energy independence and our national security interests are 

closely tied. Countries like Russia have shown, obviously, that they 

are more than willing to use energy as a weapon. Natural gas exports have the potential to not only provide significant economic 

benefits to our Country’s national security interests, but can also 

advance our national security interests and increase energy security. 

While this discussion of the international picture of energy security is important, I want to focus a little bit on the domestic side 

and what these effects can be for our domestic consumers of LNG. 

Mr. Smith, studies that the DOE has commissioned have found 

that the export of natural gas will have a net benefit on our economy and that there is significant potential here for bringing more 

wealth to our Country and creating more American jobs, something 

I think we all agree with. The Gas Technology Institute, a not-forprofit research lab that I am proud to have in my district, has been 

at the forefront of developing technologies that make natural gas 

development safer, more efficient, more environmentally sustainable, and in turn have really helped to make the natural gas success story one of our wins in our domestic industry. 

Mr. Smith, do you see that efforts and capital investments in exporting more natural gas will also help to develop greater use of 

natural gas domestically, for example, the use of LNG as transportation fuel or to meet its domestic demand for its use to generate 

electricity? 

Mr. SMITH. Well, thank you very much for the question, Congresswoman. First of all, the Department of Energy has a long reVerDate Aug 31 2005 10:28 Jun 06, 2014 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 C:\DOCS\88088.TXT APRIL
32 

lationship with the Gas Technology Institute, and that relationship 

has actually been very instrumental in developing many of the 

technologies that have led to this increase in our domestic production of natural gas. 

In terms of the interaction between LNG exports and domestic 

use, if the United States does move forward to export additional 

quantities if these terminals are built by the private sector, it is 

essentially going to put greater demand on our domestic supply 

here domestically, and that is going to have impacts on a variety 

of things, and that is what we look at in a public interest determination. 

In terms of exporting LNG increasing the use of liquefied natural 

gas for transportation, I don’t see a strong correlation between 

those two issues; I think they are driven by different factors. But, 

indeed, we are seeing a greater use of natural gas in the transportation sector. Particularly in fleet vehicles we are seeing that being 

picked up right now, and we think that is important; it creates 

greater options for American consumers and American businesses. 

It helps to reduce greenhouse gas emissions, so we see that as 

being very positive. 

Ms. DUCKWORTH. I also represent, Mr. Smith, a lot of small manufacturers. I have the largest concentration of tool and dye manufacturers in the Nation in my district, for example, and many of 

the folks I have talked to in domestic manufacturing have expressed real concerns that increased exports will lead to price increases at home and, in turn, harm our businesses and consumers. 

What effect does DOE expect natural gas exports to have on the 

domestic manufacturing sector’s consumption and the prices that 

we must pay domestically for natural gas? 

Mr. SMITH. Well, thank you very much for that question, Congresswoman. We are certainly concerned about consumers in Poland and Ukraine, but we are also very concerned about consumers 

in Illinois and Ohio and Oklahoma. So we have to take both into 

consideration, which is why these public interest determinations 

are indeed complicated. 

The Department of Energy has commissioned a number of studies that have looked at price impacts significantly. The NERA 

study that was done before this had been passed export, so it 

showed, in most cases, a modest impact on industry; it showed a 

modest impact on consumers, but one that we do have to take into 

consideration and balance against the benefits of LNG exports, balance of trade, job creation in producing States, greater production, 

other things. So it is a balancing act that we have to show, but we 

certainly are interested and concerned about potential impacts on 

consumers and, importantly, on those businesses that use natural 

gas to create jobs. So that is a very important factor in our considerations. 

Ms. DUCKWORTH. Thank you. I have real concerns that our foreign manufacturing competitors don’t take advantage of our cheap 

natural gas prices at the expense of our domestic manufacturers. 

Thank you. 

I yield back. 

Mr. LANKFORD. Mr. Woodall. 

33 

Mr. WOODALL. Thank you, Mr. Chairman, and thank you for 

holding the hearing. I would like to focus a little bit more on the 

domestic side of that for a moment. 

I represent the State of Georgia, Mr. Smith, where I am told, depending on the day of the week, Southern Company, our utility 

down there, is either the number one, number two, or number 

three consumer of natural gas in the Nation; and yet Southern 

Company has come out in support of LNG exports as part of that 

national mix. 

But our pipes are full in our part of the world; we can’t get any 

more gas in our infrastructure. I look at the map on the EIA Web 

site of where the natural gas is coming from and I am thinking, 

man, how in the world are they getting that stuff out of the 

Bakken. I listen to that conversation that Mr. Jordan just had here 

and I think what is the impact that prices have on domestic manufacturing is going to be dramatically different if we have an infrastructure that can get every diesel gallon equivalent of natural gas 

out of the Bakken and down into the great State of Georgia than 

if we don’t have that infrastructure in place. 

Talk to me about what kind of infrastructure needs to be created, 

which I suspect will be dominantly pipeline infrastructure, in order 

for the American consumer and our exporters to be able to maximize the use of our natural resources. 

Mr. SMITH. Thank you, Congressman, for that question and a lot 

of really big issues there. First of all, I will mention that the Department of Energy has a very important collaboration with Southern Company. One of the most important demonstrations of carbon 

capture and sequestration is being done in Kemper County in collaboration with Southern, so that has been a really important initiative that has the potential to benefit both the company here and 

internationally. 

In terms of the infrastructure question, that is actually a really 

big topic. When we look at the growth of shale gas and the success 

that we have had here in the United States versus the challenges 

that you have in Europe, the challenges that you have in China, 

one of the big factors that was in our favor here in the United 

States was the fact that there was already a very robust infrastructure in place such that, as fields were drilled, you had to wait to 

get that gas to market, and that, indeed, is built and expanded by 

the private sector as new gas is developed. 

There is the potential for infrastructure to lag. The resource in 

areas in which you have very rapid growth, and we have seen a 

bit of that in North Dakota, we have seen a bit of that in South 

Texas, but overall there is certainly a very direct profit motive to 

build these infrastructure facilities that are necessary to make sure 

that we get this energy to the consumers that are going to be using 

it, and we believe that is generally happening. 

Mr. WOODALL. And do you believe that profit motive exists irrespective of the answer to the LNG exports question? 

Mr. SMITH. Certainly. I mean, I do not see LNG exports as being 

the single factor that determines whether or not private industry 

builds the infrastructure that we need to get gas to markets. 

Mr. WOODALL. So when I see natural gas being flared off around 

the Country due to a lack of infrastructure, clearly either the motiVerDate Aug 31 2005 10:28 Jun 06, 2014 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCS\88088.TXT APRIL
34 

vation is not there today because of low gas prices or the cooperation is not there today to go through the permitting process to get 

that infrastructure installed. 

Mr. SMITH. Well, that is actually a big question, Congressman. 

I mean, there is a challenge when you have lots of associated gas 

being produced along with oil in places where the oil is valuable 

and the gas is a byproduct of the oil production. So if you are in 

a situation where the infrastructure would be expensive to build, 

sometimes it is difficult for companies to justify the expense of 

building that infrastructure when they have the option of glaring 

the gas instead of building infrastructure to take it to market. So 

there is a market inefficiency there somewhere, but certainly State 

regulators and industry are working together to try to make that 

work better. 

Mr. WOODALL. But from a DOE perspective, DOE is just willing 

to let those market forces be at play if those market forces require 

that we flare off our natural resources to no benefit of the consumer, fair enough, and if those market forces require that we need 

to build a pipeline to get those resources to consumers, then they 

would be supportive of that as well? 

Mr. SMITH. Well, I wouldn’t characterize that as a matter of willingness. I mean, the Department of Energy has a mission, so we 

are the technology organization. I oversee the National Energy 

Technology Laboratory that does much of the R&D both 

intramurally and with industry and academia that leads to solutions for environmental sustainability and safety. I think we are 

working together with State regulators in some cases, but there is 

a question of oversight or some of these questions, and a lot of 

them are complex and involve multiple market actors in the private sector. 

Mr. WOODALL. Speaking on behalf of the State that gave America 

the president who created the Department of Energy, we support 

your mission of creating a safe and sustainable structure here in 

the Country that hopefully will not only lead to the manufactures 

that Ms. Duckworth talked about, but really change our balance of 

trade with the world. 

Mr. Chairman, thank you again for holding the hearing. I yield 

back. 

Mr. LANKFORD. Thank you. 

Ms. Norton. 

Ms. NORTON. Thank you, Mr. Chairman. You are holding this 

hearing at an interesting time when there is a lot of talk internationally about natural gas and perhaps new opportunities, new 

marketing opportunities here, where we see very low prices even 

given the technology and environmental challenges. So my question 

really is for Mr. Hochstein. 

Mr. Hochstein, I promise to give you time to answer my questions. 

You hear much of it off the top of the heads of people talk about 

our natural gas supplies being of aid to Europe and even Ukraine 

during the crisis that Ukraine is now experiencing. According to 

figures I have, Europe gets a quarter of its gas from Russia and 

half of that, and that was really news to me, half of that passes 

through Ukraine. 

35 

We remember that in 2009, early in 2009, the pipelines were 

shut down through Ukraine. What was the reason for that again, 

please? 

Mr. HOCHSTEIN. There was a price dispute between—Ukraine 

had not paid debts and the Russians shut down the gas supply to 

Ukraine first, and then to the rest of Southeastern Europe through 

Ukraine a few days later. 

Ms. NORTON. So they didn’t have much of an effect on Europe at 

that time because of the short duration? 

Mr. HOCHSTEIN. It had actually a tremendous effect in both 13 

days of no gas in the dead of winter. And Europe uses gas primarily for heating, so the timing was not accidental. 

Ms. NORTON. What did it do, increase the price? 

Mr. HOCHSTEIN. What it did—— 

Ms. NORTON. I mean, was there real scarcity going to Europe? 

Mr. HOCHSTEIN. It lasted 20 days in total, 13 days for most of 

Europe; and, as a result, what it really did was drove home the realization of the vulnerability that Europe has in its reliance on 

Russian gas and its need for diversification. Because it only lasted 

13, the pain was short-lived. 

Ms. NORTON. Well, does that mean that Europe is less dependent 

on Russia today? Did it diversify? 

Mr. HOCHSTEIN. Europe did a number of things and we worked 

very closely with Europe for the last five years to do that. They are 

less reliant today on Russia, while still are extremely reliant and 

they will be for a long time to come. But because they passed the 

Third Energy Package, which required that the destination clauses 

be gone, it meant that when Russia exports gas into the EU, the 

first country of transit, let’s say Germany or Ukraine or other EU 

countries, could not say, they couldn’t dictate you may not pass this 

on without my permission to another country. So what it allowed 

it to do is the minute the gas comes into the EU, it is now EU gas 

and can be transferred further. 

So as we talked before about reversing the flows from Poland, 

from Hungary, from Slovakia into Ukraine, that would not have 

been possible in 2009 because of the regulatory structure that was 

in place. So by working with Europe to get the regulatory structure 

there, making some investments, getting them to make investments in infrastructure, they are less reliant today. But as Russia 

will continue to be a supplier into Europe, there is more we can 

do together to make sure that that reliance is diminished, and 

quite significantly. 

Ms. NORTON. Well, is it, and forgive the pun, a pipedream for 

Americans to see themselves in anything like the near future providing natural gas to Europe, and would that have any effect on 

our domestic market or do we have so much that it would simply 

mean a new market and a new, perhaps, reduction in the trade imbalance if we were able to do that? 

Mr. HOCHSTEIN. I think that the United States has a role to play 

in this and that our exports are an important factor—— 

Ms. NORTON. We are not exporting at all now, are we, natural 

gas? 

Mr. HOCHSTEIN. Today we are not exporting. We do not have any 

facilities to export that are ready yet. 

36 

Ms. NORTON. That is what I mean. When we hear people talk 

about our becoming a supplier, that would mean a large and immense effort to construct the infrastructure to do so. 

Mr. HOCHSTEIN. Yes, that is true, but some of that is already in 

train, and the first one will come online in about 18 months from 

now. I just would mention that the gas that has already been approved by the Department of Energy is about half the amount of 

gas that Europe imports annually today. So it is an enormous 

amount of gas that has already been approved, but the market 

forces have to be there to build the facilities that have been approved. 

Ms. NORTON. Thank you very much, Mr. Chairman. 

Mr. LANKFORD. Thank you. 

I am going to open this up for open conversation on this, so anybody can jump in on any point. 

I just need to get some clarification there. You had mentioned we 

are not exporting natural gas now. Would you include Canada, 

Mexico, or off the Kenine Peninsula of Alaska in that we are not 

exporting natural gas comment? 

Mr. HOCHSTEIN. I meant to say LNG of the ones that have been 

approved through this process. Clearly, Alaska and the pipelines to 

Canada and the narrow region—— 

Mr. LANKFORD. Okay, so we are a net exporter already of natural 

gas, and we do LNG off the Kenine Peninsula at this point. But 

we are exporting, not importing, natural gas. 

Mr. HOCHSTEIN. We are also importing natural gas today. We are 

not a net exporter yet, but we are poised to become one. 

Mr. LANKFORD. Okay. So what was the time frame on that? 

Mr. HOCHSTEIN. I think as our exports—you know, it is hard to 

predict that. I can say that by 2018, which is the prediction that 

EIA has for becoming a net exporter, and I would let my colleague 

address that, but I think it is important to say we give permits for, 

as the Department of Energy gives permits, they have to be built 

and then decisions have to be made to actually sell it. 

Mr. LANKFORD. Right. We talk about it and we will come back 

to Mr. Smith on that. Mr. Hochstein mentions the amount that we 

have already permitted of the seven that are there. How many export terminals do you anticipate will actually be constructed? 

Mr. SMITH. I can’t really say, Mr. Chairman. 

Mr. LANKFORD. Give me your best guess. You are an expert at 

this; you have lived and breathed it all the time on both sides, of 

the import and export facility side of it. What is your best guess 

of how many you think will be built? 

Mr. SMITH. Well, I can say a couple things on that, Mr. Chairman. First of all, certainly there are terminals that are being built 

right now. 

Mr. LANKFORD. Right. 

Mr. SMITH. In terms of making predictions about what will happen subsequently, my experience is that I came to this job from industry; I spent 11 years at Chevron before I came to Government. 

And I actually worked on the Sabine Pass terminal when it was 

an LNG import terminals. 

Mr. LANKFORD. Right. 

37 

Mr. SMITH. So if you had asked me, at that point the question 

you would have asked me was how many terminals to import LNG 

would have been built and I probably would have made you an estimate because I was working that field. So I am going to demure 

from giving a numeric total because our collective faith in our crystal ball should be diminished. I mean, energy—— 

Mr. LANKFORD. Okay, we have seven permits out there already; 

24 permits that are still pending. Do you think we will build 31 

terminals? 

Mr. SMITH. I can safely say that I do not think 31 terminals will 

be built. 

Mr. LANKFORD. Okay. Do you think we will build 15? 

Mr. SMITH. I don’t know. 

Ms. SPEIER. Mr. Chairman, let’s kind of play this out a little bit. 

Mr. Hochstein, I think, or maybe it was Mr. Smith, said that what 

has already been permitted would generate about half the LNG 

that Europe already uses. Now, if we don’t want to have—these 

companies are big boys, so they can make decisions as to whether 

or not to build or not to build. They made decisions to build import 

facilities and then got burned, and I would venture to say they are 

probably going to be reluctant to move too swiftly, because it appears that this particular market varies dramatically from time to 

time in short periods of time. 

So if, in fact, half of the natural gas that is being used by Europe 

today has already been permitted in the United States and we 

have the countries of Australia, Mozambique, Israel, Cyprus, and 

Lebanon coming online, I mean, what are we saying here? They are 

not going to come online and not try and provide that energy to Europe in many respects, so—— 

Mr. LANKFORD. Which is actually my exact point on this, and Mr. 

Smith and I have had this conversation somewhat. If we already 

know all these terminals are not going to be built, we are giving 

a competitive advantage to people that filed a permit request a couple of days before or a couple of weeks or months before someone 

else, where they may have filed a—and some of these folks filed actually their permit request the exact same day, but they actually 

won’t find out for maybe two or three years later than other people 

on it. So we are giving a competitive advantage to some companies 

and other companies just have to wait two or three years until 

DOE makes the decision and then start with FERC. 

I agree all these facilities are not going to be built. There will 

be a lot of competition worldwide, but we will lose the competition 

worldwide if we continue to delay. So basically we are saying to 

Australia and other countries you go compete worldwide, we are 

going to discuss it. 

Ms. SPEIER. But the flip side of that coin is part of our resurgence, part of our economic reinvigoration is the fact that companies are bringing manufacturing back to the United States because 

the cost of fuel is so expensive in China and elsewhere, and they 

see the net benefit. So we are creating jobs in that regard. So we 

don’t want to cut off our nose to spite our face, either. 

Mr. LANKFORD. I totally agree. We are about four and a quarter 

right now for natural gas here in the United States; 12 bucks in 

Europe for the same piece. So even at that point companies that 

38 

are going to relocate are going to relocate. So my conversation is 

how do we balance this out? How do we use the economic engine? 

When you look at job growth over the last several years, the largest 

area of job growth in America has been energy. And how do we 

continue to maintain that engine to continue to work in a very difficult economy, to say the least? You continue to provide new markets for them to go to. So we have an economic benefit here in the 

United States and we have a geopolitical benefit worldwide, which 

I want to expand this, if I can, real quickly. 

Mr. Hochstein, as well, there is a lot of conversation between 

India and Iran right now dealing with natural gas, so we can continue to talk about Ukraine, but this is not just a Ukraine issue; 

this is a worldwide issue. Is the State Department comfortable 

with India’s natural gas supplier being Iran? And, if not, what are 

we going to do about that? 

Mr. HOCHSTEIN. Thank you, Mr. Chairman, for that question. We 

have been implementing and my office has been leading the effort 

to implement the Iran sanctions on energy for the last two years, 

especially since Congress passed it in late 2011. 

First, let me say this. We do not believe there is any truth or 

likelihood to gas supplies from Iran to India at this time, or to 

Pakistan. Iran is a net importer of gas at the moment. They export 

some to Turkey on one side of the country and they import some 

other from Turkmenistan. And we have had very close and open 

and frank conversations with our Indian friends about their oil 

purchases from Iran, as well as how we would view Iran exports 

of gas. But currently Iran doesn’t have the gas supply or the infrastructure, and that is due to sanctions; they sit on the largest reserves. But as a result of sanctions they have not been able to build 

out that infrastructure and there is no infrastructure in sight to be 

able to deliver that. 

If they do build it, Mr. Chairman, I assure you that our views 

are very well known to our friends and allies about how we feel 

about as long as sanctions are in place. 

Mr. LANKFORD. But are we in a position to be able to say, India, 

we will supply your natural gas needs? Or are they a spot to just 

say go in the market and find it? 

Mr. HOCHSTEIN. India will be one of the first that already has 

contracted for natural gas from Sabine Pass. 

Mr. LANKFORD. Okay. 

Other questions? 

Mr. Farenthold, this is the second round on this. Do you have 

questions you want to be able to ask? 

Mr. FARENTHOLD. I do, and I apologize for not being here earlier. 

Mr. LANKFORD. Go right ahead. 

Mr. FARENTHOLD. There is a Judiciary markup on human trafficking, so I am kind of bouncing between committees. But I do 

have some questions. 

Mr. LANKFORD. Go ahead. 

Mr. FARENTHOLD. I would like to ask our State Department representative there have been some discussions they have told me 

about here today and I have read your testimony, and a lot of what 

we focused on is exporting U.S. source LNG to the Ukraine. U.S. 

LNG exports are an important foreign policy tool for assisting our 

39 

allies, especially when dealing with Russia, and it would certainly 

benefit our economy at home. But I would like to talk to you a 

minute about the benefits of potentially assisting the Ukraine not 

with U.S. LNG, but with world source LNG. 

The State Department has repeatedly asserted that LNG exports 

are not a viable option for helping the Ukraine in the near term 

because U.S. LNG exports are such a long way away. I am going 

to have a conversation with Mr. Smith about that when I am finished talking to you, but I do want to know while this is unfortunately true, it is my understanding the Ukraine has been in discussions with at least one U.S. company about constructing an LNG 

terminal in the Ukraine and bringing world source LNG in until 

the U.S. supplies are available. It is my understanding that this 

could be done in as little as six to eight months. No one is saying 

they can get a plant built in six to eight months, I do point that 

out. However, Turkey is causing some potential problems by denying access to the Bosporus Straits for the passage of LNG tankers. 

What is the State Department’s view of this? Are you aware of 

the world source LNG could be a viable solution in the Ukraine 

and what are your thoughts on this? 

Mr. HOCHSTEIN. Yes, Congressman, thank you for that question. 

You are right, when we talk about LNG as a solution, I don’t think 

it is a comprehensive solution for all problems, and the U.S. is not, 

but we are not the only supplier; there are others and, in fact, 

some of the European countries that are building LNG terminals 

are in contact with other suppliers for more immediate gas. 

As far as Ukraine, we have had this conversation for quite a 

while about the interest in Ukraine to build an LNG facility on 

the—and it is not really to build a terminal, I will just say, and 

that is why it takes sort of—it is to bring in a floating LNG facility, 

a boat that will come online. So it is a little bit different. 

The concern and what is blocking it, as you said, in the Black 

Sea is exactly what you said: Turkey does not allow LNG tankers 

to cross through the Bosporus. They maintain that that is a national security issue. This has ben a longstanding position that 

came up several years ago—— 

Mr. FARENTHOLD. Are you guys working with them on it? 

Mr. HOCHSTEIN. I am sorry? 

Mr. FARENTHOLD. Are you guys working to educate them on the 

fact these things probably aren’t going to blow up the way they 

think they are? 

Mr. HOCHSTEIN. We have very frank, open, and honest conversations with our friends in Turkey about LNG trade and in general 

about what it means to have open access trade through the Bosporus. But their positions are theirs to have and they have concerns. 

Mr. FARENTHOLD. Certainly we don’t control Turkey, but Turkey 

has been a good friend and ally to this Country, and hopefully we 

can bring them along. 

Mr. Smith, in a previous hearing we have heard from the Department of Energy on the process for getting LNG export facilities 

permitted. One of the things that I have heard that the DOE considers is, all right, well, we don’t want to get too many of these because we want them all to be profitable. It seems to me is that an 

40 

appropriate role for the Government to decide how many to have 

so they are going to be profitable, or is that something that should 

be left up to the market? If the market has a demand for, let’s say, 

20 LNG export terminals and 25 are built, well, that is not the 

Government’s money that is going to be lost; that is those investors’ money that is going to be lost for making a bad investment. 

Can you talk a little bit about that, how big of a consideration 

that is in the process? 

Mr. SMITH. Well, thank you very much for that question, Congressman. That, indeed, is not a point of disagreement. The Department does not take into consideration whether or not a company is going to be profitable or not; it is not our job to protect 

companies from themselves. 

Mr. FARENTHOLD. So why is it taking so long to get these permits 

out? 

Mr. SMITH. Well, I think it was instructive to hear the dialogue 

between the ranking member and the chairman in terms of some 

of the issues that we are dealing with. There are very strong views 

on both sides of the equation about the need to balance the increased production and balance of trade and job creation and the 

places where the terminals are being built with the impact on consumers and prices and impact on manufacturing sector, environmental factors. So those are a balance that we have to make. 

Mr. FARENTHOLD. I will concede some environmental factors to 

you, but it seems like when the Government starts regulating 

based on marketplace factors and such, I think we are getting out 

of line. We could have a debate about that between the sides on 

this dais and probably the Administration, but I am out of time on 

this. The potential is so much there and the delays are just frustrating to me, but I am out of time, so I will quit preaching. 

Mr. LANKFORD. You can get a second round as well. 

Ms. Lujan Grisham. 

Ms. LUJAN GRISHAM. Thank you, Mr. Chairman. Well, maybe I 

can take on the preaching. Thank you very much for being here 

and thank you very much, Mr. Chairman, for the hearing. We are 

all looking for those investments and balances, wanting to move 

forward quickly enough that we experience the right kind of results 

from those investments. 

In my State, I am from New Mexico, the energy industry is certainly critical to our economic success; it is a significant component 

of our current economic base and, in fact, I think it is responsible 

for about 30 percent of our State’s general fund revenue; and in a 

poor State like New Mexico, that is the only way we pay for education. It is also clear to me that the natural gas revolution has national security implications. According to the International Energy 

Agency, the U.S. has enough natural gas to meet all of its energy 

needs from domestic resources by 2035, and that allows us to be 

less reliant on the Middle East and other countries for energy. 

With that said, I know this has been discussed already, we have 

a responsibility to make sure that we manage the resources in a 

safe and responsible manner. We want to protect public health, 

wildlife, the environment, and our water resources. But I think it 

is important to explore ways to ensure that the Ukraine and our 

allies have access to reliable supplies of energy for their own naVerDate Aug 31 2005 10:28 Jun 06, 2014 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 C:\DOCS\88088.TXT APRIL
41 

tional security reasons; and it is certainly all of our understanding 

that the Ukraine faces numerous energy security vulnerabilities, 

including a lack to an adequate energy infrastructure, which I just 

heard you talk about, which I appreciate, several times. 

But I would love it if you would elaborate. I know that we started that conversation with Representative Holmes Norton, but I do 

want to talk about specifically if you could elaborate on what those 

strategies are and give me a little bit more depth, please. 

Mr. HOCHSTEIN. In securing the energy security in Europe? We 

are working on a number of factors simultaneously. Number one is 

to make sure—and I am going to separate out what we are doing 

for Ukraine and there is the rest of Europe, and primarily the Baltics or South Central Eastern Europe. 

In Ukraine it is about making sure that, if there is a shutoff of 

gas in the near term, that we have reverse flow capability in Hungary, in Poland, and in Slovakia, and to expand that to the degree 

possible that it takes care of the portion of gas that they import. 

Number two, that we help them become a more efficient and 

more capable producers of their own gas. They are quite an impressive producer of natural gas, but a lot of that technology is 1970s 

Soviet technology that can be updated and they can be using and 

producing more natural gas on their own. We are also working 

with them on their interest in exploring their unconventional gas 

areas. We are working with them to make sure that the reform of 

the sector is such that they will be able to not end up in the same 

situation that they are in today, and to make sure that efficiency 

rates are there so that they can do more with less; that includes 

subsidy reform, etcetera. 

In Europe we have to make sure that the infrastructure is there, 

that the regulatory reforms that they have started continue. We 

are working very closely with them on that, and to look and make 

sure that there is no energy islands in Europe, which is a stated 

goal of the EU. So the Baltics are a good example of that. LNG is 

going to be a key factor in that. Lithuania has gone a long way. 

The chairman mentioned Anita Orbon, the Ambassador-at-Large 

for Hungary, who is a good friend and we work closely together as 

they represent and chair the V–4, the Vice Cred 4 countries, plus 

Romania and Bulgaria, to make sure that, as a southern corridor 

is established, that we have more infrastructure to supply Europe. 

So, as you can see, there is not one answer for any of these, and 

it is unfortunate that you can’t fit it into a headline, here is what 

we do with Europe; it is a lot of different aspects of it. 

Ms. LUJAN GRISHAM. And given that you have to have a broad 

approach so that it is sustainable over the long haul, I certainly 

can appreciate that and recognize, given that we have our own natural gas exploration issues in New Mexico, because we can’t recapture the cost until a lot of this gets balanced, and I am very supportive of moving so that we have more export opportunities, because that is going to create an environment in my State to further 

that exploration and then do exactly what you said, which is looking at tertiary recovery that is cost-effective and that we have the 

infrastructure to do. 

42 

But what of those strategies, in 15 seconds, are quick? So I am 

looking at some of the stability issues in Ukraine. Can you pick one 

or two that you think have more of an immediate relief? 

Mr. HOCHSTEIN. I think the reverse flow capability and making 

sure that Ukraine is able to pay the arrears so that gas continues 

to flow. But the reverse flows are very, very important, and we 

have made a lot of progress on that and we need to make more. 

If I had to say 15 seconds on one thing, that is what it would be. 

Ms. LUJAN GRISHAM. All right. Thank you. 

Mr. LANKFORD. You can go ahead and extend that out. If you 

want to go ahead and answer that, that is fine, if you have additional responses. 

Ms. SPEIER. Why don’t you speak about energy efficiency, or the 

lack thereof? 

Mr. HOCHSTEIN. Sure. As we discussed before, and I will finish 

the answer, Mr. Chairman, it is critical as we look at Ukraine, it 

is such a big problem, but if we look at the numbers and we look 

at the production rates and the import rates and what is in the 

system as made available by the regulatory changes in Europe, we 

can expand those reverse flows quite considerably so that maybe 

not fully for this winter, but in the years to come Ukraine can 

choose whether or not to import gas from Russia or to do it through 

other mechanisms. So it is very important. 

As far as the efficiency rates, ma’am, Ukraine is very inefficient, 

and the Department of Energy, together with us, is working on proposals to work with Ukraine to see what we can do to increase efficiency rates, and that means, as many have addressed, the subsidy 

issue, where a gas is so cheap that people have no incentive to conserve, but also to put in place the kind of mechanisms and structures that will allow for more conservation so that they can do far 

more with less or with the same amount. So that is a program that 

we have done in other countries. DOE and the Department of State 

work together on these issues, and I think we have a number of 

proposals that could work very well for Ukraine. 

Ms. SPEIER. Mr. Smith, can we talk about FERC and the process 

there, which my understanding is more cumbersome and takes 

longer? How does that interrelate with the process that you have 

ongoing? 

Mr. SMITH. Well, thank you, Ranking Member Speier. I don’t 

want to get too far into the details of the FERC process because 

I am not from FERC and I am afraid I would not be able to characterize it appropriately, but I would say in general terms the FERC 

has an important job of managing the environmental process of 

evaluating the environmental impact of the terminal itself, and 

they give the authorization to actually build the terminal. So they 

have a very detailed and important role to play in this process. 

Ours is kind of larger, bigger picture, looking at the impact of exporting the molecule, but they have to go through the very detailed 

process of looking at the specific impacts beside itself. So we work 

closely with them. We share information in terms of making sure 

that we know where the different projects are in the queue, but 

their process is separate from ours. 

43 

Ms. SPEIER. No, I understand that, but I have been told that 

their process is cumbersome and long, and that they have a huge 

backlog. Is that true? 

Mr. SMITH. I wouldn’t characterize their process as necessarily 

cumbersome. I think it is appropriately detailed because it is a key 

part of the decision-making process. 

Mr. LANKFORD. Can I ask a question of that as well? Are some 

of the applicants in the FERC process, permitting process now, 

even before they have a DOE permit? 

Mr. SMITH. Yes. We do see applicants going forward with the 

FERC process, which is also a significant expenditure of funds; you 

have to do a lot of work in terms of your initial engineering and 

your environmental studies. So we do see companies moving ahead. 

Mr. LANKFORD. We are obviously pretty serious with that. What 

happens when they get a FERC permit and the DOE process is not 

complete and they are in the queue? If they have a FERC permit 

in their hand, let’s say they have gone through the whole process 

and they have completed that, but they don’t have a DOE permit, 

what happens? 

Mr. SMITH. Well, I mean, there are two types of authorization 

that DOE gives: we give conditional authorizations, which is essentially consistent with the precedent we have set for giving some 

sort of confidence to individual investors that their final approval 

will be granted, and then there is the final approval. So we have 

given seven conditionals and we have given one final approval. So 

if there was someone who actually did go through the entire FERC 

process without a conditional approval, they conceivably could come 

back for a final authorization from DOE. 

Mr. LANKFORD. And would they still have to wait in line in the 

queue on that? Let’s say they are number 15—I am just going to 

make up a number—in a list, but they have a FERC permit done, 

but they are still waiting on DOE on this. Would they have to wait 

until number 12, 13, 14 is complete before they get it, or would 

they move up the queue? 

Mr. SMITH. That hasn’t occurred yet, so I don’t have a definitive 

answer to that question, but conceivably, if they were done with 

the FERC process, then we would have to come up with some process for dealing with an applicant who went forward, did all that 

work without having gone through the conditional approval process. But, again, I don’t have a precedent to point to that. 

Mr. LANKFORD. But it does become the challenge that if they 

walk through that process and get that done, they are holding the 

FERC permit process in place, they are ready to go. It shows a seriousness that others may not have. You mentioned I don’t know 

how many it is total that have already started through that FERC 

process on it. Do you know what the number is that have already 

started through the FERC permit process? 

Mr. SMITH. I don’t know. I could probably tally that up. I don’t 

know off the top of my head, but there are a number of projects 

that, even though they have not gotten up in the queue in terms 

of DOE, they have started with the FERC process. 

Mr. LANKFORD. I am guessing, just based on the preliminary report that I have, about seven companies have started working with 

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44 

proval yet, at various forms in that line. So the concern is if they 

end up with one and they are waiting on the other one, we are 

back to what Mr. Jordan and Mr. Hochstein had this wonderful 

conversation about Keystone on; they are in this unique situation 

where they are just waiting. That is the difficulty of all this from 

a business side and from also our foreign partners and allies 

around the Country, and when they come to talk to me, their one 

statement is when will we get an answer, and the difficulty is I 

can’t tell them that. 

As a member of Congress, I can’t look at them and say here is 

when the answer is coming, because there is no predictable answer. 

Because, as we talked about before, it could be two weeks before 

the next permit comes or it could be two years. It might be 20 

years; it could be five and a half years and still discussing it. So 

there is no predictability in this, and that is terrible for business 

and that is terrible for our allies. So at some point we have to get 

some sort of predictability in this process to know, yes, we are 

working through a process; here is how many weeks it is going to 

take; and it is not a red flag to people to say if you will just write 

more letters to us, then we will slow down the process even more, 

which is what it seems to be now. 

Mr. SMITH. Well, Mr. Chairman, I will make a couple points on 

that. First, I think the Department of Energy has established a 

track record of getting these authorizations done. Again, these are 

all very complex, sensitive, complicated evaluations that we have 

to do, where we have to balance a myriad of sometimes conflicting 

interests. But the Department has established, I think, a very credible and very reliable track record of moving through the queue. 

Again, we don’t have a clock or a bell that says time for the next 

application. When the team is done writing the application, the application is released by the Department. 

The second part of that answer, if someone says what is going 

to be the availability of natural gas from the United States, as my 

colleague from the State Department has pointed out, we have already authorized 9.3 billion cubic feet per day of exports, which is 

equal to all the LNG that goes into Europe, it is equal to half the 

LNG that Europeans import from Russia. So there has already 

been a tremendous amount of LNG that we have authorized even 

going through this very important public interest determination. 

And there will be a question that you posed earlier about how 

many of these will be built. At what rate will the private sector actually build the terminals that we have already authorized. 

So there is, I think, certainly some demonstrated progress that 

we have made. It is a tremendous amount of gas that we have already authorized and, indeed, the fact that we are no longer importing large quantities of LNG has already impacted global markets dramatically. 

Mr. LANKFORD. With that, when you talk about a tremendous 

amount that has already been permitted, is there some cap 

amount, that you are saying we are going to get to this certain cumulative total and we are not going to permit any more beyond 

that? 

45 

Mr. SMITH. No, there is not. We have not determined a level beyond which we are not going to permit. So that is not something 

the Department of Energy has identified or determined. 

Mr. LANKFORD. So best interest continues to be a subjective for 

each location based on the letters that come in and responses that 

come in for that area, working through looking at did you fill out 

the application correctly type thing and trying to evaluate that, 

getting a chance to interact with the Department of State to see 

who the partners are and how much is demanded from around the 

Country. Obviously, the NERA study that DOE commissioned gave 

a more objective look at the economic benefits of this, so while I 

understand you have letters coming in that say we don’t want this 

or we do want this, you also have an economic study that you commissioned that says, yes, this is a good idea and it is in the best 

interest, economically, of the United States. 

Mr. SMITH. Indeed. I mean, there was a study that was commissioned that was received by the Department that was considered 

as part of all of our applications to date. But I will point out that, 

as we go forward in time, conditions do change. As was pointed out 

earlier, a couple months ago we would not have foreseen sitting in 

this room talking about issues in the Ukraine because it wasn’t an 

issue that existed. 

Mr. LANKFORD. Well, I am not sure that is 100 percent true 

since, like I said, almost two years ago members of the Ukranian 

parliament were already knocking on my door, saying how quickly 

could we get this. They were already dealing with Russia randomly 

shutting off their energy. I think this was a pretty predictable crisis in Central Europe. It may not be specific to Ukraine, but we 

knew it was coming somewhere. 

Would you agree or disagree, Mr. Hochstein? 

Mr. HOCHSTEIN. I would agree that we have been working on the 

vulnerability that we identified the vulnerability that Europe has 

with its reliance on a single source in many cases and we have 

been trying to reduce that. So, yes, I would agree that this is a crisis that is a surprise to some, but not to others, the energy portion 

of the crisis. 

Ms. SPEIER. Mr. Chairman, I don’t know if we ever got clarification of how much natural gas is going to be generated by these 

other countries that you had mentioned earlier, Mr. Hochstein. 

Mr. HOCHSTEIN. By the other producers coming online? A lot of 

this is we are early in the process. Israel has already taken care 

of, with the first two fields that have come online. The first big one, 

Tamar, has addressed their entire ABCM, their entire domestic 

needs. They have come up with an export policy, so it is not only 

about how much you are going to produce, but how much you are 

going to put on the market, that 40 percent of their production of 

Israeli production will go on to exports. 

We don’t know yet the amount out of Cyprus. We have one field 

that has been proven, but there is going to be drilling throughout 

the summer and fall by three companies, one U.S. and two European. 

Mozambique is about double the size of the Israeli find, but they 

need to get their act together as well. 

46 

So a lot of the gas from Eastern Africa is going to end up going 

to Asia, if you think of what makes sense from a transportation 

perspective. And this takes us back to the argument this is not just 

about Ukraine and Europe. This is about a global demand. And as 

we are putting more product on the market from a variety of 

places, there is demand that is rising as well, in Asia in an impressive pace, and that has to be addressed. So what happens to Europe, they are not entirely at their own decision-making; there are 

a lot of market forces that are going to have to come into play. And 

as we see what the prices are around Asia, that will determine 

what the supplies are available for Europe. 

But that pressure is already there. As a result of our production 

and not importing, Europe, for the first time, actually went out and 

renegotiated and forced the Russians into a renegotiation of price, 

and were able to get better terms from the Russians a couple years 

ago in a way that they weren’t able to do that in the past. So these 

dynamics are having real impacts. 

I am with my colleague here, it is very difficult to make some 

predictions on this, because if you read anybody’s predictions in 

2009 into global supplies and trade of natural gas, they would have 

been very, very mistaken today, in hindsight. 

Mr. LANKFORD. Mr. Hochstein, you mentioned before that the 

State Department is helping some of the folks in Europe with nonconventional explorations of oil and gas, and you made the comment that you are helping them focus on science, not emotion. Can 

you clarify that? 

Mr. HOCHSTEIN. I didn’t say I am helping them; I said that we 

recommend that when you are going to make a decision on whether 

or not to explore unconventional and shale, it is important to look 

at what the science is and what is and what isn’t true. We have 

had a great experience here in the United States with a regulatory 

system of both Federal and the States of looking at that, and what 

we would like to do is to brief them and educate and show what 

we have been able to learn from the experience here. 

We have brought a variety of delegations here to the United 

States, together with EPA, Department of Interior, Department of 

Energy to learn from the process here; and what is great about it 

is that it is not a monolithic here is how to do it. Here is how we 

do it at the Federal level, but then look at what Colorado is doing, 

versus what New York or Pennsylvania or Texas, etcetera. I think 

that has been very useful and there is a larger and larger interest 

in that program. 

There are some countries that have announced moratoriums on 

shale development and exploration, and that is their decision to do 

it, and if they don’t want to explore it, that is fine. We continue 

these conversations even with those countries, but obviously don’t 

have programs with them to support the process if they are going 

to have a moratorium. 

Mr. SMITH. I would add one thing, if I could, Mr. Chairman, to 

that observation. A couple years ago I traveled to Warsaw with Mr. 

Bob Secuda, who is the Principal Deputy Assistant Secretary for 

the Bureau for Energy and Natural Resources, where Mr. 

Hochstein works, and we participated in a session that was held 

by the IEA called the Golden Rules for the Golden Age of Gas, and 

47 

it was a collection of subject matter experts from around the world 

convening to discuss their experiences in shale gas and unconventional gas development. 

Again, I will reiterate it isn’t our jobs to tell other sovereign nations what to do with their resources, but we think it is in the best 

interest of the United States to be as open and transparent in sharing the best practices that we have learned here to help build kind 

of a scientific basis for decision-making. So we see that as being 

positive and something that we affirmatively support through our 

actions. 

Mr. LANKFORD. Just for clarification on this, the State Department is working with other countries that have shale to be able to 

bring them to the United States, to be able to interact with some 

of our regulators, to be able to look at some of the science side of 

this, how we can actually do it, do fracking, do horizontal drilling 

to be able to take this on, because obviously their country—well, 

depending on the nature of their country and whether they own 

their own oil companies; some places do and some don’t. Basically 

exposing them to what we are doing in the United States, saying 

this is a good idea for you to be able to take this on so you can 

provide your own energy resources in your own country. 

Mr. HOCHSTEIN. I would agree with everything except for the last 

sentence. It is not for you to encourage you to do so. It is not our 

decision; it is a sovereign decision. If they decide that they want 

to move ahead and go ahead and exploit it, we will be there to support them with this program, if they are interested, to show them 

all the other things that you just said, yes. 

Mr. LANKFORD. Right. You can’t force a country to say I want to 

be independent, but most countries would say, if they have the opportunity to not be dependent on someone else for energy, they 

would most likely take that. 

Mr. HOCHSTEIN. Mr. Chairman, at times there are also external 

factors and external forces that come into countries to encourage 

them not to explore those resources. 

Mr. LANKFORD. I would say Oklahoma would be welcome to receive folks from around the world to be able to show them how we 

do natural gas exploration, how we do it extremely well, extremely 

clean. And our regulatory scheme in the State of Oklahoma and 

how we actually regulate things as far as exploration is exemplary. 

I encourage people to come drink our water and breathe our beautiful air and see our wonderful land, and to be able to see how you 

can do this and can do it clean. We have had over 100,000 fracs 

in Oklahoma, and it is a beautiful State and has very clean water 

and very clean air. 

So, as you mentioned before, trying to deal with the science, not 

the emotion, when you are finished with the rest of the world, I 

would appreciate it if you would come back to the United States 

and share what you have learned as well about dealing with the 

science, not the emotion. 

One other comment, unless the ranking member has another 

question on this, I want to shift topics. I promise I won’t stay long. 

I want to bring up the issue of crude oil exports. And what we are 

hearing from our international partners on that, we already export 

refined products around the world. We are currently not exporting 

48 

crude. What are we hearing? We have heard quite a bit from people. They are very interested in our LNG. What are we hearing 

about crude and the request for that from our allies? 

Mr. HOCHSTEIN. I think just like in the United States, this is a 

conversation that is happening around the world, and I think it 

was the next logical conversation that we were going to see happen. We are following that discussion of what it means. We are in 

the very early stages of this conversation. I followed what has been 

done here in Congress, both in the House and the Senate side, of 

discussion on what does this mean to have crude oil exports. I 

think this is a much bigger discussion. We have been so focused on 

the LNG side that the oil side is next. So I think we are in the 

early stages of understanding what it means and listening to the 

views that are being expressed. 

I think there is less than a drum beat as far as our partners; I 

think there is more of a focus on natural gas. But there is definitely an interest in the topic of what the United States is going 

to do, but less of independence for those countries like the discussion of gas and more from the aspect of understanding how will 

this impact the mid-and long-term oil markets and prices and 

structures. 

We have talked a lot about gas today, but we have the same 

changes, radical changes in the oil markets around the world today 

that are happening in gas; they are just slightly different. Big 

changes from the days where OPEC dominated the market; new 

players. And with most OPEC countries today producing at maximum capacity for a variety of reasons, some for sanctions, some 

for political instability, some for technical reasons, and some because that is the most they can do, the question of what happens 

to the market if the United States starts exporting is one that is 

fascinating those who follow the energy markets. 

Mr. LANKFORD. So let me just complete that thought. Prices drop 

worldwide if we start exporting, correct or not correct? 

Mr. HOCHSTEIN. I think it would depend on the dynamic. I have 

learned one thing in this business, which is that any prediction on 

oil prices, those who make those predictions usually regret them 

later. 

Mr. LANKFORD. It tends that all it takes is a little cross-border 

war somewhere in the Middle East and it changes everyone’s gas 

prices all the time. I do understand that. But is there an unease, 

I would say, in the OPEC countries that the United States could 

become an exporter? 

Mr. HOCHSTEIN. I think they are watching our decision-making 

process very carefully. 

Mr. LANKFORD. Okay. 

Mr. Smith, do you want to make a comment about that? 

Mr. SMITH. I would probably second the comments of Mr. 

Hochstein. There has been more focus on gas, obviously, because 

there is a statutory process for dealing with natural gas and there 

is not a statutory process for dealing with oil. But this certainly is 

a topic that we think is of interest, but we don’t have a direct role 

in even the current limited capability of exporting oil if there is a 

waiver granted, so the DOE does not have a role there. 

49 

Mr. LANKFORD. Is the DOE doing a study of oil capacities, what 

is coming online, our capability of production and what we will actually use? 

Mr. SMITH. Well, that is something that obviously the Energy Information Agency follows very closely, and that is kind of a semiautonomous part of the Department of Energy. We are consumers 

of their analysis, so we follow that very closely. 

Mr. LANKFORD. Semi-autonomous. I am enjoying that conversation. We can have that conversation about several agencies, actually, and several departments, semi-autonomous. 

The length of time issue you and I have talked about often, as 

far as the permitting, getting back to LNG. Predictability I think 

is extremely important not only for American companies and American production, but I think it is extremely important for our international partners at this point. I don’t know how we get there, because, based on what you are saying, your team is working on it, 

but there are no deadlines and there are no demands on certain 

time periods; it is we will get it done when we get it done. And my 

concern is, for our international partners, they need some certainty. The folks that have come to visit my office have all said the 

same thing: when? 

Ms. SPEIER. Well, Mr. Chairman, let me interject, then. If this 

is one of speediness and still doing the job, then the question becomes are the fees that are being charged to provide this evaluation adequate to do the job and does the office need more staff. 

Maybe you can address that as well. 

Mr. SMITH. Well, thank you. I will make two points on that. 

First, when I go and talk about LNG at various venues, I am often 

followed by a market expert who will put a chart on the wall that 

shows the exact length of time between various DOE actions and 

juxtapose that against prices or a bunch of other things, and there 

is all this analysis about why is it 10 days longer between these 

two than these other two. So those are always interesting to watch 

because there is all this theorizing about what is the back story 

about the extra four days here, and the bottom line is that there 

is not a back story; all of these are slightly different. 

But what we can see is that we have established, I think, a fairly 

reliable track record of getting these authorizations out in a reasonable amount of time. There has been a consistency over the past 

year or so. It varies from order to order within a reasonable 

amount because all the orders are not the same. So it is our intention to make sure that we are moving forward in that manner. We 

have already authorized, again, 9.3 bcf, which is a considerable 

amount, and the biggest uncertainty really now is what is going to 

be the reaction of the private sector that has already received these 

authorizations. At what rate are these terminals going to be built? 

Because they are massive multi-billion dollar investments that are 

complex to get built, and they will be built if the market determines that there is going to be a demand for U.S. gas. 

Mr. LANKFORD. But if they have the FERC permit done, they are 

not moving in line or they are moving in line? 

Mr. SMITH. Again, we have a number of applicants that have not 

yet received a conditional authorization from the Department of 

Energy that are working through the FERC process. We have not 

50 

come to the position where someone has finished that process in 

advance of having received a conditional authorization, so unfortunately I don’t have an answer to that question because it is sort 

of a hypothetical at this point. 

Mr. LANKFORD. I understand, but that will be a big issue. I 

mean, obviously this becomes very, very significant. I would hope 

that you are addressing this, that if someone is holding the FERC 

permit in their hand, but it is two and a half years of still waiting 

on the DOE piece, or it is unpredictable, they just don’t know—I 

know you said we have established a process that has some predictability, but just because it has been done that way in the past, 

as you mentioned already, doesn’t mean it is going to be done that 

way in the future. You are not saying it is going to be six to ten 

weeks between each one; you are just saying this is what we have 

done in the past. 

Mr. SMITH. I am saying that we have established a track record. 

But, again, this is an unprecedented activity. I mean, the Department of Energy, when this market changed, and you referred to 

this energy production revolution in your opening statement that 

has taken the regulators within my organization and they have 

gone from looking at import terminals to export terminals. Everything has changed. So I think there are a number of hypothetical 

situations that one could come up with and say, well, what are you 

going to do in this situation, what are you going to do in that situation? We are busy and hard at work at making sure we are doing 

the work that is before us, that we are meeting our commitment 

to get these out in as timely a manner as possible; and as we move 

into new situations, those are things that we are going to have to 

consider and made the best decision that we can. 

Mr. LANKFORD. So it is possible at that point, if they are holding 

a FERC permit, for them to be able to come back and be able to 

step out of line. We have to reevaluate that. 

Mr. SMITH. I will certainly say that at all times we are looking 

at ways to make the process better and more efficient based on signals that are being sent by the markets. So as the market sends 

us signals that are different from the signals that were sent when 

we established a certain process, we are not inflexible to doing the 

thing that is appropriate based on appropriate market signals and 

our assessment of public interest. 

Mr. LANKFORD. Okay. 

We will still have more conversations about this, obviously, because I understand you are still saying look at our history, but 

there is no predictability of what happens in the future, and that 

is really a much needed thing right now, both in our Nation, development of infrastructure. If any of these facilities are going to be 

built, we have to get pipelines to them. That is years in the process, it is years of construction and it is lots of capital. It is going 

out and pursuing contracts worldwide. It is our international partners saying, okay, we are going to get it, here is the date we are 

going to happen. All those things are all pending on your team 

making a decision and people knowing when it is going to happen. 

So not to say you have the whole world in your hands, but there 

are a lot of folks around the world that are waiting on decisions 

that if we can’t get predictability of when they are going to happen, 

51 

there are a lot of folks around the world that are just waiting a 

lot of economic development here in the United States that is waiting to be released pending a decision from your office. So if we can 

get some level of predictability on that, it would certainly help our 

economy and would help our geopolitical situation as well. 

Mr. SMITH. Understood. 

Ms. SPEIER. Mr. Chairman, I would just like to close by thanking 

our two witnesses who have, I think, presented some very persuasive arguments for why this is global in nature and not something 

that the United States, in and of itself, is going to fix. But certainly 

your admonition that there should be some predictability is worthy 

of us reviewing, but I would urge us to look at FERC as being part 

of that, and they are absent from this discussion here today, and 

they are a key component as well. 

So thank you for your good work and for your service to our 

Country. 

Mr. LANKFORD. Gentlemen, thank you. 

With this, this hearing is adjourned. 

[Whereupon, at 11:56 a.m., the subcommittee was adjourned.] 

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