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89–677 2014

S. HRG. 113–414 

THE ECONOMIC IMPACT OF INCREASED NATURAL 

GAS PRODUCTION 

HEARING 

BEFORE THE

JOINT ECONOMIC COMMITTEE 

CONGRESS OF THE UNITED STATES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JUNE 24, 2014 

Printed for the use of the Joint Economic Committee 

( 
(II) 

JOINT ECONOMIC COMMITTEE 

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress] 

HOUSE OF REPRESENTATIVES 

KEVIN BRADY, Texas, Chairman 

JOHN CAMPBELL, California 

SEAN P. DUFFY, Wisconsin 

JUSTIN AMASH, Michigan 

ERIK PAULSEN, Minnesota 

RICHARD L. HANNA, New York 

CAROLYN B. MALONEY, New York 

LORETTA SANCHEZ, California 

ELIJAH E. CUMMINGS, Maryland 

JOHN DELANEY, Maryland 

SENATE 

AMY KLOBUCHAR, Minnesota, Vice Chair 

ROBERT P. CASEY, JR., Pennsylvania 

BERNARD SANDERS, Vermont 

CHRISTOPHER MURPHY, Connecticut 

MARTIN HEINRICH, New Mexico 

MARK L. PRYOR, Arkansas 

DAN COATS, Indiana 

MIKE LEE, Utah 

ROGER F. WICKER, Mississippi 

PAT TOOMEY, Pennsylvania 

ROBERT P. O’QUINN, Executive Director 

NILES GODES, Democratic Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS OF MEMBERS

Hon. Amy Klobuchar, Vice Chair, a U.S. Senator from Minnesota ..................... 1 

Hon. Kevin Brady, Chairman, a U.S. Representative from Texas ...................... 3 

WITNESSES

Dr. Daniel Yergin, Vice Chairman, IHS, Washington, DC .................................. 5 

Mr. Jim Bruce, Senior Vice President of Corporate Affairs, United Parcel 

Service, Washington, DC ..................................................................................... 7 

Ms. Diana Furchtgott-Roth, Senior Fellow and Director, Economics, Manhattan Institute for Policy Research, Washington, DC .......................................... 9 

Mr. Elgie Holstein, Senior Director for Strategic Planning, Environmental 

Defense Fund, Washington, DC .......................................................................... 11 

Mr. Charles Meloy, Executive Vice President, U.S. Onshore Exploration and 

Production for Anadarko Petroleum Company .................................................. 13 

SUBMISSIONS FOR THE RECORD

Prepared statement of Hon. Kevin Brady ............................................................. 28 

Prepared statement of Dr. Daniel Yergin .............................................................. 30 

Prepared statement of Mr. Jim Bruce ................................................................... 41 

Prepared statement of Ms. Diana Furchtgott-Roth .............................................. 48 

Prepared statement of Mr. Elgie Holstein ............................................................. 58 

Article published December 19, 2013, in Science Magazine titled ‘‘What 

Role for Short-Lived Climate Pollutants in Mitigation Policy?’’ ............... 65 

Prepared statement of Charles A. Meloy ............................................................... 67 

Questions for the Record submitted by Senator Robert P. Casey, Jr., and 

responses from Dr. Daniel Yergin ...................................................................... 68 

(1) 

THE ECONOMIC IMPACT OF INCREASED 

NATURAL GAS PRODUCTION 

TUESDAY, JUNE 24, 2014 

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC. 

The committee met, pursuant to call, at 10:17 a.m. in Room 216 

of the Hart Senate Office Building, the Honorable Amy Klobuchar, 

Vice Chair, presiding. 

Representatives present: Brady, Paulsen, Carolyn B. Maloney, 

and Delaney. 

Senators Present: Klobuchar, Casey, Murphy, and Lee. 

Staff present: Ted Boll, Hank Butler, Conor Carroll, Gail 

Cohen, Sarah Elkins, Connie Foster, Niles Godes, Colleen Healy, 

and Robert O’Quinn. 

OPENING STATEMENT OF HON. AMY KLOBUCHAR, VICE 

CHAIR, A U.S. SENATOR FROM MINNESOTA 

Vice Chair Klobuchar. Thank you, everyone. We are calling 

the hearing to order. I know that Chairman Brady is on his way, 

and I apologize that we are getting started a little later. There are 

a lot of hearings going on, and I so appreciate you all coming in, 

and also many of you we have had to reschedule this hearing several times and I really appreciate your patience with that. This is 

a very important topic. 

We have a distinguished panel of witnesses today who have a 

wealth of expertise and insight in this area. 

First of all, we have Dr. Daniel Yergin, who is the Vice Chairman of IHS, a leading source of information, insight, and analysis. 

Dr. Yergin is a Pulitzer Prize winning author and leading authority 

on energy, international politics, and economics. 

Mr. Jim Bruce is the Vice President of Corporate Public Affairs 

for the United Parcel Service. He previously served as senior counsel on the Senate Energy and Natural Resources Committee. 

And then we have Ms. Diana Furchtgott-Roth, who is the Director of Economics21, and Senior Fellow at the Manhattan Institute 

for Policy Research. She was a chief economist of the Department 

of Labor, and chief of staff at the Council of Economic Advisers in 

the George W. Bush Administration. 

Mr. Elgie Holstein is the Senior Director for Strategic Planning 

with the Environmental Defense Fund. Mr. Holstein was previously a senior advisor to the Obama Presidential Campaign on 

Energy and Environmental Policy matters, and co-director of the 

Department of Energy Presidential Transition Team. 
2 

Mr. Charles Meloy is the Executive Vice President, U.S. Onshore 

Exploration and Production for Anadarko Petroleum Company. Mr. 

Meloy has over 30 years of experience in the oil and natural gas 

industry. 

So I am going to start by talking about some recent developments in natural gas production. I know a little bit about it, being 

from the State that is the neighbor to our friends in North Dakota, 

and having gone to Williston and some of the surrounding areas 

with Senator Hoeven and seen the amazing development going on 

there. 

The U.S. already produces about 20 percent of the world’s natural gas, and there is potential for making that number even higher. 

In its most recent annual Energy Outlook, the Energy Information Administration forecasted that natural gas production will 

grow more than 50 percent by 2040. Much of this projected increase is due to continued exploration and development of shale 

gas resources. 

According to the Energy Information Administration, by 2040 

half of the natural gas production in the U.S. will come from shale 

gas. Net imports of natural gas are now at the lowest level since 

1990, and it is predicted that we will be producing more natural 

gas than we consume domestically by 2018. 

Because of this expanded production and the expectation of continued growth, it is expected that natural gas prices will remain 

low for the foreseeable future. U.S. natural gas prices are less than 

half of what they are in Europe and Asia. You can see that this 

gives us a competitive edge. 

IHS estimates that without the expanded production from shale 

and other unconventional sources, Gross Domestic Product would 

have fallen by an additional .09 percentage points, and an additional 900,000 jobs would have been lost during the Recession. 

Unconventional oil and natural gas activity has also been estimated to have increased U.S. disposable income by an average of 

$1,200 per U.S. household in 2012. 

In addition to benefitting from lower energy costs, businesses are 

using natural gas to move product inexpensively throughout our 

country. UPS, as we will hear from shortly, now uses over 2,000 

alternative fuel delivery trucks in the U.S., about half of which run 

on natural gas. And by the end of the year, UPS will have natural 

gas fueling operations in 10 states. 

This spring, the St. Cloud, Minnesota, area became my State’s 

first transit system to convert its bus fleet to compressed natural 

gas buses, reducing emissions and saving the region about 

$300,000 every year. I would also add, one of the coolest parts 

about this project, Mr. Chairman, was that they made the buses in 

St. Cloud, as well, with New Flyer buses. We are pretty proud of 

that project. 

We have Anderson Windows, which is on the Wisconsin border, 

that is actually building its own fueling stations so that it can 

transport its windows in a safer and in a cheaper way. 

Of course business’s use of natural gas extends beyond transportation fuel. Lower natural gas prices are boosting domestic manu-
3 

facturing in natural gas-intensive industries such as fertilizers, 

chemical manufacturing, and steel production. 

Some manufacturers have started moving production facilities 

back to the U.S. to take advantage of lower natural gas prices. 

Despite increased production of natural gas and its byproducts 

like propane, there have still been problems in some areas. I am 

well aware of this because there were propane shortages in Minnesota that were very severe. Exports of propane and related products are ten times larger than they were ten years ago. We need 

to make sure that our export policy is not contributing to the problems like the one we experienced this winter in the Midwest when 

propane prices spiked and remained at extremely high levels for 

many weeks. 

That price spike has far-reaching and had dangerous effects in 

rural Minnesota where more than 200,000 households rely on propane to heat their homes. It also hurt livestock and poultry producers who need propane to heat their barns and keep their animals warm. 

We took emergency action. Senator Hoeven, Senator Franken, 

Senator Baldwin, and Senator Johnson and I worked on a bill, and 

then Senator Thune and I just passed a bill that the House just 

passed yesterday, last night, that’s going to be signed into law. 

That helps with some of the shipment of propane, but we are continuing to look into the next year and we will be working with everyone in the industry to make sure this does not happen again. 

One last concern of course is the environment. As natural gas 

production continues to grow, we also need to balance the economic 

needs of businesses and consumers with protecting our environment and preserving our natural resources for decades to come. 

Natural gas is cleaner than coal because it is less carbon-intensive and emits less sulfur dioxide. Switching to natural gas for electricity production and transportation should be part of our energy 

policy. Recent studies do show that methane leaks may be diminishing some of the environmental benefits of natural gas, and I believe that the best practices that the industry and regulators can 

develop are necessary to make sure that production is done in an 

environmentally sensitive way. 

As we continue to work in this area, we should be mindful that 

Americans expect and deserve a common-sense approach to regulation, one that protects consumers and the public interest without 

stifling innovation and economic growth. 

Thank you very much for being here today. There is much we are 

going to be talking about, and I am glad that we have been joined. 

I know that Chairman Brady had a lot going on today, and I am 

so glad he made it over here to the Senate side, which is a little 

bit of a walk, to join us. We also were joined earlier by Congressman Paulsen, and Senator Murphy is here as well. 

Chairman Brady. 

OPENING STATEMENT OF HON. KEVIN BRADY, CHAIRMAN, A 

U.S. REPRESENTATIVE FROM TEXAS 

Chairman Brady. Well thank you, Vice Chair Klobuchar, Members, and distinguished witnesses: 
4 

Free market capitalism and science are revolutionary forces that 

can change the world for the better. George Mitchell, the founder 

of my hometown, The Woodlands, Texas, and a noted philanthropist and environmentalist, first combined hydraulic fracturing, 

which uses pressurized liquid to break rocks and release the natural gas and oil trapped within, and horizontal drilling. 

This combination has turned the world of hydrocarbons upside 

down. In the winter of 1977–78, President Carter warned that the 

United States could exhaust its supply of natural gas in two generations. In response, Congress passed legislation to limit the use 

of natural gas in industry and electricity generation. 

Even as recently as 2012, President Obama incorrectly warned 

that ‘‘with only 2 percent of the world’s oil reserves, we can’t just 

drill our way to lower gas prices, not when we consume 20 percent 

of the world’s oil.’’ Yet, as he was making those dated remarks in 

his weekly radio address, America was experiencing an energy revolution. 

In recent years, fracking and horizontal drilling have greatly increased the potential supply of natural gas and oil in the United 

States. Consequently, America does not need to import liquefied 

natural gas and is reducing its dependence on foreign oil outside 

of sources among our friendly neighbors, Canada and Mexico. 

In April’s ‘‘Annual Energy Outlook 2014,’’ the Energy Information Administration projected that domestic crude oil production 

will increase from 6.5 million barrels per day last year to 9.6 million barrels per day in 2020, a production level not seen since 1970. 

Moreover, the import share of U.S. petroleum and other liquid 

fuels will fall to about 25 percent during the last half of this decade. Indeed, the U.S. can become a major exporter of LNG 

(Liquified Natural Gas). 

Fracking and other improvements in production technology have 

opened vast stores of domestic oil and natural gas and have lowered production costs. In light of recent developments in Ukraine 

and Iraq, increased U.S. production of both oil and natural gas will 

make our economy far less dependent on costly and unreliable oil 

imports and will mitigate the prices of both oil and natural gas, if 

this White House does not interfere or attempt to slow down domestic production. 

America’s energy revolution has also created tens of thousands of 

well-paying jobs during a disappointing economic recovery. These 

jobs cover the entire spectrum from the unskilled to the highly 

skilled and are a new source of employment for minority workers 

across the country. And as the energy workforce ages out, even 

more opportunities will occur for workers of all skills. 

Of course more American-made energy means more Americanmade tax revenues for communities, states, and the Federal Government. With the exception of individual tax receipts, the energy 

industry is now America’s second largest taxpayer. So more natural 

gas production in America helps to balance the budget and fund 

necessary services to families who need assistance. 

Despite the natural gas and oil revolution, some people prefer renewable, zero-emission energy sources such as wind, solar, and geothermal power. Renewable fuels should be encouraged, but none of 

these green energy technologies has yet to demonstrate sufficient 
5 

economies of scale to compete with fossil fuels as a major energy 

source without dependence on significant taxpayer subsidies, regulatory mandates, and tax preferences. While future technological 

breakthroughs are possible, as of today green energy cannot compete affordably with traditional energy in the free market. 

Developing countries have rejected the siren song of green energy, and many developed countries that had embraced it, such as 

Germany and Japan, are backing away from their earlier commitments. 

Some environmentalists continue to press for their preferred 

sources of energy even though natural gas can reduce greenhouse 

gas emissions more quickly and at less cost. Artificially supporting 

current green energy technology takes money away from development of new green technologies that could be competitive with fossil fuels on their own merits. 

The U.S. legal and regulatory regime for international trade in 

oil and natural gas as well as a continuing mindset in some quarters are stuck in a time of import dependency. But the United 

States now is in a position to export natural gas, petroleum products, and even high quality ‘‘light’’ crude oil. 

We must adapt our mindset and our rules accordingly. We must 

do so for the sake of the domestic economy, the stability of world 

oil and gas prices, and geo-political stability. 

The Administration has been slowrolling drilling permits, licenses for LNG export terminals, and approvals for deliveries to 

countries that do not have a free trade agreement with the United 

States, meaning all but 20 countries, none of which is in Europe. 

The fracking revolution has both profound economic and geo-political implications. Fracking has the potential to increase alternative sources of supply in North America and reduce the world’s 

dependence on supply from North Africa and the Middle East. Exports of domestically produced LNG and refined petroleum products can also alleviate Europe’s dependence on Russia. 

The fracking revolution is a win for everyone involved. Domestic 

natural gas and oil production is igniting an industrial renaissance 

in the United States, especially in the industries that are energy 

intensive or use natural gas and oil as feedstock; and it is creating 

tens of thousands of high-paying jobs for middle-class American 

workers. 

With that, Madam Vice Chair, I look forward to the testimony 

of today’s distinguished witnesses. 

[The prepared statement of Chairman Brady appears in the Submissions for the Record on page 28.] 

Vice Chair Klobuchar. Thank you very much. 

Why don’t we get started with Dr. Yergin. 

STATEMENT OF DR. DANIEL YERGIN, VICE CHAIRMAN, IHS, 

WASHINGTON, DC 

Dr. Yergin. Thank you, Vice Chair Klobuchar, and Chair Brady, 

Members of the Committee: 

It is really an honor to be here today to speak about how America’s energy position has changed by what has happened in energy, 

and specifically natural gas, and what it means for employment, 

and what it means for economic growth. 
6 

One is cautious about using the word ‘‘revolution.’’ It is an overused word, but I think given the scale and the speed of what has 

happened, it is appropriate to talk about an unconventional revolution in oil and gas in the United States. 

Natural gas production is up 27 percent between 2007 and 2013. 

Estimates of recoverable natural gas resources have literally doubled since 2005. Shale gas, which was just 2 percent of our natural 

gas a little more than a decade ago, is now 44 percent. And certainly the mentality around energy, as the opening statements 

have indicated, has changed. 

The same has happened with oil. Our oil production is up 3.3 

million barrels a day since 2008. That is a 66 percent increase. But 

what really makes it interesting is just the increase is greater than 

the total output of 11 out of the 12 OPEC countries. So it tells you 

something really big has happened, as you described, Vice Chair 

Klobuchar, in North Dakota. 

Also as you pointed out, we at IHS have engaged in several studies since 2009 trying to understand what the economic impacts are. 

We see it in terms of employment: 2.1 million jobs supported by 

this unconventional revolution in 2012. About 60 percent of those 

jobs were natural gas. We expect that 2.1 to reach 3.3 million jobs 

by 2020. 

In 2012, this unconventional revolution added $74 billion to federal and state government revenues, a number that we think will 

rise to about $125 billion by 2020. It is stimulating a manufacturing renaissance, and it has been a very important contributor to 

the economic recovery. 

A few months ago, former Federal Reserve Chairman Ben 

Bernanke described the unconventional revolution as one of the 

most beneficial developments, if not the most beneficial development, since 2008 in the economy. 

This unconventional revolution came along at the right time. 

Just consider what our economy would look like today without it: 

much higher energy bills, higher unemployment, lower growth. 

Strikingly, these economic impacts are not limited just to states 

that produce unconventional oil and gas. Because of the nature of 

the supply chains across the economy, we see great impact on 

states that do not have significant shale gas or tight oil activity. 

In fact, a quarter of the jobs that I described are in nonproducing 

states. The State of Minnesota—19,000 jobs in the State in 2012, 

going to 35,000 jobs by 2020. And $260 million in State and local 

taxes as a result of it. 

If we look at Illinois, 38,000 jobs and $450 million in State and 

local taxes. New York, 44,000 jobs and $1 billion in State and local 

taxes. California, 100,000 jobs and $1.6 billion in State and local 

taxes. And this is because of the supply chains that run all across 

our economy, how interconnected it is. 

It has already been remarked,—we are having a manufacturing 

renaissance in the United States. There are many reasons for it, 

but right at the top of it is because of what is happening in terms 

of affordable and abundant natural gas. 

Companies are now planning investments that are very large as 

a result. In his 2014 State of the Union Address, President Obama 
7 

remarked upon the large number of dollars that are going into investment because of the availability of gas. The latest census that we have seen has that figure at $117 billion going into our economy as a result of this. Obviously, industries like the chemical industry are a big part of that. Dow Chemical has announced $4 billion of new investment in the United 

States, but what is really striking is that 62 percent of this investment that is going into this economy, 62 percent of this $117 billion 

is foreign direct investment. It is coming from other countries, 

other companies abroad coming to the United States because of 

this advantage we have in terms of low priced gas. 

And it is not just chemicals. It is iron, and steel fabrication; it 

is many other industries that take advantage of this. 

Senator Klobuchar has remarked about what it has meant also 

in terms of household incomes. In 2012, it added $1,200 a number 

that will grow to $2,700—the benefits to each household. 

In all of this, however, I do feel—and before this Committee 

which concerns itself with the state of the U.S. economy—it is important to have one word of caution. 

I mentioned the 3.3 million barrels a day increase in U.S. oil production since 2008. That is just about the same number of barrels 

that have been removed from the world market by disruption and 

by sanctions on Iran. 

Over the last two weeks a major new crisis has emerged in Iraq. 

So far the impact on the global market has been minor. The conflict is several hundred miles away from where the major sources 

of Iraqi production is. But should production in the southern part 

of Iraq be disrupted, the world oil market could well enter into a 

crisis of supply with prices spiking much higher than they are 

today. 

Iraq is one of the key sources for new oil. This would be a major 

setback for the U.S. and the world economy, and I think it is important to be prepared for what could be an imminent risk, and 

particularly appropriate for this Committee to consider, given its 

focus on the overall U.S. economy. 

To sum up what I have said, altogether this unconventional natural gas and oil revolution has already had a major impact in multiple dimensions on the U.S. economy, whether you’re talking about 

U.S. energy supply, energy costs, government revenues, manufacturing, household spending, and the wider economy. Its significance 

will continue to grow as this unconventional revolution continues 

to unfold. These hearings provide a very timely opportunity for assessing the impact and significance, and I am pleased in due course 

to respond to the Committee’s questions. Thank you. 

[The prepared statement of Dr. Daniel Yergin appears in the 

Submissions for the Record on page 30.] 

Vice Chair Klobuchar. Thank you very much, Dr. Yergin. Mr. 

Bruce? 

STATEMENT OF MR. JIM BRUCE, SENIOR VICE PRESIDENT OF 

CORPORATE AFFAIRS, UNITED PARCEL SERVICE, WASHINGTON, DC 

Mr. Bruce. Vice Chair Klobuchar, Chairman Brady, and Members of the Committee: 
8 

Thank you for the opportunity to testify on the economic impact 

of increased natural gas production as seen from UPS’s vantage 

point. 

To put it simply, natural gas is revolutionizing UPS’s trucking, 

particularly heavy trucking. You have my prepared testimony. In 

my oral statement I would really like to make just three points: 

First, UPS spent the first three quarters of a century of its existence becoming more and more dependent on petroleum. In the last 

30 years, we have tried to gradually move away from petroleum. 

And natural gas is the key to that shift. 

Second, although UPS has tested almost every conceivable form 

of alternative fuel or advanced technology for vehicles, natural gas 

is the only one that meets the performance requirements that we 

have for heavy trucks. And heavy trucks are the key, the best candidate for alternative fuels. 

The third point is that how fast UPS and other companies shift 

from petroleum is dependent not only on what we invest, but on 

what financial incentives we receive from the States. And, frankly, 

whether the Federal Government removes its Federal disincentives 

to alternative fuels. 

So let me go back to my first point. UPS began in 1907, not dependent on petroleum but on foot, on bicycles. We were carrying 

messages, not packages. It took six years before we bought our first 

truck, a Model-T Ford. 

Over the next three-quarters of a century, UPS amassed a fleet 

of 100,000 trucks, a fleet of aircraft, and we obviously became more 

reliant on petroleum. 

Beginning in the 1980s, UPS began testing compressed natural 

gas delivery trucks. However, the price jolt in the years 2005–2006 

on natural gas hurt our confidence in natural gas, and in fact it 

hurt the confidence of a lot of natural gas vehicle users. 

Fortunately, the recent surge in reserves has given us confidence 

that we can rely on relatively stable prices for natural gas in the 

future. 

Now to that second point. While we have tested almost every 

kind of alternative fuels, natural gas is the only alternative fuel 

that works for us in the heavy truck. We have tested in the last 

30 years many advanced technologies and alternative fuels, and we 

test them in service in what we call our ‘‘rolling laboratory.’’ 

And in my prepared testimony you will see a chart dated April 

16th, 2014, which is a snapshot of our fleet. It shows over 2,300 

vehicles domestically that are alternative fuels, and over 3,400 

worldwide. Natural gas is revolutionizing trucking at UPS because 

that snapshot from April 16th is already out of date. Yesterday I 

saw a new internal snapshot dated June 16th. Our total alternative 

fleet had grown to 3,606 trucks, another 169 trucks, all heavy LNG 

trucks, and that was in two months. 

Looking ahead, we have plans and have committed to deploy almost 5,500 alternative fuel vehicles, and that means, based on current plans, alternative fuel vehicles will be 5 percent of our entire 

fleet worldwide. 

So why are heavy trucks the best candidate for alternative fuels? 

Simply because they use the most fuel per vehicle. A tractor trailer 

can average 450 miles a day and burn 100 gallons of diesel fuel; 
9 

whereas, the little brown package delivery truck you’re familiar 

with might use a tenth of that per day. The more diesel fuel you 

displace per vehicle using alternative fuels, the more you can afford 

to pay for a more costly alternative fuel vehicle up front. So you 

have to focus on heavy trucks. 

But for those big rigs, the tractor trailers, we found no alternative other than natural gas that would give us the power and the 

torque and the range that we need, to go from hub to hub and 

back. However, around the year 2000, dual-fuel LNG diesel engines 

became available that ran on LNG and a small amount of diesel. 

And in 2002 we began testing 11 of these LNG/diesel engines, and 

the fleet of LNG trucks has grown ever since. In fact, our LNG 

tractors are now racking up 2 million miles a week on the road, 

displacing over 300,000 gallons of diesel. And then the third point 

is—— 

Vice Chair Klobuchar. Mr. Bruce, we have votes at 11:00 so 

just try to—you have great stories to tell here, but maybe just another 10 seconds here. 

Mr. Bruce. We are investing from 2010 to 2014, we have committed over $400 million to our alternative fuel fleet and fueling infrastructure in the U.S. and Canada. We will buy 1,000 heavy LNG 

trucks this year. I think the key point to make is that we have 

been seeking state financial incentives, but what is really important is to address the federal disincentives, and those are that the 

federal tax on heavy trucks applies to the total cost. So we are paying a 12 percent tax on the premium cost of an alternative fuel vehicle. And the other is the fact that LNG is taxed at a rate that 

is substantially more than diesel fuel, and we are trying to get 

Congress to fix those disincentives. 

[The prepared statement of Mr. Jim Bruce appears in the Submissions for the Record on page 41.] 

Vice Chair Klobuchar. Thank you. Okay, thank you. 

Ms. Furchtgott-Roth. 

STATEMENT OF MS. DIANA FURCHTGOTT-ROTH, DIRECTOR, 

ECONOMICS 21, AND SENIOR FELLOW, MANHATTAN INSTITUTE FOR POLICY RESEARCH, WASHINGTON, DC 

Ms. Furchtgott-Roth. Thank you very much, Chairman Brady, 

Vice Chair Klobuchar, thank you so much for inviting me to testify 

today. 

We have heard a lot about the benefits of natural gas. We have 

heard a lot about the revolution, the energy revolution, and that 

is in my testimony, but I certainly do not want to repeat what 

these eminent witnesses have already said. 

What I would like to do is make the case for exporting natural 

gas and increasing our exports of LNG. The world is a very volatile 

place. Europe and Ukraine depend on natural gas from Russia, 

which is far more expensive than our natural gas. And we should 

be in a position to export it to them, to export our natural gas. 

And, Honorable Members, you could immediately assist Ukraine 

and other countries by amending the Natural Gas Act to ensure 

that the Energy Department approves LNG export applications 

within a short period of time. 
10 

Now I have a table here that your staff can put up showing liquid natural gas applications under U.S. Department of Energy review. There are about two dozen, over two dozen, of these applications. Many of them have been there since 2012 and 2011. And we 

should be speeding up this process. 

You could also pass legislation allowing LNG to be exported to 

all World Trade Organization members, irrespective of whether 

they have Free Trade Agreements with the United States. And you 

could go still further and you could cease to require approval for 

all LNG exports. 

Steve Jobs of Apple started making iPhones, and he did not just 

keep these iPhones here in the United States. They were exported 

all over the world. That made more jobs for Americans, and more 

important it increased the innovation of the iPhone because more 

people purchased it. And so Steve Jobs could innovate and sell 

more types of iPhones. 

The same with natural gas. If we exported more technology to 

improve LNG and fracking would be faster, companies would have 

an incentive to put in place more infrastructure that would benefit 

us as well as benefitting other countries to whom we could export 

because of the substantial price differential. 

Last fall in a forum on Capitol Hill, Ambassador Pavilionis, the 

Lithuanian Ambassador to the United States and Mexico, said, ‘‘An 

ability to import natural gas from the U.S., even very small 

amounts by U.S. standards, would make a huge impact on the 

Lithuanian gas market and allow the nation to develop a reliable 

alternative to Russian gas.’’ 

And in the same forum, Jaroslav Zajicek, the Czech Republic’s 

Deputy Chief of Mission, said, ‘‘We have already seen examples 

where the Russian negotiating position during contract-renewal 

talks was weakened thanks to decreasing prices on the markets in 

Western Europe.’’ 

There are four major reasons for not exporting natural gas, and 

I would like to just briefly address them. 

Myth one: exporting natural gas will increase prices. I have a 

chart here that your staff can put up for you showing that as natural gas exports increased, prices actually went down. Drilling efficiency has substantially increased and productivity of oil and natural gas wells is increasing, and we can expect this trend to continue. 

Myth two: Actions today will not increase exports until it is too 

late. We have been saying this for years and years, saying there 

is no point in exporting natural gas because we do not have the infrastructure in place. To export natural gas, we need more pipelines, more terminals, and this is not going to have an effect for 

another five years until we get all this in place. But this disregards 

the role of expectations. Look at what has just happened in Iraq. 

Without one fewer drop of oil on the markets, oil prices went up. 

In the same way, when there is the expectation that the United 

States is going to do something, futures’ prices adjust. And that 

also affects current prices. 

Myth three is that exporting natural gas will increase production 

and emissions. Environmentalists who do not want the use of natural gas say that this will increase production and emissions, the 
11 

opposite of what some other people say. But if natural gas substitutes for coal power, we can find that global emissions will decline. 

The final myth is that America is incapable of using its economic 

power to promote our strategic national interest. This is the most 

dangerous myth of all, that we are incapable of helping our allies 

through economic means. 

I understand we do not want to put boots on the ground, but we 

have resources here that by exporting we can create jobs here in 

the United States and we can also help our allies and friends 

abroad. 

It is in your hands, and I hope that you manage to act by just 

repealing these regulations. Thank you so much for allowing me to 

testify today. 

[The prepared statement of Ms. Diana Furchtgott-Roth appears 

in the Submissions for the Record on page 48.] 

Vice Chair Klobuchar. Thank you. 

Mr. Holstein. 

STATEMENT OF MR. ELGIE HOLSTEIN, SENIOR DIRECTOR FOR 

STRATEGIC PLANNING, ENVIRONMENTAL DEFENSE FUND, 

WASHINGTON, DC 

Mr. Holstein. Vice Chair Klobuchar, and Chairman Brady, 

thank you for the opportunity to be with you today and the other 

Members of the Committee, to discuss these important natural gas 

issues. 

There is no question that unconventional gas development is lowering energy costs, creating new jobs, supporting more domestic 

manufacturing, and even delivering some measurable environmental benefits. But it is also imposing localized public health and 

environmental risks, and it is accelerating global climate change. 

Because of intensive shale gas development, the small town of 

Pinedale, Wyoming, along with many communities in the Upper 

Green River Basin, have experienced smog concentrations comparable to those of Los Angeles. And in Pennsylvania, wastewater 

production from drilling operations has posed major challenges to 

municipal water treatment plants. 

Clearly, public concerns are growing and they are posing a rising 

threat to the industry’s social license to operate. For example, last 

fall in a national poll the Pew Research Center found that 49 percent of those surveyed opposed the increased use of hydraulic fracturing. 

In Colorado, four cities in the heart of the Denver/Julesberg 

shale gas region, have voted either for a moratorium on shale gas 

development or to prohibit it entirely. And of course in New York, 

one of the four states under which the Marcellus Shale lies, there 

has been a moratorium on shale gas development since 2010. 

Let me describe specifically the problem with methane. Natural 

gas is mostly methane, and when that methane leaks and is vented 

from well sites and from natural gas infrastructure, it is 84 times 

more potent than carbon dioxide as a greenhouse gas in the first 

20 years after it is released. 
12 

Although natural gas does burn more cleanly than coal, these 

leaking and venting methane emissions are threatening to cancel 

out the climate benefits that come from gas combustion. 

Across our economy, the oil and gas sector represents 37 percent 

of U.S. methane emissions, the largest of all industrial sources. 

There is much research underway, including by us, but while 

this research goes forward we already know that action to limit 

methane reductions is needed now. We know that methane released into the atmosphere does serious damage. We also know 

that those emissions can be reduced dramatically and at low cost 

in the oil and gas sector. 

Let me put a number on that. A recent cost analysis performed 

by experts at ICF International—based on real data directly from 

the industry—found a striking opportunity for achieving dramatic 

reductions in methane emissions from the onshore oil and gas sector. 

The study revealed that a 40 percent reduction in methane emissions from that sector could be achieved over the next five years 

at a cost of less than one penny per thousand cubic feet of gas produced. Low-cost reductions of this magnitude would go a long way 

toward ensuring that the expansion of natural gas production will 

not be a net loss for the environment. 

That opportunity for a 40 percent reduction in emissions from 

this sector translates into the equivalent of 54 LNG tankers per 

year. 

Moveover, according to ICF, methane emission reductions at this 

scale can be achieved using current technology. That is, most if not 

all of the equipment and operational improvements needed to provide meaningful emissions reductions can already be found on the 

market. 

So we believe that state and federal action to require methane 

emission reductions is needed now. A few states are beginning to 

respond. Earlier this year, Colorado put in place the Nation’s first 

and most ambitious set of rules designed directly to reduce all hydrocarbon emissions, methane as well as volatile organic compounds. Altogether, the new rules will annually remove 100,000 

tons of methane, 90,000 tons of smog-forming VOCs, equal to the 

emissions of all the cars and trucks in the State of Colorado today. 

EDF, Environmental Defense Fund, worked hard in support of 

the new Colorado rules, but we were not alone. Anadarko Petroleum, Encana, and Noble Energy—among the largest companies at 

the forefront of new oil and gas extraction in the Rocky Mountain 

West—supported the new rules as well. 

The Colorado model provides a powerful example that can be 

drawn upon at the federal level to ensure that states and communities across the country receive a similar level of protection from 

volatile organic compounds, threats to water supplies, and especially the climate-related harm from methane emissions. 

Doing so will deliver multiple benefits to society while ensuring 

that America’s new bounty of natural gas can not only advance our 

Nation’s energy and economic interests but our environmental and 

public health interests as well. 

[The prepared statement of Mr. Elgie Holstein appears in the 

Submissions for the Record on page 58.] 
13 

Vice Chair Klobuchar. Thank you very much, Mr. Holstein. 

Mr. Meloy. 

STATEMENT OF MR. CHARLES MELOY, EXECUTIVE VICE 

PRESIDENT, U.S. ONSHORE EXPLORATION AND PRODUCTION FOR ANADARKO PETROLEUM COMPANY 

Mr. Meloy. Good morning, and thank you, Chairman Brady and 

Vice Chair Klobuchar, for the pleasure of speaking with the Joint 

Economic Committee this morning about the economic impacts of 

the natural gas revolution. 

We are indeed in the midst of an energy re-boot in America unlike any I have seen in my 30-year career, and driven by the innovation and technology of the many dedicated men and women of 

the oil and gas industry. 

In terms of technology, the confluence of the time-tested, proven 

techniques of horizontal drilling and hydraulic fracturing served as 

the game-changer in opening access to shales and other tight-rock 

formations. 

America’s new-found abundance of cleaner natural gas is only 

possible through the combination of these technologies. In other 

words, without fracking and without horizontal drilling, there is no 

new age of energy self-sufficiency in America—which is very important for the geo-political reasons spoken to earlier; there is no material carbon reductions from greater utilization of natural gas that 

have resulted in the U.S. lowering its total carbon emissions to levels not seen since 1994; there are no lower consumer costs that 

benefit every American, amounting to $1,200 per household as was 

mentioned earlier; and there are no substantial taxes, royalties, 

and leases paid by industry to the tune of $85 million per day, 

which helps governments pay for important public services, including the education of our children. 

In addition, if you think back to 2005 when Hurricanes Rita and Katrina hit the Gulf of Mexico, natural gas prices spiked to $14 per 

million Btu, demonstrating how dependent the U.S. was on natural 

gas from the Gulf of Mexico. Shales, gas shales, have provided a 

geographical diversity in the United States that has stabilized and 

increased supply and significantly dampened the price volatility. 

Production of natural gas in the U.S. has increased 30 percent 

since that time and, whereas the EIA back in 2009 predicted natural gas prices of $35 per million Btus in 2035, they are now predicting $6 per million Btus. 

This is outstanding news for consumers, manufacturers, electrical providers, and others; and it is the economic engine that I believe can bolster the U.S. economy for decades. 

The company I work for, Anadarko Petroleum, is currently the 

third-largest natural gas producer in the United States. We are the 

largest natural gas producer in Senator Mike Lee’s home State of 

Utah, and we have invested more than $4 billion developing natural gas from the Marcellus Shale in Senators Tommey’s and 

Casey’s home State of Pennsylvania. 

I am proud that we have achieved a 40 percent reduction in the 

amount of surface space needed to develop oil and gas in Colorado’s 

Wattenberg Field. By expanding gathering and pipeline infrastructure, we have eliminated more than 10 million truck miles in the 
14 

Wattenberg Field, significantly reducing the traffic and associated 

emissions. We continue to invest in technology to reduce emissions, 

detect methane leaks, and also source, transport, and recycle 

water. 

The key going forward for industry is for our elected leaders to 

keep working together toward solutions, refusing to perpetuate a 

climate of obstruction and the demonization of an industry that is 

fundamental to modern life. It means recognizing that a vibrant oil 

and gas industry makes other industries more productive—fueling 

the economy that creates opportunity. 

We recognize the need for comprehensive and consistent statebased regulations. They provide legitimacy for our activities and 

help build public trust. This is why many states continue to benefit 

from the shale expansion and tight-sands development. Yet these 

activities are relatively stagnant on federal lands due to the costly 

and uncertain federal regulatory environment. 

Enabling infrastructure and pipeline expansions will help ensure 

that we stay ahead of other parts of the world that have shale resources but no infrastructure to move it to market. 

Creatively partnering with industry to expand compressed natural gas fueling stations can help put more natural gas in the gas 

tanks of the American fleet vehicles, meaning cleaner cars, cleaner 

fleets, cheaper fuel, and less reliance on foreign oil. 

We do not have to choose between a future with fossil fuel development or a future with a cleaner environment. We can choose 

both. It is solely dependent upon our ability to continue to collaborate, rely upon sound science, streamline access, and not just identify problems but do what our industry has been doing for decades: 

use human ingenuity to find solutions. 

Thank you. 

[The prepared statement of Mr. Charles Meloy appears in the 

Submissions for the Record on page 67.] 

Vice Chair Klobuchar. Thank you very much. 

We are going to start with questions. I guess I will start with 

you, Dr. Yergin, about this idea of exports. There is a lot of discussion among Senators about how far we should go with exports. 

Obviously they are allowed for countries with which we have a 

Trade Agreement, I believe, and there are some pending applications. Obviously we have a situation where the lower prices—and 

I know Ms. Furchtgott-Roth would dispute some of this—but the 

concern is that some of the prices will go up; that one of the reasons we are in this situation with bringing manufacturing back is 

because of the lower prices. And I just wanted to get some more 

expanded thoughts from you on the exports and how this would affect U.S. consumers if we had unrestricted exports. 

Dr. Yergin. Thank you for the question. 

I think the first thing to observe is how dramatic the change in 

the supply base is. Our view is that the market is really constrained by demand, not by supply, which is different from what 

we have had for many decades. And production could certainly continue to increase. We have more demand for LNG, but the biggest 

source of new demand is going to be electric power, and also vehicles as has been mentioned. 
15 

We should not just look at this in the U.S. context. I just came 

back from East Africa. They are gearing up to do major LNG exports. And when we look at the number of projects that are out 

there, they are far larger than actually the global market can absorb. 

Vice Chair Klobuchar. I see. 

Dr. Yergin. So the global market is actually going to be constrained. British Columbia is going to be exporting. Of the number 

that we see of projects, only a fraction of those will end up being 

built. 

Vice Chair Klobuchar. Did you look at what happened with 

that propane crisis? It was a combination of things. 

Dr. Yergin. Yes. 

Vice Chair Klobuchar. Some of it was a—I think people underestimated how much we would need in the Midwest, the winter 

was so cold, when we were colder than Mars. 

Dr. Yergin. Yes, it’s very interesting about the propane and very 

important, obviously, to your State and others. It was partly, as 

you say, the polar vortex. It was a confluence of things. There was 

a very large corn crop, and a very rainy season, the need for extra 

propane for drying. 

Then on top of that, there were exports. There were also pipelines that were down for maintenance. 

Vice Chair Klobuchar. Yes. 

Dr. Yergin. And then you had people who are on ‘‘will call’’ as 

opposed to people who ‘‘keep full.’’ And so all of those things came 

together in those few weeks. 

Vice Chair Klobuchar. Okay—— 

Dr. Yergin. Exports was just one element of it. 

Vice Chair Klobuchar. One element. I agree. All right, very 

good. 

Why don’t we talk just a minute about methane, Mr. Holstein. 

According to the study you guys commissioned, the oil and gas industry could achieve a 40 percent reduction in methane pollution 

within five years for a very low cost. 

By addressing this, as you know, the industry could address one 

of the major reasons that people are opposed to this. Do you think 

industry is moving to do this? And I guess I will ask Mr. Meloy— 

I know he touched on this—the same question. Mr. Holstein? 

Mr. Holstein. We certainly think that some of the progressive 

members of the industry are. But they are to some extent constrained by competitors who may not be so anxious to move in the 

same direction. 

And one of the things that has been happening in the headlong 

rush to develop these new gas resources is that all of the focus of 

the investment has been in obtaining leases, building the infrastructure, and creating the, if you will, the foundation for this new 

natural gas boom. And environmental considerations have been 

somewhat of a second thought on the part of some members of the 

industry, but not all. 

Vice Chair Klobuchar. Um-hmm. 

Mr. Holstein. The industry, finally, I would say, was absolutely 

essential in helping us move forward collaboratively in the State of 
16 

Colorado with some of the most comprehensive methane and other 

pollutant-control measures adopted anywhere in the United States. 

Vice Chair Klobuchar. Very good. 

Mr. Meloy. 

Mr. Meloy. Yes. I do not think it is a coincidence that since 1994 

our emissions—we are back to the emission levels of 1994, while 

gas production has increased by 30 percent. I think that is clear 

evidence that this is an opportunity to improve the climate of the 

planet. 

And I think if you take a look at natural gas and the way that 

we can manage the program, it is in our best interests to put every 

molecule in the pipeline, and that is what we are working hard to 

do. 

We have worked with EDF and many others to make sure that 

is the standard by which the operators operate, and we are in favor 

of it. 

Vice Chair Klobuchar. Thank you very much. And one last 

question, Mr. Bruce. You got cut off a little and I know I only have 

a minute left here, but did you want to expand on your—some of 

the proposals you have of what would be getting in the way of you 

converting these trucks to this more efficient fuel that is better for 

the environment? 

Mr. Bruce. I mentioned the Federal disincentives, which is the 

fact that liquid natural gas is taxed on a volumetric basis as opposed to an energy equivalent basis to diesel. So it is bearing a 70 

percent higher tax. 

We would love to see Congress address that. 

So, and the other thing is the Excise Tax on heavy trucks is on 

the entire cost of the truck. So I mean we will pay sometimes 

$65,000—it used to be $100,000—premium on the truck. So we are 

paying tax on that, as well. So we are being taxed for doing the 

right thing. 

Vice Chair Klobuchar. Okay. Very good—that doesn’t sound 

good. But I think many of us up here would like to see comprehensive tax reform, including Chairman Brady who knows also a little 

bit about producing energy in his State and his District. 

Chairman Brady. 

Chairman Brady. Vice Chairman, thank you very much. And 

thank you all, to the witnesses. It is hugely helpful testimony. 

Dr. Yergin, thank you for making the point that, as impressive 

as the economic impact from this new technology in natural gas is, 

it is not just occurring in the Gulf States, or in new giants like 

North Dakota, Utah, or Pennsylvania, but creating 100,000 new 

jobs in California, which is experiencing, like much of the country, 

a disappointing economic recovery. Thanks for making that point. 

I do not know if your numbers reflect the growing need for pipelines. The continued studies in that area, the last study I saw 

showed that to be able to deliver this product to the market and 

back up to the refineries and back to the market, we will need the 

equivalent of 2 to 3 Keystone XL pipelines every year for the next 

20 years—huge economic growth from that standpoint. 

Both you and Ms. Furchtgott-Roth made the point that there are 

a lot of benefits from exports, both from an economic standpoint for 
17 

the U.S., from a global price stability standpoint, but also from the 

geo-political standpoint. 

The Middle East has long used its influence through its energy 

development to shape foreign relations. Russia is doing that in 

Ukraine and Europe today. Today Sunni rebels captured the largest oil refinery in Iraq, creating a devastating blow to the government’s ability to stabilize there. 

The thought that our children would never have to grow up wondering if the Middle East will turn the spigot on or off for the 

United States is kind of exciting. To both of you, can smart exports 

from the U.S. give us a stronger footing in foreign affairs? 

Dr. Yergin. I think the word you used was ‘‘influence’’ and there 

is no question that U.S. exports of oil and natural gas will give a 

new dimension to American influence in the world. 

It will be a message that will be read around the world. Frankly, 

I also think it will provide an answer to some countries where 

there is a view that there is a zero sum struggle with the U.S. over 

energy. If they are importing from us it will show that we have 

very common interests. And so I think it is something that is not 

going to be a miracle solution, but it will certainly bolster the 

American position and will affect psychology around the world. 

Chairman Brady. Thank you. 

Ms. Furchtgott-Roth. 

Ms. Furchtgott-Roth. Yes, I would like to agree with Dr. 

Yergin and also say that if we export that means less revenue for 

Russia, and that is very important, too. And it lowers the price of 

the natural gas that Russia can export. 

Russia is very dependent on its natural gas revenues. We can be 

cutting into those revenues by exporting because the price will adjust. 

Dr. Yergin. Can I add one thing? It is not only theoretical, it 

is happening, the sanctions against Iran would not have worked 

had it not been for the increase in U.S. oil production. Simply, the 

world market would have been too tight. 

So this impact is already there from what is happening in this 

country. 

Chairman Brady. Great point. Thank you. I do have legislation 

that removes the need for energy permits on natural gas, except to 

state-sponsored terrorist nations, and it seems to me the number 

of projects—and they are hugely expensive, the exporting projects— 

that the market itself will take care of the need for these projects. 

And, Ms. Furchtgott-Roth, you made the point, too, economically, 

if we restrict energy exports, just as if we were to restrict cars 

being exported, computers being exported, Dow chemicals being exported, the price will not go down; they will simply manufacture 

less of it. And that will happen in the United States as well. 

Mr. Meloy, I want to thank you for being here. Anadarko is really our major iconic corporate citizen in The Woodlands where I live. 

You are a treasured company for us. I saw a picture of one of your 

projects I think in Utah, Senator Lee’s State, that both while it was 

occurring and afterwards it was nearly invisible to the human eye. 

And after it was gone, it was invisible. 

You have made tremendous progress in reducing your environmental footprint. Advice to us? Do you think the Federal Govern-
18 

ment can do more to facilitate the expansion of domestic natural 

gas and oil production? And, conversely, what should we not be 

doing? 

Mr. Meloy. Thank you. I appreciate the comments with regard 

to our position within The Woodlands, and we certainly appreciate 

your support in Washington. 

Our company has been very active on every element of our environmental footprint, including reduction of the viewshed issues, 

emissions, and the overall activity that we have to get any one job 

done. We have made significant investments in infrastructure. 

And you have talked about the need for that in the future, and 

I think it cannot be overstated. Investments in pipelines and infrastructure to move this product, confined inside a pipe so we do not 

have to deal with multiple transfers of the product, is very important and very economically energizing for our economy because it 

creates a tremendous amount of jobs and activity. 

With regard to the Federal Government, I think access is key. 

The lands that we hold on the BLM lands have not seen the same 

sort of revolution that other areas, other states like Colorado, 

Pennsylvania, and Texas have seen. I think that opportunity exists. 

We just have to be—we have to work harder to get the opportunity to drill on those lands so that they can be developed in a 

similar fashion with a similar remit, and a similar footprint that 

we are seeing in other states. 

I strongly encourage state-based regulation so that they can see. 

They are closer to the action and provide a broader, more definitive 

set of eyes and regulation toward our activities. 

Chairman Brady. Great. Thank you, sir. Yield back. 

Vice Chair Klobuchar. Very good. Thank you very much. Congressman Delaney—or, Senator Casey, I think, because a vote was 

just called. Thank you. 

Senator Casey. I will be—I will just, so the Congressman can 

get his time—I will just ask one question because I know we are 

pressed for time. 

Dr. Yergin, I want to ask you about manufacturing. One of the 

great benefits of natural gas extraction and the impact it is having 

on the economy of my home State of Pennsylvania, as well as the 

Nation, is the benefit it provides to our manufacturing sector. 

As we make decisions about it, I just want to make sure that we 

are going down the right path. I just wanted to ask you about that 

benefit and how—what advice would you have, or what perspective 

would you have on this, taking the right steps to manage what I 

think so far has been a very positive benefit to our manufacturing 

sector. Can you speak to that? 

Dr. Yergin. Sure. I think that the impact we have seen is this 

turnaround in psychology in terms of companies who thought they 

would never be investing again in the United States. Your State 

clearly is a beneficiary, and it extends to many industries. Chair 

Brady referred to pipes, manufacturing steel. So as you know, 

areas that seemed to be in terminal decline have really rebounded 

with a relocation of manufacturing. 

And one of the things that really drives it home is if you look 

at a country like Germany, which depends for 50 percent of its 

economy on exports, and manufacturing prowess,—the Minister of 
19 

the Economy is talking about a ‘‘dramatic deindustrialization’’ because they see their manufacturing companies leaving Germany 

and investing in the United States. 

So it is, as you point out, a very beneficial trend that goes across 

the economy. 

Senator Casey. I will submit a couple of other questions for the 

record and yield back 3 minutes and 13 seconds. 

[Questions for the Record from Senator Robert P. Casey, Jr. appear in the Submissions for the Record on page 68.] 

Vice Chair Klobuchar. That is so impressive, Senator Casey. 

[Laughter.] 

Okay, Senator Lee. 

Senator Lee. Thank you, Madam Chair. And thanks to all of 

you for joining us. 

Mr. Meloy, first of all thank you in particular for all you do in 

my State, and for acknowledging what Utah has to offer in terms 

of our country’s energy potential. 

As you and I both know, operating in a state like Utah that has 

a lot of federal land can be challenging. The Federal Government 

owns about 30 percent of the land mass in the United States, and 

about two-thirds of the land in my own state. And as you and I are 

both painfully aware, energy development has not occurred at the 

same pace in recent years on federal land, particularly onshore development has not occurred at the same pace. In fact, it has been 

really slow. It has slowed. 

So even though we have seen a big increase in recent years in 

natural gas production, we have not seen that on federal land. 

Now whether this drop, whether this slowing has occurred as a 

result of permitting delays, uncertainty caused by the regulatory 

environment, or the regulatory difficulty of building a pipeline, the 

results are clear, which is that there has been a drop in production 

on federal land. 

Can you explain for us in what ways have federal policies adversely impacted the ability of states like Utah with high concentrations of federal land to fully enjoy economic growth and jobs 

that have been precipitated by this boom? 

Mr. Meloy. Thank you, Senator Lee. I would offer two ideas that 

we are actually actively working on with the government. 

The first of which is modernizing the permitting process, using 

technology such as GIS, that would significantly reduce the bootson-the-ground type requirements, and the cost of actually doing the 

permitting process not only for the operator but for the Federal 

Government. 

The second would be—and you are very aware of this—is the 

process, modernizing the process, or streamlining the process to 

achieve EIS on critical projects like what you and I did for the Natural Buttes in Utah. I think this is an opportunity where we can 

utilize parallel processes, good, modern project management practices, to actually do these things on parallel paths and close the 

timeline that has been continuing to extend now in excess of 10 

years. 

This process should take 3 or 4 years, tops. And I think that 

would incentivize people to move and invest in federal lands at a 

greater pace. 
20 

Senator Lee. Thank you. Thank you, that’s helpful. 

Ms. Furchtgott-Roth, I also wanted to ask you a question. So a 

lot of people, including a lot of people within the current Administration, have become fond of saying that they promote an ‘‘all of the 

above’’ energy strategy, and they are saying that at the same time 

that they are encouraging more use of natural gas domestically, 

and at the same time that some are advocating that we also open 

up natural gas to export. 

Is this really an all-of-the-above energy strategy when we complicate the process of developing our natural gas resources through 

permitting delays, regulatory uncertainty, and making it really difficult to build a pipeline? 

Isn’t that sort of in tension with an all-of-the-above energy strategy? 

Ms. Furchtgott-Roth. That’s right. It’s not all-of-the-above if we 

are not allowing permitting on federal lands. We could be getting 

immense amounts of tax revenue, royalty revenue from such permitting. We also need a vast new infrastructure of pipelines, not 

just Keystone XL. Oil and natural gas that is being produced in the 

Bakken Region has lower prices because we just cannot get it out. 

Lower prices for that oil means less tax revenue for North Dakota and other States. So the oil that is trapped is selling at a discount to Brent Crude. That means less tax revenue for the states 

where it is taking place. 

And the State Department has just come out with a report saying how if oil is transported by rail rather than pipeline, there will 

be more fatalities and more injuries. I think it is clear that we need 

to have a bigger—all-of-the-above should mean more pipelines. 

When we talk about ‘‘all of the above,’’ we should also be careful 

not to impose on ordinary Americans’ high utility costs caused by 

the high price of solar and wind, and force them to buy it, because 

it costs twice the amount to produce electricity through wind and 

solar as it does through natural gas and coal. 

Senator Lee. So part of your concept of all-of-the-above would 

mean everybody competes, everybody competes on a relatively level 

playing field—— 

Ms. Furchtgott-Roth. Exactly, yes, and there are many people 

concerned about inequality, and the bottom fifth of the income distribution. People in that group spend about 25 percent of their income on energy—that’s gasoline and electricity. And we need to be 

mindful of their welfare and not force them to buy more expensive 

fuel. 

Senator Lee. So this hurts the poor more than anyone else. 

Ms. Furchtgott-Roth. Exactly, yes, because the top quintile has 

spent 4 percent of their income on energy, on average, as opposed 

to 25 for the bottom quintile. Requiring them to buy electricity produced by wind and solar adds to inequality. 

Senator Lee. It sounds very regressive. 

Ms. Furchtgott-Roth. Exactly. 

Senator Lee. I see my time has expired. Thank you, very much. 

Thank you, Madam Chair. 

Vice Chair Klobuchar. Thank you. I think Congressman 

Delaney is next, and I am going to the vote now, and so I want 
21 

to thank the witnesses very much for being here. It was a good 

hearing. Thank you. 

Ms. Furchtgott-Roth. Thank you, very much. 

Representative Delaney. Thank you, Vice Chair Klobuchar, 

and I want to also thank the witnesses for their testimony here 

today. 

When confronted with these questions about kind of significant 

energy decisions, I have developed my own kind of three-part test, 

which is: 

The first part is: Is it in the economic interest of the United 

States? 

The second part of the question is: Is it consistent with our national energy policy as it continues to evolve? 

And the third part is: Is it consistent with our view of the environment? 

And when I look at the decision as it relates to exporting natural 

gas, to me I get a resounding ‘‘yes’’ on all three of those tests. I 

do think it is very consistent with the economic policy of the United 

States. This is a U.S. asset. There is a very big business opportunity associated with producing this. 

I understand there are potentially some negatives associated 

with energy costs related to the manufacturing sector. I tend to 

think they will work through that over time. But I think it clearly 

tips in favor of this being a very significant economic opportunity 

for the U.S. 

I think it is consistent with our future energy policy. Natural gas 

has to be a bridge to the kind of energy future that at least I envision for this country. 

And then thirdly, I think it is very consistent with our environmental policy if done in a safe and accountable way, including vesting a certain amount of local control on these decisions to local 

communities. Again, I think it is very consistent with our future 

environmental policies. 

So to me, I think we should approve all these export facilities. 

I think it would be very good for the economy. I am not sure how 

many of them will be successful. I tend to think they will find natural gas all over the world. The technologies and things that we 

are using here are going to be there, I am sure they’re using like 

crazy all over the world and probably half of them will go out of 

business but I’m all for approving them all. 

When I apply the same test, for example, though, to Keystone, 

I get a ‘‘no.’’ I don’t think it is consistent with our economic policy 

because it is largely not our asset and it will be sold to the world 

market. It will create some jobs in the short term, but in the long 

term it does not really do anything. 

I do not think it fits with our long-term energy strategy. And it 

certainly does not fit with our long-term environmental strategy, if 

you actually care about climate change, which I do quite strongly, 

which I actually think does have to be factored into the cost. 

When we talk about a level playing field, you cannot not include 

the cost of climate change in that calculus. But my question for the 

witnesses is: 

If there were to be an increase, which I think would be temporary, related to natural gas prices associated with increasing our 
22 

exports, do you think that would actually help the renewable business in this country? And in a way, is it in fact somewhat of a proenvironmental policy? Because if you believe in markets, which I 

do, which is one of the reasons I think we should export because 

we are America, I do believe in free markets and we shouldn’t be 

hoarding this stuff, but if you believe in markets, you have to assume that if we increase exports the price of natural gas will go 

up. Do you think that will help the renewable business? 

I will start with you, Dr. Yergin. 

Dr. Yergin. Well I think the renewable business, two things are 

helping the renewable business. One, costs are coming down. Solar 

costs have come down a lot, one significant reason is over-capacity 

in Chinese manufacturing. Wind costs have also come down. 

Natural gas is a kind of natural partner of renewables because 

of the intermittency. So even if you have a strong renewable strategy or mandates, as we have, as has already been pointed out, you 

are going to need more natural gas capacity to balance it out. 

Representative Delaney. So my question is, though, on the 

price. Does the price—Ms. Roth, maybe you could comment on 

this—does the price increase in natural gas, which will probably 

happen if we increase exports for at least the time being, I know 

your data suggests otherwise, I’d love to see what is behind some 

of that data, but if we were to assume for a second, which you may 

not agree with, that the price might go up, will that actually help 

the competitiveness of renewables? And to some extent steer the 

country towards this greener future that at least I want, and many 

share that view. 

Ms. Furchtgott-Roth. The price of natural gas, if it goes up, 

will still be far below the costs of producing electricity with solar 

and wind, which those are heavily dependent, by the way, on the 

tax credit. So that is also going to be a favor, if Congress keeps the 

tax credits in—— 

Representative Delaney. But it narrows the gap, it sounds 

like. 

Ms. Furchtgott-Roth. It does narrow the gap, but it doesn’t 

make it a winner. 

Representative Delaney. But if we continue to see the kind of 

cost improvements associated with renewables that Dr. Yergin 

mentioned, you could actually see how this could take you down 

the path towards a more competitive renewable portfolio. 

Ms. Furchtgott-Roth. I would say the cost of natural gas, electricity produced by natural gas, is always, for the foreseeable future, going to be less than the cost for electricity produced by solar 

and wind. 

And by the way, the reason to have Keystone also is because we 

have refining facilities in Louisiana and Texas that benefit from 

the heavy crude being exported from Canada. We want the job of 

refining that heavy crude. We don’t want that to be going elsewhere and be refined elsewhere. We want those jobs. 

Representative Delaney. I’m going to switch to Mr. Holstein, 

but it is interesting you mentioned how the Keystone, because the 

Keystone tar sands are trapped up there, it is actually allowing it 

to be sold at cheaper prices to the Midwest. So to some extent Mid-
23 

westerners are getting the benefit of lower energy because we do 

not have the pipeline, which is interesting. 

Ms. Furchtgott-Roth. Yes, but Canada has just approved its 

Northern Gateway pipeline that is going to take its oil out to the 

East and to the West and to Asia. 

Representative Delaney. Well it’s their oil. They can do what 

they want with it, I guess. 

Mr. Holstein. 

Mr. Holstein. I think the answer to your question is, it all depends. But the fact is that natural gas actually pairs quite well 

with renewable energy, because it helps compensate for the 

intermittency of renewables. 

So as we continue to make strides in advancing the complexity 

and functionality of the Nation’s grid, the opportunity for natural 

gas to dramatically expand the penetration of renewables goes up, 

even if natural gas prices go up somewhat. 

Representative Delaney. Right. 

Mr. Holstein. It is very difficult to predict just where international natural gas prices would settle, because that depends, as 

you suggested, on new sources around the world, the level of demand, and very heavily on the rather high transportation costs 

from the United States to foreign markets. 

Representative Delaney. Right. Mr. Meloy, I don’t know if you 

have a view on this? 

Mr. Meloy. I think Mr. Holstein made some great comments. I 

would add that I sense that it has a very similar lifecycle to what 

natural gas has seen, where the new technologies that are being 

employed today and deployed in the oil fields and gas fields of 

America have delivered a lower cost, and even safer condition. 

So I foresee that renewables will follow that trend and, because 

of its pairing with natural gas and renewables, that that is a very 

complementary and virtuous cycle. 

Representative Delaney. I see my time is up. Thank you. 

Chairman Brady [presiding]. Thank you, Mr. Delaney. 

Former Chairman of the Joint Economic Committee, Mrs. 

Maloney is recognized. 

Representative Maloney. I thank all the panelists, and the 

Chairman, and the Ranking Member, for holding this truly important meeting. 

I want to really raise an issue that Mr. Holstein raised with 

methane. In many studies after studies, researchers have found 

that Americans living near these sites are more likely to develop 

respiratory illnesses, birth defects, and other possible health problems. 

And I very much appreciated Mr. Holstein’s testimony which focused on the real costs of increased methane emissions, and his 

point that we need to make sure that it is not leaking, that the 

methane is not leaking. And it is a huge greenhouse gas, and we 

need to control that. 

But my question to you, Mr. Holstein: Before we further increase 

natural gas production, we need to evaluate this, the methane and 

how that is being controlled, and other issues to determine that all 

necessary safeguards are in place to protect the water and air. And 

are we doing that? Your comments and words on that? 
24 

Mr. Holstein. Thank you, Congresswoman Maloney. I strongly 

agree with the sentiment that the race to develop America’s bounty 

of new natural gas is one that needs to be accompanied by an 

equally fervent effort to ensure that the new infrastructure that is 

built to produce and transport and use that natural gas, including 

in transportation, be as tight as it can be. 

And the good news there is that the technology exists, as I indicated in my testimony, to tighten up the system and also to ensure 

that new infrastructure is very tight, as well. The fact that natural 

gas is 84 times more powerful in the near term than CO–2 as a 

bad actor on climate merely exacerbates globally the local conditions you just referred to in terms of air quality and public health. 

Representative Maloney. I think that is important, and I 

think a broader issue is how do we accomplish what you are saying? If the technology exists, why are we not using it? Of course 

it is very expensive. And most of the fracking and other activities 

are exempt from important federal protections that Congress 

passed, such as the Clean Water Act. 

So we cannot go in and enforce Clean Water protections that we 

have in other areas because this is specifically exempt. So I would 

like to ask all the panelists, yes or no, do you think it is a good 

idea to exempt from important federal protections that Congress 

passed, such as the Clean Water Act, these harmful—in some 

cases, they are, like the methane emissions that Mr. Holstein mentioned. Yes or no, do you think it is a good idea to exempt fracking 

from the Clean Water Act? 

Mr. Yergin, yes or no? Yes, or no, because I have a lot of questions. 

Dr. Yergin. I will just say that I think this is a highly regulated 

activity. Much of it is regulated by the states. And—— 

Representative Maloney. Okay, so yes, or no. Do you think it 

is a good idea for it to be exempt from the Federal Clean Water 

Act? 

Dr. Yergin. I think as long as it is heavily regulated appropriately by the states. 

Representative Maloney. Okay. All right. Mr. Bruce? 

Mr. Bruce. Yeah, I mean as far as we’re concerned, we pay for 

the gas and we have safety concerns to worry about, so what you’re 

describing is upstream of us. I mean, we would—— 

Representative Maloney. Yes or no? I mean, you can talk all 

day on this. 

Mr. Bruce. I would agree with Dr. Yergin, that we would presume that—— 

Representative Maloney. Yes, okay. Ms. Roth? 

Ms. Furchtgott-Roth. Yes, it should be up to the states. We 

should roll back all that legislation and leave it—— 

Representative Maloney. Mr. Holstein—— 

Ms. Furchtgott-Roth [continuing]. To the states. 

Mr. Holstein. In general, I don’t think it’s a good idea and I do 

think that we need to have more comprehensive federal and state 

regulation to be sure—— 

Representative Maloney. But do you think it should be exempt 

from the Clean Water Act? 

Mr. Holstein. No. 
25 

Representative Maloney. No? Okay. 

Mr. Malay. 

Mr. Meloy. Meloy. 

Representative Maloney. Meloy, I’m sorry. 

Mr. Meloy. No. I think it’s a heavily regulated industry and the 

states are best suited to regulate us. 

Representative Maloney. Okay. So it should be exempt from 

the Clean Water Act, according to you. Right. 

Okay, also do you think it should be exempt from the Clean Air 

Act? Because it is already now, even though fracking involves dangerous, harmful chemicals. 

Mr. Yagan, yes, or no? 

Dr. Yergin. ‘‘Yer-gin.’’ Yergin. 

Representative Maloney. Yergin, I’m sorry, that pertains to 

your testimony. Yes, or no. 

Dr. Yergin. I’m going to defer to Mr. Holstein who will have—— 

Representative Maloney. Mr. Bruce? 

Mr. Bruce. I’m not aware of the implications of that. 

Representative Maloney. So you’re not taking a position? 

Mr. Bruce. No. 

Representative Maloney. Okay, Ms. Roth? 

Ms. Furchtgott-Roth. Yes, the states should be regulating their 

own affairs, not the Federal Government. 

Representative Maloney. Okay. 

Mr. Holstein. 

Mr. Holstein. Exemption from the Clean Air Act? Absolutely 

not. I think the Administration has the authority and should use 

it to ensure that these localized emissions that you referred to are 

addressed. 

Representative Maloney. No, you don’t have it if you’re exempt from it. Okay, Mr. Meloy? 

Mr. Meloy. Thank you. I actually think the state regulators are 

doing a fine job in this arena and they have provided, as has Colorado, with a very sound basis on which to regulate this activity. 

Representative Maloney. But we know that states have different standards, and some states have higher standards than others. So how should policymakers specify and document the health 

costs to communities that could come from fracking to clean water 

that’s been documented in others? 

And also, Dr. Yergin, you recently released a report, an IHS report, that supports the economic benefits of developing America’s 

natural gas resources. But I was concerned that the report did not 

account for the negative impact of poorly executed extractions. 

We know that there are many positive benefits, but how do we 

make sure that the technology is there, that the problems aren’t 

there? And do your reports assess whether a lack of health and environmental protections could hurt the public? Just on your report, 

Dr. Bergin, and also in a broader sense I would like to go to Mr. 

Holstein first and then others on how do we document the environmental and health costs? We are documenting the benefits, the 

money you make, but not what happens to our environment and 

the health of individuals. 

First, Dr. Yergin, and thank you for your research. 
26 

Dr. Yergin. Thank you, Representative Maloney. I served on the 

Commission that President Obama had set up on the environmental aspects and concerns around fracking and around shale 

gas. And I think that report pointed to four areas to focus on, and 

said that these are issues that need to be managed. And I think 

the takeaway was that they are largely being managed. 

I think the issue of methane that has been surfaced, and EDF 

has played a particularly important role in trying to actually get 

a handle on measuring it, to know what are the volumes of methane that are being emitted or not being emitted, and they have 

been very constructive in that. 

Representative Maloney. Okay—and may we have time for 

Mr. Holstein to respond? 

Chairman Brady. Yes, why don’t we have him wrap up. 

Representative Maloney. Thank you. 

Mr. Holstein. Thank you, Mr. Chairman. 

Representative Maloney. And anyone else who wants to testify. 

Chairman Brady. I didn’t say that. 

Mr. Holstein. Environmental Defense Fund, together with 

roughly a hundred university, academic, scientific, and industry 

partners, are in fact doing many of these measurement studies to 

which you allude. 

But there also exists the technology necessary to monitor the air 

in many of these regions, and for these reasons the State of Wyoming has adopted stronger rules with respect to volatile organic 

compounds. Because as I said in my testimony, they have so much 

natural gas development going on there that they have ended up 

with air quality in much of the Upper Green River Basin equivalent to downtown Los Angeles. So the technology already exists at 

the state and local levels to monitor air quality. 

We in particular are looking at methane emissions. 

Ms. Furchtgott-Roth. This is a very complicated issue, and 

states make their own tradeoffs. For example, if New York were to 

have fracking at the same rate as Pennsylvania, New York State 

would have another $8 billion over the next four years, but it has 

made that tradeoff not to do so. 

Individual states make their tradeoffs with respect to fracking 

and jobs and employment and what they need. And we need to 

leave it like that because there are many advantages to Washington D.C., but we cannot decide on the combination of oil exploration and jobs and income for all of the 50 states, not to mention 

all of the counties. 

Chairman Brady. Thank you very much. 

I want to thank Vice Chair Klobuchar who hosted this hearing 

today. This is a timely subject. There is a lot to it that matters. 

The witnesses have been tremendously insightful and I want to 

thank you all for being here today. 

With that, the hearing is adjourned. 

(Whereupon, at 11:32 a.m., Tuesday, June 24, 2014, the hearing 

in the above-entitled matter was adjourned.) 
(27) 

SUBMISSIONS FOR THE RECORD 
28 

PREPARED STATEMENT OF HON. KEVIN BRADY, CHAIRMAN, JOINT ECONOMIC

COMMITTEE

Vice Chair Klobuchar, Members, and distinguished witnesses: 

Free market capitalism and science are revolutionary forces that can change the 

world for the better. George Mitchell, the founder of my hometown, The Woodlands, 

Texas and a noted philanthropist and environmentalist, first combined hydraulic 

fracturing, which uses pressurized liquid to break rocks and release the natural gas 

and oil trapped within, and horizontal drilling. 

This combination has turned the world of hydrocarbons upside down. In the winter of 1977–78, President Carter warned that the United States could exhaust its 

supply of natural gas in two generations. In response, Congress passed legislation 

to limit the use of natural gas in industry and electricity generation. 

Even as recently as 2012, President Obama incorrectly warned that ‘‘with only 2 

percent of the world’s oil reserves, we can’t just drill our way to lower gas prices, 

not when we consume 20 percent of the world’s oil.’’ Yet, as he was making those 

dated remarks in his weekly radio address, America was experiencing an energy 

renaissance. 

In recent years, fracking and horizontal drilling have greatly increased the potential supply of natural gas and oil in the United States. Consequently, the United 

States does not need to import liquefied natural gas (LNG) and is reducing its dependence on foreign oil outside of sources among our friendly neighbors, Canada 

and Mexico. 

In April’s Annual Energy Outlook 2014, the Energy Information Administration 

projected that domestic crude oil production will increase from 6.5 million barrels 

per day in 2012 to 9.6 million barrels per day in 2020, a production level not seen 

since 1970. Moreover, the import share of U.S. petroleum and other liquid fuels will 

fall to about 25 percent during the last half of this decade. Indeed, the United 

States can become a major exporter of LNG. 

Fracking and other improvements in production technology have opened vast 

stores of domestic oil and natural gas and have lowered production costs. In light 

of recent developments in Ukraine and Iraq, increased U.S. production of both oil 

and natural gas will make our economy far less dependent on costly and unreliable 

oil imports and will mitigate the prices of both oil and natural gas, if this White 

House does not interfere or attempt to slow down domestic production. 

America’s energy revolution has also created tens of thousands of well-paying jobs 

during a disappointing economic recovery. These jobs cover the entire spectrum from 

the unskilled to the highly skilled, and are a new source of employment for minority 

workers across the country. As the energy workforce ages out, even more opportunities will occur for workers of all skills. 

Of course, more American-made energy means more American-made tax revenues 

for communities, states and the federal government. With the exception of individual tax receipts, the energy industry is now America’s second largest taxpayer. 

So more natural gas production in America helps to balance the budget and fund 

necessary services to families who need assistance. 

Despite the natural gas and oil revolution, some people prefer renewable, zeroemission energy sources such as wind, solar and geothermal power. Renewable fuels 

should be encouraged, but none of these ‘‘green’’ energy technologies has yet to demonstrate sufficient economies of scale to compete with fossil fuels as a major energy 

source without dependence on significant taxpayer subsidies, regulatory mandates, 

and tax preferences. While future technological breakthroughs are possible, as of 

today ‘‘green’’ energy cannot compete affordably with traditional energy in the free 

market. 

Developing countries have rejected the siren song of ‘‘green’’ energy, and many developed countries that had embraced it, such as Germany and Japan, are backing 

away from their earlier commitments. 

Some environmentalists continue to press for their preferred sources of energy 

even though natural gas can reduce greenhouse gas emissions more quickly and at 

less cost. Artificially supporting current ‘‘green’’ energy technology takes money 

away from development of new ‘‘green’’ technologies that could be competitive with 

fossil fuels on their own merits. 

The U.S. legal and regulatory regime for international trade in oil and natural 

gas as well as a continuing mindset in some quarters are stuck in a time of import 

dependency. But the United States now is in a position to export natural gas, petroleum products, and even high quality ‘‘light’’ crude oil. We must adapt our mindset 

and our rules accordingly. We must do so for the sake of the domestic economy, the 

stability of world oil and gas prices, and geopolitical stability. The Administration 

has been slowrolling drilling permits, licenses for LNG export terminals, and ap-
29 

provals for deliveries to countries that do not have a free trade agreement with the 

United States, meaning all but 20 countries, none of which is in Europe. 

The fracking revolution has both profound economic and geopolitical implications. 

Fracking has the potential to increase alternative sources of supply in North America and reduce the world’s dependence on supply from North Africa and the Middle 

East. Exports of domestically produced LNG and refined petroleum products can 

also alleviate Europe’s dependence on Russia. 

The fracking revolution is a win for everyone involved. Domestic natural gas and 

oil production is igniting an industrial renaissance in the United States, especially 

in industries that are energy intensive or use natural gas and oil as feedstock; and 

it is creating tens of thousands of high-paying jobs for middle-class American workers. 

With that, I look forward to the testimony of today’s witnesses. 
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PREPARED STATEMENT OF CHARLES A. MELOY, EXECUTIVE VICE PRESIDENT, U.S. 

ONSHORE EXPLORATION AND PRODUCTION, ANADARKO PETROLEUM CORPORATION

Good morning, and thank you Chairman Brady and Vice Chair Klobucher for the 

pleasure of speaking with the Joint Economic Committee this morning about ‘‘The 

Economic Impacts of the Natural Gas Revolution.’’ 

We are indeed in the midst of an energy re-boot in America, unlike any I’ve seen 

in my career—a re-boot that is driven by innovation and technology, and the nearly 

10 million dedicated men and women in the oil and natural gas industry. 

In terms of technology, the confluence of two time-tested, proven techniques, horizontal drilling and hydraulic fracturing (fracking), served as a game-changer in 

opening access to shale and other tight-rock formations. 

America’s new-found abundance of cleaner natural gas is only possible through 

the combination of these technologies. In other words, without fracking and horizontal drilling there is no 1) new age of energy self-sufficiency in America, which 

is very important given the current geo-political instability in places like Russia, 

Iraq, Syria and others; 2) material carbon reductions from greater utilization of natural gas that have resulted in the U.S. lowering its total carbon emissions to levels 

not seen since 1994; 3) lower consumer costs for the benefit of each and every American, amounting to $1,200 per household per year; and 4) substantial taxes, royalties, and leases paid by the industry to the tune of $85 million each day, which help 

governments pay for important public services including education. 

It wasn’t that long ago, America was contemplating LNG import terminals to 

meet natural gas demand. How times have changed, as today, we’re expanding our 

ability to export natural gas, enhancing our nation’s global influence and balance 

of trade. Every barrel of oil or molecule of gas we produce here is one less we have 

to import. 

I’m proud to say the natural gas revolution has also spawned a U.S. manufacturing renaissance and tremendous growth in the chemicals industry, because of the 

cheaper natural gas feedstock. 

In addition, if you think back to 2005 when Hurricanes Rita and Katrina hit the 

Gulf, natural gas prices spiked to more than $14 per MMBTU (million British thermal units), demonstrating how dependent the U.S. was on natural gas from the Gulf 

of Mexico. Shales have provided a geographic diversity that has stabilized supply 

and significantly dampened price volatility. 

Production of natural gas in the U.S. has increased by 30 percent since that time, 

and whereas the EIA, back in 2009, projected natural gas prices to be near $13 per 

MMBTU by 2035, the newest projections show prices will more likely be around $6 

per MMBTU. This is outstanding news for consumers, manufacturers, electricity 

providers and others and is an economic engine that can bolster the US economy 

for decades. 

Thanks to the natural gas revolution, the American economic recession has been 

muted in many sectors of the economy. Our industry is adding jobs. Plus, for every 

oil and natural gas job that’s created, an additional three jobs are created in other 

sectors of the economy. 

The company I work for, Anadarko, is currently the third-largest natural gas producer in the U.S. We are the largest natural gas producer in Senator Mike Lee’s 

home state of Utah, and we’ve invested more than $4 billion developing natural gas 

from the Marcellus Shale in Senators Toomey’s and Casey’s home state of Pennsylvania. 

Among the achievements I’m most proud of, is that as we perfect the technologies 

we’re also optimizing how we deploy people, equipment and best practices to drive 

efficiency gains in every aspect of our business. This translates into fewer days on 

location drilling and completing a well. Our innovations in Utah’s Greater Natural 

Buttes field have resulted in six Utah Earth Day Awards. 

We’ve achieved 40-percent reductions in the amount of surface space needed to 

develop oil and natural gas in Colorado’s Wattenberg field. By expanding gathering 

and pipeline infrastructure, we’ve eliminated more than 10 million truck miles and 

avoided more than 450,000 truckloads in the Wattenberg field, significantly reducing traffic and associated emissions. We continue to invest in technology to reduce 

emissions, detect methane leaks and source, transport and recycle water. 

We’re also working collaboratively with all stakeholders. This includes Anadarko’s 

work with the Clean Air, Clean Jobs Act in Colorado in 2010, which was a statebased solution to federal air quality requirements. It also includes our work with 

Colorado Governor John Hickenlooper, industry partners and the Environmental 

Defense Fund (EDF) resulting in new air-quality regulations in Colorado, and our 

efforts with federal and state regulators, tribal leaders and the Southern Utah Wil-
68 

derness Alliance on the 2012 Greater Natural Buttes yielding a Record of Decision 

and project approval to develop the extensive resources of Utah. 

The key going forward for our industry is for our elected leaders to keep working 

together toward solutions, refusing to perpetuate a climate of obstruction and the 

demonization of an industry that is fundamental to modern life. It means recognizing that a vibrant oil and natural gas industry makes other industries more productive—fueling the economy that creates opportunity. 

We recognize the need for comprehensive and consistent state-based regulations. 

They provide legitimacy for our activities and help build public trust. This is why 

Arkansas, Colorado, Louisiana, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Texas, Utah, West Virginia, and Wyoming continue to benefit from shale 

and tight-sands development. Yet, these activities are relatively stagnant on federal 

lands due to the costly and uncertain federal regulatory environment. 

Our industry can do so much more with reasonable access to federal lands. Consider the oil and natural gas industry more than pays for the cost of all leasing, 

permitting, monitoring, and inspecting activities by returning almost $89 for every 

dollar BLM spends administering the onshore program. 

Enabling infrastructure and pipeline expansions will help ensure we stay ahead 

of other parts of the world that have shale resources but no infrastructure to move 

it to market. Creatively partnering with industry to expand compressed natural gas 

(CNG) fueling stations can help put more natural gas in the gas tanks of America’s 

fleet vehicles, meaning cleaner cars, cheaper fuel and even less reliance on foreign 

oil. 

We don’t have to choose between a future with fossil fuel development or a future 

with a cleaner environment. We can choose to have both. It is solely dependent upon 

our ability to continue to collaborate, rely upon sound science, streamline access, 

and not just identify problems, but do what our industry has been doing for decades—use human ingenuity to find solutions. Thank you. 

QUESTIONS FOR THE RECORD SUBMITTED BY SENATOR ROBERT P. CASEY, JR., AND

RESPONSES FROM DR. DANIEL YERGIN

Senator Casey: 

We have our own major shale play in Pennsylvania that is now making meaningful contributions to our Nation’s natural gas supply, as the Marcellus is now responsible for as much of 20 percent of America’s natural gas supply. You have watched 

shale plays develop around the U.S. and the jobs generated from direct investments 

from shale operators. However, we now have domestic natural gas selling for half 

of what it sold in 2008. 

Question #1 

How do you see this dynamic benefitting the manufacturing sector? Could we begin 

to see a significant ramp up in manufacturing jobs being generated due to affordable 

and abundant supplies of natural gas in Pennsylvania? 

Dr. Yergin’s Response: 

The Marcellus is an extraordinary engine of economic growth and development – 

one with great impact both on Pennsylvania’s economy and on the nation’s. Overall, 

in the IHS study America’s New Energy Future (2012–2013), we examined the impact of the unconventional energy on US manufacturing and concluded that manufacturing will benefit from the new discoveries and the resulting lower natural gas 

prices. The benefits will be concentrated in drilling activity, the supply chain sectors 

(those that provide goods and services to support capital expenditures for drilling 

and completion of new wells and for the construction of related facilities, such as 

pipelines, and for on-going support of the activities), industries that use natural gas 

as a feedstock (primarily petrochemicals), and those that benefit through lower energy input (gas or electric power) cost. 

Energy intensive sectors like energy-related chemicals, petroleum refining, aluminum, glass, cement and the food industry are investing and expanding their US 

operations in response to declining domestic prices for their energy inputs. Over 

$100 billion of new investment has been announced just for the petrochemical sector 

in the United States, and the eventual total manufacturing investment as the result 

of this unconventional revolution will be measured in many multiples of that hundred billion. This will translate into economic growth and substantial job creation, 

directly and indirectly. 
69 

Pennsylvania manufacturing does have growth potential due to the development 

of the Marcellus and the state’s skilled workforce in manufacturing and related sectors, as well as its proximity to major population centers and numerous transportation nodes. However, a significant ramp up in Pennsylvania manufacturing jobs 

does not necessarily follow. As drilling activity continues, the supply chain sectors 

operating within the state will continue to support the oil and gas industry in its 

drilling and related efforts, and this sustains and creates jobs. There is also the 

prospect of petrochemical industry expansion within the state. The degree to which 

manufacturing does ramp up will be affected by the overall business climate both 

for the upstream gas industry and manufacturing and by state policies on taxation 

and regulation. 

A recent IHS study on ‘Manufacturing Growth Strategies for Philadelphia MSA’ 

(2013) identified competitive strengths of the manufacturing sectors in, among others, chemicals and refining. However, the study showed that the region is not 

achieving the maximum benefit from Marcellus development. These industries use 

natural gas liquids as a feedstock, and access has been limited by insufficient natural gas liquids pipeline capacity, among other things. 

Senator Casey: 

I understand that some industries that rely on natural gas as a feedstock or energy uses are concerned that new demand for natural gas by the transportation sector, or an aggressive move to export natural gas, might dramatically increase demand, and as a consequence drive up prices. 

Question #2 

What is the long-term outlook on the supply and price of natural gas? 

Dr. Yergin’s Response: 

We estimate that technically recoverable natural gas resources in the US are approximately 3,000 trillion cubic feet (Tcf), enough to supply current levels of consumption (26 Tcf in 2013) for well over 100 years, and enough to accommodate significant growth in consumption for decades, even without additional discoveries or 

technology developments that would increase the recoverability of gas resources. 

Over the next 20 years we project US natural gas consumption will total 692 Tcf 

(cumulatively), leaving some 2,300 Tcf of resource for future consumption. And given 

the industry’s track record for increasing recoverability and reducing unit costs, we 

would expect the resource base to continue to grow in coming years. We consider 

our estimate to be conservative. 

The technologies that have been developed for recovering gas from impermeable 

formations—so-called ‘‘unconventional’’ gas—yield significant scale economies, with 

individual wells producing far more gas than was true in the recent past using more 

conventional drilling and completion techniques. Because the costs of drilling and 

completing today’s wells now can be spread over a higher volume of production, the 

unit cost of gas production is today much lower than it had been before the unconventional gas revolution. 

IHS Energy estimates that a large volume of gas from unconventional dry gas 

plays can be produced economically at a Henry Hub price at moderate prices. There 

is the potential for cost inflation to affect this likely price range. If the costs of key 

inputs such as steel pipe, fracking sand, labor, or other inputs increases faster than 

general inflation, the likely price band will shift upward accordingly. 

Question #3 

Given the supply, how viable is natural gas as a transportation fuel, and are there 

specific segments of the motor vehicle market where it is particularly applicable? 

Dr. Yergin’s Response: 

Natural gas—either as LNG or as CNG—can be economically competitive in the 

high-mileage parts of the transport sector. Fleet operators whose vehicles return to 

base every night—trash trucks and buses, for example—are showing the highest 

rate of adoption, but represent a relatively small portion of US fuel demand. The 

trade-off between incremental up-front costs (it costs more to buy a natural gas engine) and fuel savings (natural gas is cheaper than diesel) means that the more the 

vehicle consumes, the more competitive natural gas is. In the longer-term, the highest natural gas fuel usage can be expected in marine bunkering, heavy-duty trucking, and possibly even rail. Long-distance heavy-duty trucks are considered one of 

the prime potential markets. There are, however, two notable constraints on the 

penetration of natural gas in trucking. One is infrastructure—the lack of a widespread refueling system. The other is competitive—the fact that the fuel economy 
70 

of diesel trucks is improving. Passenger vehicles, the majority of fuel demand, however, currently show less promise because of the low miles traveled, on average, but 

could still prove competitive in some circumstances. 

Over the past several years, Congress has encouraged the use of alternative fuels 

by providing tax credits. We have heard that many alternative fuels are not economically viable in the marketplace without long-term government support. 

Question #4 

What are the economics of natural gas as a transportation fuel versus conventional 

fuels? And, if the economics are positive, what would providing tax credits achieve? 

Dr. Yergin’s Response: 

The economics of switching to natural gas can be positive, with the balance being 

determined by the incremental costs (higher capital cost) and fuel savings (lower operating expense). LNG costs are about $1.50-$1.75 per diesel gallon equivalent (dge) 

cheaper than diesel pump prices, and the CNG discount is near $2 per dge or more. 

With oil and gas prices in North America fundamentally disconnected, these discounts could change. 

While LNG truck engines cost $40,000-$75,000 more than their diesel counterparts, incremental CNG engine costs are considerably lower. The economics are 

highly sensitive to these two factors, and in particular how much fuel is consumed 

by each vehicle. The more fuel consumed, the more positive the economics. 

Whether tax credits should be used is a matter for policy discussion, in terms of 

overall objectives and long-term effects. One question is whether the tax credits 

would be applied to capital costs of new vehicles or to fuel prices. It would also be 

useful to compare current levels of taxation on an energy basis. 

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